S&P 500: Bullish
Although the benchmark charted one more long downside whipsaw on the weekly timeframe, and the volatility was enormous as per the summer vacation season, the general long-term uptrend is still in play. The Ichimoku Cloud trend indicator is still bullish with the leading span’s large positive surplus, while the Baseline support curve still limits losses in terms of weekly close rate. In this case, weekly downside whipsaws do not matter as the technical analysis takes into account only close rates. The screenshot below also shows strong support levels at 2888.6 points, which is the upper band of the leading span, and at 2875.2 points, the Ichimoku Base Line support curve. Those traders who missed the double-chance to open fresh longs this past week should hope for another bearish rebound, which might not even happen as the retracement is coming to an end, and the bulls should take the market back under control. If confirmed, the all-time high rate of 3028.3 points could be renewed.
The pair traditionally acts as a leading indicator for the U.S. dollar versus major currencies, and this past week was not an exception. USD/CHF bounced off the local bottom at 0.9692 (the lowest daily close rate), signalling a reversal in the market’s sentiment across the board. That low allowed to complete the descending formation and raw the support trendline, which is the second part of the asymmetric triangle. The bulls could try to lift USD/CHF higher towards 34-days simple moving average resistance curve (0.9838 currently), and the upper band of the descending channel (0.9877) as MACD lines are about to cross each other, while MACD histogram is going to enter the positive territory. However, the fast RSI oscillator is still below the threshold of 50%, which is bearish. Swing traders should consider using the sell-highs trading strategy at around the range mentioned above, while aggressive short-term speculators could hold long positions for a while. The only requirement for both scenarios is to keep stop-loss and take-profit orders tight as the market’s sentiment is changing frequently, underlining the large volatility.
The Japanese yen reflected the price action of U.S. stock indices. The USD/JPY currency pair had tested the resistance curve of Ichimoku’s Conversion Line, but the bulls failed to break it through. The leading span of the daily chart (see the screenshot below) remained bearish with a negative surplus and resistance at 106.60 yens per dollar. That mark is the threshold, which divides the chart into two parts, and if the bulls were not able to overcome that defensive barrier, then the bears would dominate again. The main concern though is that the pair is placed between two Ichimoku lines, which should point to a deeper bullish retracement in the near term. Pivot points to watch: 107.18 and 107.90 on the upper side, and 105.66 and 105.08 on the bottom.
As long as the Australian and New Zealand dollars had a multidirectional price action this past week, the AUD/NZD cross-rate was lucrative in terms of volatility. What’s more, the downtrend, which started on April 19, came to an end as the exchange rate went off the descending channel after reaching the bottom at 1.0266. Three oscillators had a strong trading signal to go long on AUD/USD. Commodity Channe Index bounced off the oversold territory, fast Relative Strength Index appeared above the 50% level, while Bollinger Bands %B confirmed the bullish breakthrough signal. As a result, UAD/NZD is headed towards the nearest target of 1.0628, and if breached, the top of the formation at 1.0732 would be achieved sooner rather than later. All of the three indicators show strong bullish momentum, despite a certain overbought bias. The buy-dips trading strategy is applicable.
The Chinese yuan gained some temporary strength versus the U.S. dollar as USD/CNH corrected towards the middle of the triple EMA (13, 21, 34) on the daily chart. However, the buyers stepped in at 6.9897 as the depth of the bearish retracement was enough to resume the uptrend. The pair charted four consecutive daily close rates above the upper range of the indicator, pointing to a bullish continuation rather than a consolidative range ahead. If the bulls were able to lift the exchange rate above the psychological round-figure resistance of 7.1000 yuans per dollar, then the bullish trade could accelerate, and the highest level in a decade would be re-written. Otherwise, the lack of further bullish development might lead to take-profit flows from speculative accounts, as well as short-squeeze from real-money traders. It’s too early to conclude that the uptrend is over though. Therefore, standing against such a sharp and sustainable trend would be dangerous. The support of 7.0000 looks solid so far.
Although the most heavy-volume cross rate of the FX market bounced off the local top for almost 2%, and the weekly timeframe has a sign of bearish engulfing, the daily chart shows that the uptrend is not over yet. After five consecutive days of losses, EUR/GBP turned neutral from a technical point of view. Parabolic SAR signals a bearish continuation as its dots jumped above the price, and ADX surplus turned negative. However, the momentum is still strong, and the fight between the bulls and bears might be even crueller than in the past two weeks. Therefore, another round of large volatility is expected for the EUR/GBP cross-rate. A support level of 0.9088 looks attractive for fresh long positions, counting on a bullish breakthrough above the upper band of the ascending formation and the local top of 0.9325. The buy-dips trading strategy could be lucrative in the medium-term perspective.