S&P 500: Bullish
The benchmark charted a bullish engulfing on the weekly timeframe as the past week’s close rate was higher than the previous week's open. The weekly gain exceeded +3.4%, which was never seen since the last bullish breakthrough candlestick in June. The monthly chart has a long downside whipsaw, pointing to strong demand from buyers on pullbacks. August closed above 2900 points, promising another bullish run toward the all-time high value noticed this summer. The technical outlook is bullish as the 55-weeks exponential moving average held the S&P 500 index from further decline, acting as the support curve. What’s more, Commodity Channel Index with 21-weeks period charted a bounce-by-trend pattern, bouncing off the oversold level. The depth of the bearish retracement was not enough for the Bollinger Bands %B indicator to perform a breakthrough signal, and the recent performance lifted the indicator above the average line, showing a potential bullish continuation. The bulls have only 100 points to go before re-testing the highest value in history, and that should happen sooner rather than later.
Although the safe-haven Swiss Franc was one of the weakest currencies among majors this past week, USD/CHF is still bearish in the long-term perspective. The past week’s growth left many questions about its sustainability due to several technical factors. First, the upside momentum was limited by 55-weeks exponential moving average as the weekly close rate failed to eliminate the resistance. Even a difference of six pips matters for the technical analysis and that inability of the bulls to get back above EMA55 might signal a weakness. Second, the Relative Strength Index with a modified period of 21 weeks failed to cross the threshold of 50% and remained bearish. Third, MACD histogram is still in the negative territory, even though its lines are about to cross each other. The bulls must confirm their intention to reverse the trend, and a weekly close above 0.9988 should act as the mark dividing growth from decline. A bearish slide is more likely for the week ahead for USD/CHF which should come back to a consolidative range of 0.9763/0.9817.
After testing three-year lows (104.45), USD/JPY bounced toward resistance range (106.68). Such a fast-moving performance means that big money is not ready to with the recent downtrend, especially when it comes to Japanese export-oriented corporations. The pair remained inside the descending asymmetric triangle formation below the middle line. Daily Ichimoku Cloud trend indicator kept the bearish sentiment as the leading span did not narrow the negative surplus, and both Base and Conversion Lines did not change the angle. The only positive achievement was that daily rates came back into the range between resistance lines, which could promise further buying pressure in the short-term perspective. On the other hand, the upside risk is limited due to multiple resistance levels such as Ichimoku’s Base Line at 106.89 and the bottom band of the Cloud at 107.40. Both resistance should be considered for fresh short positions.
As long as EUR/USD printed the lowest weekly close rate in 28 months, the EUR/JPY cross-rate continued the downtrend. However, some reversal signs start appearing on the weekly timeframe. The ADX mainline is turning back down, indicating that the bearish momentum is getting exhausted. Williams %R and Stochastic RSI oscillators are extremely oversold. A healthy retracement is required to keep the descending formation in play. Otherwise, a strong bearish whipsaw could lead to a long downside shadow on the weekly chart, and thus a bullish reversal on the long-term perspective. It’s recommended to start taking profits for those traders who still hold short for EUR/JPY.
The British Pound failed to develop the local success versus the U.S. dollar as GBP/USD was giving a perfect entry signal on Tuesday last week. The daily chart below shows that the last green candlestick was limited by the upper line of the Bollinger Bands indicator, which pointed to an end of the bullish retracement. Slow RSI oscillator (21 days) had a bearish confirmation as the bullish momentum was exhausted right below the 50% threshold. Early Wednesday’s price action was on the negative side, allowing the bears to step in. As a result, GBP/USD plunged 130 pips, finishing the trading week slightly above the middle BB line at 1.2163. The bottom of the range comes above 1.2020 dollars per pound and the pair is going to test that support in the week ahead if nothing changed on the fundamental side. So far, British politicians can’t offer something positive for global investors and currency traders. Therefore, the Sterling should continue the long-term downtrend related to the Brexit mess.
The New Zealand dollar was one of the weakest currencies among majors for six straight weeks. Even the rebound in commodity prices did not help the Kiwi to recover at least part of its losses. As a result, NZD/USD dropped another 88 pips (-1.37%), threatening to lose the ground below the round-figure psychological support at 0.6300, which never happened since August 2013 or within six years. All of the weekly oscillators are extremely oversold, and there is no sense to add them to the price chart. The graphical analysis shows that if the bears broke through the horizontal support line at 0.6237, then the bottom line of the descending channel would appear in the market’s focus. This upcoming Autumn promises more bearish achievements for NZD/USD in the range of 0.6100 and 0.6000 in extension.