S&P 500: Bullish.
The index completed the bullish reversal pattern on the daily chart (see the screenshot below), and set to continue the long-term uptrend. The equity bulls might rewrite the all-time high value as early as in the upcoming week as the workout distance of the ascending triangle formation (green bold lines on the chart) indicates the level of 3085.0 points as the nearest target. Before that, there must be at least one daily close above the recent top at 3022.8 charted on July 26.
The trend MACD indicator is bullish enough to sustain the momentum. The histogram is well above zero, the signal line turned positive, while the divergence line is about to cross the threshold, which divided growth from decline. Fast Relative Strength Index climbed above 50%, dropping below it for one single day on September 3 during the bearish retracement, which formed the local bottom. The overbought territory is far from current RSI levels, thus the oscillator has more room to go North. There is nothing to stop the bulls so far, from a technical point of view.
The U.S. dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies tested the highest level since May 2017 this past week. However, the bears stepped in with heavy-volume selling pressure for the U.S. dollar across the board, and the index dropped -0.80% as the weekly result.
The upside swing started in June 2019 is still in play until the dashed green support trendline holds the rate from further decline (see the daily chart below). The Ichimoku Cloud technical indicator has a sign of a deeper retracement though. The daily close rate breached both Ichimoku’s Conversion and Base support lines, suggesting more downside action at least to the upper band of the cloud. The range of 97.60/80 will represent the nearest support for the ascending formation, while lower rates down to 97.40 would mean the market’s uncertainty in terms of bullish continuation.
The leading span is still bullish, and all Ichimoku lines are placed in the right order to proceed. Therefore, the support range mentioned above should hold the bears from further selling pressure in the upcoming week as well as provide an attractive depth for conservative buyers set for a long-term buy-dips trading strategy.
The Swiss Franc had quite a volatile trading week, especially versus the U.S. dollar. USD/CHF bounced off the 89-days simple moving average, exactly as we expected, but failed to develop the bearish achievement, reversing slightly above 0.9800 handle. The upside swing, again, was limited by the same SMA89 resistance curve, which left many questions regarding further trend’s direction.
Bollinger Bands %B had a healthy retracement toward the middle level, which should point to the fact that the bullish breakout signal printed last week was not worked out yet, and traders should see USD/CHF rates above 0.9920. On the other side, the Commodity Channel Index remained below the overbought zone, signalling a weak bullish momentum.
The most probable scenario for the week ahead is a sideways consolidative action between 0.9900 resistance and 0.9800 support. If one of the barriers breached, the action might gain momentum and accelerate the trend in the appropriate direction.
Despite the general long-term downtrend, USD/JPY is bullish for the near future. The Japanese Yen was the only weak currency (among majors versus the greenback) in the foreign exchange market this past week, reflecting the overall risk-on sentiment and higher risk-appetite compared to previous weeks. Although the Ichimoku Cloud trend indicator is still bearish for USD/JPY as the leading span is negative, two crucial technical events happened this past week.
Firstly, USD/JPY charted a daily close above Ichimoku Base Line resistance for the first time in four weeks. Secondly, Conversion and Base Lines performed a golden crossover. Both technical signals point to a deeper bullish retracement if not a long-term reversal. The upside pressure should continue toward the bottom band of the cloud, which is currently coming at 107.40 approximately. The pair could also test the upper band of the cloud at 107.70 if the first target was achieved.
Thus, aggressive traders could try to find intraday depth for fresh long positions, but keep take-profit and stop-loss orders tight. Conservative traders should stay on hold until the daily pattern had a more clear signal, especially in terms of bullish momentum at the resistance range mentioned above. Any sign of weakness might lead to acceleration or renewal of the recent downtrend.
The Aussie turned bullish on the daily chart for the first time in seven weeks. AUD/USD reversed the downtrend after testing six-year lows at around 67 cents and bounced 150 pips off the local bottom. This price action was predicted by the Stochastic RSI oscillator, which used to diverge with the rate since mid-August, as well as charted a classic bounce-by-trend signal on September 2. As a result, the indicator appeared in the overbought territory after hovering near the bottom for quite a while.
AUD/USD is currently trading above the median dashed line, which used to divide the descending formation onto two parts. What’s more, the pair breached triple EMA consisted of 21-, 34-, and 55-days curves as the highest daily close rate was printed at 0.68484 on Friday, while 55-days EMA comes at 0.68474. Before charting further bearish action, the bulls have to overcome a strong defensive barrier in the range of 0.6870/6900 and print at least one daily close above 0.6912. If confirmed, the Aussie’s exchange rate versus the greenback could try to get back above 70 cents, the level which acted as a support in the first quarter of 2019.
The Canadian dollar was one of the strongest currencies among majors this past week. USD/CAD was giving a perfect entry point at around 1.3380 as the technical setup was in favour of the bearish reversal and here is why. First, the price action was extremely slow in August, and the bulls failed to have a sustainable performance above 1.3350 resistance, having five failed attempts to breach it. Both the Commodity Channel Index and Relative Strength Index charted a serial bearish divergence, which did not play out yet. The final trigger was that the daily close rate was below the Bollinger Band’s upper line, signalling a strong reversal combination. Thus, USD/CAD dropped more than 200 pips from the local top, and the bearish action should continue in the upcoming week. The nearest target is coming at around 1.3074, and if the bears were strong enough to overcome that defensive barrier, then the pair could drop as low as 1.3026, the lowest daily close rate this past summer.
The yellow metal’s uptrend is in danger of a deep bearish retracement. Although the bulls had another attempt to try water above $1550 this past week, the bears stepped in aggressively, adding the selling pressure to the price of gold, which declined to $1506 in a volatile trading week. The technical sentiment had already changed to negative on Parabolic SAR’s point of view as its dots jumped above the price. ADX mainline turned south, pointing to the fact that the bullish momentum is getting exhausted. The current rate is extremely close to the nearest support level, which comes together with the median line, former resistance. If the gold price dropped below $1500 handle, the decline could extend to $1480, the bottom of the market on August 13. However, upside swings and bullish whipsaws are still possible as such strong trends as we saw this summer do not reverse just like that.