Currency pairs update Week 31 2016

NZDUSD channel back in play; breakout did not look like sure thing

The setup that I was looking for in NZDUSD is back in play as it seems that a Northward breakout in the pair is not a sure thing after all. At the moment NZDUSD is sitting on the top trend line of that equidistant channel. This is a support. If NZDUSD falls below, then the channel is back in front and bears will have reason to push the pair to the bottom of the channel.

NZDUSD daily chart July 2015 - present

NZDUSD daily chart July 2015 – present

 

A few points to note:

  • At the moment NZDUSD is sitting on the top trend line of that equidistant channel.
  • Jumping out visually is a possible head and shoulder pattern where price is at the right shoulder. Overhead is a very clear resistance zone. The pattern can only be confirmed when neckline is broken so anyone who jumps a short now is in danger of anticipating with a counter trend move.
  • The redeeming price action for bearish traders include last night’s big bearish engulfing candle which has eaten up all of Tuesday’s candle.
  • Also the pair is now below the opening price of the month so sentiment is bearish. This can be confirmed if price meets resistance if it retraces to that level.

 

USDCAD fighting to establish direction

There are 2 ideas for USDCAD. 1. A breakout above 4-month high of an ascending triangle discussed here. 2. A failure to break followed by re-test of 4-month high as ‘resistance’ and then subsequently breaking downwards to bottom of triangle or even beyond.

USDCAD daily chart Jan 2016- present

USDCAD daily chart Jan 2016- present

At the moment, price action appears to favour the latter condition especially following the false breakout last week. Further price action on Monday, Tuesday and last night also appears to verify the 4-month high as still valid resistance. However lower time frame picture also show the validness of rising channel lines in black that show short term trend that is still rising.

USDCAD H4 chart July 2016 - present

USDCAD H4 chart July 2016 – present

What is certain is that if both support and resistance do not break, that price will continue to ping pong in between towards the apex – it is going to get tight.

Getting the direction right is going to be rewarding but triply so. Without a doubt, USDCAD’s fall last night coincided with WTI/Brent strengthening last night from oil data. This is a well established correlation so should not be a surprise to anyone. But getting USDCAD right should also get DXY correct. Over long, USDCAD direction is directly tied to the strength of the USD that makes day-day oil data but a distraction only.

Well established correlation between DXY, USDCAD and WTI/Brent.

  1. USDCAD up, DXY up, WTI/Brent down.
  2. USDCAD down, DXY down, WTI/Brent up.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
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