What a way to end the week. In my opinion the market was like zombie the whole week and then on Friday with Yellen’s Jackson Hole speech Kapow! currency pairs, crude oil, gold and silver jump one way then the other.
Week 34 2016 price action can be described only as moribund followed by Jackson Hole come alive. Last 12 hours trading was also shoot-one-way, U-turn-the-other with initial bearish USD followed by bullish USD. Torn, indecisive action or just herding traders into a big trap?
NZDUSD reverses entire week’s gains
First chart I want to look at is NZDUSD. With that last 8 hours of price action, NZDUSD closes below week open which terminates the entire’s week’s gain.
Notice that before those last 8 hours of action, NZDUSD was up. According to what I recall, Yellen’s speech was already known to the market (I have to verify this) which means that despite Yellen’s hawkishness, the initial market reaction was bearish-USD. They didn’t believe her? Next question: what changed from that T-8 hours?
NZDUSD H4 chart
Zoom out to the bigger picture, I bet that Dollar strengthening was not a surprise to a big segment of traders – because despite the week – week, month to month uptrend, NZDUSD was really stuck at resistance zone since 2 months. I see former multiple year support turn resistance, I see downward equidistant channel suggesting down trend continuation and then I see a wash and rinse/bull trap top.
NZDUSD weekly chart
AUDUSD reverses 4 weeks! of gains
AUDUSD at a glance appears already much weaker than NZDUSD. With that Friday night action, it reverses all gains over the last 4 weeks. I see year – year downtrend, trend line resistance and I see AUDUSD break back below former support from early 2015.
AUDUSD weekly chart
Despite the big picture might look so ‘obvious’, it is actually not easy to manage this kind of setup. By ‘crashing’ in such a manner, there is the question whether price will continue to follow through down on Monday. Follow through is just something that is very scarce these days. In the past few weeks, there were a number of Friday night big moves followed by U-turn the following week. If this is not obvious, recall Brexit. Markets fell big time on 24 June which was a Friday night and then completely reversed by the end of the following week. This is just one example – there were many others. So the question to someone who wants to short AUDUSD but have not gone in yet – has AUDUSD already reached support with that big move? But if we wait for retracement, what if it does not retrace?
AUDUSD H4 chart
XAUUSD has same bearish Dollar reaction and then about turn
Gold has that same bearish USD initial reaction and then about turn in last 8 hours of trading as we saw in Kiwi H4 chart.
XAUUSD H4 chart
In the bigger weekly chart time frame where we can inspect year to year price action, XAUUSD definitely looks more bullish than AUDUSD and NZDUSD with that new 52-week high above 1307. With this chart I do not see XAUUSD as a pair for shorting except to traders of the lowest time frame. In fact any correction is now very welcome. I should say please come down lower so I can buy cheaper.
XAUUSD weekly chart
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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"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."