Today we will update our jobless claims data. Since 2009, U.S. jobless claims have been declining from 650K levels to 350K. This has been a strong downtrend and reached levels that proved to be major support over the past decades. 300-350 area is strong support. Higher jobless claims data over the next few months could signal a major turning point that could result in weak job market. Currently unemployment rate stands at 7.5%.
Russian ruble is another emerging market currency that has lost ground against the U.S. dollar. Over the past 9 months cross rate completed an inverted head and shoulder pattern with the neckline acting as resistance at 31.80 levels. Inverted head shoulder is regarded as a bullish reversal pattern. We are now seeing USD/RUB breaking above the resistance at 31.80 levels. With a stop-loss slightly below 31.80 we should follow this cross rate to move higher favoring U.S. dollar. Inverted head and shoulder price target will be 33.70 in the medium-term.
U.S. dollar continues to gain strength against major emerging market currencies. In this update I’m analyzing the USD/ZAR (South African Rand). USD has been strong against the Rand since mid-2011. We are now seeing the uptrend accelerating towards the long-term resistance at 10.70 levels. Earlier tops in 2001 and in 2008 was marked with an upward spike. 10.70 is the likely short-term target.
U.S. jobless claims spiked higher in the May 11 week, up 32,000 reaching 360,000. Earlier analysis showed a long-term chart of the weekly jobless claims, reaching strong support levels. Over the past 4 years jobless claims moved from one extreme to another.
Many people must have seen the latest H&S chart pattern on the EUR/USD. If you haven’t seen it above is the price chart of the EUR/USD with its 200 day simple moving average. H&S patterns do fail. Reversal above the right shoulder (1.33 level) would result in a failed H&S pattern. If there is no failure then there will be a confirmation of the H&S pattern by a breakout above or below the neckline; in this case 1.2750. It is clear that there is weakness in the euro. Or in other words strength in U.S. dollar against major currencies. Weakness in EUR can continue in the following days. Breakdown below 1.2750 will confirm the head and shoulder chart pattern and will set a price target of 1.20 levels. If EUR/USD reverses from these levels and breaches 1.33 on the upside, then the target in the following weeks becomes 1.37.
Another emerging market currency that is weakening against the U.S. dollar is Indian rupee. Recent update on the 7th of May drew attention to the possibility of a strong breakout from the low volatility period. USD/INR is now close to 55 levels; last minor resistance before the cross rate targets 56-58 area. Technical outlook is bullish for the U.S. dollar.
U.S. dollar is gaining strength against most of the developed and emerging market currencies. I analyzed USD/TRY in the previous updates and drew attention to the bullish outlook on the dollar versus Turkish Lira. In mid-2011, cross rate broke above 1.75 levels and since then it has been consolidating between 1.75 and 1.90. Last year’s consolidation appears to be a flag formation; usually considered to be a bullish continuation pattern. As long as 1.75 holds as a medium-term support, breakout to higher levels will remain likely. Breakout above 1.83 levels could initiate another upward spike on the USD/TRY towards 1.92 levels.
Between 2009 and 2011, Sri Lanka’s COLOMBO ALL SHARE INDEX was one of the best performing equity markets. Since mid-2011 this market has lagged the global equities and its peers in the frontier markets. Now the index is completing a perfect chart formation; cup with handle. Cup with handle formation is considered to be a bullish continuation pattern. Price target is usually calculated by taking the width of the chart formation and adding it to the breakout level. This leaves us with a price target of 7,650. Bullish technical outlook is confirmed after the breakout above 6,000 levels.
In December 2012 we have seen Lumber price clearing the strong horizontal resistance at 330 levels. Breakout was followed by a sharp rise towards 400 levels in less than two months. Since March 2013, Lumber has been pulling back to the previously broken support/resistance area. Price should find support between 330 and 340 levels and rebound once again. The lower boundary of the last one year’s uptrend, 200 day moving average and horizontal trend line are all forming support between 330 and 340 levels.
