AUD/NZD

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I analyzed this pair in April 2014. Cross rate showed significant chart pattern development at a historical support. AUD/NZD is trying to rebound from 3 decade-long support level. 1.05 was tested for five times over the past thirty years. Each test was recorded as medium/long-term low. We are there again… Not only the long-term chart is signaling a possible rebound but also the daily chart is suggesting higher AUD/NZD with a double bottom chart pattern.

  1. On the long-term monthly scale chart MACD is trying to reverse from a historical low-level. Buy signal on MACD will be bullish for Australian dollar.
  2. On the daily chart AUD/NZD breached the horizontal resistance at 1.095. Last challenge is the 200-day moving average at 1.103 levels.

I think the overall technical outlook is turning in favor of Australian dollar versus New Zealand  dollar.

Monthly scale chart

AUDNZD

Daily scale chart

AUDNZD II

CORN

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Is Corn forming a perfect inverted head and shoulder chart pattern? If yes, price should rally from these levels and reach the neckline around 530 levels in the next few weeks and if you see such price action you should be more confident that a year-long base formation is about to complete, suggesting much higher levels. I like to see symmetry in head and shoulder chart patterns and also a horizontal neckline. So far the chart pattern followed these characteristics. We are probably still at the early stages but it’s worth adding this chart to our watch list as a bullish chart development.

CORN

GBP/SGD

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Long-term trends can be interrupted by short/medium-term consolidations; in other words “breath-taking” periods. In technical analysis these type of short/medium-term consolidations are classified as flag, pennant, triangle or rectangle chart pattern. Each chart pattern has its own characteristics.

Since the beginning of 2013, British pound has been outperforming Singapore dollar. Cross rate formed a clear uptrend. After reaching 2.13 levels in the beginning of 2014, GBP/SGD started moving sideways to form a common consolidation pattern known as symmetrical triangle. Volatility on daily and weekly scale suggests another trend period is likely to unfold following the latest consolidation. Breakout above 2.12 levels will be bullish for British pound and GBP/SGD cross-rate will target 2.15-2.18 area. As long as the cross rate remains above 2.09 levels the uptrend will remain intact.

GBPSGD

US DOLLAR/KENYAN SHILLING

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USDKES

In 2011, USD/KES (U.S. Dollar/Kenyan Shilling) cross rate experienced a strong breakout to all-time high levels. Breakout from the low volatility period was followed by a sharp rally that pushed the cross rate from 82 levels to 106 levels in less than a year. Central Bank of Kenya reacted by raising the benchmark interest rate from 6 pct to 18 pct over the course of sharp currency depreciation. Shilling recovered in the last quarter of 2011 and fell back to the support level at 82.

Kenya Interest Rate (Benchmark Interest Rate)KENYA BENCHMARK INTEREST RATESource: www.tradingeconomics.com / CENTRAL BANK OF KENYA

Since then the cross rate has been forming another base formation with a clear horizontal resistance at 88 levels. Cross rate might be preparing for another strong breakout. A decisive close above 88 levels can put pressure on the local currency once again.

BRENT CRUDE OIL

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Over the past few months I wrote several updates on Brent Crude Oil . I think energy sector will be the “hot” topic in the second half of the year. The likelihood of a strong breakout is increasing as the consolidation resumes in this tight trading range. Breakouts from low volatility periods are usually very powerful.  United States Brent Oil ETF (BNO) trades in NYSE (New York Stock Exchange) and ETFS Brent (OILB.L) trades in LSE (London Stock Exchange). Both charts are due for a strong breakout. Breakout above 45 levels on (BNO) and above 73 levels on (OILB.L) will be very bullish for the energy sector. Another chart that is likely to follow the same trend in the energy sector is BP (BP.L). BP trades in LSE. Breakout above the strong horizontal resistance at 510 levels will be bullish for the stock.  These are the charts and levels that I’m watching closely to understand what is next for the energy sector.

What is your view on this? Are there any other supporting factors/developments that suggests a strong directional move any time soon? You can share your views with other followers.

BNO

ETFS BRENT

BP

U.S. GOVT BONDS

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Long-term base formations are powerful and breakouts from these chart patterns should be taken seriously. In April, the 30 year U.S. government bonds broke out of an inverse head and shoulder pattern. Breakout above 135.3 levels confirmed the bullish chart pattern which was followed by a pullback. Now we are seeing the continuation of the earlier strength.

Another bullish chart pattern, falling wedge is developing on the 10 year U.S. treasuries. Breakout above 126 levels will confirm the bullish chart pattern on the 10 year T-Note. Technical outlook remains positive for both instruments. (Earlier analysis on the U.S. governments bonds is here)

30 YR US TREASURY V US 10 YR T NOTES II

INDIA BSE SENSEX

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Markets that breakout to all time high levels usually don’t look back. Price enters the uncharted territory where it doesn’t meet any resistance. Some breakouts fail and fall back below the resistance they breached earlier. At that point we know that something was wrong with the earlier breakout. However most of the breakouts to all time high levels are so powerful and decisive that they don’t leave the price action in question. India’s breakout has been one of those set-ups where breakout to historical high levels from low volatility period is now being followed by a strong upward trend. This is extremely positive for Indian equities and suggests higher prices in the medium-term. I attached below similar breakouts to all time high levels on South Africa All Share index and S&P 500 index. (For earlier analysis on India you can refer here)

INDIA BSE SENSEX

SOUTH AFRICA ALL SHARE

S&P 500 INDEX

U.S. DOLLAR INDEX

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Friday’s move on the U.S. dollar index could be a major medium-term reversal for some of the cross rates out there. I’ve discussed the U.S. dollar index chart in my earlier updates and drew attention to the importance of the strong medium-term support at 79.5 levels. (Earlier update is here) During last week U.S. dollar index breached the support level at 79.5 but failed to close below it. Instead the weekly close was at the highest level of the weekly bar. The low levels in March-April and May formed positive divergence on the MACD. Positive divergence on MACD is a bullish technical development. Following the same thought process on my earlier analysis, I will focus on two levels in the following weeks. 1) 200-day average at 80.50 levels which will act as resistance. 2) Medium-term support area between 79 and 79.50.

Do you see other bullish developments favoring U.S. dollar strength in the coming weeks? How would emerging market currencies react to possible strength in the U.S. dollar index? You can share your views with other followers. Have a very good week.

U.S. Dollar Index (Daily scale)

US DOLLAR INDEX daily

U.S. Dollar Index (Weekly scale)

US DOLLAR INDEX weekly

UK FTSE 100

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If markets are going to move higher, especially in Europe, UK’s FTSE 100 index is my top candidate for a strong breakout. Index is testing 13 year-long horizontal resistance at 6,850 levels. The fact that the market hasn’t pulled back from the resistance area shows its strength and possibly its willingness to clear the multi-year resistance. Of course, this has to be seen in the form of a decisive close above the strong resistance. In the medium-term index formed a bullish ascending triangle. Breakout above 6,850 levels will have long-term implications. Breakdown below 6,500 levels can change the bullish outlook to neutral/negative.

UK FTSE 100 INDEX

UK FTSE 100 INDEX II

COTTON

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Long-term charts are usually very powerful and reveal important information. Over the past four decades  cotton price fluctuated between 95 and 30 levels with the exception of two occurrences in 1995 and 2010. Breakouts from long-term consolidation ranges are usually followed by strong trend periods. Breakout above 95 will push Cotton price outside of its long-term consolidation range. Such breakout could trigger another sharp rally on the upside. Earlier short/medium-term analysis on cotton is here.

COTTON