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

AUD/NZD

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AUDNZD

Long-term charts usually reveal important information. Historical price levels are widely followed by investors and traders. Australian Dollar/New Zealand Dollar cross-rate is now at a historical support level. This long-term support was tested for the 5th time over the past three decades. 1.05 acted as support and each time the cross rate reversed from this level and moved higher.

AUDNZD II

Similar technical action can repeat itself as we are also seeing a bullish base formation in the short/medium-term. Double bottom chart pattern suggests higher prices if the neckline at 1.095 is broken on the upside. A decisive break above 1.095 will favor Australian dollar against the New Zealand dollar in the short/medium-term.

SILVER and COPPER

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Both metals avoided sharp sell-offs by holding above critical support levels. Silver tested the strong support area between 18.3 and 18.8 for the 3rd time over the past year. Copper managed to hold above 3 levels which acted as strong support since 2012. Copper and Silver can rebound towards their long-term averages. 200-day average for Silver remains at 21.25 and for Copper at 3.2. Before we see decisive break downs of the strong support areas (Silver: 18.3-18.80, Copper: 2.85-3.0), we should expect neutral/positive technical action on Silver and Copper.

SILVER

COPPER II

INDUSTRIAL METALS

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Industrial metals remain to be an emerging market story. 3 year and 5 year weekly rolling correlations show high correlation between the MSCI Emerging market index and most of the industrial commodities. As expected there is also high correlation between the industrial metals. Zinc, Copper and Lead are high correlated industrial metals.

3 YEAR WEEKLY ROLLING CORRELATION

INDUSTRIAL METALS 3 YR CORR

5 YEAR WEEKLY ROLLING CORRELATION

INDUSTRIAL METALS 5 YR CORR

Since mid-2011, most of the industrial metals had lackluster performance. Sideways/downwards price movements were similar to the MSCI Emerging Market index. Charts are suggesting that we are getting closer to the end of the medium/long-term consolidation periods. Lead, Zinc and Tin are completing their contracting ranges and breakouts should occur in the following months. Over the past few weeks Nickel had a strong run but it is still below its downward trend resistance. Both Aluminum and Nickel performed worse than Lead, Zinc and Tin. Breakouts on these industrial metals could result in a 3-4 year-long directional movements. Global growth and emerging market performances will depend on the direction of the breakouts in these industrial metals.

ALUMINUM

COPPER

LEAD NICKEL

TIN

ZINC

MSCI EM

U.S. GOVT. BONDS

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U.S. treasury and government bond prices are completing bullish chart patterns that could resolve on the upside in the following weeks. U.S. 30-year T Bond is completing an inverse head and shoulder base and the U.S. 10 year T Note is forming a falling wedge pattern. Both chart patterns are considered to be bullish and suggest higher prices in the short/medium-term. Breakout above 135.3 levels will confirm the inverted head and shoulder on the 30-year T Bond price chart and breakout above 126 levels will confirm the falling wedge on the 10-year T Note.

US 30 YR BONDS

US 10 YR T NOTES

DAX, NIKKEI and DJIA

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For those who are not a big fan of twitter I’m posting my latest updates on global equity markets. I believe these are important charts and are worth reviewing again. Global equity markets are experiencing a correction. Long-term trends are still intact. Long-term 200-day averages will play a significant role in determining the next direction of the long-term trends.

MSCI WORLD MARKETS

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Global equity markets can experience a pull back. MSCI World Markets index is testing strong long-term resistance levels. A pull back towards the long-term averages would result in a reversal on the MACD too. It is still early to call for a reversal but it is also extremely important to keep an eye on this long-term chart after 5 years of uptrend. Failure to breach long-term resistance at 1,690 levels could result in medium-term weakness towards 1,440-1,500 area.

MSCI WORLD MARKETS INDEX

SERBIA AND SLOVENIA

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Frontier markets performed well over the past year. More and more frontier equity markets are gaining strength. Both Serbia and Slovenia equity indices are completing 2 year-long base formations. Slovenia SBITOP Index cleared 700 levels; a horizontal resistance for the cup & handle formation. Index should target 970 levels in the medium-term. Serbia SRX USD index is one step behind from Slovenia. Serbia is still preparing for a strong breakout above 187 levels that will also complete the bullish chart pattern. Both indices are gaining strength and technical outlook is turning positive. More information on cup with handle formation (here).

SLOVENIA SBI TOP INDEX

SERBIA SRX USD INDEX