USD/BRL (U.S. DOLLAR/BRAZILIAN REAL)

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U.S. dollar continues to gain strength against emerging market currencies. I’ve analyzed several bullish dollar charts in the past and USD/BRL was one of them. Over the past few weeks we have seen a fast move in USD/BRL, breaking above 1.92; inverted H&S pattern’s neckline. This resulted in a spike towards 2.0 levels and it is likely to continue towards the H&S pattern price target at 2.4 levels. Emerging market currencies are completing 2-3 year-long base formations against the USD and this signals strength for the dollar in the intermediate term.

CBOE VIX (Volatility Index)

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Yesterday’s trading session pushed the Volatility Index higher and CBOE VIX breached the important resistance at 22 levels. This is an important breakout as VIX is now above the inverted Head & Shoulder pattern neckline. Higher VIX signals weakness for equities in the intermediate term. Please note that inverted H&S pattern price target is 30. 22 level will now become support and also stop-loss for long VIX positions.

CBOE VIX (Volatility Index)

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VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.

In the beginning of March I analyzed the CBOE VIX right after the volatility rebounded from 15 levels to 19 levels. Followed by a short period of equity market correction, optimism improved during March and the volatility index eased towards 14.6 levels. However, optimism in global equity markets didn’t last long and since the beginning of April VIX reversed from 15 levels and reached 22 levels. Three month-long sideways consolidation between 14 and 22 could be an inverted Head & Shoulder reversal chart pattern. This bullish reversal pattern suggests higher levels for the CBOE VIX in the coming weeks if the index breaks above 22 levels, the resistance of the technical chart formation . Please note that extreme pessimism in  equity markets mirrored the re-test of 50 levels on the VIX.

A decisive break above 22 levels can be followed by a surge in CBOE VIX towards 50 levels once again. In the past four years April-May period proved to be negative for equities.

USD/BRL (U.S. DOLLAR/BRAZILIAN REAL)

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The longer it takes for a chart pattern to develop, the more significant it becomes. Breakout from a long-term base formation should be respected. U.S. dollar has been gaining strength against some of the emerging market currencies over the past one year. Though we haven’t experienced a major shift from emerging market currencies to U.S. dollar, reversal chart patterns spread over time and became more visible. One of those emerging market currencies that has been forming a possible long-term reversal chart pattern (inverted Head & Shoulders) is the Brazilian Real. USD/BRL has been bottoming between 1.5 and 1.9 over the past 3 years.

With the latest breakout from a sideways consolidation range at 1.84 levels, USD gained strength against BRL. Currency pair is now challenging the last important resistance before breaking higher. Watch this highly traded emerging market currency for a confirmation of the breakout above 1.92 levels. A decisive close above 1.92 levels will confirm the breakout from a 3 year-long base formation and will target 2.4 levels in the following months.

EUR/USD

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EUR/USD continues to consolidate in a tight range between 1.33 and 1.305. Over the past 3 months currency pair formed a contracting range (symmetrical triangle) that is likely to be followed by a strong trend period. As we get closer to the apex of the triangle formation, probability of breaking out in one direction is increasing. It is always better to wait for a confirmation in the form of a daily or weekly close above/below major support/resistance levels. In this case we will be watching two important levels 1.305 as a support and 1.33 as a resistance. Though in the short-term a break above 1.33 will be positive for Euro, in the intermediate-term outlook will turn to positive only after we see EUR/USD crossing above the 200 day moving average at 1.34.

EUR/USD

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It has been a busy week with several economic data releases. However it’s not over yet! Today market expects U.S. Q1 GDP. Expectation is to be around 2.5%. 4Q’11 was at 3%. Over the past few days housing data and jobless claims were disappointing. A the back of news flow from Euro Zone (disappointing Italian bill auction yesterday and bond auction expected today…) and U.S., EUR/USD has consolidated in a tight range between 1.33 and 1.30. If we look at the larger picture, EUR/USD is in a downtrend with the crossrate trading below the 200 day moving average (1.34) and continues to remain in the downward trend channel. However, in the short-term it is more of a sideways consolidation that will see a strong breakout in one direction. 1.33-1.34 area is strong resistance and if it is broken on the upside it will signal intermediate term strength for EURO towards 1.38 levels. 1.30-1.305 area is strong support. If the cross rate breaks down the support area we will expect dollar strength in the intermediate term towards 1.25 levels. Until we see that major breakout we continue to watch EUR/USD with a neutral short/intermediate term outlook.

US DOLLAR / TURKISH LIRA (USD/TRY)

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We are getting closer to exciting times in financial markets. In several asset classes we are likely to see sharp movements in the following days/weeks. Low volatility suggests strong moves for the upcoming weeks.

USD/TRY was one of the cross rates that I analyzed back in February.

http://techcharts.wordpress.com/2012/02/13/us-dollar-turkish-lira-usdtl/

At that time the currency pair was testing 1.75-1.76 area (200 day moving average) and I was expecting a rebound. Rebound took USD/TRY to 1.8250 but it was short-lived. In the past one month currency pair consolidated in a tight range. Though still holding above the long-term moving average and the intermediate term trend support, USD/TRY should move in one direction sooner or later. Low volatility on the daily chart suggest high volatility is on its way… The direction is not clear yet but we should closely watch two important levels. 1.81 as a strong resistance and 1.7850 as a strong support. A break above 1.81 will push USD/TRY towards 1.85-1.90 area and a break below 1.7850 will target 1.75 in the short-term.

SUGAR

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Symmetrical triangles are usually regarded as “continuation patterns”. This very common technical chart pattern contains at least two lower highs and two higher lows. Trend lines converge and take the symmetrical triangle shape. Though symmetrical triangles often mark a continuation of the trend, they sometimes mark major trend reversals. A safe way to analyze and trade these patterns is to wait for a valid breakout from the symmetrical triangle.

Sugar has been contracting in a range for the past one year. 200 day moving average has been flat at 25 levels and price has been volatile around the moving average. Over the past one year trend lines converged. Boundaries were at 23.60 and 28 levels. In the past one week Sugar price breached the lower boundary at 23.60 level. This could be the first signal of a multi-month downtrend and a symmetrical triangle marking a trend reversal. Intermediate/long-term technical outlook turned negative. With a stop-loss between 23.60 and 25, we can expect lower prices in the intermediate term. Unless we see the price reversing back above 23.60, negative technical outlook will remain intact.

CORN

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Rising wedge or bearish wedge begins wide at the bottom and contracts as prices move higher. Prices are expected to move in trends and form parallel trend channels. However, when price loses momentum on the upside, it fails to reach the upper boundary of the trend channel. This type of price action is due to sellers being more aggressive than buyers. As a result bearish wedge pattern forms with contracting trend lines. Opposite is true during a downtrend where price fails to reach the lower boundary of the trend channel and forms a falling wedge (bullish wedge).

Since October 2011, Corn price has been moving upwards in a choppy trading range. The slope of the uptrend is extremely weak and suggests a possible “major” breakdown to lower levels in the following weeks. Over the past 6 months corn has formed a bearish wedge pattern and failed to stabilize above the long-term moving average (200 day exponential moving average). RSI has also failed to sustain its move above 50 levels. Technical data suggest lower prices towards 500 levels in the coming weeks/months.

ARGENTINA MERVAL INDEX

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Symmetrical triangles usually form during a trend as a continuation pattern. There are instances where symmetrical triangles mark trend reversals but in general they are part of a larger trend as a continuation pattern.

Symmetrical triangle on Argentina’s MERVAL index is one of those continuation patterns. Index broke down the lower boundary at 2,630 levels and since then it has been sharply lower. Since 2009 MERVAL had a good run. We are probably in a counter trend that is correcting the previous uptrend (827-3,680). 50%-62% fibonacci retracement levels are at 2,270 and 1,920 levels respectively. We should expect continued weakness after such breakdowns and this weakness is likely to pull the index towards the support area between 2,270 and 1,920.