Renowned FX market expert Eddie Tofpik looks at how the majors will fare during election week.
By Eddie Tofpik, Head of Foreign Exchange, ADM Investor Services International Limited
When I wrote this next piece last month…in my heart I really didn’t think it would actually come about…yet I felt obliged to draw your attention to it as I would otherwise not have been sincere or living up to the standards accepted as a Technical Analyst…’Ultimately, scenario 3) would look to a target somewhere around 1.1250…a quite stark prospect.
So which is it likely to be…well…it’s too early to say yet, though I would point out two key current factors. A) The lagging indicator effect – all MAs are pointing down and b) the Jul 2014 – Aug 2015 Bearish Schiff Pitchfork which is still running the market. In this Pattern we could see prices down to 1.2500 during Oct on the Lower Tine (currently 1.2562) and still maintain a gradual decline rather than a steep fall as the HH or ST/C may suggest. Overall, would suggest further bearish activity and watch the action should we get to 1.2796.
On the 4th of Oct we broke down through 1.2796…then on the 7th of Oct we had the ‘Flash Crash’ & I’ve a low on the Daily Chart of 1.1447…not too far from that 1.1250 I was so reluctant to publish.
Since then we’ve recovered & even seemingly made a Possible Double Bottom with the recent action and with potential to 1.2600 on the Upside. We’re back over the Key 50% Fib of the Flash Crash move (1.2447) & closed last Friday back over the old Lower Tine of the Jul 2014 – Apr 2015 Schiff Pitchfork (currently 1.2432) a second consecutive close and also within 17 tics of where I suggested we could see prices last time (see above). So what now? Well again to be honest…this isn’t really that much.
We’re where we ought to be if we’d had no Flash Crash. Three out of Four MAs still point lower & are above the market.
The Weekly Chart has seen two Indecisive Doji Crosses followed by a move up this week…so that is positive I suppose. Going back to the Daily Chart above, it can be seen as significant that we’ve had our first close above the Sep-to-date Downtrend (currently 1.2429) and I can see a recovery to perhaps the 1.2800 area…but we’re still within an overall Bearish scenario. Support 1.2447 – 1.2429(dynamic), 1.2329, 1.2270, 1.2211, 1.2112, & 1.2081. Resistance 1.2600, 1.2683, 1.2812, 1.2863, 1.2914, 1.2993(dynamic), 1.3058, 1.3120 & 1.3233. With all this, the bullet point stays the same…mildly Bearish…we’d need consecutive closes over 1.3233 to look to turn it neutral.
On Crossover days here I’ve come out 1 from 2. I wrote last time ‘I would point out two additional significant items; I have circled Crossovers of Tines on the Daily Chart. The first is this Friday, hardly surprising as it is NFP Friday. The second is on the 19th …not in itself an outstanding day at this time but I would suggest that such Crossover days are significant in market action and also possibly beginning/end of Trends… caution!
Friday was indeed NFP Day & more interestingly the GBPUSD Flash Crash day which had the impact here of clearing up the Daily Chart above nicely. Since the Flash Crash we’ve gradually eked our way lower and managed to achieve 1) a Bearish Andrews Pitchfork over the Oct action, 2) closed twice consecutively below the Jun-to-date Uptrend (currently 0.8948) & 3) managed (just) a Key Reversal Down on the Weekly Chart.
As for the other date…the 19th…nothing…just an Indecisive Doji Cross that didn’t indicate much at the time or since. So where now? Well, the action recently, though Bearish, has not managed to impress that much as we are still over the Key 50% Fib of the recent move at 0.8848.
I grant you that the KR Down on the Weekly Chart is good for Bears but all MAs bar one still point upwards and you’d need to have consecutive closes below 0.8482 just to go neutral. That being said, there is some room for manoeuvre lower should we have consecutive closes below the 0.8848 50% Fib, that would be down to 0.8690 – 0.8725…but even then it’s not saying anything other than just getting back to where we were in early Oct. Support is currently at 0.8848, 0.8725, 0.8690, 0.8586, 0.8575(dynamic), 0.8552, 0.8482, 0.8416, 0.8330. 0.8273 & 0.8200(dynamic).
Resistance is currently at 0.8948, 0.8970, 0.9008(dynamic), 0.9048, 0.9057, 0.9140 & 0.9366. Given these points, the bullet stays mildly Bullish for the while…expecting a pullback down but not convinced of its strength.
As expected from my Neutral bullet point above last time…nothing much initially happened. It was only after the 10th of Oct when we had our first close below the key 1.1139 level that things started happening…especially followed by the second consecutive close & then we were away lower with two Key Reversals Down swiftly thereafter, one on the 14th & the other on the 20th. It looked like we may try lower still till we turned around with a KR Up on the 25th followed since by rapidly ascending markets.
Then last Friday we started the real testing back up, First close over the Key recent 50% Fib at 1.1107 plus the first close over the Key 50% Fib of the whole 2015 move at 1.1125 & testing though not yet closing back over that old Key 1.1139 Fib. We also have as a result of the action, a Pipe Bottom on the Weekly Chart and we’ve managed to close for the first time back over the Medium MA (currently 1.1130). In the meantime the MAs have also had some interesting patterns.
First off, we’ve a potential Bearish Dead Cross of the Short/Medium MA down through the Medium MA…that may happen as soon as Monday. Secondly, we have a potential (though not perfect) Bearish Bow Tie formation of the Short/Medium, Medium & Long MAs.
This happened about the 13th and by normal counting should start to kick in between the 3rd – 10th of Nov…i.e. about now. However, though the order of entry & exit is good, the Long MA has maintained the rise post crossover…which tempers considerably the pressure lower…so watch out for that one this coming week. Finally, I would just once again like to point our 1.1139…this level is key. Any try higher has to be effective through this area and though we’re back at neutral, we have Bearish pressure above that is coming closer to the market each day.
The Bullish bounce back from 1.0847 was good but it doesn’t look too sustainable just yet, therefore caution! Support is currently at 1.1130, 1.1125, 1.1107, 1.1070, 1.1045, 1.1018(dynamic), 1.0986, 1.0857 & 1.0847. Resistance is currently at 1.1139, 1.1168, 1.1181(dynamic), 1.1209, 1.1218(dynamic), 1.1231, 1.1250, 1.1263, & 1.1277(dynamic). For the moment the bullet point above stays in neutral.
To reprise a portion of my comments from last month ‘Given recent action, I suggest it entirely appropriate for a test lower back to the 0.7488 – 0.7492 Support previously mentioned along with Medium MA (currently 0.7502). Yet if we halt there and reverse as is entirely likely then the Downtrend will be tackled once again.
In which case look out for selling ahead of it and stops above with further stops above 0.7756.’. Well…we did fall and halted just as we touched the Support at 0.7504 before turning up…& you’ve guessed it…broke the back of the Downtrend (now removed) but not enough to threaten the recent high at 0.7757.
Since then we’ve moved back and forth till we’ve ended up 16 tics higher than last time…which is I suppose a small vindication for the mildly bullish bullet point above. Nevertheless, there are some things to note in this recent action. The most obvious is the potential Ascending Triangle Pattern formed since Sep that’s seen pretty constant highs between, 0.7710 – 0.7757 and increasingly higher lows as time has progressed. Next comes the Medium Fib (currently 0.7581) which has given the Angle of Attack of the market & some perforated support.
These have been complimented by the perforated & somewhat optimised Uptrend (currently 0.7584) and the Lower Tine of the Bullish Jan – May Schiff Pitchfork which has also done a nice job of defining the Angle. Topside, the resistance is ragged but within the band previously mentioned.
I’ve given an initial ‘X’ at the potential target level for any AT…something around 0.7975 area & I decided to place it around where the Middle Tine intersects this level…just in case…early Dec…though I make no claim on the timing. Support is currently 0.7650, 0.7635, 0.7598, 0.7581(dynamic & combined), 0.7570 – 0.7560, 0.7534(dynamic), 0.7494 – 0.7488(dynamic & combined), 0.7448 & 0.7406. Resistance is at 0.7708, 0.7734, 0.7757, 0.7765, 0.7835, 0.7926(dynamic) & 0.7943.
The bullet point stays the same Mildly Bullish as though all MAs point higher & the market’s above them all…the AT has not hit in yet…if it ever does, so caution.
Finally… This past month the market broke the Bearish pressure from the May – Jul Schiff Pitchfork (now removed from the Daily Chart above) and rallied up through the recent 50% Fib (103.27) until a week last Friday prices tested over the Upper Tine of the recent Schiff Pitchfork (currently 105.15) …and failed to go higher with a Key Reversal Down and at the same time echoing almost to a point, my cautionary comment from last month ‘Now as you are aware, I suspect KRs in any JPY pair.
However, it seems the KRs Down at this point in time have a greater validity than KRs Up…so watch out for them, especially near the Tines.’ and moved the market into…neutral. We’ve just had the second close below the Aug – Sep Bullish Andrews Pitchfork…so I guess I’m going to can that one next time & we are currently resting on the Medium MA (currently 102.80) support…plus we’re below (again) the Key 103.27 50% Fib. Though the recent AP may not have merit, I’ll hold off on judging the SP for the moment…though it is basically sideways in angle of attack. With one MA pointing up & one down and two sideways…it seems suitable to move the bullet point above into neutral.
I can also see the merit of the recent action being a Triple Bottom…or even calling it a Quad Bottom…but there is no follow through. If we have consecutive closes below the combined support from the Medium MA & the Centre Tine of the SP (both at 102.80) then it would seem likely a test of 100.74 may be on the cards…but probably not much more. Otherwise, we’ll really struggle to get to 105.00 I suggest. Support is currently 102.80(combined & dynamic), 102.28, 101.40, 101.18, 100.74, 100.58(dynamic), 100.23(dynamic), 100.07, 99.53 & 99.07.
Resistance is currently at 103.27, 103.62(dynamic), 104.26, 105.15(dynamic) & 105.53. We’d need to have consecutive closes over the Long MA (currently 106.72) to even look at going fully Bullish and below 99.07 to even look at going fully Bearish.
I wrote last time about my concern that prices were once again testing resistance and that this time perhaps they might have some success…’…what was the key factor in knocking the market back down then? Was it the Jul high, the Medium MA or the Upper Tine of the AP. I suggest it was a combination of all three as they were available near to each other.
What is more interesting now is that they are now quite disparate, a range of just under 1000 between them. Hence the efficacy as combined resistance to another try higher is greatly diminished & opportunity for any further attempt up to succeed is greatly enhanced.
The potential is there because of the very small 34 tics difference between writing now & writing a month ago…we should be seeing now prices a lot lower if there was any strength to the combination…other than stopping the rise. Hence my concern & the reason why though I’ve a Bearish bullet point (2 MAs Down and 2 MAs Sideways suggest I ought) I’ll nevertheless stick with a question mark on it as I am increasingly of the opinion that it may be suspect.’.
The Upper Tine of the Sep 2015 – Jan 2016 AP (currently 3.1518) assuaged my concerns for most of the month till the week before last when the distance between the Upper Tine, the Medium MA and the Jul high was too much & bolstered by fresh ammunition from the Aug low…prices rose quickly & broke the Upper Tine (I’ve decided to leave it on for one more month on the Daily Chart above) & tested the recent Key 50% Fib at 3.2361 plus the nearby Medium MA (currently 3.2387).
During last week, I was ready to go from mildly Bearish bullet point to mildly Bullish in one action when the action on Friday caused me to pause…it was a Key Reversal Down on the Daily Chart…though you could also say it’s an Indecisive Long Legged Spinning Top Pattern as well.
Nevertheless, closing back below the Medium MA & the 3.2361 Fib has given pause to think & even draw a cheeky little Downtrend from Sep just in case. This doesn’t stop me moving the bullet point above into neutral…we are after all in a wide resistance band 3.2041 – 3.2681 plus one MA up, one Sideways & two are down. It does indeed give time to pause and see if going back up is the right idea. Support is currently at 3.2228, 3.2041, 3.1632, 3.1518, 3.1120, 3.1006, & 3.0854. Resistance is currently at 3.2361, 3.2387(dynamic), 3.2541, 3.2614(dynamic), 3.2681, 3.2984, 3.3675 & 3.3716.
In the commentary you will note immediately following the currency pair there’s a bullet point indicating the TREND. To clarify the comments & notes for this point I’ve prepared a short summary.
TREND UP – Any one or more of the following may occur! Market has turned upwards/risen & is likely to carry on, usually till at least the next Monthly Foreign Exchange Commentary. Moving Averages (MA’s) are pointing higher or have either crossed, formed a ‘Golden Cross’ or based out. Chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) point higher. No appreciable resistance levels (Fibs, Historical, etc…) are noted.
TREND UP? – Any one or more of the following may occur! Market exhibiting signs of exhaustion after a recent rally. Prices may be achieving an upside/downside target level or approaching major/strong resistance. Market may have started/completing a rally/recovery and it may be looking indecisive/going sideways or it is too early to tell in the short, medium or long-term charts. Moving Averages (MA’s) may point higher or have positive crosses but the picture is not conclusive. Some, but not all chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) indicate higher. Appreciable resistance levels (Fibs, Historical, etc…) are noted close to the market.
TREND? – Any one or more of the following may occur! Market exhibiting neither a bias for a rally or a decline. Market is either nowhere near or alternatively caught within narrow bands of support/resistance. Moving Averages (MA’s) point sideways & indicate no immediate likelihood of crossing. No strong chart patterns or trendlines evident. …Sometimes… I frankly haven’t a clue!
TREND DOWN? – Any one or more of the following may occur! Market exhibiting signs of a recovery after a recent fall. Prices may be achieving an upside/downside target level or approaching major/strong support. Market may have started/completing a decline/fall and it may be looking indecisive/going sideways or it is too early to tell in the short, medium or long-term charts. Moving Averages (MA’s) may point lower or have negative crosses but the picture is not conclusive. Some, but not all chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) indicate lower. Appreciable support levels (Fibs, Historical, etc…) are noted close to the market.
TREND DOWN – Any one or more of the following may occur! Market has turned down/fallen & is likely to carry on, usually till at least the next Monthly Foreign Exchange Commentary. Moving Averages (MA’s) are pointing lower or have either crossed, formed a ‘Dead Cross’ or topped out. Chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) point lower. No appreciable support levels (Fibs, Historical, etc…) are noted.#forex, #markets, #trading, #US Election, #volatility