Many stock markets and currency markets have been trading in a sideways direction for an extended period of time, some since the beginning of this year. The four hour chart for the dollar index below, shows the sideways pattern for the last three months since the middle of January.
When we look at the daily chart below going back over one year, we can clearly see the bear trend. The last three months sideways trading pattern, appears to be a consolidation of this negative trend. Confirmation of this came at the end of last week as we topped exactly at the 23.6% Fibonacci resistance, and the more important 13 month downward sloping trendline, intersecting around the 90.50 area. Note how the blue 100 day moving average is hovering just above that trendline, adding a further layer of resistance. It would appear this time around, that the challenge was just too great as the dollar index heads back towards the middle of the three month range.
The AUDUSD pair has been trading in a very gently upward sloping channel for over two years now as you can see in the daily chart below. At the beginning of this month we bounced nicely off important 500 day moving average & double Fibonacci support at 76.40/76.30. This level was just above the more important 27 month rising trendline support. Now, bulls are faced with an important barrier in the form of the 100 and 200 day moving averages, which have really flattened out in recent months, to reflect the lack of direction in this market over the past year.
NZDUSD showing a clear sideways pattern for most two years in the daily chart below. A break above the eight month trendline resistance at 73.80/73.90 allows us to retest the high for this year at 74.36... But this only gives us a 50 Pip profit potential. Obviously if holding longs, the profit potential is much greater. If we can beat this year’s high targeting 74.85 before the high for last year at 75.58.
If we try shorts at the 8 month resistance level, we have an initial profit potential of 90 pips, as we target the first support level of 72.90/80, before much better support at the 38.2% Fibonacci & 100 and 200 day moving averages at 71.90/71.80. The support level certainly done only the job so far this year, marking the low of the three-month range.
USDJPY has been trading sideways for the last two months, but is showing an interesting pattern. There is an argument for not just one, but two potential inverse head and shoulders patterns. I have drawn the necklines in the four hour chart below.
If I’m right about these patterns and we break above 107.50 we have a measured target at 109.90/110.00, although at the pace these markets are moving, it could take two months to get there. If the pair was to break below 106.20, it less likely that these patterns are reliable.
EURUSD is another candidate for of the ‘best sideways market of the year’ as we hold a 400 Pip range for the last three months.
The monthly chart really shows why we have been unable to rise any further. Strong resistance from the 100 and 200 month moving averages intersecting with the longer term, 38.2% Fibonacci resistance in the low 1.2500 area has stopped the bulls in their tracks.
However, the sideways action in recent months means neither bulls nor bears are winning at this stage.
The four hour chart for gold clearly shows the sideways channel developing since the beginning of the year. Bulls need a break above the three month trendline resistance at $1351/53 and then the March high at $1356/57 to start to take control.
But then as you look further out on the weekly chart for gold, we see there are greater challenges from the three-year trendline at $1361/1362. Bulls will need a clear break above the 2018 high of $1366 and then the 2016 high of $1375 before they can test the 2014 high of $1391/1392. It is only above here that bulls really have longer-term control of the precious metal.
The daily chart for silver shows a triangle pattern as the ranges decrease over the last year, the message reinforced with sideways trending moving averages. More recently over the past 2 to 3 months, the market has held a range of 90 points only. Around the midpoint of the triangle, we have 100 and 200 day moving averages in the $16.60/$16.75 area. Bulls need to push the price up through the $17 mark to target 500 day moving average and one year upper trendline of the triangle at $17.35/17.45. It will take a break above this year’s high at $17.70 for longer-term buy signal. Important support comes in the form of the 61.8% Fibonacci, 8 month trendline and 200 month moving average at $16.10/$15.90.
There’s therefore need a sustained break below here, but we run into further strong support from a 14 year trendline at $15/$14.90.
-Jason Sen-
www.daytradeideas.co.uk