S&P 500
The S&P 500 continues to be very noisy, and this past week has seen it test the 7,000 level and even break below the 6,800 level before turning around. Ultimately, this is a market that still looks very much like an index that’s trying to sort out where to go next and that makes perfect sense considering that we are in the midst of earnings season.
Ultimately, this remains a bit of a buy on the dip bounce. I think it brings more FOMO into the picture. If the S&P 500 can break above the 7,000 level, then the S&P 500 will probably continue to go much higher. I do think that’s the case, but in the meantime, things might be a little bit noisy.
EUR/USD
The Euro has been very noisy during the week as we are testing the 1.18 level, an area that previously had been resistant. The previous week was a horrific looking shooting star, so we are still in a phase of questioning as to whether or not the Euro really can take off to the upside.
If we break down below the bottom of the candlestick for this past week, I think we could go looking to the 1.16 level, just re-entering the consolidation phase. Ultimately, I expect to see a lot of noisy behavior, but over the longer term, there are still a lot of questions as to what the ECB’s going to do and of course whether or not the Federal Reserve is going to cut rates quick enough and perhaps satiate the market. All things being equal, I’m pretty neutral on this pair.
USD/CAD
The US dollar rallied against the Canadian dollar but struggles at the 1.37 level again. It’s sitting right at the 200-week EMA and had formed a hammer during the previous week, so we’ll have to see whether or not the buyers can push this thing higher.
From a technical analysis standpoint, it does look like a very interesting area to get long and the interest rate differential does favor the US, although I think this is more the purview of short-term traders and I would not be looking for massive moves anytime soon because quite frankly that’s not what this pair does most of the time anyway.
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USD/CHF
The US dollar has rallied a bit against the Swiss franc to break above the 0.78 handle, a large round psychologically significant figure that a lot of people will be watching. I’m particularly interested in this pair because of the hammer that formed last week and the fact that the Swiss National Bank continues to complain that they do not like the strengthening Swiss franc.
If that continues to be the case, they will eventually get involved and intervene, sending this pair and anything else denominated in Swiss francs higher as they devalue their own currency. It’s a positive swap to go long, but it’s also going to be a difficult path higher, so keep that in mind.
USD/MXN
The US dollar has been all over the place against the Mexican peso as the 17.50 level continues to offer resistance. That being said, the 17 pesos level below is probably going to be your short-term target.
There is a lot of support underneath from a long-term standpoint, so we’ll have to see whether or not we can break down below there. As things stand right now though, it is still a nice carry trade, at least for shorter-term traders. This week probably ends up being just as choppy as the previous two, so I’m not expecting massive moves here.
DAX
The German DAX has been bullish most of the week, but it still struggles with the 25,000 level. If we can break above that 25,000 level on at least a daily candlestick if not a weekly one, then I think that opens up the German index to go much higher.
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Quite frankly, I think that happens eventually. This is not the type of market that I believe you can short; it is going to get a lot of support from the German government given enough time as they are just throwing money into the economy. So, I like the idea of buying dips in the DAX.
USD/JPY
The US dollar has performed quite well against the Japanese yen this week despite the fact that recently we had some type of intervention. The 158-yen level is a massive level on long-term charts, and I think that’s something you really have to pay close attention to because this area goes all the way back to May 1990.
If we can break above the 163-yen level because there’s on the monthly chart a big, huge area here, this thing could go as high as 250 yen before it’s all said and done. I don’t expect this coming week, but that’s what I see longer term with the yen unless something changes quite drastically.
GBP/USD
The British pound has been all over the place during the trading week and it looks like we continue to see a lot of resistance at the 1.3750 level again. Breaking below the 1.35 level would be very bearish for the British pound against the dollar and probably send the pound down to the 1.30 level.
Ultimately, I don’t know if the US dollar has bottomed out, but it’s certainly starting to look like it’s going to give some attempt to make that happen. This is going to catch a lot of people on the wrong side of the market if it is.
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