Breakouts on Gold, Silver, Oil & Key Forex pairs - Weekly Outlook
By: Mary McNamara - Market Analyst
Last week: I'd questioned last week if there was more puff in this Christmas rally and this turned out to be the case! There were numerous trend line breakouts across Forex pairs, yielding many hundreds of pips, and stocks have continued with their rally. There have been new breakouts from long-term technical patterns on both the EUR/USD and Gold so watch for any follow-through with these. There are still two more trading days before month and year end so I'll be watching with interest, like the rest of the planet, to see if there is even more to run with this bullish 'risk on' momentum. This is my final weekly update before 2020 so I wish everyone a Happy and prosperous New Year.
Market updates: The analysis in these weekend updates covers a range of markets and trading instruments. It is the opinion of the author that traders are well advised to keep abreast of the major themes driving different sections of the market at different times, even if they only trade one asset class. For example, it is worth understanding how risk appetite compares across different sections of the market; stocks, currencies, Bonds and commodities, to see if there is any alignment as the flows with one of these can impact flows in other spaces.
Trend line breakouts: There were quite a few trend line breakouts following on from the charts posted in my last weekly update. This is most encouraging given that Forex moves, on many currency pairs, have been few and short lived over recent months. Breakouts from last week's chart patterns gave over 800 pips and include the following:
- Gold: a Bull Flag trend line breakout for 300 pips:
- EUR/USD: a descending wedge trend line breakout on Friday for 40 pips. This is a significant break of trend line as it marks a 22-month descending wedge breakout:
- AUD/USD: a triangle trend line breakout for 70 pips:
- AUD/JPY: a triangle trend line breakout for 85 pips:
- GBP/USD: a breakout from the 1.30 level; currently near 75 pips:
- NZD/USD: a triangle trend line breakout for 90 pips:
- GBP/JPY: a wedge trend line breakout and move above 141.50 for 200 pips:
This Week: (click on images to enlarge):
- DXY: US$ Index: The US$ index closed with a bearish weekly candle BUT there is still potential for a Bull Flag here. Traders need to also watch for any bearish Death Cross on the daily chart. This is where the 50 SMA crosses below the 200 SMA. It is also worth noting that the FX Indices are currently aligned for 'risk on':
DXY weekly: watch for any Bull Flag:
DXY daily: watch for any Death Cross:
- New Year period: Updates will be brief over the next week or so due to the New Year holiday period.
- Silver and Gold: both metals have made trend line breakouts since my last weekly update and I posted an article midweek on this topic. Note that Gold has finally made a breakout from the Bull Flag that had been brewing for around 4 months.
- Brexit and GBP pairs: The GBP/USD and GBP/JPY both printed indecision-style weekly candles. I suspect GBP pairs might remain choppy given the looming Brexit exit date. Information on the Brexit timetable can be found through this link.
- EUR/USD: this currency pair has made a new breakout from a bullish-reversal descending wedge that had been brewing for almost 2 years! Watch to see if there is any bullish follow-through.
- NASDAQ: Back in 2016 I was mapping the NASDAQ for a potential bullish continuation Ascending Triangle, or Cupping pattern, breakout above the 5,200 level. One of the chart's I posted on Twitter from 2016 is reproduced below and shows the first monthly candle close above the key 5,200 level. The Height of the Ascending Triangle / Cup was around 4,000 points and so the target for this breakout move was posted as 9,200 (5,200 + 4,000). We're almost there now!
NASDAQ monthly: new Ascending Triangle / Cup pattern breakout: chart posted in 2016:
NASDAQ monthly: Ascending Triangle / Cup target almost reached:
- NASDAQ-100: NDX monthly: The NASDAQ-100 has now completed its breakout from a bullish Cupping pattern. A Twitter chart post from back in early 2017 can be found through this link. The target for the breakout above 4,900 was 8,600 ( 4,900 + 3,700):
- DAX: The DAX has continued with its bullish triangle breakout but printed a bearish coloured Spinning Top weekly candle. This is an Indecision style candle as price action consolidates under the previous High, circa the 13,600 level.
- Russell-2000: the bullish breakout on this 'Canary in the Coal Mine' continues so watch for any push to the previous High, near 1,750. The index closed with a bearish-coloured Spinning Top weekly candle BUT watch for any push up to 1,750:
- XLF monthly: The Financials ETF is still looking ripe for a bullish ascending triangle breakout as it closed just below the $31 breakout level. Watch the $31 level for any new breakout:
- Emerging Markets: The Emerging markets are often the first to suffer in any economic downturn. No sign of this at the moment though with a bullish triangle breakout in progress and note the close above the $45 S/R level! Watch for any push up to the 61.8% fib, circa $47.
- Copper weekly: Copper is often a metric used to gauge the health of the economy and note the recent uptrend here. Watch for any breakout on this long-term triangle with Copper:
- VIX weekly: the Fear index closed with a bullish-coloured Spinning Top weekly candle but is still below 14.
S&P500: SPX: Like last week, the S&P500 closed with a bullish weekly candle, at a new all-time High and above the key 3,200 whole number level which is keeping the 3,300 in focus ahead of the end of year close.
The index closed at 3,240 and so that will be the level to watch for any new make or break. (MT4 version shows a close below this but the official S&P500 index close was at 3,240.02).
Bullish targets: any hold above 3,240 would bring the 3,300 into focus.
Bearish targets: any break below 3,240 would involve a break of the 4hr chart support trend line and would bring 3,200 followed by the weekly support trend line into focus.
- Watch for any new make or break at 3,240:
Bonds: TLT Bond ETF: The Bond ETF printed a bullish-coloured Spinning Top, and almost Inside, weekly candle reflecting ongoing Indecision.
Price action remains in a weekly / daily triangle so watch the trend lines for any new breakout. The flow into 'safety-haven' bonds has been in a downtrend for the last few months but the longer term trend remains upward. This recent downtrend in Bonds parallels the recent uptrend in stocks, which is not surprising.
NB: My charting software still has a bullish Wave 5 in play on the weekly chart so I'm keeping an open mind here.
Bullish targets: any bullish trend line breakout would bring 144 and 150 into focus.
Bearish targets: any bearish break below the daily/ weekly support trend line would bring the daily / weekly chart's 61.8% fib, near 126, into focus.
- Watch for any new triangle trend line breakout:
ASX-200: XJO: The next two trading days will be very important for the ASX-200 as traders will be watching to see if there can be a monthly and yearly close above the previous all-time High level of 6,893.70.
The index closed the week with a bullish coloured Doji weekly candle, reflecting indecision, as price action continues to struggle under the previous all time intra-day High level of 6,893.70 and the pre-GFC High of 6,851.50.
There is new triangle on the 4hr chart giving traders trend lines to monitor for any new breakout.
Bullish targets: Any bullish 4hr chart triangle breakout will bring 6,850 followed by the previous all-time High, circa 6,893.70, and, then, 7,000 into focus.
Bearish targets: Any bearish 4hr chart triangle breakout would bring the daily chart's support trend line followed by 6,000 into focus as the latter is near the daily chart's 61.8% fib.
- Watch for any 4hr chart triangle breakout:
Gold: What a huge week it was for Gold! Finally, a breakout from the Bull Flag pattern that had been brewing for around 4 months! Remember that this Bull Flag was a consolidation pattern that formed up under the weekly chart's 61.8% fib, circa $1,600.
The precious metal closed with a large, bullish weekly candle and about 300 pips ($30) up from the Bull Flag. Recall that the length of the Flag pole here is about $300 and, according to technical theory, this could be the expected move on any bullish Flag breakout. This Bull Flag breakout now brings the $1,780 region into focus, being the target of the $300 Flag pole above the $1,480 breakout level, and this is up near previous S/R for added confluence:
Gold weekly: new Bull Flag breakout:
Price action consolidated towards the end of the week and this is giving the 4hr chart its own new Bull Flag! The Flagpole here is about 350 pips ($30.50) and so any breakout would bring the $1,550 level into focus (see 4hr chart).
Bullish targets: any 4hr chart Bull Flag breakout would bring $1,550 and $1,600 back into focus on the way to the longer-term Bull Flag target $1,780 level.
Bearish targets: any bearish 4hr chart Bull Flag breakout would bring $1,500 and, then, the recently broken 4-month Bull Flag trend line.
- Watch for any 4hr chart Bull Flag breakout:
Oil: Oil closed with a bullish weekly candle and still above the recently broken 12-month bear trend line.
The hold above $60 and this 12-month bear trend line is bringing another bear trend line into focus; this one is of 10-year duration and so is quite significant. Note how this 10-year trend line cuts in just below the $70 S/R region (see green trend lines on weekly chart).
Price action closed just above $61.50 and so this will be the level to watch for any new make or break. Note how the weekly chart's 61.8% fib is just above this level, circa 63 so that would be a first target for any bullish continuation move.
Bullish targets: any hold above $61.50 would bring the weekly chart's 61.8% fib, circa $63, followed by the 10-year bear trend line and the $70 S/R region into focus.
Bearish targets: any retreat below $61.50 would bring $60, $58 and, then, $55 back into focus.
- Watch $61.50 for any new make or break.
EUR/USD: The EUR/USD closed with a bullish, almost 'Engulfing', weekly candle, above 1.11 S/R but just below the 1.12 S/R region making the latter the one to watch for any new make or break.
More importantly though, the EUR/USD has made a breakout from the long-term descending wedge pattern so traders should watch for any bullish continuation from this pattern as the target for this breakout move is the daily chart's 61.8% fib which is up near 1.20 S/R.
Note how there has been an uptick and breakout with bullish momentum on the daily chart.
Bullish targets: any break above 1.12 would bring 1.13 and other whole-number levels into focus on the way up to the daily chart's 61.8% fib, near 1.20.
Bearish targets: any bearish hold below 1.12 would bring 1.11 and 1.10 back into focus.
Watch 1.12 for any new make or break:
AUD/USD: The AUD/USD closed with a bullish weekly candle and continues to move higher following the recent breakout from the 23-month bullish-reversal descending wedge. I'm also noting that there has been a breakout with bullish momentum on the weekly chart. Recall that this wedge has the 61.8% fib up near 0.76 and so this would be the longer term target with any bullish continuation.
Price action continued on with this bullish wedge breakout last week but, also, broke up from a more recent 4hr chart triangle, such that the Aussie is currently trading just under the major 0.70 S/R level making this the one to watch for any new make or break. The monthly chart reveals the significance of this 0.70 level.
Bullish targets: Any bullish breakout above 0.70 would bring whole number levels on the way up to the weekly chart's 61.8% fib, near 0.76, into focus.
Bearish targets: Any bearish hold below 0.70 would bring the 4hr chart's support trend line, followed by 0.69, into focus.
- Watch 0.70 for any new make or break:
AUD/JPY: The AUD/JPY closed with a bullish weekly candle following on from the recent breakout of a 12-month triangle pattern and I now note an uptick with bullish momentum on the weekly chart which is rather encouraging.
Price action also broke out from last week's, smaller, 4hr chart triangle bringing the 77 level into greater focus. However, the AUD/JPY closed just under the 76.50 level and so this will be the one to watch for any new make or break.
NB: Traders need to be mindful of the whole-number 80 level above as this aligns near the next major bear trend line; a trend line of 5-years duration and near the weekly chart's 50% fib level.
NB 2: as per previous weeks, AUD/JPY traders should keep an eye on the broader stock market as this currency pairs often trades in tandem with stock market sentiment.
Bullish targets: Any bullish break above 76.50 would bring 77, followed by whole numbers on the way to the weekly 50% fib, being near the 80 S/R level and a 5-year bear trend line, into focus.
Bearish targets: Any bearish hold below 76.50 would bring the 4hr chart's support trend line followed by 76 and 75 S/R into focus.
- Watch 76.50 for any new make or break:
NZD/USD: The NZD/USD closed the week with a large, bullish weekly candle and just above the 0.67 level. This is quite an important S/R level as the monthly chart below reveals.
More importantly though, price action is now trading just under the 5-year bear trend line giving traders levels to watch for any breakout. Note, also, the uptick with bullish momentum on the daily chart so watch for similar on the weekly chart.
Bullish targets: any breakout move above the 5-year bear trend line would bring whole-number levels on the way up to the weekly chart's 61.8% fib, near 0.70 SR, into focus.
Bearish targets: Any bearish break back below 0.67 would bring the 4hr chart's support trend line followed by 0.66 into focus.
- Watch the 5-year bear trend line for any new make or break.
GBP/USD: The Cable closed with a bullish coloured Inside and Spinning Top weekly candle with both reflecting Indecision. Traders need to remain cautious with GBP pairs and keep abreast of Brexit news.
Price action last week shaped up in a 4hr chart bullish-reversal descending wedge and, subsequently, broke up and out from this pattern for about 75 pips. It closed the week above 1.30 keeping this as the region to watch for the next new make or break.
Bullish targets: Any continued 4hr chart wedge breakout above 1.30 would bring 1.32 into focus as this is up near the 4hr chart's 50% fib.
Bearish targets: Any bearish break below 1.30 would bring the support trend line followed by the recent Low, near 1.29, and then 1.28 back into focus.
- Watch for any continued wedge breakout move:
USD/JPY: The USD/JPY closed with a bullish-coloured Doji weekly candle, yet again, reflecting indecision.
Price action hovered all week near the weekly 200 EMA keeping this as the region to watch for any new make or break.
Bullish targets: Any bullish move above the weekly 200 EMA would bring 110 into focus.
Bearish targets: Any bearish hold below the weekly 200 EMA would bring 109 and 108.50 back into focus.
- Watch the weekly 200 EMA for any new make or break:
GBP/JPY: The GBP/JPY closed with a bullish coloured Spinning Top weekly candle but still holding above the recently broken 50-month bear trend line.
I've mentioned over recent week's that 140 is strong S/R and the GBP/JPY pulled back down to this region but support from this S/R zone has held thus far. However, caution will be needed as Brexit negotiations continue and another test of this major region is not out of the question.
Price action broke out during last week from a 4hr descending wedge pattern and closed just above 143 S/R making this the one to watch for any new make or break. Any bullish continuation would bring the 4hr chart's 61.8% fib into focus and this is near the 146 and weekly 200 EMA level.
Bullish targets: any hold above 143 would bring the 4hr chart's 61.8% fib, circa 146, into focus.
Bearish targets: any bearish break below 143 would bring 141.50 followed by 140 into focus.
- Watch 143 for any new make or break:
Analysis written by Mary McNamara, Market Analyst from Tradecharting.com