This review will cover markets from earlier posts, and put current price action into the broader context of going into 2021. USD weakness is one of the major themes going into the end of the year, and I believe this will continue to play out into the coming spring and possibly over the next few years.
There are plenty of opportunities taking shape in the Forex markets, both in USD crosses and non-USD crosses, and I am sure more will develop as the primary trend gets underway.
But first let's start out with a broader view of the Dollar Index...
DXY (Monthly)
A pattern emerges when we zoom out and look at the monthly chart of DXY. The DXY appears to be topping, and a completion of that top could commence a multi-year downtrend in the USD.
DXY (Weekly)
I expect a pause and consolidation above 88.00. However, when and if that level is broken, the decline in the USD could really open-up.
EUR/USD
This is a slightly different look at the EUR/USD weekly chart from past posts. I believe the Euro is basing against the USD, and that 1.2500 can be viewed as the boundary line.
The rally in 2017 provided many trading opportunities on the daily chart in the form of flags and pennants. I imagine we can expect the same in 2021.
USD/CHF
The USD/CHF cross is a great example of a long-term consolidation resolving in the direction of the underlying trend established in 2002.
I expect to see more continuation patterns develop on the daily scale as the trend unfolds. This can be said of multiple Forex markets.
CAD$
It's a toss-up between the CAD$ and the NZD$ for most preferred market to short USD. The NZD$ definitely led the way, but as I mentioned last week the breakout in the CAD$ was quite convincing.
Below is the weekly chart of CAD$ futures. A possible double bottom is forming. This market could provide ample trading opportunities in the coming year.
BRICS
Emerging Market Leaders - Brazil, Russia, India, China and South Africa
Included below are each of the BRICS currencies, as well as a custom, equally-weighted index.
Equally-Weighted BRICS Currency Index
I have included the CEW-WisdomTree Emerging Currency Fund in past posts, but I wanted to put together a custom index of BRICS currencies to see if I could glean any additional information.
The custom index looks very similar to the CEW chart, just inverted, and confirms broad market USD weakness.
Brazilian Real
The USD/BRL is forming a massive symmetrical triangle. If this pattern is completed to the downside, then an initial target could lie in the 4.10 - 4.20 zone.
Russian Ruble
The USD/RUB looks to be putting in a double top.
Indian Rupee
The USD/INR cross has the least direction of the BRICS currencies in my opinion. Market participants seem to be trading around familiar levels, waiting for a higher degree of conviction.
Offshore Chinese Renminbi
Target has been met for the double top completed earlier this summer.
South African Rand
Target for the H&S continuation pattern is within striking distance.
Non-USD Crosses
Below are a few non-USD crosses that I believe are important, or may present trading opportunities in the coming weeks and months.
AUD/JPY
I've pointed out the AUD/JPY cross numerous times over the past month, highlighting a possible H&S reversal pattern and its intermarket implications.
One way of approaching this chart is that a 10 year H&S pattern was completed last year, and just fell shy of reaching its measured move this past spring. Now, price is back above the H&S neckline, which is an area that carries an incredible amount of price memory.
Interestingly, there are a number of emerging market stock indexes that have completed tops, reached their targets, and are now nearing or back above broken support. The Philippine PSEI Index is a good example.
GBP/AUD
The H&S bottom in the GBP/AUD could just as easily become a H&S failure pattern. Classical charting patterns only exist as a possibility until completed, and even once completed provide no certainty. The formation of the right shoulder hints at a H&S failure.
EUR/AUD
This could be a great trade in either direction.
AUD/NZD
If I were ever to take a mean reverting trade this would be it. I believe the AUD is basing against the NZD.
EUR/NOK
The EUR/NOK cross may be forming a double bottom. If the pattern forms symmetrically, then we could expect a test of the upper boundary sometime in the spring.
EUR/CAD
This chart could also provide a trading opportunity in the new year. I would prefer to enter a trade in the 1.5740 area versus the grey shaded boundary. The long spindles at the upper boundary of the range depict a volatility I want to avoid.
EUR/GBP
I have included this one in the past and will continue. I think we could have parity in the EUR/GBP in the near future.
If you missed any of the recent breakouts, don't worry. Opportunities continue to develop in Forex markets.
Most importantly, we could see trade set-ups in the form of continuation patterns. This would allow us to trade with the strength of the primary trend, which is always my preference.
Thanks for reading! If you have any questions or comments, please feel free to contact me at ianculley@culleycharts.com
DISCLAIMER: All information and opinions expressed by Culley Charts are strictly that, and should not be construed as investment advice. Market participation comes with inherent risk, and the responsibility of managing this risk lies solely with each individual investor.
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