Directional Moves to Start?

Friday may have signalled a change in the structural conditions in the 30-year bonds and the US dollar. As for the US stock indices, I suspect this week will tell us whether the short-term trend is likely to change.

Today, I’ll talk about the US dollar and the 30-year bonds.

The chart below shows the six currencies that I follow for the USD crosses.

We see that:

The USDJPY is the strongest. It has a confirmed breakout from a 3-bar congestion pattern.

The next strongest is the USDCAD. Again, we have a breakout from a 3-bar congestion pattern. Normally I would ask to see a second bull bar; however, Friday’s bar was so strong that I have no doubt we shall see a breach of the highs at 1.3390.

Then, we have the EURUSD and AUDUSD both showing similar patterns. On Friday, we had a marginal breakout from a 3-bar congestion pattern. However, today’s opening turned the marginal breakout into an extension of the lower boundary.

Given Friday’s price action:

• A daily bearish conviction close in the AUDUSD below 0.7078 will trigger a 3-bar congestion breakout.
• In the EURUSD a daily bearish conviction close below 1.1361 also will trigger a 3-bar congestion breakout.
• The hard stop in each case will be above the upper boundary. The soft stop will be a daily close back into the boundaries of congestion.

Finally, we have the NZDUSD (within a 12-month 3-bar congestion) and the GBPUSD (RePo sell signal will be confirmed on a daily bearish conviction close below the Primary Sell Zone at 1.3192).

The next chart is the 30-year bond (CFDs).

The price action on Friday triggered a sell signal (rising rates). If the signal proves valid, it’s signalling a rising rate environment which is bullish for the USD.

Tomorrow, I’ll consider the US stock indices.

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