Good afternoon traders. Well another week is now beginning and let's take a look at what is on the radar screen.
Last weeks soft close by the S&P's (1629) was certainly out the norm - I mean equities only go higher with 'The Bearded One' at the helm - right? Kidding aside, the move lower off the May 22nd highs is likely just part of a long overdue correction. It is certainly possible prices could move lower towards 1604 (minimum downside target if wave count is correct) while a move back above 1637 creates overlap and gives the bulls reason for hope.
I could do all sorts of further scenario analysis, but the fact is, the S&P's are not as key recently for FX markets as is the Dollar Index (DXC). This index is not only a bit cleaner in terms of the price structure/wave count but is far better correlated with the likes of EUR/USD, AUD/USD and NZD/USD.
DXC: broke down off the May 22nd highs and while some minimum Fibonacci support levels have contained the drop, the action off the May 30th lows is not convincing me just yet that a low is in place. Additionally, some of the momentum studies (triggered May 30th) I also rely on are suggesting the bears have control for the time being.
EUR/USD: the rally off the May 22nd lows is not impulsive and last week's break above 1.2997 suggests momentum/directional change could be in the works.
USD/JPY: benefit of the doubt goes to the bulls unless the 99.87 level gives way. For now I am neutral on this pair.
AUD/USD: the downtrend remains intact, no reason to look for picking a bottom at this stage. However, looking for shorts in and around current levels is not advised either.
AUD/NZD: this is the FX cross I find most interesting presently. It has been a solid downtrend since mid-March, yet on May 31, price action triggered some fresh upside momentum that may have legs. Additionally, the move above 1.2030 gives further ammo to the bulls.
EUR/NOK: last, but certainly not least, our orders to get long in EUR/NOK at 7.6435 remain in place and if EUR/USD can begin to make a move higher early in the week - this cross could catch a nice bid higher.
As always, there will be some twists and turns - but that is trading, but if you lack a plan you know the odds of making money are greatly reduced.