Technical Analysis charts and strategy from JP Morgan’s FX Markets Weekly after the NFP report on Friday (h/t to you-know-who-are for this report, and many thanks):
There is a lot of charts and text following, including a table of current technical trades (stops and targets etc also). It’s a lot of info, so apologies if its too much, but I tried to present it completely …
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CAD:
- While the medium term trend for CAD remains bearish, the price action over the past week has put a dent in the short term setup. As mentioned in our regular updates, the reversal in USD/CAD from the early -April low suggested the medium term uptrend can extend. This is in line with the effective test and hold of the key 1.09/1.0860 support zone. Again, this area includes the 38.2% retracement of the rally from the September low and is the ideal basing zone. Still, the subsequent rally has struggled against important initial resistance levels while leaving the door open to a retest of the recent lows. We still see the upside bias as the preferred view for a test, if not sustained break of the 1.12 area. However, we recognize that a violation of the April low would alter that landscape leaving USD/CAD vulnerable to an extension into the 1.08/1.07 area which includes the uptrendline from the September low. A break above the 1.1050/80 area would suggest the upside bias is back on track.
- One growing concern for the bearish CAD view is the action on the crosses, as the retracements from the recent lows has developed with a corrective bias as the proximity to critical levels presents an important test for several pairs. In this regard, the corrective retracement from the early April low for EUR/CAD has struggled against initial resistance in the 1.5225/95 zone. Moreover, with the correction developing symmetry with the January -February range, the risk that the pair is forming a potential head and shoulders topping pattern has increased. Moreover, the price action for GBP/CAD suggests a similar pattern, while noting the advance is quickly approaching critical long term resistance in the 1.8700/1.8830 zone. This area includes the downtrendline and 38.2% retracement from the 2004 high.
NZD:
- Despite this, we continue to see upside risks for NZD/CAD. This is in line with the corrective nature of the decline from the March peak, as key support levels in the .9350/00 area have contained the downside for now. Moreover, this week’s bullish reversal amid a short term oversold framework presents an ideal setup for a continuation of the medium term uptrend. Importantly, this is consistent with the renewed bullish setup for NZD/USD, as the reversal from the critical .8514/.8480 support zone suggests a growing risk that the medium term uptrend is back on track. This area includes the lows from April and mid-March, as well as the 38.2% retracement of the rally from the Februarylow. With the advance from this area taking on a clear impulsive bias, we see a growing risk for a retest, if not a break of the April peak. We recognize the risk of a topping pattern if NZD/USD fails at the .8695/.8700 resistance zone (76.4% retracement) but short term momentum studies remain in a favorable setup for additional upside.
- The backdrop for the crosses also argues for additional outperformance. In this regard, AUD/NZD has reversed from the important range highs near 1.0950 while confirming a short term head and shoulders topping pattern below the 1.0770/35 support zone. In turn, we see an increased risk that the cross can see a retest of the range lows near 1.0540/1.0493. We continue to recommend a long NZD position against AUD and CAD. For AUD/USD, the pullback from the critical .9450/.9550 resistance zone remains intact as the short term risks argue for additional downside. Again, this critical resistance zone includes the November peak and the 76.4% retracement from the October high. As important, the late-week decline is consistent with the view for additional downside given the push below the .9228/05 support zone. This area includes the April low and the uptrendline from the late-January low. In line with this break, the focus is now on the .9155/35 support area. As this area represents the 38.2% retracement from the January low, the November breakout area and the 200-daymoving average, violations would likely confirm a deeper retracement into the .8900/.8800 zone.
- Like AUD/NZD, we see an increased risk of further underperformance for other crosses. In this regard, both AUD/NOK and AUD/SEK have reversed from critical medium term resistance levels implying short term tops. For AUD/NOK, the failure at the 5.62/5.63 range highs from December has led to a break of the 5.5560/5.5250 support zone (April low and 200-day moving average) suggesting a closer test of the 5.40 area (76.4% retracement), if not the March low. Similarly, AUD/SEK reversed from the critical 6.25/26 resistance zone and highs from late-June. The subsequent decline implies a growing risk of a deeper retracement with key support in the 5.95/5.92 area confirming the downside bias. Note that we maintain short positions in both.
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