Risk disclaimer

The content in the weekly analysis is based on years of accumulated experience and knowledge of professional fund managers. They shares their views on the weekly economic and market trend with Clients. This is aimed to enhance the Client’s awareness of the economic situation and the market conditions. Clients understand and acknowledge that the purpose of this weekly analysis is to educate and share opinions and not as an investment or trading advice. Clients must be responsible for their own investment and trading results.

Outlook for Week of 1 – 5 November 2021

The trader is a professional trader with institutional experience having worked in both banks and fund management companies.

His educational background is a Bachelors degree in Business Administration with a major in Finance.  His favourite subjects are banking and finance as well as psychology.  These subjects allow him to have an understanding into the behaviour of financial markets.

Treasure trader relies on fundamentals to initiate his trades whether they are trades in currencies, stock indexes or metals.  He then follows up with technical charting to identify entry and exit points where he can maximise returns taking on the appropriate risk.

The technical charting methods that the trader uses is also proprietary and he has developed this unique skill over many decades of observation of the markets.

Treasure trader’s objective is to target returns in excess of 50% per annum by taking on risk of up to 30% annually.

Chart 1A: USD INDEX WEEKLY CHART

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A key reversal in last week’s price pattern could be the signal for a break of the weekly chart resistance at 94.30. Prices were at one point threatening a break of the upward sloping trendline last week but the strong close towards the end of the week has raised the probability now of a final break of the weekly chart resistance. Markets tend to move in anticipation of an upcoming event and this would be in line with an announcement by the Federal Reserve on a tapering in November.

Chart 1B: USD INDEX DAILY CHART

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We had a closing below the support of 93.49 on the daily chart last Thursday followed by a key reversal on Friday. Market participants who took a short position on the close below 93.49 were squeezed out of their shorts on Friday and we could see Dollar index testing the resistance zone between 94.58 to 94.98 next week.

Chart 2A: AUDUSD WEEKLY CHART

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AUDUSD remained strong despite strengthening of the Dollar last Friday. We are mindful of the neckline resistance of AUDUSD at the 0.7530 level and if Dollar is to continue its strength next week, we could see AUDUSD struggling to break above this resistance level.

Chart 2B: AUDUSD DAILY CHART

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AUDUSD has remained strong despite strength in the Dollar and as such we remain neutral on AUDUSD at current levels. In our view AUDUSD is just as likely to trade towards resistance at 0.7651 or make a pullback towards daily chart support zone between 0.7403 to 0.7436.

Chart 3A: GBPUSD WEEKLY CHART

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GBPUSD failed to trade above the downward sloping trendline which remains a resistance and is now threatening to trade below a neckline of a Shoulder Head Shoulder Pattern. The neckline support is at 1.3680 and we could see renewed selling of GBPUSD once it trades below this level.

Chart 3B: GBPUSD DAILY CHART

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We are currently neutral on GBPUSD. We see a trend of lower highs depicted by a downward sloping trendline which seems to indicate selling pressure but during the last break of GBPUSD below its daily chart support zone, we also saw a short squeeze followed by a rally. So for GBPUSD there is clear selling interest above 1.3800 while at the same time there is strong buying interest below 1.3500.

Chart 4A: EURUSD WEEKLY CHART

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We had a short squeeze on EURUSD the week before but it was contained below the downward sloping trendline which acted as a resistance. Last Friday we saw EURUSD close below 1.1602 again which makes it more likely to continue its downward path.

Chart 4B: EURUSD DAILY CHART

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EURUSD traded back towards its resistance zone between 1.1630 to 1.1691 last week but had a strong sell-off last Friday. Based on the pattern, probability seems skewed for EURUSD to continue a path lower.

Chart 5A: USDJPY WEEKLY CHART

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No change in view for USDJPY. The weekly chart looks bullish and with comments by Bank of Japan governor, Kuroda that a weak yen is positive for Japan’s economy we are likely to see a continuation of the bull run for USDJPY.

Chart 5B: USDJPY DAILY CHART

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On the daily chart the USDJPY has been trading within a channel and a breakout of this channel is likely to propel USDJPY much higher.

Chart 6: AUDNZD WEEKLY CHART

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AUDNZD is currently in neutral territory but a rally toward 1.0580 may be a good risk reward sell opportunity with a stop 20 pips above recent high of 1.0611.

Chart 6B: AUDNZD DAILY CHART

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Daily chart for AUDNZD suggests resistance at 1.0607 hence in line with the weekly chart it may be a good risk reward sell opportunity on a rally toward 1.0580 and a stop at 1.0631.

Chart 7A: EURNZD WEEKLY CHART

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EURNZD continues to be one of our most watched currency pair now that it has broken weekly support, an upward sloping channel as well as the low of 1.6320 in February of this year.

Chart 7B: EURNZD DAILY CHART

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This currency cross continues to trade lower and with a positive swap on this currency pair plus likelihood of Bank of New Zealand being faster to raise rates than the ECB we think this cross has potentially huge downside.

Chart 8A: EURCAD WEEKLY CHART

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As we mentioned last week, EURCAD has similarity to the EURNZD weekly chart. It has broken the weekly chart support at 1.4487 as well as an upward sloping trendline. However it has not traded below the previous low of 1.4263. But the technical picture shows a potential reverse flag formation which could lead to a substantial move lower.

Chart 8B: EURCAD DAILY CHART

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EURCAD is testing the daily chart support at 1.4332 again. Path of least resistance seems lower for this currency pair and we are likely to see a continuation of the down trend.

Chart 9: BITCOIN DAILY CHART

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After a breakout of resistance and setting a new all-time high, Bitcoin consolidated with a re-test of support level at 57970 which has held. Currently there is a 4-hourly chart resistance at 63070 which when broken will see Bitcoin resume its uptrend.

Chart 10: DOW WEEKLY CHART

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Dow continues trending upwards in a channel. Although the anticipation of Fed tapering has caused bouts of selling, the path of least resistance for the Dow seems to be higher.

SUMMARY:

  • US Dollar appears to be on the cusp of a breakout and once resistance at 94.30 is broken we could see a substantial rally. This rally could have legs for further upside if it goes with an announcement of Fed tapering as well in November or December.
  • The commodity currencies like AUD, NZD and CAD are showing more strength than currencies like EUR and GBP. As such we are neutral on currency pairs like AUDUSD, NZDUSD and USDCAD.
  • AUDNZD is at a neutral level although the medium term trend seems to be lower. We prefer to sell on rallies for this cross for better risk reward opportunities.
  • EURUSD did encounter short covering last week but towards the end of the week it resumed its downtrend. Now that it has gone below weekly chart support of 1.1602 we believe it will continue to trend lower.
  • USDJPY could be a potential winner if the USD rallies on break of resistance. BOJ Governor Kuroda has given an indication they do not oppose Yen weakness and we see that the technical picture could be positive.
  • EURCAD saw some volatility last week on the back of short covering in EURUSD which brought the price of EURCAD above 1.4400. But by the end of the week, it is trading below daily chart support of 1.4330 again. We think the path of least resistance is lower for this currency pair.
  • EURNZD has broken weekly chart support, broken the uptrend channel as well as the low of 1.6320. With the break of all three points we believe this cross should head much lower.
  • Dow is again at an all-time high despite expectations of Fed tapering either next month or December. The price movement is following an up-trend channel and until this channel breaks the path of least resistance seems higher.
  • After attaining all-time highs, Bitcoin re-tested the previous resistance of 57,970 which now stands as a support. We see 4-hourly chart resistance at 63070 and a break of this level could see Bitcoin heading towards our objective of 85,000.