After a wide upthrust bar, also marked as heavy supply, on last Wednesday, the Yen broke the support at 107.62 the day after. It broke with healthy volume, and the prices only stopped downtrending on a reverse upthrust, and later a churn, which are volume patterns that show demand.
USDJPY H4 Breakout
On M15 the action can be seen more clearly, and the trading range in the last days is more evident on this lower timeframe. By today’s end of Tokyo session, at 5 am GMT, the market showed supply on very high volume, from the three timeframes – M15, M30 and H1. Right now the prices are trending lower, though on very thin volume due to Japan’s bank holiday on 3rd May. Thinly traded markets can be an opportunity for large players to make their movements however, since there is little to no resistance to any significant organized action.
It would be wise to be on the lookout for more demand/strength between 106.200 – 106.300. To the upside, the price 107.62 is the trigger for short positions, if the supply shown in H4 proves to be consistent. The fact that there are many announcements regarding unemployment on US will surely provide plenty of movements, and make the price reach these critical areas in USD/JPY.
USDJPY M15 Demand Zone
Gold
Upon reaching $1235, there has been significant selling on gold by major players, which can be seen by the volumes in both Forex (on high liquidity brokers) and Futures. An important high was made at $1272, which held on multiple break-out attempts. On the most recent low, VSA also showed some demand, which started this new rally onto the previous highs. Volumes are drying up and today’s price is on the lows of the day. If the weakness continues on this rally, it’ll form an head and shoulders top (with selling behind, which is perhaps more important than the price formation), and we’ll be looking for shorts near $1272 or on the break-out of $1204.
Brent Crude Oil
Brent Crude Oil took a pause in the uptrend and corrected, when prices reached the upper part of the trading channel like we noted on the last Crude Oil analysis. On reaching the trendline, both VSA and Reversals signaled a reversal, but after the trendline was broken the rally attempt first showed high volume on a narrow range bar (first arrow), afterwards an upthrust, a bar making a higher high but closing on the lows, and afterwards more high volume even though prices didn’t move much.
Crude Oil H4 – Failed rally attempt after trendline break
Later, again using the previously set sensitivity (4), Reversals showed the way, and finally the retracement was over, this time without any vacillating type of rally. This rally made the prices reach the top of the daily channel. Right now lower timeframes look more promising to trade crude, since the current move is already well extended, though there is no significant weakness to look for shorts just yet.
Crude Oil Daily Trend
Tomorrow the number of US non-farm employment change numbers will be released, together with the Unemployment rate. Before, at 9:30 UTC+1, the British manufacturing PMI will also be known. GBPUSD is on a short-term uptrend, and on the long-term, it’s near a down trendline. In the last top at yesterday’s London/US session, there was considerable supply, and as in today’s London session prices attempted to rally, it was met by further selling, shown as an upthrust. Due to this recent weakness, a break of the up trendline would be a good confirmation of a downtrend to come. If the news are positive to GBPUSD however, since there are sellers around 1.441 – 1.444, a whipsaw could occur as these could take the high liquidity as an opportunity to continue shorting.
News, Trend and Supply/Demand in Sterling
In the first hours of today’s London session, activity and volumes spiked up in gold. This activity, VSA showed, was major supply hitting the market, just below a high formed days before, on heavy supply, at $1258. In the last post we noted that below $1270, the “control point” of selling of the last weeks, we should be looking for shorts in lower timeframes, and this was the ‘golden’ opportunity.
In M15 there were multiple supply signals, and the background turned from strong to neutral.
Supply in uptrend in Gold M15
In M5 the dynamic trend turned red shortly after, when the short was taken, with SL above the previous high and TP a bit above the down trendline, where buying is to be expected. Prices went down on wide range and reached the target, with the rally afterwards showing low volume. When prices attempted to break the trendline, VSA showed Minor Demand, and the price then went up on high volume. The no-demand test shown in M5 (pink bar) succeeded, as there was supply afterwards and its low was broken, which is a temporary stop of the uptrend. The background is strong in M5, and more demand, or a bullish test, just above the broken down trendline, would be a long.
Supply and trend turned down in Gold M5
These commodities have been among the biggest rises in prices in the past few months, and coupled with the bond market, give an interesting inter-market view on the global financial markets.
Stock Market
The latest rally has been in a great part, lead by gold/oil groups. Interestingly, bonds have been falling for the past month (interest rates rising) after a climax top, which means there is going to be a shift from interest-rates driven stocks to inflation-driven stocks. Tech stocks, the former stock market leaders, are now laggards, with NASDAQ lagging behind S&P and Dow Jones. Financial stocks, which also lead much of the bull market, have also been weak, despite the stimulus from the Fed and ECB. Getting on defensive/commodity stocks, or staying on the sidelines altogether, it’s probably the best course of action to take at the moment.
Gold
After showing persistent demand between the $1050-$1100, and breaking the long-term down trendline, it didn’t stop until major supply hit the market again. It’s good to note that there is an important resistance at $1306, and the supply here might come from the fact that there are major traders taking profits before it gets there.
On the H4, we can see the current action more clearly – a trading range, with a slight uptrend. $1270 has been a key resistance in the last weeks, with significant supply showing every time the prices approach it. Last Wednesday on FOMC’s announcement, the prices got near this price again, and VSA showed another supply signal (purple dot), along with an high volume (red) later, with prices reversing afterwards. The key levels are therefore this resistance, and the up trendline below. In M15 there is a down trendline at $1260 right now, and as the background there is weak, this will be a good timeframe to look for shorts while prices are kept below $1270.
Brent Crude Oil
Brent Crude Oil uptrend didn’t pick up so fast as gold’s in the beginning, but it has been steadier. Looking at H4, it has been showing supply and down reversals at fresh 3 month highs, and it’s getting to the ‘overbought’ part of the trending channel, so I’d prefer to wait for the prices to reverse to the trendline first. If there are low volume down bars or a bullish test in this area, it’d be another long opportunity, because that would show the supply before was overcame.
Trend and Supply Brent Crude Oil
Like I wrote in last Monday’s post, it was likely for the uptrend to continue due to the major shakeout, in the first blue rectangle. After the rally on the Asian session, yesterday by the end of NY session, we have seen one good VSA setup which will often mark as Top Reversal, near a zone of previous supply.
The reason why we commonly should consider this as sign of weakness are:
1. Volumes were decreased on two up bars when this candle tried to break 1.1050 level.
2. On the second try, which is marked in the 2nd blue rectangle, confirmed this as Top Reversal. Combination of two bars give us insight that supply has swamped the demand. First bar is marked up with very high volume and closing on the highs. And the next bar rapidly reverses down on a wide spread and closing on the lows.
The market went down quickly after, which gave no opportunity for a confirmation, in the form of an upthrust or no-demand bars. But as there was an up trendline nearby, its break would be another confirmation (Trendline breakout), of course, if you happened to be watching the markets in the mid of Tokyo’s session! EURUSD kept on downtrending and only more weakness after a significant rally would give another opportunity for a short. Below the support at 1.09394 I expect more demand to show up, as the trades who bought at the shake-out earlier might still be interesting in buying more at those prices.
Distribution, Trend Changing in Eurusd
