Heightened bond and FX volatility (notably JPY) has spilled over to equities. SPX is pressing yearly lows and there is no sign of a hold at this point. Price action since September is a distorted head and shoulders top with a negative sloping neckline…very bearish. The measured objective from the pattern is 3724. Barring a miraculous save, 3724-3856 looks like the next magnet. Recall that we started sounding the alarm on a top last September when price was pressing into the long term upper channel line (see below).
USDCNH broke above a year long trendline today and price also completed a 4 month head and shoulders pattern today. Watch the top side of the blue trendline for support near 6.3930. I realize that this goes against the idea of the USD topping. Maybe the USD has more to go that previously thought?
DXY has reached the bottom of the zone cited last week for possible resistance. The line off of the November 2021 and March highs is right up here along with the well-defined horizontal that goes back to 2015. Within the sequence from the January low, wave 5 would equal wave 1 slightly higher at 100.59. Also, DXY is now up 9 days in a row (see below). The last time that happened was at the March 2020 high!
You may have heard that Russia is in the news. USDRUB reversed sharply lower today after tagging daily reversal resistance (daily high close from March 2020). This level was also resistance in November 2020 (U.S. election). The reversal lower today ‘fits’ with a coming squeeze in equities and a pullback in gold. I’m wondering if the USD also breaks down. The chart below shows USDRUB and DXY since the beginning of the year. Let’s see…
AUDUSD is pressing against the trendline from the October high. The center line of the short term bullish fork is also in the vicinity. A break above the trendline opens up the January high at .7314 and possibly the confluence of the upper parallel from the bullish fork and trendline from February 2021 near .7440.
USDOLLAR held the trendline that originates at the September low today. A break of this line is what I’m waiting for to signal ‘all clear’ on the downside for the USD.
SPX has retraced 61.8% of the decline from the high. This is also ‘original’ trendline resistance. This is a perfect spot for at least an interim high. I’m looking lower towards 4494 or so (2022 VWAP) and possibly 4404.
Pay attention to 1.3375-1.3410 in GBPUSD for support. The zone is defined by the 12/16 high, 61.8% retrace of the rally from December, and September low. The bottom of the zone also intersects with the lower parallel of the short term bearish fork (see 4 hour chart below).
USDJPY broke the line off of the September and December lows. The underside of this line should provide resistance now near 114.70. Initial downside focus is the mentioned 112.20/50 zone.
Make or break time for USDOLLAR! Price closed right at 8 month channel support. IF price breaks below the channel, then the objective is the channel extension which intersects the March-May line and March high at 11929 in early February.
1/11 – Pay attention to the USD indices over the next few days. The big level for USDOLLAR is about 12115. This is the trendline from the May low and September high. A break below would ‘announce’ that the USD trend is lower.