Tech Musing:- Currency Reviews

 

In my previous post on Currency written on June 10^th 2014 and updated on 20^th August 2014, I have called for US Dollar index to move up from 80.25 levels to 85 – 86 levels. Today DXY made a high of 85.485 and reached the first target.

If we look at the given chart we can see that DXY has moved up to a crucial resistance. I think it will break out from here and will move up to 92 – 96 -100 levels in next one year or so.

In the same post I called for Euro to fall from 1.36 levels to below 1.30 levels. Euro recently made a low of 1.2725 and is looking extremely week. I won’t be surprised to see Euro falling to 1.20 levels and below. If DXY manages to break above 86 – 88 levels, I won’t be surprised to see Euro going below 1.15 or even 1 to USD in next two years.

 

GBP has also crashed from 1.67 levels to 1.61. I must admit that GBP is one of the strongest currencies against USD and may not fall much. I think GBP has a good support at 1.50 – 1.56 levels.

In my previous post on AUD written on 6^th July 2013, I have called for a weaker AUD. AUD consolidated almost for a year before breaking down again. If we look at the given chart of AUD we can see that AUD is forming a head and shoulder pattern and it spend an entire year forming the right shoulder pattern. AUD should break below 0.88 -0.86 levels and fall sharply from there. Overall my target for AUD remains intact at 0.75 – 0.78 levels in next two years.

 
 

Similarly CAD has also broken out of 12 year long uptrend and should correct sharply from here. The target for CAD stays at 1.20 and above.

 

CHF is also breaking out of 14 year long uptrend and if it stays above 0.95 levels we may see a long term reversal in CHF

Summary:-

1.       Overall US dollar is looking extremely strong against most of the global currency.

2.       JPY, CAD, AUD, EURO, CHF, SEK should depreciate sharply against USD.

3.       GBP also look mildly bearish against USD

Tech Musings:- Global Market

In my previous post on Shangahi written on 22^nd June 2013 I wrote the following, “I gave a buy call on Shangahi composite with a stop loss of 2180. The index closed yesterday at 2074 levels and hit my stop loss. If we look at the given chart of Shanghai we can see that it is near to its long term trend line. Unless Shangahi breaks below 1950 levels on weekly closing basis further correction shall be ruled out. In fact it may become attractive buy at 2000 – 2050 range with a stop loss of 1920 on weekly closing basis.”

Shangahi Composite stayed at those levels for one full year and it never went below 1975 levels. After an enormous consolidation at those levels Shangahi Composite has broken out of a long term downtrend. 

In the first chart we can see Shangahi breaking out of 6 years long consolidation and with the bottom firmly made at 2000 it can move up substantially from here. 

On 22^nd May 2013, I wrote the following, “I have been bullish on Nikkei since 4^th may 2012 and reiterated my view on 16^th November 2012. Nikkei has moved up by 73% since my last call on 16^th November. I updated the price target for Nikkei from 12000 to 15000 in my post on 16^th February 2013. Nikkei has even outperformed my expectation and the entire market rally was without any correction. If we look at the given chart we can see that the rally in Nikkei looks over extended and upside in Nikkei from here is very limited. I think Nikkei won’t go above 16500 levels in near term without any meaningful correction.”

Nikkei played out exactly I have expected. It consolidated between 12500 to 1500 levels for more than a year. Nikkei, it has been in a 25 year long bear market. If we see the given chart Nikkie is trading at the upper end of the channel resistance. With yen breaking above 109 and expected to go up to 120+ levels, I think Nikkei will breakout and will enter a multiyear bull market. 

Tech Musings - US interest rates

I have been a long time bull in US interest rate market. My first post written on 19^th December 2012  called for an up move in the interest rates upto 3% and beyond. In 2013 Interest rates moved up from 1.82% to 3.25% which surprised the entire world.

When the world was expecting the up move to continue, interest rates went sideways and today opinion of most experts believe that interest rates will stay range bound for considerable period of time. But the charts tell the other story.

If we look at the current 10 year US treasury yield chart we can see that yield has done a 50% retracement at 2.3346% and now it has moved up to break the downward trending channel at 2.60. If yield consistently stays above 2.60 the next target for Yield will be 3.25%

In the second chart is a monthly chart of 10 year yield. Here we can see that US 10 year yield is forming a inverse head and shoulder pattern. Once yield breaks above 3.25% the next target will be as high as 4% and beyond and this will be achieved in a very short time

Tech Musings: - Currency

My previous post on INR called for a correction to the levels of 57 and further to 55. The call was given when INR was trading at 60.02 with a stop loss of 61.30. INR fell from that level to 58.33 and then bounced back to hit my stop loss of 61.30.

In my previous call I had made the following assumption

1.       Narendra Modi will become the prime minister of India

2.       Equity markets will break out

3.       India will witness heavy FII inflows

4.   Another implicit assumption was BJP govt. will force RBI to allow INR to appreciate as strong currency will give a positive signal to people.

The first three assumptions came true while the fourth did not. The failure of INR to move beyond 58 indicates that RBI will strongly maintain the floor for INR.

If we look at the current structure of INR it’s forming an inverse head and shoulder structure. Any breakout above 61.50 will see a severe depreciation and INR can move up to 63 levels and beyond.

Meanwhile DXY has appreciated to 84 levels while Euro (1.29), GBP (1.60), JPY (106) are plummeting as mentioned in my previous post.