Weekly technical analysis chart pack 2 nd June 2014 James Brodie Chartered Market Technician

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1 Weekly technical analysis chart pack 2 nd June 2014 James Brodie Chartered Market Technician EURUSD EURUSD continues to trend lower after recent comments by ECB head Mario Draghi. The key central bank meeting on 5 th June will be the main focus for the market this week, and likely herald the direction of the currency for the medium term and are key support and resistance levels. EURUSD vs 2 year interest rate differentials the upcoming ECB meeting on 5 th June could herald a new wave of EURUSD selling if the respective 2 year interest rates break out of their current range. Federal Reserve tapering and fresh ECB easing will weigh on the currency. USDJPY USDJPY continues to trade is a tight range. Key resistance comes in at from a 16 year resistance line, while support lies at A break of one of these trend lines will hail the start of a new medium term trend. USDJPY vs NIKKEI the long term correlation between the currency and the equity index continues with a slight downside bias to the currency. GBPUSD Cable is showing some early signs of weakness after the price broke through the base of the 6 month trend channel last week. A close above is required to resume the uptrend. AUDCAD appears to have formed a short term top at as interest rate movements continue to favour the Canadian dollar. A break back below will herald a resumption of the down trend. AUDCAD vs 2 year interest rate differential over the last 3 years while the currency has remained unchanged the respective two year interest rates have converged by 230 basis points This will keep an underlying selling pressure on the currency. NZDUSD recent US dollar strength is the cause of the short term move lower in the NZDUSD cross. Last week s break below marks a medium term top is in place with long term support at AUDNZD Appears to have based at This quadruple bottom with a low of has held for over 30 years with the range being EURJPY both EUR weakness and JPY strength has contributed to the recent weakness in the EURJPY cross. A medium term top is in place at with the price action now making

2 a series of lower highs. A break below the 200 day moving average at will resume the downtrend. US 10 year treasury note The US 10 year government bond yield is probably the most important chart in the financial markets at the moment with its influence on equities, currencies, commodities as well as interest rates of course. After a break out of the 30 year resistance line last year the price has come all the way back down to retest that trend line. Without any exogenous factors the price action will struggle to go lower from here, with a likely retest of the 3.05% peak before a move towards 4.00% in the long term. EURUSD The EURUSD has recently failed to break out of its 6 year trend channel and fallen below the 200 day moving average. While the short term trend is lower the market awaits the much anticipated ECB meeting on 5 th June for confirmation of the recent move. Interest rates continue to weigh on the currency top long term trend channel top day moving average double bottom and 2014 low trend line support double bottom and 2013 low low multi-year low

3 EURUSD vs 2 year interest rate differentials While EURUSD has risen from to over the last two years the difference between the respective EUR and USD 2 year interest rates has remained unchanged, close to 10 basis points. While the Federal Reserve looks committed to keep tapering from their Quantative Easing policy and the ECB looks set to start a new aggressive wave of easing, a break lower in the two year interest rate differential would force the EURUSD lower, back towards the multi-year low.

4 USDDJPY USDJPY continues to trade in an ever narrowing range, though it has recently broken the 1 year trend line support from June The key resistance level is , the cycle high, double top from 1 st January 2014, and resistance from 16 year trend line. Key support is now at A close below this level would confirm a top is in place and target in the medium term Cycle high and double top April 2014 short term peak long term trend line short term resistance line day moving average double bottom June 2013 low and 38.2% Fibonacci retracement level

5 USDJPY vs NIKKEI As the Nikkei continues to flirt with the key 14,000 (13,885) level an end of day close below here would herald a fresh wave of USDJPY selling. The market remains caught between the notions of risk on and risk off, interest rates higher versus equities lower.

6 GBPUSD The 1 year trend higher for GBPUSD from 1.48 to 1.70 is starting to show signs of weakness, with the currency breaking out through the bottom of a 6 month trend channel. Below will confirm a top is in place, while a break of is needed to resume the uptrend % Fibonacci retracement level from 2007 peak to 2009 low peak high trend channel resistance swing low day moving average long term support and resistance level low

7 AUDCAD The long term convergence of the respective interest rates (see below chart) keeps an overall selling pressure on the currency. This selling will accelerate as the price breaks below The key focus this week will be Canadian employment data on 6 th June. lies at peak high short term cycle lows swing high day moving average low low

8 AUDCAD vs 2 year interest rate differentials AUDCAD has decoupled from its long term correlation with the two year interest rate differentials. While the currency has remained unchanged since the start of 2011 the respective interest rates have converged by 230 basis points. This will keep long term pressure on AUDCAD to move lower.

9 NZDUSD The strength of the USD lies behind the recent weakness in the NZDUSD cross, with a break of the key level last week confirming a medium term top is in place. The near term target is as the currency has been the weakest G10 performer of the last week peak peak short term resistance level day moving average low quadruple bottom

10 AUDNZD AUDNZD based in January 2014 at and in the last 20 years has based multiple times between 1.05 and (2005) levels. However the recent move higher in the cross has yet to be confirmed by the respective interest rate differentials Long term Fibonacci retracement level day moving average Triple top Trend line short term low low Multi-year low.

11 EURJPY Both EUR weakness and JPY strength has contributed to the recent weakness in the EURJPY cross. A medium term top is in place at with the price action now making a series of lower highs. A break below the 200 day moving average at will resume the downtrend cycle high trend line resistance day moving average day moving average low % Fibonacci resistance line

12 U.S. 10 year Treasury Note The US 10 year government bond yield is probably the most important chart in the financial markets at the moment with its influence on equities, currencies, commodities as well as interest rates of course. After a break out of the 30 year resistance line last year the price has come all the way back down to retest that trend line. Without any exogenous factors the price action will struggle to go lower from here, with a likely retest of the 3.05% peak before a move towards 4.00% in the long term Double top and Fibonacci projection level cycle high 2.82 double top peak low 1.38 multi decade low

13 James Brodie C.M.T. CIO, The Sherpa Funds Board member, Market Technicians Association (1 st July 2014) Twitter: jamesrbrodie The views and opinions expressed in this report reflect the personal observations and views of individual Sherpa Funds traders which may differ from or be inconsistent with proprietary positions of The Sherpa Funds. Traders at The Sherpa Funds may have taken trading positions for The Sherpa Funds in any currencies or securities mentioned herein in advance of disseminating these views and opinions. This report is for information only and is not a specific offer or solicitation to buy or sell. Historic performance is not indicative of future returns. Facts and data provided are from sources the trader believes to be reliable, but neither the trader nor The Sherpa Funds can guarantee they are complete or accurate. The Sherpa Funds will not be liable for any damages or losses in any way related to this report. The Sherpa Funds is regulated by the Monetary Authority of Singapore under Singaporean laws. All charts sourced from Bloomberg.