By Nic Lenoir of ICAP
A quick look at these charts says that unless this is yet another fake H&S which will get squeezed in no volume tomorrow, we have more to go. The previous times though we had divergence as we were triggering the patterns: not this time. Clean H&S break on the Nikkei future and Nasdaq future. Similar pattern on the S&P (though downward sloping neckline) and the Elliott Wave count indicates that whether this is a full bearish impulse from the highs or just an A-B-C correction, the 3/ or C wave is not completed for sure. Looking closely at the sub-structure for AUDUSD confirm our impressions. We see intermediary target at 1,934 for the Nasdaq future and 1,143 for the S&P future, but the key medium term support for the S&P future is currently at 1,114.
For AUDUSD focus on the 200-dma support. A break below on a daily close and we risk to retest 0.8562 which if broken sets up for a double top on the highs...
Another currency I like to short is the ZAR (post world cup infrastructure effect), and it seems it decided not to wait for the kick-off. Eskom posted very ugly earnings today, which added to the pressure on ZAR in addition to the general weakness of all emerging currencies. We have triggered and inverted H&S in USDZAR and TRYZAR has been moving dangerously close to the 200-dma which has been a perfect envelope. Ideally buy TRYZAR between 4.90 and 4.85, but if the 200-dma is broken on a daily close we would load up anyways and ride the trend.
Good luck trading,