bearish trend

This currency pair has been falling down for the last 6 weeks and may reach soon the low levels posted in late 2008 and early 2009, when 1 US Dollar was exchanged against “only” 87.10 Japanese Yen. The current rate is around 89.60. A further decline by 2.80% would drive the pair to the support level of 87.10.

On the weekly chart, the bearish trend triggered in June 2007, more than 2 years ago, remains in place. The long-term descending resistance line (in red) starts from the high point of June 2007 (point A, at 124.16) and goes through the lower highs of August 2008 (point B, around 110.60) and the recent peak of last month (point C, at 97.72). The weekly MACD triggered a bearish signal in early July this year and argues for a continuation of the negative trend.

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This soft commodity has suffered strongly last year when the crisis pulled metals, energy and agricultural prices back to low levels. After a rebound this year, wheat price action has plunged once again. And now it is about to reach a long-term support that is likely to generate another rebound.

Let’s see this in details. First, have a look at the weekly chart. It gives an immediate and clear snapshot of what the price action has been doing for the last few years. You probably remember that the boom of many commodities occurred in the second half of 2006. This is what happened with Wheat, as the price took off from $3.60 per bushel in August 2006 to a historical high price of $13.49 in February 2008, only 18 months later. That was a 274% rise (point D on the chart).

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We were paying much attention to the level of the area between 4,000 and 4,100 points on the ASX 200. It was expected to be potentially a resistance zone. But the resistance has been cleared and as a result the index has been taking advantage of its current momentum to continue its rise.

The resistance line, remember, comes from the historical high of early November 2007 (point A on the chart). Two significant lower highs (points B and C) were posted on this line, confirming the bearish trend that had been initiated in late 2007.

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Let’s have a look today at a metal that recently cleared an important level and that should continue riding its bullish trend. I’m talking about lead. From the lows posted in December last year, lead price has more than doubled. It jumped from $880 (per tonne, point A on the chart) to a last closing price of $1,774.

The retracement on the upside from the lows of last December has been made quickly and without significant consolidation phases. The bullish trend in place is characterized by regular higher lows and higher highs. Both on daily and weekly basis, the current uptrend looks strong and durable.

Actually the price action crossed above two important levels in late May and early June. Those levels were technical resistances. The first level cleared was a previous low (point B, posted in early July 2008) that became then a new high twice (points C and D). It corresponds to a tight zone between $1,525 and $1,550.

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