Several currency trusts look to complete long-term downtrends and are nearing breakout levels to the upside. If the prices falter at these levels, it could signal the long-term bottoming process is continuing, with more downside to come in the short-term. If the prices continue to rally, though, it would signal the next major wave higher is underway.

The Currency Shares Australian Dollar Trust (FXA) was in a long-term decline since the 2011 peak at $110.99. The trust fell as low as $68.33 in early 2016. Following that low, the price moved up to $78.30 and has been consolidating in a descending triangle since then. $77.60 is the resistance area of the triangle. If the price falters in that region (or below), it could hold lower to test the bottom of the triangle near $72. If the price rallies above $77.60, and ideally $78, that would signal a breakout of the triangle and that another move to the upside is underway. The approximate upside target for that breakout is $84 (height of triangle added to breakout price). 

The CurrencyShares Canadian Dollar Trust (FXC) also commenced a long-term downtrend after peaking at $105.59 in 2011. The price fell to $67.71 in early 2016 and then rallied aggressively to the $79 region by April. Since April, the price is in a declining wedge pattern, which is potentially just a pullback in what is now a long-term uptrend (the downtrend was broken by the early 2016 rally). In January, the trust broke above $75, which was the resistance point of the wedge. That signals another move to the upside may be underway. A conservative upside target is $80, while the long-term target is $83 to $84. The price has been struggling to move through the $75 to $76 region. If the price slides back below $74, the wedge is likely continuing, which would mean some weakness in the short-term. Based on the wedge, support should kick in near $72, providing an alternate buying location. 

The CurrencyShares Japanese Yen Trust (FXY) also looks to have broken out of its long-term trend with a strong rally in the first half of 2016. In late 2016 the yen experienced a deep pullback, providing a buying opportunity for those who are long-term bullish on the Japanese currency. The pullback bottomed at $81.34 in December (well above the 2015 low of $77.19) and currently trades at $86.01. If the uptrend continues, the price is expected to rally well above the 2016 high of $96.75. One target is $100, but over the long-term, the yen trust could exceed that.

$82 to $81 is a critical support area (former resistance) extending back to late 2014. If price drop backs below $81 that would warn that this recent move to the downside is not over and would negate the bullish bias.

The Bottom Line

Based on the long-term charts, these currency trusts look to break out of their former downtrends and initiate overall uptrends. Upside breakouts from recent pullbacks or consolidation patterns would signal a buying opportunity for the next wave of the uptrend. These trades ideas are based on the thesis that an uptrend is underway, and therefore the price is likely to make higher swing lows and higher swing highs. Trends can reverse, though; a drop below support indicates the downtrend may be resuming. Utilize stop loss orders below support to control risk in the event the price turns lower again.

Disclosure: The author doesn't have positions in the ETFs mentioned.