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The US Dollar Index (DXY) is down into a big area of long-term support, a zone which dates back as far back as 1998. The index is at the upper portion of the zone and could still dive deeper into support before finding a low, and with tepid price action that is what looks to be the most likely scenario at this time. The euro, which is a large portion of DXY, is holding up well and showing solid signs of consolidation for another leg higher. GBPUSD has been weak, weak, weak; but it could soon find support in the mid-12700s and rebound. It’s had a nice short-term sequence for sellers on the hourly chart, but that could change very soon if support holds. USDJPY continues to look heavy. USDCAD looks poised for lower prices, but the 2012 trend-line may become a point of interest in the not-too-distant future to look for a rebound to begin from. We also looked at AUDUSD and NZDUSD, with the two having diverging outlooks. With a little time, we should gain clarity as to which will offer a better opportunity.
Yen-crosses are generally heavy in-line with a stronger Yen versus USD. We took a look at EURJPY, GBPJPY, and NZDJPY in particular. We also looked at EUR & GBP vs. other currencies, but the one we took note of from a short-term standpoint was GBPAUD. There is a nice little descending wedge forming on the hourly in-line with the broader trend lower. There is support about 100-150 points lower via a trend-line extending back to October, but for the short-term trader an opportunity may be there. EURGBP is trading outside of the rising wedge formation we looked at last week, but is at risk of becoming an 'overthrow' as it trades up into the important October 7 spike-day high. Should we soon see a reversal from resistance and undercut of the bottom-side of the pattern interest from the short-side will pick up quickly as the overthrow signals a fake-out breakout.
Gold is well beyond the 2011 trend-line, but trading around double-top levels near 1300. For the long-side to gain traction a strong push above 1300 is needed, but certainly in the cards. Silver is trading within the confines of a rising channel and as long as it stays within it then the bias is neutral to bullish. For silver, we’re keying in on that 1300-break (or not) in gold prices. Crude oil is a tough one to get a handle on with whip-saw volatility dominating. But overall, the feeling on this end is we are nearing another swoon lower and will eventually end up sub-40.
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Equity indices are a tough spot to be right now. The DAX is coiling up and thus directionless for the most part. Remain below the low-12300s and the outlook remains neutral to bearish. The S&P 500 breaks hard, but quickly rebounds above broken trend support. Generally, it’s still a bull market and all short set-ups are difficult. However, longs at this time aren’t much easier. Better opportunity at this time looks to be in the FX-space.
For full technical considerations, please see the video above…
---Written by Paul Robinson, Market Analyst
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