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Today, to start we looked at the US Dollar Index (DXY) as it pushes back down to test last week’s key reversal created on Tuesday. With the ECB coming up tomorrow and the euro accounting for ~57% of the DXY we are at a pivotal spot. The thinking on this end is will we will see further weakness in the euro. We looked at a steadfast line of support on the 4-hr chart which must be broken first before more weakness can set in. USDCAD faces the BoC today, and short-term implied volatility suggests we could see a sizable move. The pair is trading at a trend-line rising up from 2012, and today could be a critical day for determining its fate for the foreseeable future.
GBPUSD continues to add to its bounce from the mid-12700s, and if we are to see a broader turn higher in USD this pair will need to show material weakness before rising up on the radar as a short. USDJPY is trying to hold support in the low 10800s and will need to start turning higher if it is to stage a bounce. Overall, the outlook here is murky.
A couple of cross-rates which have potentially rewarding opportunities are GBPNZD (holding old resistance as support) and GBPJPY (attempting to carve out a right shoulder of an inverse head-and-shoulders pattern). Confidence at this time is higher in the former set-up.
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Gold continues to forge on into resistance levels etched out during the 2016 decline, with last year’s high at 1375 as the big level. We will continue to operate with a bullish outlook in the near-term as long as the rising channel it’s been in for several weeks continues to hold. Silver is crossing levels and also has a very similar channel (unsurprisingly). Crude oil is cruising towards a test of a major trend-line, viewed as a possible spot for it to turn lower from.
Equity indices continue to be a more difficult space to be in right now. The DAX is still trying to make a run at breaking the June trend-line which will bring the area around 12300 into focus (big resistance). Tomorrow’s ECB meeting could be a decider on its short-term fate should we see the euro make a big move. The FTSE is sagging back towards big support at 7300, it’s an important level to hold. The S&P 500 came off yesterday, but still giving the benefit of the doubt to the top-side.
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---Written by Paul Robinson, Market Analyst
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