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The US Dollar Index (DXY) is trading just below a long-term support zone which helped provide the recently failed bounce, and while it is slightly below it isn’t enough just yet to call it a full break given how long-term the zone is (goes back to ’98). However, price action isn’t supportive yet for another turn higher, but a descending wedge pattern if fully developed could lead to a turnaround in the weeks ahead. EURUSD is trying to work above the spike-high from 8/29 and in reverse of DXY it could be forming an ascending wedge. We’ll need to be patient in seeing this one come to form. GBPUSD continues to blast higher, with little to lean on from the short-side. USDJPY is clearly below the 10800-threshold and if it closes below today the next real support doesn’t arrive until below 10600 where a trend-line rising up from 2012 comes into play.
Yen strength has a few of the crosses back-pedaling, with primary focus on bearish set-ups in AUDJPY, GBPJPY, CHFJPY, and possibly NZDJPY soon. USDMXN continues to struggle around the 17.90/18 area as it turns lower from this key area again. A wedge could soon take shape and if it does a bearish break would be the most likely scenario. But with wedges you have to wait for the break first. USDZAR has a clean trend lower on the 4-hr and support was recently broken, putting the burden of proof on buyers. Looking for lower prices.
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Gold continues to forge higher, now trading beyond the upper parallels of a bullish channel since the summer low. Important levels lie ahead, with the most important arriving at the 2016 high of 1375. As long as the lower parallel of the channel maintains the intermediate outlook remains positive. The same goes for silver, looking for the April high at 18.65 on continued strength.
The DAX is trading around very big resistance in the low-12300s. It reversed yesterday on an attempt to trade above, but is holding steady so far. Full clearance will be needed to turn bullish though. The CAC 40 turned down from the top-side of a channel dating back to the French elections, and will need to break free from the pattern to turn bullish. The S&P 500 is hanging out near highs, with the benefit of the doubt given to higher prices. There is one bearish possibility (H&S formation), but will need gather downward momentum soon if it is to come to fruition, and even then, the Feb 2016 trend-line may prevent a drop from occurring. We are in a seasonally weak period of the year so it’s certainly a possibility, though.
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---Written by Paul Robinson, Market Analyst
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