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Trading Outlook for Euro, AUD/USD, Cross-rates, S&P 500, and More

Trading Outlook for Euro, AUD/USD, Cross-rates, S&P 500, and More

2018-01-17 12:41:00
Paul Robinson, Strategist
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The euro and cable are trying to work off short-term overbought at key levels, while aussie and kiwi look to extend into big resistance zones. A couple of cross-rates are on the radar as possible trade candidates. U.S. indices headed for a pullback.

Technical Highlights:

  • EUR/USD and GBP/USD look to digest the recent surge
  • AUD/USD and NZD/USD poised to extend into major resistance zones
  • U.S. indices gap-and-trap yesterday sets bearish tone short-term

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

EUR/USD and GBP/USD look to digest the recent surge

EUR/USD extended just above a couple of resistance lines, but as we expressed in the weekly euro technical forecast, follow-through looked limited heading into this week. So far, that is the case as the single-currency reverses lower. For now, we’re going to watch to see if the market can constructively digest gains following the breakout.

GBP/USD is currently finding difficulty near the Feb 2016 swing-low of 13846. Just as is the case with the euro, how cable can act following the surge will be crucial to what’s in store next. Looking to buy the dip as apposed to chasing it higher looks like a prudent approach at this juncture.

Chart 1 – EUR/USD: Daily

eurusd daily price chart

AUD/USD and NZD/USD poised to extend into major resistance zones

AUD/USD has been on a straight-line move higher since finding support on the January 2016 trend-line. Given the vertical rise with very little pause, it is becoming increasingly overbought. What lies ahead is a zone from around 8030 up to 8162. We’ll watch for signs exhaustion via a bearish candlestick formation. It’s a wide zone, so waiting for actionable price action will be important before thinking about shorts.

NZD/USD is of course acting similar to AUD/USD, and also has an important zone of resistance. It consists of tops back to November 2016 and a trend-line running down from 2014. The zone is ~7340-7400. A bearish candlestick in that vicinity could offer a short-trade in an extended pair.

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Chart 2 – AUD/USD: Daily

audusd daily price chart

Looking at the cross-rate between the two aforementioned, AUD/NZD may nearing a breakdown from a head-and-shoulders top, or descending wedge – depending on how you want to label it. In either event, a solid break below 10830 could set into motion a much deeper decline. We’ll touch on this more later as price action unfolds…

Chart 3 – AUD/NZD: Daily

audnzd daily price chart

U.S. indices gap-and-trap yesterday sets bearish tone short-term

The U.S. stock market has been on a tear, seemingly with no end in sight. And while we respect the upward trend, yesterday’s ‘gap-and-trap’ (strong gap and reversal) is signaling that a pullback may have begun. It may be very short-lived, but a downward bias looks to be in place for now.

The first level of support we are watching in the S&P 500, is the top of a channel it recently broke out of and then used as support. It clocks in only about 20 points lower, but does leave room for the very short-term trader to operate. NDX support arrives around 6650.

Chart 4 – S&P 500: Daily

s&p 500 daily price chart

For full technical considerations, please see the video above…

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---Written by Paul Robinson, Market Analyst

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