In this webinar, we used price action to look at macro markets as we open the door to the second quarter of 2018. So far in the new quarter, US equities appear to be carrying-over some of the bearish drive that started to show in the second half of Q1. Prices made a quick run-lower yesterday to find Fibonacci support at the 38.2% retracement of the post-Election move in the S&P 500. That support has held up so far today, but will the rest of Q2 be as forgiving?
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S&P 500, US Equities Start Q2 on a Sour Note
Yesterday saw many European markets remain closed in observance of Easter, but American traders were probably wishing that US markets had taken the same break as US equities started the quarter by selling-off in a rather aggressive fashion, with the S&P 500 breaching below the March lows on the first trading day of April. We’ve seen a bit of support show up around 2,554, which is the 38.2% retracement of the post-Election move in the S&P 500, taking the low from the night of the election up to the fresh all-time-high that was set in January. Inability to hold this support exposes the double bottom from February, and if that cannot hold, then we may be headed deeper into correction territory, with short-side targets at 2490, 2454 and 2400.
US Dollar Clings to 90.00
While US stocks opened the quarter on the run, the US Dollar has continued to cling to the 90.00 level on DXY. The Greenback made a quick jump up to this level last week, and that’s largely held as we’ve now seen four trading days of grind near resistance. While this does not negate the longer-term bearish picture, it does highlight the danger of trying to push a short position in a heavily shorted long-term move. Resistance from the March up to the January highs remains as interesting, and this zone runs from 90.45-91.01.
EUR/USD Nears Confluent Support
The topside of EUR/USD has been one of the more attractive trends of recent across FX markets, and the bullish trend-line from 2017 appears to be getting closer to a re-test. This upward sloping trend-line is fast approaching the March lows around 1.2337, and this keeps the door open for bullish setups. Our setup as part of the EUR/USD, EUR/JPY trade remains as active, with EUR/JPY having hit its target while EUR/USD remains open.
GBP/USD Gets Messy Again, Longer-Term Bullish Trend Remains As Active
GBP/USD has had fits and starts this year, periods where the pair appears to be carrying a rather clean setup have been followed by downright nasty or confounding price action. Shorter-term, we’re closer to the ‘nasty’ part right now, with the pair finding a bit of resistance on the ‘s3’ area of support we had looked at a couple of weeks ago. This can make short-term dynamics a bit more difficult to work with, but the longer-term zone of support that we’ve been following that runs from 1.3982-1.4000 remains work-able should support actually show in this region.
USD/JPY: Short-Term Channel Meets Long-Term Wedge
We’ve looked at this one from a few different angles, including in this morning’s Market Talk article. USD/JPY started to test the underside of a longer-term symmetrical wedge formation in February, and since then has been procedurally breaking below that level, accompanied by lower-lows and lower-highs throughout. This has helped to create a bearish short-term channel, and this would keep the door open for short-side setups, looking for a re-test of March lows around 104.61 and, potentially a longer-term move towards 100.00.
USD/CAD Breaks Below March Lows in First Few Days of April
Friday is lining up to be quite interesting around USD/CAD, as Non-Farm Payrolls comes out of the US while Canadian jobs numbers are released at the same time. In USD/CAD, that bullish breakout from March is continuing to pullback, with the well-worn area of prior support around 1.2800 finally giving way. This could be positive for longer-term bullish composition, as this is likely clearing out a considerable number of stops on long positions. More interesting is whether support develops in an area that runs around the 1.2750 psychological level ahead of Friday’s US/Canada employment numbers.
AUD/USD Finds Support
AUD/USD was one of our favored venues for USD-strength for a large portion of Q1, and as we open Q2, the pair remains fairly bearish with prices continuing to dwindle near last week’s lows. This could be a difficult time to establish short-side exposure, and we looked at a Fibonacci retracement that could keep the door open for a bigger bullish move. The more interesting part of the equation is what happens at resistance, and we looked at a possible area to look to for a lower-high in the pair.
NZD/USD Long-Term Range Fill for USD-Strength Scenarios
We looked at the weekly chart of NZD/USD to illustrate a range that’s been at work for well-over a year now, and prices appear to be leaving the resistance area of that setup. We then dialed down to a daily and a four-hour chart to show how that move could be worked with.
To read more:
Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.
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--- Written by James Stanley, Strategist for DailyFX.com
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