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Price Action Setups: Dow, Nasdaq 100, EUR/USD, GBP/USD, USD/CHF

Price Action Setups: Dow, Nasdaq 100, EUR/USD, GBP/USD, USD/CHF

James Stanley, Strategist

Dow, Nasdaq 100, EUR/USD, GBP/USD, USD/CHF Price Analysis

  • This is an archived webinar looking at numerous macro markets in the search for strategy parameters for the days or weeks ahead.
  • US equities continue to recover but are we yet out of the woods? The trader’s stance around US equities is likely going to be dependent on which index is being followed or analyzed.
  • The US Dollar has softened after another jump to begin April and Q2 trade.

April Recovery as Hope Percolates Around Coronavirus Data

The April recovery continues in US equities as Q2 has started on a markedly more upbeat tone to what had showed up last month. Hope reigns supreme right now as there’s been the initial slowing of growth in new coronavirus cases in hotspots such as New York City, going along with similar slowdowns in hard-hit areas of Europe such Spain or Italy. This softening in new cases points to the fact that social distancing is at least helping to slow the spread, and on the other end of the spectrum a number of initiatives in testing for both the virus and antibodies has made headway, going along with at least ten potential vaccines that are in the works. The human race is collectively tackling this issue across the world at the same time.

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It’s far too early to say that we’ve turned a corner – but markets are forward-looking in nature and the fact that buyers have continued to press the bid in a number of risk markets highlights the hope that has permeated the backdrop over the last week following a trouble series of events in the month of March. This still could be a bear market bounce, however, so traders would likely want to keep potential for either scenario in the cards for the days and weeks ahead.

S&P 500 Four-Hour Price Chart

ES SPY SPX Four Hour Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

In the S&P 500, price pushed up to another fresh three-week-high today, finding a bit of resistance at a longer-term Fibonacci level around 2753. This is the 23.6% marker of the 2009-2020 major move, and this follows yesterday’s topside breakout beyond another area of prior resistance, taken from the 2645 area, which is the 38.2% marker of the February-March sell-off.

S&P 500 Monthly Price Chart

SPX Monthly Price Chart

Chart prepared by James Stanley; SPX500 on Tradingview

As looked at in the webinar, for those looking to make bullish plays in US equities, the Nasdaq 100 may be more attractive. The February-March sell-off was comparatively subdued, as price action caught support around the 50% marker of the 2016-2020 major move in the NDX while the S&P 500 fell all the way down to the 76.4% retracement from the same major move. The recent bullish response has been more aggressive, as well, with the 50% marker of the February-March sell-off in the S&P in a confluent area around the 2800 level. The Nasdaq 100 meanwhile has already cleared the 50% retracement of the February-March sell-off; highlighting the additional strength that’s shown in the tech-heavy index.

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Nasdaq 100 Monthly Price Chart

Nasdaq 100 Monthly Price Chart

Chart prepared by James Stanley; Nasdaq 100 on Tradingview

On the other end of the spectrum, bearish US equity plays may be more attractive in the blue chip index of the Dow Jones Industrial Average. The Dow seemed to get hit harder by this recent sell-off, pushing all the way down to the 78.6% retracement of the 2015-2020 major move; and the ensuing bounce has been lighter than what’s shown in the Nasdaq 100 so far.

Dow Jones Daily Price Chart

Dow Jones Daily Price Chart

Chart prepared by James Stanley; Dow Jones on Tradingview

US Dollar Catches Support After Entrance of Extreme Volatility

It was a major rollercoaster for the USD last month, with a bearish move reversing hard in mid-March, pushing DXY from a fresh yearly low up to a fresh three-year-high in less than two weeks. Since then, however, directional strategies have been of challenge as the currency has continued to coil. At this point, the bullish side of the pair may look more attractive, given a hold of support in the 99.80-100.00 area on the chart.

US Dollar Four-Hour Price Chart

US Dollar Four Hour Price Chart

Chart prepared by James Stanley; USD on Tradingview

EUR/USD Breakdown Scenarios

For long-USD strategies, EUR/USD may remain as attractive, especially given proximity to the fresh two-year-lows that were set just last month. In the webinar, I looked at a couple of different possible manners of approach in the pair; and the more attractive backdrop is likely longer-term in nature, as last month printed a long-legged doji in the pair. A similar scenario had played out in Gold and I talked about that last week, just before the monthly bar closed with that long-legged doji formation. As shared in that article, a long-legged doji highlights extreme indecision which could soon resolve in extreme volatility with a breakout in one direction or the other.

EUR/USD Monthly Price Chart

EURUSD Monthly Price Chart

Chart prepared by James Stanley; EURUSD on Tradingview

GBP/USD Resilient After Leadership Scare

At the forefront of the global coronavirus headline is a still continuing saga around UK Prime Minister, Boris Johnson. After announcing that he had the virus recently, and was going into isolation at 10 Downing; news circulated this weekend that his condition had worsened to the point of hospitalization. That took another turn for the worse yesterday as he was moved into the Intensive Care Unit.

The initial response in the Pound was one of weakness as the guiding force through the Brexit scenario was forced to, at least temporarily, cede power to Dominic Raab. So far, GBP/USD has recovered some of those losses, and there could be scope for further gains. Sitting atop price action is a zone of resistance that held the highs through a few different tests, running from around 1.2461, which is the 50% marker of the December-March major move.

GBP/USD Four Hour Price Chart

GBPUSD Four Hour Price Chart

Chart prepared by James Stanley; GBPUSD on Tradingview

USD/CHF Puts in Evening Star

This could be of interest for scenarios around EUR/USD looked at above; particularly for long-USD scenarios focusing on the short side of EUR/USD.

To balance off or hedge that USD-risk, short-side USD/CHF scenarios could be of interest, particularly given the evening star formation that’s built on the daily chart following a failed test above the .9766 level. This can keep the door open for continued mean reversion after the v-shaped recovery showed in the month of March, with buyers eventually throwing in the towel around the .9902 Fibonacci level.

USD/CHF Daily Price Chart

USDCHF Daily Price Chart

Chart prepared by James Stanley; USDCHF on Tradingview

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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