Support & Resistance

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EUR/USD Technical Analysis: Ready to Test Above 1.24 Figure?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro aims above 1.24 after breaking yet another chart resistance level
  • Conflicting cues argue against taking long or short position at this time

The Euro has soared to the highest level in over three years against the US Dollar, with a break past yet another layer of chart resistance hinting the move upward will continue. Prices pulled back after showing a bearish candlestick pattern as expected but the move quickly turned follow a hawkish ECB meeting minutes.

From here, a daily close above the 50% Fibonacci expansion at 1.2430 opens the door for a challenge of the 61.8% level at 1.2637. Alternatively, a move back below the 38.2% Fib at 1.2223 paves the way for a retest of resistance-turned-support at 1.2092, the September 8 high.

Standing aside seems prudent for now. Longer-term positioning shows the Euro entering a critical resistance zone, arguing against chasing the currency upward. On the other hand, the absence of a clear-cut bearish reversal signal means that entering short is premature, especially given recent bullish momentum.

What will drive the EUR/USD trend in the first quarter? See our forecast here!

EUR/USD Technical Analysis: Ready to Test Above 1.24 Figure?


Japanese Yen Technical Analysis: Ancient USDJPY Uptrend Threatened

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • USD/JPY has fallen and stayed down
  • It’s now closing in on what could be a key uptrend channel
  • AUD/JPY has recovered, meanwhile, and looks set for more gains

Which 2018 trading opportunities do the DailyFX team of analyst find most compelling? Find out here.

The Japanese Yen has posted strong gains against the US Dollar in the past week, taking USD/JPY back to lows not seen since mid-September last year.

The fundamental justification for these moves is clear enough. The greenback has been under general pressure thanks to increasing market certainty that other developed markets will see tighter monetary policy in due course, crowding a field which for much of last year belonged solely to the US Federal Reserve. The Eurozone is held to be the most obvious candidate as stronger economic data see bets rise that stimulus withdrawal will accelerate.

The Yen has had a specific, domestic driver, too, even if its rationality is open to question. The Bank of Japan trimmed ever so slightly the amount bought at its regular bond-market operations last week. This was seen by the market as a sign that even Japan’s extraordinary accommodative monetary policy could be tightened and the Yen duly rose. Now the Bank of Japan has effectively denied the markets’ implicit charge since. It has stuck to its ancient line that all current settings will remain in place until inflation rises sustainably. But the Yen has not weakened, suggesting perhaps that the markets do not wholly buy this line.

In all events, USD/JPY’s fall to the 110.24 region puts early-September’s lows in the 107 region in focus, and they were the lows for 2017 as a whole.

Japanese Yen Technical Analysis: Ancient USDJPY Uptrend Threatened

If we look a little further back for clues, we find USD/JPY now within striking distance of what could be a quite significant longer-term upward channel on its daily chart. This channel is rooted in the lows of September 2016. Its lower bound has quite a few validation points, not least the intraday low of November 9, 2016 which provided investors with a very broad daily range but a rather smaller actual gain.

Channel upside need hardly detain us long as a test of it looks most unlikely in the near term. However it is probably worth pointing out that that upside is necessarily bounded by the highs of late 2016 and early 2017. These look like outliers now, given the trading action before or since. A more valid channel top would probably take in the lower highs of March or even May 2017.

Still, the point is that this reasonably long-term uptrend will be in serious trouble for the first time in its history if the Dollar closes below 109.75. That is not very far from current levels.

Japanese Yen Technical Analysis: Ancient USDJPY Uptrend Threatened

By the same token of course US Dollar bulls may be able to defend this uptrend. But the contest should come soon and its outcome will be worth watching.

The Australian Dollar took a knock against the Japanese currency at about the same time as USD/JPY began to fall more heavily, around January 10. However, AUD/JPY has fought back far more convincingly with rises chalked up for the past five sessions, albeit quite modest ones.

Japanese Yen Technical Analysis: Ancient USDJPY Uptrend Threatened

Aussie bulls need to make progress above that January 10 fall, which means they need to retake 88.78, before moving on to an assault of the previous high, January 5’s 89.08. At the moment the Aussie seems to have enough tailwind to suggest that both levels could be tested. Official Chinese Gross Domestic Product data on Thursday could provide the fundamental impetus, especially if they show growth comfortably in the ‘better’ region of Beijing’s “6.5% or better” target. Analysts expectations centre around a 6.8% gain.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


GBP/USD Technical Analysis: Rally to Fibonacci Resistance

Price action and Macro.

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Talking Points:

- GBP/USD tested a key support zone last week, but has since posed a 360+ pip rally.

- Retail traders are heavy on the short-side, with a current read of -2.03 via IG Client Sentiment.

- If you’re looking for longer-term analysis behind GBP and/or USD, check out the DailyFX Q1 Forecasts.

GBP/USD Sets Fresh Post-Brexit High

Last year turned out to be rather bullish for the British Pound, as the pair started trending-higher in the first quarter of the year and continued that upward advance into the close of 2017. During this time, a bullish trend-channel showed-up, and prices remained within that trajectory as we opened into 2018. Last week, we investigated a key area of support in the pair, revolving around the 1.3500 psychological level and aided in-part by a key Fibonacci level at 1.3478. This Fibonacci level is the 50% retracement of the ‘Brexit move’ in the pair, taking the June 2016 high down to the October 2016 low.

After a test of support last week, bulls took over, and have pushed prices up to fresh post-Brexit highs, with current resistance showing at the 61.8% retracement of that same Fibonacci study.

GBP/USD Daily: Bullish Trend Channel Defines the Trend

GBP/USD Daily with Trend Channel and Fibonacci Applied

Chart prepared by James Stanley

Fibonacci Resistance a Hurdle for Bulls

Given that we’ve seen a rather aggressive leap from the 50% retracement of the post-Brexit move all the way up to the 61.8% retracement, buyers may want to utilize caution if looking to onboard additional long exposure at current levels. A bit of short-term support has developed over the past couple of days around 1.3750, and for shorter-term stances, this can be investigated as a jumping-off point for bullish continuation strategies.

GBP/USD Hourly: Short-Term Support 1.3750, 61.8% Fibonacci Resistance

GBP/USD Hourly with Short-Term Support Around 1.3750

Chart prepared by James Stanley

Moving Forward:

While the trend is undeniably bullish here, the primary reason for consternation is one of risk-reward. The past couple of days have seen a bit of support develop around the 1.3750 psychological level, but this is so far away from the previous zone of support or any other potential support variables that justifying risk-reward for longer-term bullish cases could prove challenging. Shorter-term approaches can look to near-term support for adding on bullish exposure, but outside of that, traders with longer-term horizons will likely want to wait for a cleaner setup to present itself before chasing the pair-higher.

To read more:

Are you looking for longer-term analysis on GBP/USD? Our DailyFX Forecasts for Q1 have a section specifically for GBP/USD. We also offer a plethora of resources on our GBP/USD page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

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

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USD/CHF Technical Analysis: Two-Year Range Remains in-Force

Price action and Macro.

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Talking Points:

- USD/CHF has been range-bound for more than two years.

- As we move towards the close of 2017, price action remains near the middle of this two-year range.

- Want to see the DailyFX Q4 Forecast on USD? Click here for full access.

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As we near the end of 2017, the range in USD/CHF has now turned two years old. The removal of the peg from the Swiss National Bank in January of 2015 led to extreme volatility in the Franc; but after settling down in the months following, prices moved into a rather consistent range that’s now held for more than 24 months. Resistance around 1.0300 at the top of the range has shown twice, in December of 2015 and then again in December of 2016.

USD/CHF Daily: Range-Bound Since Q4, 2015

USD/CHF Technical Analysis: Two-Year Range Remains in-Force

Chart prepared by James Stanley

Perhaps most surprisingly, this range developed while the U.S. Dollar was in the midst of some rather respectable trends. In the latter portion of 2016, the Dollar caught a significant bid as we moved towards year-end after the election of U.S. President, Donald Trump. This created a fresh 14-year high in the Greenback per DXY; but in USD/CHF, we merely saw that revisit to resistance around 1.0300. But, as that troubling USD weakness began to show in the first and second quarters of the year, USD/CHF tracked-along with it, albeit in a more confined manner; eventually running down to support around the .9450 area, at which point buyers showed up to help cauterize losses before prices moved higher.

At this point, there are few reasons to anticipate a break of this range. Price action is currently testing the mid-line of the recent range around .9883, and this can make directional prognosis even more complicated at this point, as we’re in the middle of a meandering section of price action.

Until USD/CHF exhibits some tendency to trend, traders would likely want to move-forward under the expectation that this range will continue. Visits to support, categorized as the 2017 low of .9421 up to the .9550 level could be attractive for bullish exposure with targets cast towards parity and then 1.0200. And resistance of 1.0200-1.0350 can be investigated for short-side stances with targets cast towards parity and then .9775.

USD/CHF Daily: Middle of the Range as we Near Close of 2017

USD/CHF Technical Analysis: Two-Year Range Remains in-Force

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Aussie Dollar Menacing 2017 Peaks

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar menacing 2017 peaks after hitting 4-month high vs US counterpart
  • Actionable trade signal and improved risk/reward parameters needed to enter trade

The Australian Dollar has advanced to the highest level in four months against its US counterpart, with buyers seemingly poised to force a test of last year’s peak. The advance paused below the 0.79 figure – inspiring the unwinding of a long position from 0.7666 – but upside momentum proved quick to resume.

Confirmation of a break above the 76.4% Fibonacci retracement at 0.7978 on a daily closing basis opens the door for a challenge of the July 27 high at 0.8066. Alternatively, a reversal back below the 61.8% level at 0.7887 – now recast as support – paves the way for a retest of the 50% Fib at 0.7813.

An upside break of near-term resistance is yet to be confirmed. Without that, prices are too close to the barrier to justify re-entering long from a risk/reward perspective. On the other hand, the absence of a clear-cut bearish reversal signal argues against taking up the short side. Standing aside seems most prudent for now.

What is the #1 mistake that traders make, and how can you fix it? Find out here!

AUD/USD Technical Analysis: Aussie Dollar Menacing 2017 Peaks

Canadian Dollar Rate Forecast: Markets Set For Probable BoC Rate Hike

Position Trading based on technical set ups, Risk Management & Trader Psychology.

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Canadian Dollar Rate Talking Points:

  • USD/CAD Price Forecast: CAD looking to strengthen below 1.2350/90 on BoC
  • Bank of Canada rate hike expectations close to 90%. Failure to hike could bring volatility
  • Sentiment Highlight: Retail selling overtakes longs, bias bullish

The Canadian Dollar rate looks ripe for further strengthening as traders prepare for the Bank of Canada to hike rates with 85% probability per Bloomberg data ahead of the meeting. The Canadian Dollar rate could also strengthen should BoC Governor Poloz share a confident view that could further result in front-end Canadian Treasury selling that has been correlated to CAD strength.

A risk that traders should watch for would be a hawkish hold where the BoC fails to hike but encourages the markets to look for a rate hike at an upcoming meeting. Given the pricing in of a rate hike per overnight index swaps, a failure to hike now would like see USD/CAD test resistance at prior resistance near 1.26, which also is where the 100-DMA stands.

Another background data-point that traders should be aware of is the positioning data from the CFTC Commitment of Traders (CoT) report that showed institutions added to their CAD long exposure. The net CAD long is barely positive meaning an aggressive unwind or betting on significant CAD weakness does not appear to be a smart bet as institutions do not have an extended position that they’d need to unwind.

Unlock our Q1 forecast to learn what will drive trends for the US Dollar at the 2018 open!

USD/CAD Chart: Looking Heavy below Key Resistance

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Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

Major resistance on USD/CAD currently stands at 1.2904, where markets delivered a triple top pattern over Q4 2017. When looking at a triple-top, the breakdown through the bottom of the channel begins to act as a polarity point.

Learn about Triple Tops and Bottoms here from DailyFX

The next key level of resistance will be the support point at the bottom of the triple-top range. The bottom of the range is at 1.2665 to the opening range high of 2018 at 1.2590. This 75-pip range includes a large variety of significant technical points that includes the 38.2% retracement of the December to January 5 range.

Downside targets through the week’s end would be the triple-top target at 1.23335, which is the 100% expansion lower of the triple-top range with an extended downside target at 1.21522, the 1.618% expansion of the same range.

Valuable Insight from IG Client Positioning for USD/CAD: Retail selling overtakes longs, bias bullish

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We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bullish contrarian trading bias.

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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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Contact and discuss markets with Tyler on Twitter: @ForexYell


NZD/USD Technical Analysis: Working on Sixth Week of Gains

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar working on sixth consecutive weekly gain, aiming about 0.73
  • Adverse risk/reward parameters warn against entering long trade for now

The New Zealand Dollar continues to push upward against its US namesake, with prices now seemingly aiming to test the waters above the 0.73 figure. The currency is working on a sixth consecutive week of gains, which would amount to the longest run in over seven months.

Near-term resistance is at 0.7345, the 76.4% Fibonacci retracement. A daily close above that initially targets the September 20 swing high at 0.7434, followed by the July 27 peak at 0.7558. Alternatively, a turn back below the 61.8% level at 0.7261 exposes the 0.7170-0.7212 zone (trend line, 50% Fib)

Entering long is a tempting proposition but an attractive risk/reward setup seems tough to define. A break of trend line support is the logical stop-loss parameter but that implies exposure to too great of a drawdown relative to the first available upside target. Waiting for a better-defined setup appears to make sense.

Need help building confidence in your NZD/USD strategy? See our guide here!

NZD/USD Technical Analysis: Working on Sixth Week of Gains

EUR/GBP Technical Analysis: 3-Month Range Floor Support Exposed

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8824
  • Euro recoils from resistance, suffers worst two-day drop in over a month
  • Short position activated, looking for a retest of recent range floor support

The Euro looks vulnerable to deeper losses after suffering the worst two days in over a month against the British Pound. Prices recoiled from resistance capping the upside since mid-October after putting in a bearish Evening Star candlestick pattern, with the medium-term range floor now in the crosshairs.

From here, a daily close below the 0.8733-46 area (September 27, November 1 lows) opens the door for a test of the 38.2% Fibonacci expansion at 0.8689. Alternatively, move back above former support in the 0.8842-65 zone, now recast as resistance, paves the way for a retest of the 38.2% Fib retracement at 0.8925.

Technical and risk/reward parameters appeared compelling and a short EUR/GBP position was activated at 0.8824, initially targeting 0.8746. A stop-loss will be triggered on a daily close above 0.8865. Profit on half of the trade will be booked and the stop moved to breakeven when (and if) the first objective is met.

Not sure where to start on your EUR/GBP trading strategy? Check out our beginners’ guide!

EUR/GBP Technical Analysis: 3-Month Range Floor Support Exposed

EUR/GBP Technical Analysis: 3-Month Range Floor Support Exposed

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8824
  • Euro recoils from resistance, suffers worst two-day drop in over a month
  • Short position activated, looking for a retest of recent range floor support

The Euro looks vulnerable to deeper losses after suffering the worst two days in over a month against the British Pound. Prices recoiled from resistance capping the upside since mid-October after putting in a bearish Evening Star candlestick pattern, with the medium-term range floor now in the crosshairs.

From here, a daily close below the 0.8733-46 area (September 27, November 1 lows) opens the door for a test of the 38.2% Fibonacci expansion at 0.8689. Alternatively, move back above former support in the 0.8842-65 zone, now recast as resistance, paves the way for a retest of the 38.2% Fib retracement at 0.8925.

Technical and risk/reward parameters appeared compelling and a short EUR/GBP position was activated at 0.8824, initially targeting 0.8746. A stop-loss will be triggered on a daily close above 0.8865. Profit on half of the trade will be booked and the stop moved to breakeven when (and if) the first objective is met.

Not sure where to start on your EUR/GBP trading strategy? Check out our beginners’ guide!

EUR/GBP Technical Analysis: 3-Month Range Floor Support Exposed

EUR/JPY Technical Analysis: Trend-Line Bounce into Resistance Zone

Price action and Macro.

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Talking Points:

- EUR/JPY has reversed last week’s bearish trend after running into trend-line support.

- Prices are fast approaching 136.00, which has shown a recent tendency to produce resistance in the pair.

- If you’re looking to improve your trading approach, check out our Traits of Successful Traders research. And if you’d like more of a basic primer for the FX market, check out our New to FX Guide.

EUR/JPY Bounce From Trend-Line Support

EUR/JPY capped off what was an impressively strong 2017 by continuing to show strength in the first few trading days of the New Year. But, after an evening star formed around the close of the first week of the year, prices continued to drop as worries about a ‘stealth taper’ from the Bank of Japan created considerable Yen strength. This amounted to a pull-back in the previously ebullient trend of EUR/JPY, and as we wrote last week, prices had pulled back to the first of two interesting areas of potential support. That support is derived from a trend-line projection that can be found by connecting the August and November lows from last year; the projection of which runs into December and now January, 2018 swing-lows.

EUR/JPY Daily: Trend-Line Support From August, November Lows

EUR/JPY Daily: Trend-Line Bounce into Resistance Zone

Chart prepared by James Stanley

Prior Fibonacci Resistance as Fresh Support

After support built-in off of that trend-line, buyers took control, and pushed prices all the way up towards the two-year high that was set a couple of weeks ago. Problematic, however, is how bulls have thus far been unable to break-above this area, and this points to the fact that the move may still be stretched after this recent topside run. So, while the bullish trend continues to show healthy signs of strength, justifying fresh exposure while so near an area that’s been unwilling to budge can present challenges.

More interesting, however, is an area of prior resistance at 134.41. This is the 61.8% Fibonacci retracement of the 2014-2016 move, and this helped to form a triple-top in the pair last year. To date, this has yet to show-up as any significant level of support, and traders looking to on-load bullish exposure can look to this area of prior resistance in the effort of establishing bullish exposure at a potential higher-low.

EUR/JPY Daily: Resistance Around 136.00, Potential Support Around 134.41

EUR/JPY Four-Hour: 136.00 Resistance with potential higher-low support

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the Euro or Japanese Yen? Our DailyFX Forecasts for Q1 have a section for both EUR/USD and USD/JPY. We also offer a plethora of resources on our EUR/JPY page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

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

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Contact and follow James on Twitter: @JStanleyFX


GBP/JPY Technical Analysis: Blast-Off to Fresh 18-Month Highs

Price action and Macro.

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Talking Points:

- An impressive rally has taken place in GBP/JPY over the past week, with the pair now trading at fresh post-Brexit highs.

- While worries of a Japanese ‘stealth taper’ have been soundly faded out of GBP/JPY, the concern now rests with one of risk-reward for forward positioning.

- If you’re looking to improve your trading approach, our Traits of Successful Traders research can help.

GBP/JPY to Fresh Post-Brexit Highs

The past week of price action in GBP/JPY is a good example of how much change can quickly take place in global capital markets. As the Japanese Yen was exhibiting considerable strength last week on the back of concerns around a ‘stealth taper’, we looked into the potential for that theme being an overblown inference. The Bank of Japan has made a noticeable effort of recent to be more open and transparent with markets, and after the bank’s ‘stealth move to negative rates’ in January of 2016, this makes sense.

Shortly after the open of the New Year, GBP/JPY formed a three-bar evening star formation, and that led into last week’s spill. The total sell-off eclipsed 300 pips, but as we wrote, support showing above the psychological level of 150.00 could retain the longer-term bullish structure behind the pair. Over the following couple of days, support set-in, and a morning star formation built, helping to catapult prices to current levels, or fresh 18-month highs in the pair.

GBP/JPY Daily: Evening Star to Morning Star to Fresh 18-Month Highs

GBP/JPY Daily: Evening Star to Morning Star to Fresh 18-Month Highs

Chart prepared by James Stanley

Prior Short-Term Resistance as Support

While traders can now operate with alignment of the longer-term bullish trend with the shorter-term theme of strength, the complication now rests with the prospect of entry. This would be the third approach in GBP/JPY above the 153.40 level, with each of the prior two attempts failing. Also complicating matters is one of risk-outlay. Last week’s morning star set a low at 150.16, which is more than 375 pips away from current prices.

For bullish continuation strategies, traders can zone-in to a prior area of short-term range in the effort of adding bullish exposure. This area showed up after the formation of last week’s morning star, and there were multiple tests of support around 152.00 while short-term resistance was showing from 152.80 up to 153.10. Price pulling back to find support in this area of prior resistance opens the door for bullish continuation strategies, with the possibility of stops lodged below the prior area of support around 152.00.

GBP/JPY Four-Hour: Prior Resistance Area as Potential Staging Ground

GBP/JPY Four-Hour: Prior Short-Term Resistance as Potential New Support

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on GBP and/or JPY? Our DailyFX Forecasts for Q1 have a section specifically for each We also offer a plethora of resources on our GBP/JPY page, and traders can stay up with near-term positioning in GBP/USD and USD/JPY via our IG Client Sentiment Indicator.

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

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Contact and follow James on Twitter: @JStanleyFX


USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Price action and Macro.

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Talking Points:

- USD/CHF resisted off of a key area again this morning. Should USD-strength continue, a bullish move over this resistance level can open the door to breakout strategies in Swissy.

- While USD weakness continued well into this month, USD/CHF has been range-bound since July, deductively highlighting a relatively weak Swiss Franc that could become attractive for continuation should USD-strength continue to show.

- Want to see how USD has held up to the DailyFX Forecasts? Click here for full access.

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The U.S. Dollar has had a rather rough 2017. In a down-trend that’s seen as much as -12.3% of the U.S. Dollar’s value erased, even while the Fed talks up additional rate hikes, few currencies have been able to keep pace with the Greenback’s declines. After coming into the year trading above the 1.0300 level, USD/CHF has seen as much as 925 pips taken-out as the pair has driven-lower.

But after running into support in mid-July around the .9433 level (the 2016 low), the declines have slowed as USD/CHF has built into a rather volatile range-bound pattern. Resistance has begun to build around the .9773 level, and we’ve seen multiple iterations of resistance show-up here; each rebuking USD/CHF’s upward advance.

USD/CHF Daily: Range-Bound Since Re-Test of 2016 Low

USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Chart prepared by James Stanley

At this point, a top-side break of that well-worn resistance level could open the door to an attractive bullish breakout setup. Just above this area of resistance is another level of interest at .9813, as this is a prior swing-low point of support that also showed as a quick swing-high before the pair initially sank below .9770. This can be used in a couple of different ways. For traders looking at the more aggressive route of taking on bullish exposure on a break of .9775 (a few pips beyond the exact point of resistance), the level at .9813 can be utilized as an initial target and an opportunity to move the initial stop up to breakeven. Or, for those who want to approach USD/CHF a bit more conservatively, the .9813 level can be used to trigger the bullish breakout, with .9772 becoming an area to look to for stop placement in the effort of containing risk in the event that the breakout doesn’t continue-higher.

On the chart below, we’ve added five potential resistance levels above the .9813 inflection point, each of which has been derived from a prior price action swing and/or group of swings. Each of these can be used as potential targets should the bullish breakout continue if/when resistance is taken out.

USD/CHF Four-Hour: Potential Top-Side Resistance Levels Applied

USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Chart prepared by James Stanley

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

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CAC 40 Double Tops at Channel Line

Swing trading, chart patterns, breakouts, and Elliott wave

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Talking Points

  • CAC 40 carves a double top pattern
  • Elliott Wave pattern could not push beyond the mid-line of the Elliott Wave channel
  • Bears are activated on a move below channel support near 5200

The Elliott Wave pattern on CAC 40 is intriguing. CAC 40 appears to have finished the five wave impulse move at the Elliott Wave channel mid-line. This implies a weak market and is a bearish pattern.

This pattern suggests that a longer term correction is underway. The first battle of support emerges near 5,200 where the blue Elliott Wave support channel emerges as well as the bottom of the Ichimoku cloud.

Interested in learning more about Elliott Wave and Ichimoku? Grab the beginner and advanced Elliott Wave guide as well as the Ichimoku guide.

CAC 40 Elliott Wave and Ichimoku Pattern

CAC 40 Double Tops at Channel Line

Created using IG Charts

Any near term bulls would need to show themselves in CAC 40 near 5,200. If this level breaks, then the door is opened up to 4,900-5,000. We have two different levels appearing there.

First, the previous wave ‘iv’ extreme is near 5,000. Previous fourth waves tend to act like a magnet in corrective moves.

Secondly, the 38% retracement of the June 2016 (Brexit) low to the November 1, 2017 highs appears near 4,921.

Therefore, if 5,200 breaks, traders can look for further weakness down towards the 4,900-5,000 price zone.

Lower potential exists, but we will need to see the structure of how the correction develops to weigh the odds further.

Why do traders lose money? Find out in our Traits of Successful Traders Research.

---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to help break down the patterns according to Elliott Wave theory.

Discuss this market with Jeremy in Monday’s US Opening Bell webinar.

Follow on twitter @JWagnerFXTrader .

Join Jeremy’s distribution list.

Other Elliott Wave forecasts by Jeremy:

GBP/USD Hanging Over the Edge of a Cliff

AUDUSD technical forecast hints at the market searching for a bottom.

Short term EURUSD Pattern Hints at Bounce to 1.17.

USD/CAD dives 200 pips, will it continue?

Gold price forecast points towards lower levels.

Crude oil prices reach highest level since July 2015.

NZDUSD Elliott Wave Analysis: Temporary Relief Rallies

USD/JPY : A Bird in the Hand is Better Than Two in the Bush


Crude Oil Price Forecast: Bulls Push to 50% of 2014 Drop, Brent to $70

Position Trading based on technical set ups, Risk Management & Trader Psychology.

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Crude Oil Price Forecast Talking Points:

  • WTI Crude Oil Technical Analysis Strategy: strong impulsive rise above $58.95 (Nov. high)
  • Hedge Funds load into bullish bets per CFTC data as price approached 50% of bear market
  • Trader Sentiment Highlight from IG UK: rise in net-bullish position may see price reverse ST

Crude Oil bears are having a hard time at the start of 2018 maintaining a shred of credibility. Naturally, there are arguments on the surface that have merit, but momentum is a cruel opponent as Oil short sellers are finding out. This week, Crude has continued to be bid on optimism that the supply surplus is on its way to a supply deficit relative to rising demand, which has pushed Brent above $70 and both the US and global oil benchmark to 50% of the 2014 drop.

Hedge Funds Look to Be “All In” on Upside

The CFTC’s Commitment of Traders report showed that hedge funds are set to push and look to profit on marginal gains in Crude Oil. Data as of January 9th showed a record long net position of $41,402 MM long. The rally in Crude oil has been backed solidly by the Hedge Funds loading into the trade as positive data such as the 2017 development per the US EIA and China General Administration of Customs showing that China passed the U.S. as the largest oil importer thanks to new refining capacity in China has boosted demand while OPEC holds off on discussing an exit strategy.

The concern, at least as the bear’s argument goes, is that shale production will explode given the high prices. This is possible, but would likely take a long time to make a material impact that would fundamentally shift the supply curve and physical market given the aggressive rise in demand recently seen. Additionally, US crude stockpiles continue to fall so without new supply coming on, price will likely continue to aggressively rise as the sequence of declines per the EIA weekly inventory report is the longest string of declines in a decade.

Technical Levels for WTI Crude Oil

After recently topping the 2015 high, short-term price support can be found at prior resistance at $59.02/05, which was the late-November high and H2 2017 price target that price eventually broke through in late December derived as the 1.618% Fib Expansion off 2017 low. A break below $59.05 would indicate the immediate trend has shifted to neutral, but it would take a break and close below $55.83 to shift from neutral to medium-term bearish.

Technical traders can also look to the 20-DMA as a form of dynamic support, that currently sits at $61.42/bbl whereas short-term traders may look to the 9-day midpoint at $63.07/bbl before getting out on fear that a wash-out could ensue as profit takers may not have much patience for a retracement.

Unlock our Q1 18 forecast to learn what will drive trends for Crude Oil at the open of 2018.

Crude Oil Chart Watch: Trendline & Price Support

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Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

WTI Crude Oil Insight from IG Client Positioning

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We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse lower despite the fact traders remain net-short.

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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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Gold Technical Analysis: Has Support Set-In?

Price action and Macro.

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Talking Points:

- Gold prices started a bullish trend in mid-December, rallying from a low of $1,236.

- The past few days have finally seen that bullish trend pull back; but will buyers respond to near-term support?

- Gold is currently carrying heavy bullish retail exposure, with a +2.0 read via IG Client Sentiment.

Gold's Bullish Trend Takes a Pause

Gold prices took a hit in the early-portion of December. As markets braced for another rate hike from the Federal Reserve, Gold sold-off from the $1,296 resistance level all the way down to $1,236. But, after establishing support around the time of that rate hike, bulls returned and didn’t look back; prices had re-ascended to $1,296 by the end of the month, and the early portion of 2018 saw that bullish trend continue all the way up to fresh near-term high of $1,344, which was set shortly after the Sunday open this week.

Gold four-hour: Bulls Take Over After the FOMC December Rate Hike

Gold Prices Four-Hour Chart with Bullish Up-Trend

Chart prepared by James Stanley

Will Buyers Respond to Support?

After setting that fresh four-month high earlier in the week, bulls have been unable to continue the move-higher. Prices have pulled back to carve out near-term support around $1,332, which was a prior swing-high in Gold prices when the bullish trend was on the way up. Also of relevance, this near-term high came-in very close to a prior unfilled gap from all the way back in September. Prices closed the week on September 8th at $1,345.90, but opened the following week at $1,338.86. Until recently, that gap remained largely unfilled; but with prices running up to a fresh near-term high at $1,344, this leaves a portion of that gap remaining, from $1,344.74 up to $1,345.90.

Gold Hourly with Near-Term Support and Resistance Applied

Gold Hourly with Near-Term Support and Resistance Applied

Chart prepared by James Stanley

Moving Forward

A big portion of this bullish move in Gold prices has been a response to a continuation of U.S. Dollar weakness, so for those looking at top-side exposure, a continuation of the pain trade in USD will likely be a necessary component to further upside in Gold prices.

Continued support above $1,332 keeps the door open for bullish strategies, with targets directed to near-term resistance levels of $1,344.74. A top-side break of this high, and a touch of the prior gap at $1,345.90 can also be construed as bullish; but traders should be careful of a pullback from those levels should the September gap get filled. Additional resistance/top-side targets can be directed towards $1,350 (major psychological level), $1,357.50 (the 2017 high) and then $1,367 and $1,375 (the three-year high).

To read more:

Are you looking for longer-term analysis on Gold prices? Our DailyFX Forecasts for Q1 have a section specifically for Gold. We also offer a plethora of resources on our Gold page, and traders can stay up with near-term positioning via our IG Client Sentiment Indicator.

Chart prepared by James Stanley

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

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Gold & Silver Technical Outlook: Can They Break Resistance?

Price behavior analysis, short to intermediate-term trade set-ups.

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What’s inside:

  • Gold extending, but has two key significant points which could stall rally
  • Silver acting well, but has a lot of resistance to work through, still
  • Price action dependent, pullbacks may soon be signaled

Traders have been buying the rally in gold, see the IG Client Sentiment page to find out what this could mean in the near-term; for a longer-term technical and fundamental outlook, see the Q1 Forecast.

Gold continues to push higher with the help of a weak US dollar, now over $100 better than where it was a month ago. The recent extension has it trading at a trend-line dating back to 2013. The connecting points are important as one is the 2016 high and the other last year’s high.

If gold can overcome this significant hurdle, the next level is the 2017 high at 1357. A breakout beyond that point would be deemed important from the stand point of creating another higher-high since the rally began back in December 2016. This would leave room up to the 2016 high at 1375, an even bigger point of interest.

A scenario worth keeping in mind: If a reversal develops from around current levels we could see further development of a broad triangle formation dating back to mid-2016, with the 13-month underside trend-line as the bottom of the formation. From a big-picture perspective, this could be an explosive development.

For now, we’ll focus on how price action plays out at the aforementioned resistance levels and take it from there. You can join me on Tuesdays at 10:00 GMT for live in-depth technical analysis on precious metals and other commodities, along with equity indices.

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Gold: Daily

Gold daily price chart

Last week, silver held the trend-line off the December low, and is making another go at overcoming resistance. There is a price zone in the current vicinity up to 17.46, which is in confluence with the trend-line running down off the 2016 spike-high.

A breakout above these thresholds could spark momentum, with the next eyed line of resistance extending down from April, ~17.70. However, at the moment, silver is not only at resistance, but also lagging behind gold. This still leaves the burden of proof on buyers’ until a breakout above resistance can take shape.

Silver: Daily

Silver daily price chart

---Written by Paul Robinson, Market Analyst

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‎US Dollar Index (DXY) Forecast: Pessimism Holds on Move to 2009 Extreme

Position Trading based on technical set ups, Risk Management & Trader Psychology.

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US Dollar Index (DXY) Talking Points:

  • US Dollar Index Technical Analysis: approaching 2012 high could bring wave of selling
  • Traders right to fear new era of Dollar Weakness as other CBs move to taper
  • Trader Sentiment Highlight from IG UK: EUR/USD bearish bias from retail weakens

Things appeared to be going well fundamentally speaking for US Dollar Index Bulls. Economic data was surprising to the upside, and the Federal Reserve was sticking to their rate hike forecasts, which has helped to push the US Treasury 2-year yield above 2% for the first time since 2008.

Despite this, the US Dollar has recently traded below the 2017 low and now looks set to approach a polarity point on the chart marked by the Q1 2009 high. Aggressive and volatile capital marked the 2009 high flows sent markets rushing into Treasuries on a ‘world-ending’ capital market scenario that aggressively reversed and saw the US Dollar weaken over the next two years.

DXY Approaches Polarity Point of March 2009 High

A polarity point happens when prior resistance (typically a spike high or series of highs) converts into new support meaning that traders are unwilling to sell below a certain level. The very idea of a polarity point is that the market has a technically new understanding of how a market should trade. When a polarity level breaks, the market is seen entering into a new understanding of the value of that currency.

A key polarity point for the US Dollar Index is the March 2009 high at 89.71. Markets aggressively bid the US Dollar up through this level at the close of 2014 and the markets appeared content to keep the US Dollar at this “new normal” until now.

As the opening range solidifies for the first half of 2018, traders are now seeing the dollar has fallen in good times uniquely ripe to drop further as positive economic data reverts to the norm and likely begins to disappoint against economist’s expectations. It does not matter (at least when looking at the price) that other central banks are not on the same course of 3-4 hikes. What does appear to matter is that capital is flowing to riskier/ higher-yielding assets or repatriating to economies that are looking to taper their QE programs, which is expected to leave the USD further susceptible to weakness.

DXY Technical Update

The key technical level on the US Dollar is the 2018 opening range high that was traded at intraday on January 9 at 92.27. Given the bearish momentum picture, traders would do best to heed the momentum at present and continue to favor further DXY downside for now.

The dollar’s struggles are not going away and flow into other economies argues that weakness will persist. While there were arguments for short-term USD strength, they failed to materialize showing that pressure remains and US Dollar Index weakness remains preferred.

Short-term resistance is at the opening range high at 92.27. Below these levels, momentum prevails to favor focusing on the March 2009 high at 89.71 followed by the 61.8% Fibonacci retracement of the July 2014 to January 2017 range at 88.43.

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Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

Unlock our Q1 forecast to learn what will drive trends for the US Dollar through 2018's open!

Insight from IG Client Positioning: Pickup in short positioning favors support of price advance

EUR/USD sentiment is analyzed for insight since EUR/USD makes up 57.6% of DXY.

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We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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Contact and discuss markets with Tyler on Twitter: @ForexYell


S&P 500 Trading Outlook: Hard to Buy, Even Harder to Short

Price behavior analysis, short to intermediate-term trade set-ups.

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What’s inside:

  • S&P 500 continues to rise, buying not appealing but neither is shorting
  • Top-side channel line might provide support again on a pullback
  • Volatility likely to rise in meaningful way, just not today and not likely tomorrow either

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In the first couple of days to start the year, we noted that the S&P 500 was extended but that momentum wasn’t worth fighting. At the time, the market was at the upper end of the channel starting back at the beginning of December, a channel which it has been exceeded in recent sessions, and even as late as Wednesday tested as support.

The view hasn’t changed, the market is extended and while it may be tempting for some to short it because it’s ‘too high to buy’ or simply overbought, ‘up here’ can become ‘down there’ quickly in as strong of a market as the current one. Initiating fresh longs doesn’t hold much appeal, but shorting holds even less. There will be a time for shorts, just not yet.

What is a trader to do? Another dip back to the upper parallel may offer traders a level of support to lean on, but the time for a meaningful decline may also be nearing. Keep an eye on price action on any decline which unfolds. Not all declines are created equal. Those with momentum want to be sidestepped until momentum subsides and reverses, while dips (corrections) which are shallow and lacking any meaningful power are viewed as more favorable for entry.

As we’ve discussed on a couple of occasions, most recently at the very end of last year, volatility looks poised to rise at some juncture, and likely in a meaningful and sustainable way. You can check out detailed commentary on the subject in the Top Trading Opportunities in 2018 under “Resurgence of Volatility, S&P 500 Runs into Trouble”. But until we see cracks in the lining, we’ll have to continue trading in the market environment we are currently being dealt.

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S&P 500: Daily

S&P 500 daily price chart

---Written by Paul Robinson, Market Analyst

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DAX Technical Outlook: Bulls Hamstrung by Euro, May Soon Change

Price behavior analysis, short to intermediate-term trade set-ups.

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DAX Highlights:

  • Euro rally hampering DAX strength, may soon change
  • Seen similar scenario before, euro pausing may be enough to help market
  • Notable technical levels, lines to keep an eye on

For longer-term fundamental and technical analysis on the DAX & Euro, see the DailyFX Trading Guides page.

The strong euro rally the past few days has dampened upward momentum on the DAX and other European indices influenced by the pull of the single-currency. Prior to the surge, the German benchmark looked poised to trade to new record highs.

There is reason to believe, though, that EURUSD may find it difficult to sustain momentum in the days ahead as it looks to have gotten ahead of itself; could this be enough to allow the DAX to finally notch a new record? There has been an interesting relationship change between the DAX & euro which we’ve seen before get corrected.

While the very short-term (1-week correlation) has been solidly negative, the 1-month correlation between the DAX & EURUSD just turned positive for the first time since late-October, and when it did such back then, it lasted only a couple of days before reverting to its typically strong negative reading. Prior to that, it’s happened on a few other occasions, but only relatively brief periods of time.

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Chart – DAX: Daily

DAX daily price chart with euro correlation

DAX, Euro correlation in lower pane turned positive, but may only be temporary like before. Market still holding onto most of rally from Jan 2 low, could soon challenge monthly high if support holds.

It’s interesting to note that during the last turn positive in the correlation, the euro had made a strong move lower which helped bolster the DAX to new record highs. Shortly after the swift down-move in the currency, momentum in stocks stalled and reversed forcefully lower. We may be in for a similar scenario, but in reverse this time.

The thinking on this end, is that the euro could soon begin a consolidation period or worse, and it’ll be enough to at least give European equities breathing room to trade higher. In terms of support, we’ll start with last week’s low at 13151, and from there trend-lines extending higher since last year.

On the top-side, there is resistance at a trend-line off the record high, followed by the monthly high at 13425. If the market can get into gear above the second threshold, it’s only a 100 points to the prior record at 13525.

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinsonFX


ASX 200 Technical Analysis: Uptrend Threatened But Sill Holding

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The ASX 200’s uptrend endures
  • But it has been shaken and momentum looks weaker than it did
  • The next couple of trading sessions could be decisive

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The ASX 200 is clinging to its uptrend channel but certainly looks weaker technically than it did a week ago.

As you can see from the chart below, January 10 was an interesting day, if not one bulls would much want to revisit. The ASX slipped quite markedly in that session, as did many other Asian bourses. This was puzzling in one important respect- the region had quite a strong Wall Street lead to follow and there was no obvious piece of local bad news to rock the boat.

ASX 200 Technical Analysis: Uptrend Threatened But Sill Holding

But whatever its cause, January 10’s fall has clearly had an effect. It may be yet to completely invalidate the uptrend channel in place since December 6. But it has already given us an intraday foray bellow the channel downside, even if the channel is holding on a daily-close basis.

And, if we zoom in a bit we can see that the latest upside attempt appears to have fallen some way short of the channel top, putting the focus once again on the index’s lower boundary.

ASX 200 Technical Analysis: Uptrend Threatened But Sill Holding

Assuming that downside channel support holds, it may be best to wait a day or two to get the full picture. Monday brings the Martin Luther King Day holiday in the US. This will see both equity and bond markets closed and, probably, some thinning of Asian trade in advance of it.

That support comes in at the 6069 area, perilously close to current levels. The ASX was only 20 points or so above that point at the time of writing (0100 GMT Monday).

However, if we see a decisive break and daily close below the channel then it’s reasonable to assume that the bulls are losing heart- admittedly after a very good run. This need not mean heavy falls. December 29’s close at 6026 was also the intraday low of January 2 and that level may provide some near-term support.

The first Fibonnaci retracement of the remarkable rise from last October’s lows to January’s ten-year highs comes in at 6037.3. The second comes in at 5951.6, although the effects of a decisive fall through the psychologically important 6000 level may render that a tough prop to defend.

But we may be getting ahead of ourselves. The first order of business will be to see whether the current uptrend survives a return to normal US post-holiday trade. And that will have to wait effectively until Wednesday in the Asia Pacific region.

It might be best for the uncommitted to hold off until then.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Upside Channel Holds, Even Up Here

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The Nikkei has settled into a narrow, elevated range
  • However, it remains in an uptrend which began in October
  • Retracement support looks strong

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The Nikkei 225 still looks remarkably comfortable even though it is currently around highs not previously seen since 1991.

The Japanese equity benchmark has been loitering around these levels for a couple of weeks now and, although it has lacked the impetus to push on it hardly looks as though it is preparing for a dive either. Momentum indicators are elevated, as they would be. But they don’t suggest rampant overbuying. The moving averages remain in pristine order too, with no troubling crossovers to report.

Nikkei 225 Technical Analysis: Upside Channel Holds, Even Up Here

The index looks a little stuck in a band between 23,526 at the bottom and 24,011 at the top. That band has contained all the trading action since January 4.

An upside push would have to crack the top of that band but, at this altitude, where it might go next is very hard to say. 1991 was too long ago for its memory to be much help. However, there is a quite compelling uptrend channel in play. It has been with us since October 25 and has been validated quite often, especially on the downside. A second upside test has just held too, suggesting that resistance beyond the merely psychological now exists in the 24,000 region.

Nikkei 225 Technical Analysis: Upside Channel Holds, Even Up Here

The downside is better-known territory of course.

Under current range lows, the index is likely to find support at 22,878.6. That would be the first, 23.6% Fibonacci retracement of the long climb up from September 8’s lows to the highs seen on January 8.

Nikkei 225 Technical Analysis: Upside Channel Holds, Even Up Here

Sure enough, a cluster of index support in that region stretches all the way back to early November last year. Should all of those give way the next retracement (38.2%) will be found at 22,1793. This offers a less obvious prop than the first, however.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX


FTSE Short-term Chart Pattern Triggers, Shifts Focus Lower

Price behavior analysis, short to intermediate-term trade set-ups.

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What’s inside:

  • FTSE’s momentum wanes, builds bearish wedge on hourly chart
  • Triggered yesterday after a brief ‘overthrow’, shifts focus on downside
  • Levels and lines to consider in the near-term

See what’s expected to drive the FTSE and GBP this quarter in the Q1 Trading Forecasts.

When we looked at the FTSE last week, we made note that while the trend was still higher and should be respected, there was reason to be cautious. A rising wedge was developing on the hourly chart which pointed to potential for a pullback.

After a brief ‘overthrow’ (an event marked by price exceeding the top of a wedge, but falls back inside) on Friday, there was a trigger of the pattern via a break of its underside trend-line rising up since the first trading day of the year.

Chart 1 – FTSE: Hourly

FTSE 1-hr price chart

Rising wedge triggered after brief 'overthrow', levels of support to watch on the way down. Breakout above 7792 negates bearish implications.

Support levels we have penciled in start arriving around 7717, then 7690, and after that nothing of substance until down towards the base of the wedge around 7625. Pulling back to the daily chart, a decline to that point will be nearing the breakout zone of 7600/550. This would be a critical zone to hold bigger-picture.

Negating the bearish implications of the pattern will be a breakout above 7792. Even if a decline ensues as the bearish rising wedge portends, the broader trend is higher and it will take some technical damage to shift the intermediate-term outlook negative.

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Chart 2 – FTSE: Daily

FTSE daily price chart

Broad outlook remains positive as long as market stays above breakout zone (7550/600). A drop below would be concerning. 7850/900 projected target based on size of H2 '17 range could still be obtained after pullback.

---Written by Paul Robinson, Market Analyst

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