Support & Resistance

Last updated:
S - Strong
   |   
M - Moderate
   |   
W - Weak
   

EUR/USD Technical Analysis: Euro Topping Cues Intact After Bounce

Fundamental analysis, economic and market themes

Connect via:

To receive Ilya's analysis directly via email, please SIGN UP HERE

Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro upswing keeps bearish breakout implications broadly intact for now
  • New bearish reversal signal needed for an actionable short position setup

The Euro turned higher finding support below the 1.19 figure against the US Dollar but the outlines of last week’s bearish breakout remain intact. Indeed, recent gains have been conspicuously capped by a rising trend line that served as defining support for three months before being recast as resistance.

A break above this upward-slowing barrier – now at 1.2020 – opens the door for retesting a double top in the 1.2068-70 area (23.6% Fibonacci expansion, August 29 high). Alternatively, a move back below the 14.6% level at 1.1980 paves the way for another challenge of the 38.2% Fib retracement at 1.1863.

Last week’s entry order to sell EUR/USD at 1.1921 was activated and the resulting trade was subsequently stopped out. Positioning below the trend line as well as the double top argues for a bearish bias but a new actionable signal is needed to re-enter short. In the meantime, staying flat seems most prudent.

Have a question about trading EUR/USD? Join a Q&A webinar and ask it live!

EUR/USD Technical Analysis: Euro Topping Cues Intact After Bounce


USD/JPY Pushing Into Critical Resistance Alongside Correlated Markets

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

Connect via:

Key Takeaways:

  • USD/JPY technical strategy: breakout above 200-DMA/ trendline could signal breakout
  • 200-DMA (112.195) and 2017 falling trendline acting as key resistance on move
  • IGCS Highlight: Drop in net-long exposure favors contrarian via of upside

A textbook definition of a downtrend is a series of lower lows and lower highs on the chart and time frame you’re following. The question is, when does a lower high break higher and thus signal a changing of a trend from lower to higher? USD/JPY is at a potential breaking point such that if the downtrend remains, here is a great place for the market to turn. Highly correlated markets like the US Treasury 10Yr Yields (overlaid as a line on the chart below) are also at a seeming turning point.

The key point on the chart of USD/JPY is that the price pattern is that of a wedge. Wedges tend to indicate big moves on the horizon. However, the direction of the move is less certain. A similar wedge pattern is developing in UST 10Yr Yields. The direction of the wedge is lower since the double top in yields from late 2016, early 2017 at the 2.62 level.

The USD/JPY chart did not post a similar double-top, and in fact, was a helpful tell that there was an underlying weakness in the second move higher in US Yields as JPY strength kept a lid on USD/JPY appreciation. We’re at a similar point where both markets are pushing to resistance, and the next move higher or lower could dictate the market, as well as overall risk-sentiment going forward.

From a fundamental perspective, the markets await FOMC, which is unlikely to surprise in a hawkish given uneven data prints in the US. A more dovish than anticipated Fed would motivate the broader USD selling trend and likely send USD/JPY lower. In Japan, the focal events are the BoJ and the Lower House election, which is not expected to directly affect the JPY due to the recent subdued JPY price volatility.

The most Bullish development would be a daily close above the Ichimoku Cloud (ceiling is at yesterday’s close), and the 200-DMA (aligning with the 2017 trendline). The zone of this resistance is 111.60-112.20. This 60 pip zone could act as strong resistance. A break above this zone would favor a move to the 2017 resistance point of 114/5. A failure to breakout from here could usher in a wave of treasury buying (lower yields), and JPY strength. This bearish development would be best confirmed on the move back below 110 on a daily close basis.

Daily USD/JPY Chart: Strong resistance into 111.60/112.20 Zone (Ichimoku + 200-DMA)

USD/JPY Pushing Into Critical Resistance Alongside Correlated Markets

Chart Created by Tyler Yell, CMT

USD/JPY Insight from IG Client Positioning: Drop in net-long exposure favors reversal higher

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

USD/JPY Pushing Into Critical Resistance Alongside Correlated Markets

USDJPY: Retail trader data shows 66.2% of traders are net-long with the ratio of traders long to short at 1.96 to 1. In fact, traders have remained net-long since Jul 18 when USDJPY traded near 114.057; the price has moved 4.2% lower since then. The number of traders net-long is 5.5% lower than yesterday and 5.2% higher from last week, while the number of traders net-short is 14.5% higher than yesterday and 4.4% higher from last week.

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

---

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

To receive Tyler's analysis directly via email, please SIGN UP HERE

Contact and discuss markets with Tyler on Twitter: @ForexYell

Access Our Free Market/ Trading Guides Here:


GBP/USD Technical Analysis: Support Test After Carney Taps the Brakes

Price action and Macro.

Connect via:

Talking Points:

- The British Pound put in an aggressively bullish move around last week’s BoE rate decision, and is seeing a bit of retracement to start this week after a speech from BoE Governor, Mark Carney.

- With the recent bout of GBP strength we’ve seen a rise in retail sellers. IG Client Sentiment sits at -2.46 as of this writing, and given retail traders' traditional contrarian nature, this is bullish for the pair.

- Want to see how GBP and USD have held up to our DailyFX Forecasts? Click here for full access.

To receive James Stanley’s Analysis directly via email, please sign up here.

In our last article, we looked at GBP/USD ahead of a key Bank of England rate decision. While we walked into that meeting with little expectation for any actual moves on rates, the big item of interest was whether the BoE would warn of impending rate hikes in the effort of tempering inflation. While there were a lot of questions around the BoE’s stance, there were few around the rising inflation that’s been seen in the British economy since the bazooka of stimulus launched by the BoE, post-Brexit. With August inflation running up to 2.9%, this became something that the BoE could no longer ignore; and when the bank warned that some monetary stimulus may need to be removed in the coming months, the British Pound ran-higher as traders began to price-in rate hike bets out of the U.K. This catapulted GBP/USD above the vaulted 1.3500 level that we had looked at last week, and this put the currency in a bullish position as we set a fresh one-year high.

GBP/USD Hourly: Aggressive Top-Side Pop After Bank of England

GBP/USD Technical Analysis: Support Test After Carney Taps the Brakes

Chart prepared by James Stanley

To open this week, BoE Governor Mark Carney gave a speech at the IMF in Washington D.C. In that speech, we heard more of the familiar concerns around the British economy as Brexit discussions continue. But perhaps the most important line for currency markets was when Mr. Carney said that interest rates will “rise a limited extent at what can be expected to be a gradual pace, settling at levels significantly below those seen pre-crisis.” This acted as an immediate buffer to that topside run in the British Pound, and already we’re seeing the currency correct.

GBP/USD Daily: Price Falls to 50% Retracement of Brexit-Move, Prior Swing-High

GBP/USD Technical Analysis: Support Test After Carney Taps the Brakes

Chart prepared by James Stanley

The big question is how much firepower this warning may carry. Are markets to believe that one rate hike will quell the rising inflation being seen in the U.K.? And further – once Mr. Carney and co. do actually hike, what’s next? More monetary accommodation? How can we know that inflation will drop after one or two rate hikes, to the spot where the Bank of England can foreseeably forecast future rate policy? This raises a whole host of questions, none of which have defined answers, because they’re all dependent on something that hasn’t yet happened (that first rate hike in more than 10 years).

More pressing to the near-term performance of GBP/USD will be the continued sell-off in the U.S. Dollar along with British inflation prints. At this stage, price action remains bullish, and prices are testing a key support level at 1.3478. This is the 50% marker of the ‘Brexit move’ in the pair, and just below we have two key areas that could be used for bullish continuation approaches around 1.3350 and 1.3250. Each of these can open the door for stops to be placed under the confluent support zone that runs from 1.3117 (the 38.2% retracement of the same move) and 1.3187.

GBP/USD Four-Hour: Subordinated Support Levels Below Current Support

GBP/USD Technical Analysis: Support Test After Carney Taps the Brakes

Chart prepared by James Stanley

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX


USD/CHF Technical Analysis: The Down-Trend Continues

Price action and Macro.

Connect via:

To receive James Stanley’s Analysis directly via email, please sign up here.

Talking Points:

- USD/CHF Technical Strategy: Long-Term, Intermediate-Term down-trend.

- Swissy is moving back-down after bouncing from prior swing support at .9440.

- If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q1, 2017. If you’re looking for ideas more short-term in nature, please check out our IG Client Sentiment.

The down-trend continues in USD/CHF. Two weeks ago, price action found support around a prior swing at .9440, and began to move-higher. For a brief period, it looked as though buyers may be able to take control, as prices ran-above the key Fibonacci level at .9684; but after moving up to the prior swing-high around .9765, resistance showed-up as the upward advance began to stall.

After two days of resistance in this region showed over a three-day-sequence to close last week and open this one, sellers began to take over, and as risk aversion continued into this morning, the pair moved back-down to continue the bearish trend.

USD/CHF Technical Analysis: The Down-Trend Continues

Chart prepared by James Stanley

This, of course, is due in large part to the continued weakness currently being seen in the U.S. Dollar. This run of weakness in the Greenback has been going for more than seven months at this point as ‘DXY’ has shed more than 10% of its value. Many traders are rightly cautious towards chasing the move-lower, and this could make longer-term setups in Swissy a bit of a challenge at the moment, as we’re still trading above the May 2016 low around .9440.

Given current dynamics, near-term short-side trades could be for traders comfortable looking for a third test of support at .9440. As of this writing, there are approximately 200 pips of potential down to that swing-support, and if using the prior swing-high for stop placement, there would be approximately 140 pips of risk taken on.

For longer-term positions in Swissy, traders may want to wait for a cleaner setup. A support test at .9401 could be particularly interesting for reversal scenarios, as this is the 50% retracement of the major move that spanned May, 2010 to August, 2011. This Fibonacci retracement’s 61.8% level offered numerous bouts of resistance during last summer’s range, and at this point neither the high or low of that major move has been taken-out, so this could be a usable level should support begin to show.

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX


AUD/USD Technical Analysis: Down Move Gaining Traction

Fundamental analysis, economic and market themes

Connect via:

To receive Ilya's analysis directly via email, please SIGN UP HERE

Talking Points:

  • AUD/USD Technical Strategy: Short at 0.7970
  • Aussie Dollar breaks secondary trend support, hinting at further weakness
  • Short trade triggered, aiming for a decline toward 0.78 versus the US Dollar

The Australian Dollar has fallen to the lowest level in a month against its US counterpart, with a breach of trend line support hinting at further losses ahead. Preliminary topping was noted last week but a secondary support break appeared to be needed for confirmation. It now looks to have transpired.

The next major layer of support lines up in the 0.7808-19 area (August 15 low, 38.2% Fibonacci retracement), with a daily close below that opening the door for a test of the 50% level at 0.7725. Alternatively, push back above trend line support-turned-resistance – now at 0.7979 – exposes the July 27 high at 0.8066 anew.

Risk/reward considerations appeared acceptable to attempt a short trade and AUD/USD was sold at 0.7970, initially targeting 0.7819. A stop-loss will be activated on a daily close above 0.8051. Profit on half of the position will be booked and the stop moved to breakeven when (and if) the first objective is met.

Are you making the #1 most common mistake when trading AUD/USD? Find out here!

AUD/USD Technical Analysis: Down Move Gaining Traction

USD/CAD Downtrend Disrupted By Rising UST Yields, Falling Commodities

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

Connect via:

Key Takeaways:

  • USD/CAD technical strategy: former support (1.2450) seen as new resistance
  • Resistance at 1.2400, late July low (sport at 1.2205)
  • CAD gains likely to come against weaker currencies than USD, such as CHF, NZD, & JPY
  • IGCS Highlight: USD/CAD72% net-long exposure favors contrarian downside bias

USD/CAD is working to establish a short-term uptrend amidst the broader downtrend thanks to short-term bouts of USD strength. On Thursday, a little more than a week after the Bank of Canada raised their reference rate to 1.00%, and with the 2-year US/ CA government debt spread shifted to show a negative 20bps favoring the CA yields USD/CAD has moved higher. The move off the low last week around 1.2060 to 1.2240 (Thursday’s high) accounts for a 1.5% gain. However, the long-term fundamental outlook, as well as technical bias when combined with the sentiment picture (details below), favors the downside as long as daily trading does not see a close above the late-July low of 1.24.

On September 12, USD/CAD printed a high-low on the chart, which helped to show a corrective (counter-trend) move was under way. As a technically driven trader, the preferred evidence that the downtrend that began in May near 1.38 is resuming would be a move below 1.2080. One market that has prevented the CAD from losing too much ground against the USD as others like JPY have is the stability of correlated markets like commodities (Brent Crude has a -0.88 correlation coefficient over the last 20 days).

Currently, the market appears to be pricing in ~60bps or more than two more hikes by the Bank of Canada. Naturally, this is energizing CAD Bulls, and if the yield on Canada’s two-year not continues to trade at a premium to US debt and extends the premium, traders should expect further CAD strength or at least, hesitate to fight such strength.

Some traders may want to look to weak currencies against the CAD like CAD/JPY to see when CAD strength is resuming. Another way to see if CAD strength is really taking hold again is to watch it trade against the new start of G8 after a hawkish BoE, the British Pound. A breakdown in GBP/CAD would be a good sign in the current market of September 2017 that CAD strength is back in play.

What will happen to the USD as other central banks begin normalization? Click here to see our latest forecasts and find out what trades are developing in this new environment!

Technical Notes:

The short-term uptrend in USD/CAD (best seen on an hourly chart as opposed to daily below) is likely to bring in value CAD buyers in the 1.23 zone with an expectation of resistance around the September 7 high of 1.2241 or the September 5 low of 1.2336.

The initial sign of a continuation lower would be a breakdown below the September 7 low of 1.2111 and the lower high from September 12 of 1.2080. The recent low of 1.2060 is not expected to hold, and the longer-term extended targets toward 1.1950 and 1.1560 should be favored if we see the sentiment picture continues to favor the downside.

A move above 1.2471 (23.6% retracement of May high), and 1.2500 (late-July low pivot) would wipe away the bearish bias for the time being.

LT Daily USD/CAD Chart: USD/CAD downside (CAD Strength) expected to extend below 1.24

USD/CAD Downtrend Disrupted By Rising UST Yields, Falling Commodities

Chart Created by Tyler Yell, CMT

USD/CAD Insight from IG Client Positioning: 66% net-long exposure favors contrarian downside bias

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

USD/CAD Downtrend Disrupted By Rising UST Yields, Falling Commodities

USDCAD: Retail trader data shows 72.0% of traders are net-long with the ratio of traders long to short at 2.58 to 1. In fact, traders have remained net-long since Jun 07 when USDCAD traded near 1.3514; theprice has moved 9.7% lower since then. The number of traders net-long is 9.8% lower than yesterday and 0.7% lower from last week, while the number of traders net-short is 21.9% lower than yesterday and 26.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias(emphasis added.)

---

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


NZD/USD Technical Analysis: Kiwi Dollar Back on the Offensive

Fundamental analysis, economic and market themes

Connect via:

To receive Ilya's analysis directly via email, please SIGN UP HERE

Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar invalidates down trend resumption signal, probes back above 0.73
  • Current positioning doesn’t seem to offer actionable long or short trade setup

The New Zealand Dollar invalidated would-be a down trend resumption signal to try its luck above 0.73 against its US counterpart once more. Recent gains may yet prove to be corrective, but sellers have struggled to sustain momentum ahead of the upcoming general election on September 23.

From here, a daily close above the 50% Fibonacci retracement at 0.7345 opens the door for a challenge of the 61.8% level at 0.7396. Alternatively, a reversal back below the 38.2% Fib at 0.7295 paves the way for a retest of the 0.7184-0.7226 area (September 14 low and close).

The short NZD/USD trade activated at 0.7219 has been stopped out. Prices are now too close to resistance to make entering long viable from a risk/reward perspective while the absence of a clear-cut bearish reversal signal argues against re-entering short. On balance, that makes the sidelines seem most attractive.

Have a question about trading NZD/USD? Join a Q&A webinar and ask it live!

NZD/USD Technical Analysis: Kiwi Dollar Back on the Offensive

EUR/GBP Technical Analysis: Support Below 0.88 in Focus

Fundamental analysis, economic and market themes

Connect via:

To receive Ilya's analysis directly via email, please SIGN UP HERE

Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.9169
  • Euro selloff pauses after prices hit 4-month low vs. British Pound
  • Break of support below 0.88 figure to pave the way for deeper losses

A breakneck selloff that brought the Euro to the lowest level in four months against the British Pound has paused to digest near the 0.88 figure. The single currency shed nearly 6 percent in a mere three weeks after failing to overcome the high set following last year’s Brexit referendum.

Near-term support is now at 0.8774, the 23.6% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 38.2% threshold at 0.8696. Alternatively, a turn above 0.89 figure sees the next upside barrier at 0.8977, the 38.2% Fib retracement.

Half of the EUR/GBP trade triggered at 0.9169 remains in play to capture follow-on weakness after partial profit was booked on meeting the position’s first objective. A hard stop-loss order is now in place at the breakeven level. The chart setup will be monitored for opportunities to scale back in.

What makes EUR/GBP one of our top trading ideas for 2017? Find out here!

EUR/GBP Technical Analysis: Support Below 0.88 in Focus

EUR/JPY Technical Analysis: Megaphone Pattern Shows Ahead of ECB

Price action and Macro.

Connect via:

Talking Points:

- EUR/JPY remains strong around the psychological level of 130.00 ahead of tomorrow’s ECB rate decision.

- The Euro’s bullish run of 2017 will face its most critical test tomorrow as investors go into the rate decision looking for some element of clarity around the ECB’s future plans around stimulus. If the ECB announces a plan or strategy for stimulus exit, Euro strength will likely continue as investors attempt to get in-front of any potential policy tightening that may follow.

- Want to see how Euro, and Yen have held up to the DailyFX Q3 Forecasts? Click here for full access.

To receive James Stanley’s Analysis directly via email, please sign up here.

In our last article, we looked at the bullish structure in EUR/JPY as the pair continued to find buyers around the key Fibonacci level of 128.52. As we had shared, this is the 38.2% retracement of the ‘Abenomics’ move in the pair, and after re-emerging as a key level in EUR/JPY’s price action in June of this year, this price had continued to elicit support. But this hasn’t been an entirely one-sided story: After breaking above 130.00 in July, EUR/JPY has had difficulty mustering fresh buyers when testing new highs, leading to about a month’s worth of digestion as a megaphone pattern has begun to show.

EUR/JPY Daily: Range Expansion throughout August Leads to Megaphone Pattern

EUR/JPY Technical Analysis: Megaphone Pattern Shows Ahead of ECB

Chart prepared by James Stanley

Megaphone patterns are rather unique, and they can show up near the top or bottom of a move as traders continue to test either side of a range ahead of a big break. Unfortunately, this includes zero predictive power as to which direction the break may actually take place; and the reason that these patterns may show near tops or bottoms likely has to do with the bigger picture sentiment or trend showing at the time.

The key driver for the Euro’s bullish move in 2017 has been expectations around the European Central Bank. As we came into the year, the ECB was in the midst of a massive stimulus program that was set to run all the way to December of 2017. But as we moved deeper into the year, and as growth and inflation data in the Euro-Zone continued to show signs of improvement, expectations began to build that the ECB would start to walk away from their outsized stimulus outlay after the current program expires in December.

Tomorrow brings an ECB meeting in which the bank will provide fresh projections, and this will be the last set of forecasts that we receive before that December meeting around when the current stimulus program will be wrapping up. This has led many to believe that we may get that next piece of information as to what or how the ECB wants to handle the matter moving-forward, and this has kept the single currency strong as buyers attempt to front-run a potential stimulus exit from the ECB. But is this something that the ECB wants? And further – if they do actually announce a stimulus exit at tomorrow’s meeting and if Euro-strength continues, what can they possibly do quell the rampant demand that has continued to show?

Regardless of which way tomorrow’s rate decision drives prices, the current megaphone pattern can be used to direct near-term positioning. A top-side break of resistance around 131.70 is bullish, while a bottom-side break of prior support around 127.50 is bearish. After a breach of either of these levels, traders can then direct their focus to looking for lower-high resistance around 128.52 for short-side continuation approaches, while a bullish break opens the door for higher-low support around 130.50-131.00.

EUR/JPY Four-Hour: Megaphone Break Opens Door for Higher-Low (blue) or Lower-High (red)

EUR/JPY Technical Analysis: Megaphone Pattern Shows Ahead of ECB

Chart prepared by James Stanley

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX


GBP/JPY Technical Analysis: Ascending Wedge, Confluent Support Test

Price action and Macro.

Connect via:

Talking Points:

- GBP/JPY Technical Strategy: Long-Term mixed, Short-Term bearish.

- GBP/JPY tested a confluent zone of support this morning, and this can open the door to strategies on both sides of the pair.

- If you’re looking for trading ideas, check out our Trading Guides. They’re free and updated for Q1, 2017. If you’re looking for ideas more short-term in nature, please check out our IG Client Sentiment.

To receive James Stanley’s Analysis directly via email, please sign up here.

After coming into July with considerable strength, GBP/JPY spent most of the month trying to break-above the prior swing-high at 148.46. This high was set in December, just after the Fed hiked rates for just the second time in the past nine years. A subsequent top-side run in April fell short of taking out this level, and we saw this again in July as sellers set-in a ‘lower-high’ at 147.78.

But this hasn’t been an entirely one-sided story; as buyers have been responding to those retracements in the bullish move throughout 2017, and this has created an ascending wedge formation on the Daily chart of GBP/JPY.

GBP/JPY Daily: Ascending Wedge Formation

GBP/JPY Technical Analysis: Ascending Wedge, Confluent Support Test

Chart prepared by James Stanley

As you can see from the above chart, current prices are in the process of testing this bullish trend-line projection. This level is confluent with the 23.6% Fibonacci retracement of the same move, taking the October 2016 low up to the December high. Perhaps more interesting: The 50% and 38.2% retracements from this same move helped to set swing-low support in April and again in June, just before buyers came-in to take control of the situation.

GBP/JPY Daily: Current Support at 23.6% Retracement, 38.2% and 50% Prior Swing-Lows

GBP/JPY Technical Analysis: Ascending Wedge, Confluent Support Test

Chart prepared by James Stanley

This would leave GBP/JPY in a bullish position with the prospect of trend continuation as, at least at this point, prices remain above support and this can be an ideal anchor-point for bullish exposure.

However, as we discussed this morning, it appears as though we’ve seen the initial peek of risk aversion begin to show in global markets. If we do see a continuation of this theme, as driven by concerns around North Korea’s continued nuclear ambitions, GBP/JPY could potentially put in a dramatic down-side break. The British Pound is relatively weak after last week’s BoE meeting, and the Japanese Yen could see continued strength on the build of jitters around potential trouble in Asia.

For those that want to look at bearish strategies in GBP/JPY, they’d likely want to wait for a bit more information before looking to push that theme. A down-side break could open the door for bearish exposure, as bears taking control and driving below this morning’s swing-low of 142.24 could signal more pain ahead. Conversely, traders can look for ‘lower-high’ resistance below the prior swing-low of 144.00. If prices break-above 144.00, the bearish thesis will no longer look attractive, and traders would likely want to re-shift compasses back-towards a bullish direction.

GBP/JPY Technical Analysis: Ascending Wedge, Confluent Support Test

Chart prepared by James Stanley

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX


USD/CNH Technical Analysis: 6.8 in Sight Ahead of US 3Q GDP


Talking Points:

- Pair keeps pushing higher after breaking resistance at the January 7 top around 6.7584

- 6.8 handle now within touching distance as we approach US 3Q GDP numbers

- Pullback to support might initiate further buying

If you’re looking for trading ideas, check out our Trading Guides Here

The US Dollar keeps printing fresh record highs versus the Chinese Yuan in offshore trade, as the pair now sits within touching distance from what might prove to be an important resistance level at the 6.8 handle.

The pair surged higher after breaking resistance around the 6.7 handle followed by the 2016 January high around 6.7584.

Indeed, momentum still looks strong as we head into today’s key US 3Q GDP numbers, which could prove influential for the pair’s direction in the near term.

As it were, price is now sitting in close proximity to the 6.8 handle, and a break higher seems an important milestone for further gains.

If the pair reverses course, downside moves might still be interpreted as corrective as long as buyers can keep price above the 6.7 level.

The next major resistance levels seem to be the 6.8 handle, and 6.8500 while potential levels of support could be 6.7584 followed by the area below 6.7400 and the 6.7 handle.

USD/CNH Daily Chart: October 28, 2016

USD/CNH Technical Analysis: 6.8 in Sight Ahead of US 3Q GDP

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

To contact Oded Shimoni, e-mail oshimoni@dailyfx.com

Follow him on Twitter at @OdedShimoni


CAC 40 Breaks Range


Talking Points:

The CAC 40 has broken decisively lower this morning, with the Index trading down -1.31% so far for Thursday’s trading. This breakout concludes an extend range that the pair has been developing from May the 17th. Of the 40 listed CAC 40 stocks, only Vivendi is trading higher for the session (+0.30%). Top Losers for today’s trading include both Cap Gemini (-2.33) and Airbus (-2.05%).

Technically, with this morning’s breakout, the CAC 40 is again trending lower in the short term. The Index remains trading below its 10 day EMA (exponential moving average), which is found at 5,261.45. If prices continue to slide, traders may next look for support near the April 25th low at 5,158.50. In the event that the CAC 40 rebounds from today’s lows, traders should look for prices to trade back above the previously mentioned 10 day EMA. A bullish move of this nature would open the CAC 40 to potentially challenge the previous range high near 5,375.50.

CAC 40, Daily Chart with Averages

CAC 40 Breaks Range

(Created Using IG Charts)

Want to learn more about trading with market sentiment? Get our Free guide here.

Sentiment totals for the CAC 40 remain net-long for Thursday. Currently IG Client Sentiment reads at +1.58 with 61.2% of traders net-long the Index. As this value remains slightly positive, it may be seen as interpreted as a bearish signal for the CAC 40. In the event that the CAC 40 continues to breakout lower, traders should watch sentiment to push up towards negative extremes of +2.0 or more. Alternatively if prices reverse and rally higher, sentiment totals may reverse and eventually flip negative.

CAC 40 Breaks Range

--- Written by Walker, Analyst for DailyFX.com

To Receive Walkers’ analysis directly via email, please SIGN UP HERE

See Walker’s most recent articles at hisBio Page.

Contact and Follow Walker on Twitter @WEnglandFX.


Crude Oil Price Extends Higher After Breaking Above Resistance

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

Connect via:

Key Takeaways:

  • Crude Oil technical strategy: Switching bias from neutral to bullish, buying dips
  • Brent (global oil benchmark) trades to highest price since July 2015
  • RSI(5) on US Oil at highest level of 2017, showing momentum breakout

Happy days have arrived for the long-suffering Bulls of Crude Oil. Multiple Bullish signs are being confirmed with Monday’s price action on both the global benchmark, Brent Oil, and the American Oil Index, WTI Crude Oil. The technical ‘golden cross’ pattern is the most recent sign that good times are here for a while in the oil market as the 50-day moving average has traded above the 200-day moving average for the first time since 2016.

Long-term trend traders will look to a 50-day moving average cross above a 200-day moving average cross as a long-term sign of a Bullish market. While the event of the crossover of two long-term moving averages is exciting, entering at the time of the cross-over can lead you to enter at a temporarily extended price. The temporary extensionis also evidencedby the RSI(5), a momentum indicator, currently at its highest level of the year.

However, traders can look for pull-backs as opportune moments to buy a market that is working in a longer-term uptrend that corrects lower without disrupting the overall uptrend. Traders are likely keeping an eye on the spread between WTI and Brent Crude, which is trading at its widest spread since August 2015 at over $6 per barrel. There have been concerns that WTI is being influenced negatively by US E&P whereas Brent is benefitting from the global demand pickup alongside the pullback in OPEC production.

Traders watching WTI Crude would do well to keep an eye to see if a pull-back in price is temporary as proven by holding above the $50/bbl mark. If $50/bbl becomes a new support level, we could see a rush of buyers enter back into the market. Earlier in the year, funds were excited about the prospects of an Oil recovery, but then they exited on failed attempts of the energy commodity to break out. It may be that they were right, just early. If so, they have the logic figured out, and they could turn flow into the energy market to see a new Bull trend establish itself.

As global oil demand forecasts shift higher, check out our free forecast on Crude Oil prices

Daily US Oil Chart: Breakout above resistance and sentiment favors approach to resistance

Crude Oil Price Extends Higher After Breaking Above Resistance

Chart Created by Tyler Yell, CMT

---

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

To receive Tyler's analysis directly via email, please SIGN UP HERE

Contact and discuss markets with Tyler on Twitter: @ForexYell

Access Our Free Market/ Trading Guides Here:


Gold Prices Falter at Resistance: Is the Bullish Run Finished?

Price action and Macro.

Connect via:

Talking Points:

- Gold prices remained offered through most of this week after reversing at the 2016 resistance zone that runs from $1,350-$1,375.

- Short-term support has begun to show in a key Fibonacci zone, between the 76.4% and 78.6% retracements of last year’s July-December down-trend. But bulls haven’t yet been able to take-over, even with another North Korean missile test. Bulls may have to wait for a resumption of the two-month up-trend.

- Retail sentiment remains elevated in Gold, with IG Client Sentiment currently reading +2.3. Given retail sentiment’s traditional contrarian nature, this is bearish for Gold prices.

- Want to see how Gold prices have held up to our DailyFX forecasts? Click here for full access.

To receive James Stanley’s Analysis directly via email, please sign up here.

Gold prices have been on a fairly consistent run since early July after price action tested below the $1,205 level. Since then, we’ve seen a 12.7% advance as a series of factors have contributed to heightened demand. The most notable and obvious of these drivers is the situation brewing around North Korea. As the threat of thermonuclear conflict has increased, so has demand in Gold. This has driven Gold prices through a series of resistance levels and back towards the 2016 high at $1,375; but since trading over $1,350 last week, Gold has seen a dearth of demand and prices have begun falling in the first legitimate sell-off that we’ve seen in the yellow metal in more than two months.

Two-Month Rally in Gold Prices (blue) Drives to 2016 Resistance Zone $1,350-$1,375 (red)

Gold Prices Falter at Resistance: Is the Bullish Run Finished?

Chart prepared by James Stanley

After penetrating the zone of resistance that had developed last summer from $1,350-$1,375, short-term bearish price action has begun to show. Even with North Korea conducting another missile test and while the U.S. Dollar remained relatively bearish against most currencies, sellers controlled short-term price action in Gold, driving prices down to a key support zone.

If we take the major move of last year’s high down the December, pre-rate hike low; the 76.4% retracement comes in at $1,315.60 while the 78.6% retracement is at $1,321.15. This creates a zone that’s, at least so far, held the lows during this retracement. We’re looking at this zone in the below chart, demarcated in blue.

Gold Hourly: Higher-Low Support Holds Between 76.4 and 78.6% retracements

Gold Prices Falter at Resistance: Is the Bullish Run Finished?

Chart prepared by James Stanley

The fact that Gold prices haven’t put in a more vigorous response to this support zone combined with the fact that bulls failed to take over after another North Korean missile flew over Japan, it would appear that more weakness is on the horizon for Gold prices. As the bullish run was heating up from early-July, sentiment had grown pretty aggressively on the long side of the trade. My colleague, Paul Robinson, discussed this earlier in the week in the article, ‘Rapid Case of Gold Buying Cause for Pause’, and given what we’ve seen in price action this week, it doesn’t appear as though bullish continuation is yet ready for take-off.

This can lead to a deeper retracement in Gold prices, and below we’re looking at three support zones of interest below the current area. This could be looked at as potential take-off points for the longer-term bullish theme, with the expectation that an eventual re-test of $1,375 will be in the cards; while these levels can also function as short-side targets for those looking to take on bearish exposure to Gold. If Gold prices slip below the $1,275 level, then the confluent zone around $1,250 becomes attractive for short-side profit targets.

Gold Prices Falter at Resistance: Is the Bullish Run Finished?

Chart prepared by James Stanley

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

To receive James Stanley’s analysis directly via email, please SIGN UP HERE

Contact and follow James on Twitter: @JStanleyFX


Silver Breaks Support, Gold Testing Prior Double-top

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

Connect via:

What’s inside:

  • Silver furthers weakness on channel break below confluence of support
  • Gold treading precariously around April/June double-top, August consolidation period
  • Key levels and considerations outlined for both precious metals

Check out this newly released trading guide – Building Confidence in Trading

Earlier in the week we made note of the breakdown below key channel support in precious metals, highlighting that it signaled more weakness ahead. We’ll start out by looking at silver and then move onto to its big sibling, gold.

The break below the lower parallel was our initial cue that more selling was on the way, but an immediate point of hesitation came in with regard to shorts as a significant level of support was met immediately upon the breakdown. The area just above 17 has confluence through horizontal price support, the 200-day MA, and a retest of the July 2016 trend-line. It was nearly cracked on Wednesday with the help of a hawkish Fed, but it was yesterday where we got a solid closing print below noted support. (Support now becomes resistance.) This opens up a path towards 16.71, 16.56, and 16.09 in the near-term. The most latter level may be aggressive for short-term positions, but if gold gains momentum below 1290 it may be seen sooner rather than later.

Silver: Daily

Silver Breaks Support, Gold Testing Prior Double-top

Moving on to gold…

Upon the breaking of channel support gold didn’t have any immediate support until the 1296-region where the double-top was formed from April to June. It’s a steadfast area given the rejection and consolidation which took place there in August before eventually being overtaken. Yesterday brought a closing print below 1296, but came right around the closing highs seen during the aforementioned August consolidation period. If gold doesn’t get into gear quick-like, upon a break of 1290 look the recent decline from over 1350 to continue towards 1275, 1267, and with sellers piling in we could see the December trend-line tested closer to 1250. Depending on the timing, the 200-day MA may come into play around the trend-line.

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of upcoming live events.

Gold: Daily

Silver Breaks Support, Gold Testing Prior Double-top

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.


Dollar Index Fails to Show Definitive Reversal Signs Ahead of FOMC

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

Connect via:

Talking Points:

  • DXY Technical Strategy: DXY remains in “sell the rips” mode below 94.08
  • DXY appears to be bouncing off an extreme downside target, may be subject to month-end flows
  • Fed Funds Future bets take the probability of a Fed hike in 2017 down to 1/3
  • IG Client Sentiment Highlight: EUR/USD (57.6% of DXY) sentiment favors further push higher

The Dollar Index has pushed off the lows for 2017 that wastraded at earlier in the month at 91.01. The technical level of focus that traders should keep in their sights is the March 2009 high of 89.62. The 89.62 level markets the March 2009 high (seen on the weekly chart below. A break below this level would open up the breakdown/ overlap of prior price patterns.

From a price structure view, an overlap tends to indicate lack of long-term upside. A hold of support at 89.62 would favor the view that we could still be within a multi-year DXY bull market. A break below 89.62 would make the argument that we are within a larger downtrend for the US Dollar Index.

Weekly DXY Chart: Break below March 2009 High Would Eliminate LT DXY Bull View

Dollar Index Fails to Show Definitive Reversal Signs Ahead of FOMC

Chart by Tyler Yell, CMT

The chart above shows the US Dollar Index from the 2008 low up to the January 2017 high. 2017 has seen a ~12% drop in the Dollar Index, but traders have not known whether or not the price drop has been a sharp correction within a broader Bull market that would be expected to continue higher or whether we are in the midst of a multi-year move lower in the USD. I continue to favor the latter view.

We can look to different components of the chart to help guide us from here. First, until the bearish channel of 2017 (falling red channel) on the chart above and below fails to hold a price breakout, the bias will be for further US Dollar index weakness. The overall bias for swing trading is to sell strength or on a breakdown below a lower high. There has been a consolidation higher, but momentum favors further weakness until material strength is seen as evidence of a channel breakout while holding the March 2009 high as support.

Daily DXY Chart: Dollar Index Momentum favors Bearish Continuation

Dollar Index Fails to Show Definitive Reversal Signs Ahead of FOMC

Chart by Tyler Yell, CMT

The daily chart above puts focus on internal pivots to help guide your bias and trading. Initial resistance can be found at 92.68/74. Though price recently broke through focal support, there are not enough signs that a base is in place. On Wednesday, the Federal Reserve will announce their rate decision, which is widely expected to remain at the current 1% level. The focus of the FOMC decision is whether or not the famous DOT plot, where Federal Reserve voters anonymously place a vote for where they see the reference rate through 2020, is lowered.

Want to learn how to trade from our experts? We recently updated and added new trading guides here.

From a sentiment perspective, we are seeing a stretched DXY short position. However, an aggressive short position is not enough to trigger a buy signal. IG Client Sentiment helps us to see retail sentiment best through EUR/USD, which is 57.6% of DXY. Other position indicators like the Daily Sentiment Index (DSI) show the bearish positioning of DXY near extreme levels at 17% Bulls as of Monday’s close. That means there is a short-covering risk if the FOMC result is a hawkish surprise that would send DXY higher. However, the trend is there for a reason, and if nothing surprises positively for the US Economy, the upside will likely come from ECB rhetoric talking down their currency giving the USD a boost, but likely, not a definitive trend change.

If you would be interested in seeing how retail traders’ are betting key markets, see IG Client Sentiment here!

Join Tyler in his Daily Closing Bell webinars at 3 pm ET to discuss this market.

IG Client Sentiment Highlight: EUR (57.6% of DXY) sentiment favors further upside in EUR/USD

Dollar Index Fails to Show Definitive Reversal Signs Ahead of FOMC

EURUSD: Retail trader data shows 33.0% of traders are net-long with the ratio of traders short to long at 2.03 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.08475; theprice has moved 10.5% higher since then. The number of traders net-long is 7.4% higher than yesterday and 3.2% lower from last week, while the number of traders net-short is 10.8% higher than yesterday and 1.6% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD 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 EURUSD-bullish contrarian trading bias (emphasis mine).

---

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

To receive Tyler's analysis directly via email, please SIGN UP HERE

Contact and discuss markets with Tyler on Twitter: @ForexYell


S&P 500 Bulls Undeterred by Hawkish Fed; Eyes on Slope Resistance

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

Connect via:

What’s inside:

  • Hawkish FOMC only causes only minor intra-day volatility, market snaps back
  • Recent breakout might continue, but history hasn’t been kind to chasers
  • A pair of top-side trend-lines could be problematic, bring in next way of weakness

Struggling to gain momentum in your trading? Check out this beginner’s guide – Building Confidence in Trading

Yesterday, the FOMC was clearly hawkish, and with that the US dollar ripped while U.S. equities tanked (at least momentarily). The dip in stocks wasn’t really much of a “tank” as the S&P 500 fell only about 10 handles, it just felt like it in this low-volatility environment (VIX closed sub-10). Weakness was short-lived and met with buying no more than about 25-30 minutes after the Fed announcement, erasing all FOMC-induced losses and closing near the highs of the session.

Since breaking out to new record highs earlier this month it’s been a grind. It hasn’t been worth fighting from the short-side, but not all that fruitful for the longs either. The trading might not get much easier or 'exciting' until we see another bout of weakness like we had during July and August. Weak markets equal higher volatility, thus more wiggle room for trading opportunities.

Looking at how the market has acted in recent years after notching new record highs we might not have to wait too long for another spat of volatility. The S&P has had a propensity for punishing those who chased the market into record high territory (three occasions since May). It’s a ‘buy-the-dip’ market. Initial breakout buys may have worked, but the better entries have been when others were exiting into declines.

Where might the market stall and turn back lower? Not far ahead we have a couple of top-side trend-lines. The one line running over peaks back to March comes in around the 2515-mark, while the second one extending back to June isn’t until the 2525/30-area (depending upon timing of arrival). At those points we’ll pay especially close attention to price action and if it suggests we are in for another decline - even if it is only to be corrective in nature. A sharp rejection lower will be our cue. Short-term traders (intra-day to a few days) should at least benefit from this, and for those looking to ‘buy-the-dip’ another decent opportunity might present itself at a later time.

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of upcoming live events.

S&P 500: Daily

S&P 500 Bulls Undeterred by Hawkish Fed; Eyes on Slope Resistance

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.


DAX Losing Steam, but Still Constructive; CAC In Need of a Pullback

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

Connect via:

What’s inside:

  • DAX sees limited reaction to expected election outcome
  • German benchmark losing steam but still remains constructive
  • CAC is on the extended side, it could use a rest before attempting to trade higher

Struggling to gain momentum in your trading? Check out this beginner’s guide – Building Confidence in Trading

Over the weekend, Chancellor Angela Merkel was re-elected, but her party alliance (CDU/CSU) experienced its worst result since elections began in 1949. However, the outcome sparked very limited volatility given it was within expectations. It was indeed a quiet period on the headline-front leading up to the election. This morning, the market started off with a small gap lower but has seen back-and-forth trading since.

The initial push through major resistance surrounding 12300 was a powerful one earlier this month, but since then we’ve seen choppy price action with a slight upward bias. The DAX is losing steam, but remains constructive within a channel as long as we don’t see a sharp break lower. A breakout above Friday’s high at 12646 will quickly bring in the July high at 12676. If the German benchmark can get into gear above the July high there aren’t any significant hurdles until the record high at 12951. However, if we see a bearish rejection at the July threshold then we’ll have to take stock of any technical damage as a result.

DAX: Daily

DAX Losing Steam, but Still Constructive; CAC In Need of a Pullback

The CAC has been persistently rallying without going through any kind of consolidation phase, and as a result could be in for underperformance relative to the DAX as overbought conditions build. It’s been an impressive rally off the 8/29 low and the bull-flag breakout earlier this month suggests higher prices are to come. At this time, though, the market may be in need of a small pullback or consolidation period before trading through levels created during May and June. Barring a swift reversal the overall outlook remains constructive.

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of upcoming live events.

CAC: Daily

DAX Losing Steam, but Still Constructive; CAC In Need of a Pullback

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.


ASX 200 Technical Analysis: Super Range Shows Signs of Stress

Financial markets, economics, journalism and fundamental analysis.

Connect via:

Talking Points:

  • The Aussie equity benchmark has been stuck in a 160-point rut since May
  • At face value that range looks secure
  • However, there could, just be signs of a downward shift

Just getting started in the trading world? Our beginners’ guide is here to help

No one tracking the ASX 200’s technical progress can have failed to spot its “super range.”

The Australian equity benchmark has been stuck in a narrow, 160-point trading band since all the way back to May 17. There’s been plenty of volatility within that range, with 13 attempts at the upside so far, but those 160 points have been all investors have had to play with for quite a long time now.

ASX 200 Technical Analysis: Super Range Shows Signs of Stress

To put the range in context, it’s not actually a bad place to be for the bulls. Yes, its top is 200 points or so below 2017s peak. But it’s till way above the levels from which the index climbed in late 2017.

ASX 200 Technical Analysis: Super Range Shows Signs of Stress

However, for as long as the range endures investors are stuck with looking for trends within it. At the moment it looks as though the bears are exerting a measure of dominance. Three lower highs are now in place since mid-August. And the ASX is in a downtrend channel which extends from the last of them – September 13’s 5767.3.

ASX 200 Technical Analysis: Super Range Shows Signs of Stress

If that channel endures then it will in time come up against super-range support. That lies around 5650 and below. On current showing that is of course the point at which we should expect the index to bounce yet again and there seems little doubt that those levels will be the site of some doughty defense.

However, another clear lower high would be a fourth and might at least suggest that the range top has come down a little even if the base holds. Keep a close eye on that falling channel. If it leads to any daily closes around the range base, as opposed to brief, intraday probes, then things might, just be getting interesting.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Comfortable At The Heights?

Financial markets, economics, journalism and fundamental analysis.

Connect via:

Talking Points:

  • The Nikkei 225 has posted a new high for 2017
  • There’s a modest degree of overbuying evident, but it doesn’t look worrying
  • The moving averages still tell a bullish tale

What have some traders got that all wish they have? Check out DailyFX’s long look at the Traits Of Successful Traders

The Nikkei 225 has just hit a new high for 2017, which means it’s also at levels not seen since August 2015.

Borne aloft by a general revival in global risk appetite (US stocks have made their forty-second record peak for 2017 this week) and, possibly, by some upbeat Japanese numbers, the Nikkei’s gain leaves us with one big question. Can it stay up here and push even higher?

The technical signals are mixed, as they were always bound to be at such elevated levels. But they are far from gloomy. Yes, the index’s Relative Strength Index is looking a little stretched. At the 72 level it is just above the 70 line above which most investors would consider the index “overbought.” However, it’s hardly comfortable above that line yet.

More encouragingly for bulls the index is looking very comfortable indeed above its 20-, 50- and 100-day moving averages. That has been a rather rare sight this year and suggests that the Nikkei may yet have more to give. Moreover the 20-day crossed above the 50 on Wednesday. This is generally held to be a bullish sign.

Nikkei 225 Technical Analysis: Comfortable At The Heights?

It’s probably best not to take the moving averages as signs of a certain push higher. They’ve been very close together for some time, making crosses short lived before reversal and tough to read. However, the latest is certainly not a bad sign for bulls.

For now, the index is slap in the middle of its most recent uptrend channel, that traced from its September 8 closing low.

Nikkei 225 Technical Analysis: Comfortable At The Heights?

This is quite a narrow channel and it may not tell us a huge amount. That said a Friday close within it, and anywhere near current levels, will probably count as a satisfying end to the week’s work for bulls. It would also bolster hopes that the index can, at least consolidate up here. Keep an eye on that RSI though.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


FTSE 100 – Big Support Break on Hawkish BoE, Strong Sterling

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

Connect via:

What’s inside:

  • Hawkish BoE breaks the FTSE 100, rips sterling
  • A clean drop beneath 7300 clears a path towards 7100/50
  • Will take a reversal back above support to pause outlook

Confidence is must for successful trading. Check out this beginner’s guide – Building Confidence in Trading

On Wednesday, we took a look at the FTSE 100 ahead of yesterday’s BoE meeting, making note of the month-long trading range. Will the BoE break the range, we asked. Confidence in that happening wasn’t particularly high, but we recognized it as certainly a possibility. As we are seeing now it is becoming reality, with a hawkish BoE giving further life to an already strong sterling and sending shares reeling. We closed yesterday just below the very important 7300-mark, but just above the lowest point of the range created on 8/29 at 7289. So, if today the index can sustain trade where it is or worse, that will make for a confident break.

Not only will thoroughly tested horizontal support have been cleanly broken, but the double-top will be triggered with an official break of the neckline, along with saying goodbye to the 200-day moving average. The February 2016 trend-line is long gone with yesterday’s sell-off. This sets the index up for a move towards the area right around 7100, which has pretty good support, but between here and there we are left with room to operate from the short-side. The measured-move target derived by the height of the double-top formation points to a move to around 7050.

There is a lot of time between now and the close of trade today, and should we see a reversal back above our big threshold of support, then we will need to put the brakes on shorts. It won’t turn the outlook bullish, but will require waiting for the clean break before sharpening the knives. The FTSE heading lower would certainly be contra to our outlook for other major indices – DAX, CAC 40, S&P 500 – but these markets aren’t joined at the hip and can go do their own thing.

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of upcoming live events.

FTSE 100: Daily

FTSE 100 – Big Support Break on Hawkish BoE, Strong Sterling

---Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email by signing up here.

You can follow Paul on Twitter at @PaulRobinonFX.