Support & Resistance

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EUR/USD Technical Analysis: Sellers Ready to Retake Initiative?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Pending Short at 1.0631
  • Euro recoils from familiar resistance below 1.07 figure vs US Dollar
  • Near-term down trend launched in early February may be resuming

A sharp Euro recovery stalled at a familiar chart barrier below the 1.07 figure, hinting that a corrective bounce from a monthly low may have been exhausted. Near-term positioning has favored the downside since prices broke through the floor of a bearish Rising Wedge chart pattern two weeks ago.

Near-term support is in the 1.0518-28 area (November 24 low, 23.6% Fibonacci expansion), with a daily close below that exposing the 1.0341-67 zone (December 15 low, 38.2% level). Alternatively, a push above support-turned-resistance at 1.0682 opens the door for a retest of the 38.2% Fib retracement at 1.0828.

Last week, partial profit-taking and a breakeven stop-out unwound a Euro short trade from 1.0623. Positioning now looks as though it might offer an opportunity to re-establish the trade under similar parameters and an order has been set to sell at 1.0631. If triggered, the trade will initially target 1.0528 with a stop-loss activated on a daily close above 1.0682.

Are other traders buying or selling the Euro, and what does that hint about the trend? Find out here!

EUR/USD Technical Analysis: Sellers Ready to Retake Initiative?

USD/JPY Technical Analysis: Avoid The Low VIX Trap For Buying JPY

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

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Talking Points:

There is a lot going on with correlated markets to USD/JPY that should keep your attention. Many traders are familiar that the VIX, which remains near historically low levels of 12 is inversely correlated to USD/JPY or positively correlated to the JPY due to the unwind of the Carry Trade. The VIX is the SPX500 Implied Volatility Index, also known as the fear barometer, so a higher VIX implies more fear and therefore wider possibilities for SPX500 prices over the coming year. The combination of a low VIX and high or “overbought”SPX500 aligns, most often, with a stronger JPY and lower USD/JPY. The persistent decline in the VIX has seen USD/JPY bound around 112.

We noted in the recent article title, USD/JPY Technical Analysis: An Intermarket and Technical Powderkeg, that there is a lot going on behind the scenes that could cause USD/JPY to move and move big. Another positively correlated market is UST Yields, which have been unable to breakout higher (bond prices pushed lower) but have received news that the Fed appears ready to hike multiple times in 2017 as they are sitting near the targets of both mandates of price stability (inflation at 2%) and full employment.

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Many traders may look at these events and think that we’re about to see a breakout in the VIX and that the S&P at all-time highs means that a crash is imminent. While the future is unknown by definition, one should be a caution to attribute a fixed outcome to the future as the VIX seems to show less fear than in times past. If this is correct, we could continue to see the SPX500 push higher alongside USD/JPY finding upside traction.

Looking at the chart below, you can see that the price of USD/JPY is no longer trading within the Bearish countertrend channel. The price move higher in mid-February has seemed to put USD/JPY on an upward trajectory with price support near 112.61/88 that should hold our attention.

If the VIX remains lower, and the price of USD/JPY continues to trade above 112.61, we can begin to subtly shift our bias higher, which would be validated on a break above 115. A move above 115 in USD/JPY would align with a nice continuation move in the newly drawn Andrew’s Pitchfork as well as show a breakout above the Daily Ichimoku Cloud.

Conversely, a breakdown and close below the early February low of 111.59 would keep us neutral as USD/JPY continues to correct a multi-year uptrend. The takeaway is that even though the VIX seem ready to breakout and the SPX500 appears overbought per RSI going back multiple decades; it could be an expensive mistake to presume we’re about to see a breakdown in USD/JPY and try and short the pair without validation of a move below 111.594. If the price can work it’s way higher in Andrew’s Pitchfork that is biased higher, my bias will be higher as well.

H4 USD/JPY Chart: USD/JPY Trading Above Counter-Trend Bearish Channel & Recent Range 61.8% Fibo

USD/JPY Technical Analysis: Avoid The Low VIX Trap For Buying JPY

Chart Created by Tyler Yell, CMT

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Shorter-Term USD/JPY Technical Levels: February 22, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.

USD/JPY Technical Analysis: Avoid The Low VIX Trap For Buying JPY

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GBP/USD Technical Analysis: Cable Congestion, Rally to Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at GBP/USD as price action had been rather direction-less of recent. As we noted, this appeared to be playing in the longer-term bout of congestions that’s taken place near multi-year lows after the tumultuous second half of 2016. This, of course, spans the ‘Brexit referendum,’ the ensuing dovish campaign from the Bank of England, and then the ‘flash crash’ in early October. But ever since those flash crash lows have come-in, GBP/USD has sputtered anytime a legitimate test of resistance has come into-play; leading to, in essence, four months of congestion.

GBP/USD Technical Analysis: Cable Congestion, Rally to Resistance

Chart prepared by James Stanley

Within this congestion has been numerous attempts for prices to trend-higher; starting with the Bank of England’s Super Thursday in early November. When the BoE shifted inflation expectations-higher, price action in the British Pound attempted to break-out higher, but resistance came in at 1.2775, which is very near a prior level of swing-support. Since then, price action has been unable to set any new high’s or lows, leading into what has been, in essence, four months of congestion in Cable price action.

GBP/USD Technical Analysis: Cable Congestion, Rally to Resistance

Chart prepared by James Stanley

On a more near-term basis, we’ve seen price action in Cable rally up to a level of resistance that should further temper bullish excitement in the pair. The level of 1.2552 is the 50% retracement of the major move spanning from the September 22nd high down to the low on January 16th (excluding the ‘flash crash’ low).

GBP/USD Technical Analysis: Cable Congestion, Rally to Resistance

Chart prepared by James Stanley

For those that do want to push an aggressively-bullish stance, a sustained break above the February 9th high (1.2582, the same ‘activator’ level looked at in our last article) could open the door for such an approach. At the very least, this would show that bulls may be gaining some level of conviction on a longer-term basis that could, potentially, continue for a bit.

For those that want to take a more conservative stance on a market that’s been rather choppy of late, breaking above that longer-term level of resistance at 1.2775 could make such a prospect more probabilistic, as this could finally signal some element of resolution with this choppy price action that Cable has been exhibiting.

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

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USD/CHF Technical Analysis: Parity Still In Play

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the return of bullish price action in Swissy with eyes on the level of parity (1.0000) for support. And recent price action in USD/CHF has very much moved-along with general Dollar trends, in which the Greenback posed a near-historic run in the final two months of last year to lead-in to an extended bout of retracement in January.

But as we came into February, that move-lower in USD/CHF was looking a bit overdone, as we had remarked on the RSI divergence that had already begun to show. And while the first two weeks of February saw the return of bullish price action in the Dollar, the week since has been considerably less-directional as the Greenback has continually been rebuked at resistance.

But of particular note is that while the U.S. Dollar failed to punch-up to a new-high this week, USD/CHF was able to do so, albeit barely, before sellers returned. This would indicate an additional inclusion of Franc-weakness, and this could be encouraging for those looking to time long positions in the effort of getting on the side of the ‘bigger picture’ trend in USD/CHF.

For those looking to accumulate bullish exposure in USD/CHF, waiting for ‘higher-low’ support would likely be the most attractive way of moving-forward in the near-term. On the chart below, we look at three potential zones of support for bulls to track in the effort of catching that next higher-low support. The first zone, or ‘S1’ runs around 1.0033-1.0041, and this includes the 38.2% retracements from both major moves of the post-Election run as well as the January retracement. A bit deeper, the ‘S2’ level is set around parity, which is confluent with the 50% level of the January retracement. And from .9947-.9966 we have another confluent zone that includes the 50% retracement of the post-Election move.

USD/CHF Technical Analysis: Parity Still In Play

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Bearish Reversal Cues Building

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Evening Star candlestick pattern, negative RSI divergence hints at topping
  • Confirmation of reversal sought to establish actionable short trade setup

The Australian Dollarput in a bearish Evening Star candlestick pattern, hinting a top may be taking shape near double top resistance below the 0.78 figure. Negative RSI divergence warns of ebbing upside momentum and bolsters the case for a downside scenario.

From here, a daily close below the 14.6% Fibonacci retracement at 0.7649 opens the door for a challenge of the 23.6% level at 0.7597. Alternatively, a push above the aforementioned double top at 0.7760 paves the way for a test of the 38.2% Fib expansion at 0.7811.

Compelling confirmation of a bearish reversal is absent for now while near-term series of higher highs and lows set from mid-January remains unbroken. With that in mind, opting to remain on the sidelines until a more actionable selling opportunity emerges seems prudent.

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AUD/USD Technical Analysis: Bearish Reversal Cues Building

USD/CAD Technical Analysis: Wedging Between Hard Support And 200-DMA

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

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Talking Points:

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USD/CAD has fallen away from most traders attention as its volatility has dropped alongside the small price variances in Crude Oil. Looking at supportive components of the USD/CAD currency pair, we’ve seen similar stability in the 2yr US/CA sovereign debt spread for most of 2017. The stability helps to show that there is not much happeningregarding expected monetary policy that is going to drive the currency pair higher or lower for now.

However, we can look at the chart to see that price on the Daily chart is sitting below the Ichimoku Cloud. Price below the cloud is a classic Bearish indicator alongside the lagging line (bright green) that is also below price and the cloud meaning the current price is below than the closing price from 26 periods or days ago.

Adding to the Ichimoku picture that favors further downside over a bullish reversal, we can see the price is sitting below the 200-DMA and above support at 1.300. While the 200-DMA has not acted as a stiff deterrent to price in one direction or another, we can see that the price below the 200-DMA also aligns with the momentum pictures as visualized with RSI(5) and the Andrew’s Pitchfork to complement what we see with Ichimoku.

The Andrew’s Pitchfork provides a bearish channel, and the top of the channel aligns with the Ichimoku Cloud. Both technical forms of price resistance come together at 38.2-61.8% retracement of late-January to February range at 1.3128/3227. A failure for the price to break above the channel and thus, the Cloud would continue to discourage long trades and favor a trend continuation lower. The momentum picture via RSI(5) appears to show a rising wedge. Rising wedges tend to be followed by aggressive down moves.

Because we trade price and not the RSI(5), we should await a break below 1.3000 followed by an RSI(5) breakdown before anticipating lower levels in USD/CAD. A daily close below 1.3000 could bring about further USD weakness as we’ve seen against other commodity currencies like the Australian Dollar and bring about a test to the late-summer pivots of 1.28157 and 1.27594. For now, my swing-bias favors a move to these levels.

A Bullish reversal, which would be validatedon the move above the Pitchfork & Cloud would turn focus to the late-January high of 1.33875. Such a move would likely bring more confusion than clarity as USD/CAD has been a choppy pair after bottoming in May.

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D1 USD/CAD Chart: Trading Between Long-Term 1.3000 Support and 200-DMA at 1.3141

USD/CAD Technical Analysis: Wedging Between Hard Support And 200-DMA

Chart Created by Tyler Yell, CMT

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T.Y.


NZD/USD Technical Analysis: Downward Bias Favored

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Short at 0.7207
  • Kiwi Dollar rebounds after dropping to one-month low vs USD
  • Overall positioning continues to argue in favor of a downside bias

The New Zealand Dollar paused to digest losses after hitting a monthly low against its US counterpart but chart positioning continues to favor a bearish outlook. Prices topped as expected after retesting trend line support-turned-resistance set from January 2016.

Near-term support is at 0.7138, the 38.2% Fibonacci expansion, with daily close below that clearing a path to challenge the 50% level at 0.7064. Alternatively, a push back above the 0.7229-39 area (23.6% Fib, December 14 high) opens the door for a retest of the 0.7376-0.7403 zone (November 8, February 7 highs).

A short trade taken at 0.7205 hit its first objective and partial profit was booked. A subsequent rebound stopped out the second half of the position at breakeven. Risk/reward parameters look acceptable anew and a fresh short has been activated at 0.7207, targeting 0.7138. Half of exposure will be booked on hitting the first objective. A stop-loss will trigger on a daily close above 0.7239.

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NZD/USD Technical Analysis: Downward Bias Favored

EUR/GBP Technical Analysis: Ready to Test Below 0.84?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8461
  • Euro bounces sharply higher after hitting 2-month low vs. British Pound
  • Overall bias favors weakness, sellers aiming at long-standing double bottom

The Euro recoiled sharply higher after hitting the weakest level in two months against the British Pound but overall positioning still seems to favor the downside. Continued selling from here puts the spotlight on a major double bottom capping losses since early September 2016.

Near-term support is in the 0.8334-70 area (double bottom, 50% Fib expansion), with a daily close below that exposing the 61.8% level at 0.8257. Alternatively, a turn back above the 38.2% Fib at 0.8484 opens the door for a retest of rising trend line support-turned-resistance, now at 0.8568.

An order to enter short at 0.8461 has been triggered. The trade initially targets 0.8370, with a stop-loss set to trigger on a daily close above 0.8506. Profit on half of the position will be taken and the stop moved to breakeven when the first objective is reached.

What makes EUR/GBP one of the top DailyFX trades for 2017? See our forecast and find out!

EUR/GBP Technical Analysis: Ready to Test Below 0.84?

EUR/JPY Technical Analysis: Break Down to a Big Level

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at resistance showing in EUR/JPY at an area that was previously support around the 121-handle. And given that this happened shortly after a test below the 120-psychological level, the potential for a continuation of ‘lower lows’ and ‘lower highs’ brought along the prospect of range-like price action in the pair to finally yield.

After the open of trading this week, EUR/JPY continued to sell-off after reacting to last week’s resistance; and bearish momentum appeared to continue to gain speed as we tested deeper support levels at 120.14, 119.91 and then 119.30. This was likely driven, at least in part, by a dose of political risk around French elections. But as risk aversion around French elections appeared to soften this morning, support came in on EUR/JPY around an extremely interesting level; highlighting how the prior bullish trend that started after the U.S. Presidential election is holding on by a thread.

EUR/JPY Technical Analysis: Break Down to a Big Level

After this morning’s support test, buyers came-in fairly quickly around the announcement that French Presidential candidate Francois Bayrou was dropping out of the race in order to further support an alliance with Emmanuel Macron. This seemingly decreased the odds of a Marine Le Pen victory, which has largely been considered a Euro-negative. So this is still very much a fluid, developing situation; similar to Brexit or the U.S. Presidential Election in that matters are due to change very quickly.

From a price action perspective – those looking to trade further Euro breakdown could seek out a short-term setup utilizing the prior batch of resistance, around 120.40 for risk placement, targeting that same prior low around 118.60.

For those investigating bullish stances, they’d likely want to see prices breaking above that batch of resistance at 120.40 to prove that buyers may be able to take control of the situation; after which a support test in the zone from 119.91-120.14 could offer the top-side trigger.

EUR/JPY Technical Analysis: Break Down to a Big Level

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

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GBP/JPY Technical Analysis: Deeper into the Wedge

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Intermediate-term: Congested, symmetrical wedge building.
  • GBP/JPY reacted off of the key resistance zone around ¥142.50, but support showed shortly thereafter, highlighting the diminishing range currently showing in GBP/JPY.
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In our last article, we looked at a persistent batch of confluent resistance in GBP/JPY around the ¥142.50 psychological level. This led into a bearish batch of price action that brought prices back below the ¥140-handle, albeit briefly, until bulls returned to volley prices-higher. The net of this diminishing range has been further build inside of a symmetrical wedge pattern (shown below):

GBP/JPY Technical Analysis: Deeper into the Wedge

Chart prepared by James Stanley

Moving forward, traders can look for a break of the wedge to indicate the next directional move. A top-side break above trend-line resistance could open the door for bullish continuation strategies; while a break below support could signal the potential for bearish price action. On the chart below, we identify barriers that could be used on either side of recent GBP/JPY price action to institute such an approach. On resistance, we’re looking at the same zone of confluent resistance from our last article around ¥142.50, and on the support size we’re looking just below the ¥140-psychological level.

GBP/JPY Technical Analysis: Deeper into the Wedge

Chart prepared by James Stanley

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

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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

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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 Consolidates with an Inside Bar

Short Term Strategies, Scalping, Price Action Analysis, and Risk Management

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Talking Points:

  • CAC 40 Consolidates with an Inside Bar
  • An Inside Bar May Help Traders Identify Future Breakouts
  • Looking for additional trade ideas for equities markets? Read our 2017 Market Forecast

CAC 40 has failed to make little progress this week, and has failed to make any significant progress for today’s session. So far for Thursday’s trading, the Index is trading up slightly (+0.15%). Top winners for the CAC 40 include Bouygues (+4.55%) and Airbus (+3.91%). Losers for the day include Veolia Environment (-6.59%) and Peugeot (-1.76%).

Technically, the CAC 40 may be considered as trading in a short term uptrend. Despite the consolidation of the last two sessions, the Index remains above its 10 Day EMA (exponential moving average) found at 4,885.09 However with today’s lack of volatility, the Index may close with the formation of an inside bar. That means traders may reference Wednesday's daily candle to identify future market breakouts. Bullish breakouts may be considered above Wednesday’s high of 4,923.10. Alternatively, bearish breakouts may be considered beneath Wednesday’s low of 4,865.80.

CAC 40, Daily Chart with Range

CAC 40 Consolidates with an Inside Bar

(Created Using IG Charts)

Intraday the CAC 40 is now bouncing above today’s central pivot found at 4,898.60. If prices continue to rally above this value, this opens the Index up to test further values of resistance. This first includes the R1 pivot found at 4,931.40, and then the R2 pivot at 4,955.90.

If prices are rejected near present values, bearish momentum may begin as the CAC 40 trades back below the previously mentioned central pivot. Key values of intraday support include the S1 and S2 pivots found at 4,874.10 and 4,841.30 respectively.

CAC 40, 30 Minute Chart with Pivots

CAC 40 Consolidates with an Inside Bar

(Created Using IG Charts)

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

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Crude Oil Price Forecast: WTI Within 1XATR Of 2017 Highs On OPEC News

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

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Talking Points:

The last technical article painted a picture that the chart for Crude Oil appeared to favor the Patient Bulls. This view was taken from the background and larger momentum view as showed with price in relation to the Daily Ichimoku Cloud and Andrew’s Pitchfork drawn on the chart. Add to price sitting in a Bullish or upward bias with these two advanced indicators; the price has been triangulating since the beginning of the year.

Price consolidations that are visualized as a sideways move are very boring to watch, but their bias is rather clear. Consolidation tends to favor continuation of the prior trend. Since Mid-August, the price of Crude Oil has march confidently higher alongside many other commodities and commodity currencies. While Crude Oil has lagged many of its commodity brethren, there does appear to be a unified march higher in the commodity field that could continue if the anticipation of inflation persists.

On the fundamental front, we got word that OPEC is looking to step up its compliance with the late-November supply cut accord. Recent numbers we’ve seen were regarding compliance to the agreed-upon cuts were as high as 92%, but recent comments from OPEC were revealed to seek 100% compliance, which would further drop the international supply of Oil, which could continue to favor further upside.

Upon this comment from OPEC seeking higher compliance, we got a few institutions raising their Crude Oil Forecasts with Citi raising their forecast by $55/barrel. The combination of events seems to shift the focus back higher to new resistance near $55.25/bbl followed by $57.50/bbl.

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Looking at the chart, we continue to see a new and higher floor in Oil at $50 per barrel, as we could be moving toward a possible supply deficit, which Goldman Sachs has predicted despite rising U.S Crude stockpiles.

The higher price floor has encouraged the view that we see an Elliott-Wave pattern known as a triangle, which is a mid-trend correction pattern. Naturally, this would mean that the price is taking a break from its prior advance higher in a bull market (lower in a bear market) before advancing again. Therefore, we continue to be on the look for validating signs that price is again marching higher.

Tuesday’s breakout on news of seeking increased OPEC Compliance, which OPEC Secretary-General Mohammad Barkindo recently said current compliance has been, “very encouraging,” alongside institutions pushing forecasts with the chart structure remaining bullish will keep our focus higher unless we see a close below the February low of $51.25/bbl.

D1 Crude Oil Price Chart: Crude Oil Has Broken Above Pre-Defined Evening Star Resistance at $54.29

Crude Oil Price Forecast: WTI Within 1XATR Of 2017 Highs On OPEC News

Chart Created by Tyler Yell, CMT Courtesy of TradingView

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Key Levels Over the Next 48-hrs of Trading as of Tuesday, February 21, 2017

Crude Oil Price Forecast: WTI Within 1XATR Of 2017 Highs On OPEC News

T.Y.

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Gold Prices Stick in the Range: Undeterred by Rate Hike Fears

Price Action, Swing & Short Term Trade Setups

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In our last article, we looked at Gold prices trading at a key support zone after the first day of Fed Chair Janet Yellen’s Humphrey-Hawkins testimony. As we wrote, the fact that Gold prices remained within support while the Dollar was surging-higher was potentially troublesome for Gold bears. If what we were seeing at the time was a legitimate ‘rate hike fears’ theme, Gold prices likely would’ve seen a deeper test below that support zone, or, at the very least, a more feeble attempt by buyers at quelling those short-term losses.

The second day of Chair Yellen’s testimony wasn’t quite as boisterous for Dollar bulls, as a reversal began in the Greenback that catapulted Gold prices right back up to the resistance zone around $1,243. This zone of resistance had also functioned as a pivotal support swing in October, just ahead of the ‘Trump Trade’ that drove Gold prices lower by more than $210 in the following seven weeks.

But ever since the Fed hiked rates in December, matters haven’t been the same for Gold traders. Gold prices set a fresh low the day after that rate hike, and have since spent most of the time trending-higher. This further illustrates that Gold prices do not appear to be buying the Fed’s rate hike plans, as the bank has continued to persistently claim that they’re looking at approximately 3 rate moves this year, yet Gold prices continue trending-higher.

Gold Prices Stick in the Range: Undeterred by Rate Hike Fears

Chart prepared by James Stanley

Moving forward, traders looking at momentum-based strategies will likely want resolution of this range-like price action before proceeding further. On the top-side of price action, a break above $1,245 could open the door for bullish-trend strategies, while a down-side break below $1,215.17 could bring on bearish-breakout strategies. In between these two prices – be careful, as price action has been very choppy in this region of recent.

Gold Prices Stick in the Range: Undeterred by Rate Hike Fears

Chart prepared by James Stanley

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

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Silver Price Holding, Looking to Gold for Further Guidance

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

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What’s inside:

  • Silver staying within confines of multi-week channel
  • Gold could provide guidance upon pattern completion
  • Staying with a bullish bias as long as the techs continue to warrant

Looking for trading ideas? See our Trading Guides.

Not a lot has changed since when we last looked at silver prices on Friday; the upward channel within the rise out of the inverse head-and-shoulders pattern continues to keep prices supported in the near-term. The US dollar has been rallying, but precious metals aren't paying too much attention at this time. We’ll keep that relationship at arm’s length as per usual unless it begins to truly matter again.

For now, the focus is on the rising channel, with our attention drawing towards the developing triangle in silver's sibling metal. Gold could soon find itself wedged up nicely into an apex and make a break for it; silver to some degree will react to a strong break in gold. It’s preferred that the pattern in gold tightens up a bit, first, before breaking out. We’ll continue to monitor…

Gold: 4-hr

Silver Price Holding, Looking to Gold for Further Guidance

Created with TradingView

Silver could break down out of the three-week-long channel, but maintaining above 17.75 is key to keeping short-term prospects positive. A break below there would likely bring the trend-line off the December low into play, as well as the neckline of the bottoming H&S we’ve been discussing for the past few weeks. That is our bigger picture line-in-the-sand. On the top-side, stay in the channel and take out the 2/16 high of 18.14, and we should see a move to the next objective around the 18.50 mark. This represents a swing low from back in August as well as key closing prints on several spike highs back in November. As long as there isn’t a key failure the eventual target remains at 19, the November peak and measured move target of the inverse H&S formation.

Silver: Daily

Silver Price Holding, Looking to Gold for Further Guidance

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---Written by Paul Robinson, Market Analyst

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Dollar Technical Analysis: Vulnerable DXY On Fed’s Concern on Strength

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Talking Points:

Last week should have been a golden week for the USD. Janet Yellen at the Humphry-Hawkins Testimony seemed comfortable with the current state of employment (while handling questions from Congress about the ever-growing skill-mismatch in the economy), a core of the Fed’s dual mandate approach to managing monetary policy. At the same time, the Consumer Price Index showed that the Fed is above their 2% target, meaning that we have practically zero constraints for the Fed to move forward with their plan to continue hiking rates as shown via the Dot Plot.

However, it’s been telling to see that 2-year yields have been fixed at nearly 1.2% since December when the DXY peaked along with other USD pairs. The 2-year yield is a helpful proxy of what the bond market (who has earned the moniker, ‘the smartest people in the room’) sees a limit with how much the Fed will actually act despite the Dot Plot as they’ve underwhelmed markets before.

Another key tenet on the yield curve that has received a lot of attention post-Election is the 5-year yield. The 5yr is seen as the proxy for growth from the Trump Administration policies at least from the angle of promised new trade deals to put America first and a Roosevelt-type form of Fiscal Stimulus to put Americans to work in quality jobs. However, the Bond market seems also to see the upside is currently capped given the current publicly available information.

Add to the developments above, and we’ve recently had cross-fire comments from Treasury Secretary of the US, Steven Mnuchin who characterized the relatively strong dollar as a ‘good thing. What was more impressive or telling to many in the market was that Mnuchin felt that the US will probably have low rates for a long period. Mnuchin’s view was overshadowed by the FOMC minutes that said some members were concerned that the relatively strong USD could limit price stability and reduce the ability for CPI to remain above the 2% target.

Recommended Reading: The Saga of USD Congestion Continues, For Now

Technical View:

Today’s technical focus will be on the Andrew’s Pitchfork, which is drawn over the Ichimoku cloud. You can see that price is trading within the Ichimoku cloud. That tells us that Price is currently trading at a level between the 52-period midpoint and midpoint of the 9-&26-day midpoint from 26-periods ago. While that may sound confusing, the key idea is communicating that price lacks Bullish Momentum.

The Andrew’s Pitchfork shows that the price is currently trading within the lower-quartile of a rising channel. Price within a rising channel is Bullish. However, we need a move higher off of trend support, which is the rising bottom red line for there to be confidence is a resumption of Bullish momentum and a reversal of the current corrective/ Bearish momentum.

For now, we’ll keep an eye on the February high of 101.76 as a break and close above this level would be a helpful sign that the USD is regaining favor. Absent a break above 101.76; we’ll be on the watch for a retest of the rising trend support line near 100. Price action near here would help clarify forward guidance. For now, both Bulls and Bears are left wanting and waiting for a catalyst as USD drifts in search of a trend.

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Dollar Technical Analysis: Vulnerable DXY On Fed’s Concern on Strength

Chart created by Tyler Yell, CMT

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Shorter-Term DXY Technical Levels for Thursday, February 23, 2017

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.

Dollar Technical Analysis: Vulnerable DXY On Fed’s Concern on Strength

T.Y.


S&P 500 Technical Outlook: More of the Same for Now

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

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What’s inside:

  • U.S. indices continue relentless rise into record territory
  • S&P 500 has two trend-lines in focus; one as support, the other as resistance
  • FOMC meeting minutes tomorrow, otherwise calendar light.

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The relentless rise in the U.S. continued on Friday with new record closes in the major indices; the S&P 500 has tacked on about 13% since it bottomed ahead of the U.S. presidential election in November. As we said last week, the market appears to be in a ‘blow-off’ stage. When and where it stops is difficult to predict, but risk is clearly rising for fresh long positions, however; shorting isn’t an appealing proposition in the least bit.

The S&P is currently between two trend-lines rising up from the low in November and one extending back to the Feb low last year. The latter is viewed as support on any minor dip from here, while the steeply rising November trend-line is viewed as potential resistance with further strength. We will continue to run with the trend, but are on alert for a sign of exhaustion and potential reversal.

Tomorrow, at 19:00 GMT the FOMC minutes from the Jan 31/Feb 1 will be released – a potential source of volatility, but not expected to rock the boat too much. Outside of the minutes the calendar is lacking in terms of scheduled high impact events this week. See the economic calendarfor events on the docket.

S&P 500: Daily

S&P 500 Technical Outlook: More of the Same for Now

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.


DAX: Resistance Looms, but Support Not Far Below

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What’s inside:

  • DAX trend higher ‘keeps on keeping’
  • Levels and lines lie ahead which stand in its way towards achieving record highs
  • Support below on weakness

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The DAX ‘keeps on keeping’, testing levels we’ve been taking note of running as far back as 2015; where several swing highs were created on the decline from record highs. Thus far, the market continues to surpass those levels, with the first one nearly 600 handles lower. The trend for several months has been higher, and now the German index looks as though it could at some point join the UK and US in notching out new record highs this year; 12391 is the level to surpass.

If it is to do so, though, it still has a few more levels and lines to peel through before doing so; the top-side trend-line extending back to April, another off the August peak, and then another 2015 swing high arriving at 12079. Those three levels come together in close proximity. This might be where we see a break in the action and a potential spot to look for the market to pull back. On any weakness, if the DAX is to keep the trend since November intact, a decline should hold around either the Jan high of 11893 or the trend-line not far below.

Should the DAX blow through the trio of resistance, then we will look to another shorter-term top-side trend-line off the Jan 4 high as the last line of resistance before the old record high can be achieved.

Looking a little further out in time and using our imagination a bit, there is an alternate path which could unfold, but will require some time before coming to fruition. Given the converging top-side trend-line and rising December trend-line, a rising wedge may eventually carve itself out. From where that takes us, we’ll worry about that should the pattern come into view. For now, it's just food for thought.

DAX: Daily

DAX: Resistance Looms, but Support Not Far Below

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---Written by Paul Robinson, Market Analyst

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ASX 200 Technical Analysis: Must This Be A Double Top?

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Talking Points:

  • The ASX 200 could be forming a double top
  • The benchmark is mounting another assault on the peaks of January 9
  • The bulls will have to hold these to convince

The ASX 200 equity index could be at a key juncture, at which the bulls’ resolve could be both tested and crucial.

The benchmark had been climbing nicely from November right up until the start of January. On the ninth of that month it topped out at 5823.60. It then retreated from that peak and, although it didn’t fall far, it has only girded itself to challenge that summit again in the past week or so. And so far it hasn’t managed to pass that peak.

If it fails again the high of January 9 will start to look a lot like a technical “double top” and become all the more formidable a barrier for that.

Indeed, a conclusive failure here could put longer-term strength in doubt, with support at December 9’s closing low of 5538.70 in focus below. Of course if that too were to fail then the entire rise from early November could be brought into question.

For the moment, however, the bulls seem to understand their positon and are trying to defend it. At the current 5796 mark the ASX is above the 5792.2 closing level on that peak day, January 9. But not by much. And it’s still well below that session’s intra-day top. Still, if the index can continue on to close around current levels consistently then the bulls may have proved their point.

But if not, then the prospect of a double top will threaten.

In the balance: the ASX 200’s torrid start to the year

ASX 200 Technical Analysis: Must This Be A Double Top?

Chart Compiled Using TradingView

What does the rest of the year’s first quarter have in store? The DailyFX analysts’ forecasts are here.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX


Nikkei 225 Technical Analysis: Pennant Setup May Mean More Gains

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Talking Points:

  • The Nikkei 225 has lost puff since scaling the peaks of early January
  • Numerous attempts to retake them have ended in failure
  • However the downside hasn’t been tested too much either, which is an encouraging sign

Japan’s Nikkei 225 equity benchmark has stalled markedly since its quite impressive climb from November 2016.

That rise took the index up to 19570.7 on January 4, from lows of 16262.50 on November 11. The former level is a reasonably significant peak too, unmatched since late 2015.

But the going has been much heavier since. This year the index has made four attempts to break higher. All of them have stalled. The good news from a technical standpoint is that things could be about to get better.

As you can see from the red lines in the chart below, the Nikkei’s efforts to rise may have been abortive but they haven’t been altogether routed. Lower highs are clearly being offset by a procession of higher lows. The index is actually forming what is known as a Pennant pattern. This could be good news for Nikkei bulls.

Rising trendline unthreatened.

Nikkei 225 Technical Analysis: Pennant Setup May Mean More Gains

Compiled Using IG Charts

This is typically a continuation pattern and tends to indicate a pause in a trend rather than a turning point. They’re a sign that congestion is being cleared from a market, albeit slowly perhaps. And as you can also see from the chart that rising, white trend line from July 2016 is utterly unthreatened by current price action for all the index’s apparent dithering. In short the trend is still upward.

What tends to happen once a continuation pattern runs its course is a resumption of the action which preceded it. If that is the case this time then the Nikkei 225 could merely be girding itself for another move higher.

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX


FTSE 100 Technical Posturing Weakens, Watch GBPUSD

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

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What’s inside:

  • The FTSE 100 breaks down out of triangle on short-term chart and trend-line
  • On the verge of breaking more key support
  • GBP/USD rallies higher out of wedge, could put near-term pressure on the 100

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The FTSE 100 took a little bit of a hit yesterday afternoon once the U.S. market entered into action. Sterling rallying by about 75 bps vs the US dollar didn’t make matters any better; the 21-day correlation between GBP/USD and the footsie is currently -68%.

The other day we took a close-up look at the footsie on the hourly, making note of a developing triangle and expressed our continued bias towards the top-side. However, as is the case with these types of formations we must wait for the break, which we got. Downward. This cracked the index below the trend-line rising up from the head of the inverse head-and-shoulders pattern we have been running with. The footsie is currently challenging the bottom of the recent congestion period extending back to 2/14 and the neckline of the H&S formation. A break below this area, we’ll call it 7250, is likely to result in more selling. On a break of support we will look to 7227 and lower.

FTSE 100: Hourly

FTSE 100 Technical Posturing Weakens, Watch GBPUSD

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Currency impact. As already noted, there is a significant inverse correlation of -68% on a 21-day basis between GBP/USD and the FTSE 100. Yesterday, cable broke higher out of a wedge formation, which could mean we are about to finally see a directional move. If this is the case, then downward pressure is likely to be exerted on the FTSE in the days to come. There are of course other factors at work here – i.e. general risk sentiment – but the ‘what is bad for sterling is good for stocks and vice versa’ theme remains in play. Especially when it comes to the FTSE 100 out of the UK indices, due to the index largely comprised of companies which earn a majority of their profits outside the UK and benefit from weaker sterling prices.

GBP/USD: 4-hr

FTSE 100 Technical Posturing Weakens, Watch GBPUSD

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---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.