Support & Resistance

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EUR/USD Technical Analysis: Euro Trend Bias Favors Weakness

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro trend bias continues to favor weakness amid consolidation
  • Improved risk/reward needed for an actionable short trade setup

The Euro remains stuck in a narrow consolidation range near the 1.18 figure against the US Dollar but overall positioning continues to favor a bearish bias. Price action has been defined by a series of lower highs and lows since the single currency broke rising trend line support in mid-September.

Near-term support is in the 1.1711-21 area (October 5 close, 38.2% Fibonacci retracement), with a daily close below that opening the door for a challenge of the 50% level at 1.1606. Alternatively, a push above the 23.6% Fib expansion at 1.1899 exposes the 1.2041-70 zone (38.2% expansion, August 29 high).

Prices are too close to immediate support to justify entering short from a risk/reward perspective. Meanwhile, the broad case against taking up the long side is reinforced by the absence of an actionable bullish reversal signal. With that in mind, opting to remain flat seems to be most prudent.

See our Q4 forecast to learn what will drive trends for the Euro and the US Dollar through year-end!

EUR/USD Technical Analysis: Euro Trend Bias Favors Weakness


The Short-Term Reason for JPY’s Stubborn Strength You Should Know

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

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Talking Points:

  • USD/JPY Technical Strategy: awaiting reversal higher
  • USD/JPY approaching short-term support near 111.47 figure after spirited recovery
  • Sentiment Highlight: net-short retail bias gives preference for upside prevailing

The price of USD/JPY has fallen back after mounting a spirited recovery thanks to the US Dollar recovery from early September. Traders remain inclined to favor upside strength once the key market risk for Japan is cleared. On October 22, Japan will go to the polls thanks to a snap election called by PM Shinzo Abe where a victory may assure him the longest tenure of a PM in Japan’s post-war history.

Near-term positioning currently has been dominated by protection on aggressive JPY strength as identified by the options market. Short-term options that cover the October 22 election have surged to protect against a shock defeat of Abe. As the name implies, the outcome is wholly unexpected by institutions have learned to expect or at least protect against the unexpected thanks in large part to the Brexit and Donald Trump election outcomes. Should the election hand further control to Abe, the election hedge would likely expire worthlessly, and USD/JPY could catch up to risk assets like the Nikkei, which recently closed at the highest level since 1996 or the SPX55 that sits at all-time highs.

From current levels, a daily close below the 111.47 figure (late September pull-back low) opens the door for a challenge of the 111.10-109.65 area (38.2-61.8% retracement level of Sept.-Oct. range.) Alternatively, a reversal and close above 112.08 (weekly opening range high) exposes short traders to a sharp and painfulrise to the 112.31/52 zone (Oct. 12/13 high) followed by the monthly intraday high of 113.44.

Unlock our Q4 forecast to learn what will drive trends for the Japanese Yen and the US Dollar through year-end!

The Short-Term Reason for JPY’s Stubborn Strength You Should Know

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

USD/JPY Insight from IG Client Positioning: net-short retail bias gives preference for upside prevailing

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.

The Short-Term Reason for JPY’s Stubborn Strength You Should Know

USDJPY: Retail trader data shows 45.7% of traders are net-long with the ratio of traders short to long at 1.19 to 1. In fact, traders have remained net-short since Oct 06 when USDJPY traded near 112.802; theprice has moved 0.9% lower since then. The number of traders net-long is 18.2% higher than yesterday and 14.3% higher from last week, while the number of traders net-short is 9.6% higher than yesterday and 17.9% higher from last week.

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

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

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GBP/USD Technical Analysis: Clinging to Longer-Term Support Zone

Price action and Macro.

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Talking Points:

- The British Pound remains volatile after yesterday’s 3% inflation print; but a bigger picture direction remains elusive as price action clings to a longer-term support zone.

- Near-term price action in Cable is messy. Below we look at a series of levels that can be utilized in the effort of timing directional strategies in GBP/USD.

- Want to see how GBP and USD are holding up to the DailyFX Forecasts? Click here for full access.

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In our last article, we looked at GBP/USD re-breaking above a key zone of longer-term support. The area that we were referring to runs from 1.3117 up to 1.3187, with each of those prices derived from longer-term Fibonacci studies. The price of 1.3187 is the 23.6% retracement of the 2014-2016 major move, and a trend-line taken from the highs in each year projects to the September swing-high around 1.3600.

GBP/USD Weekly: Fibonacci Support, Trend-Line Resistance

GBP/USD Technical Analysis: Clinging to Longer-Term Support Zone

Chart prepared by James Stanley

The bullish burst that showed up in the British Pound came-in around the BoE’s September rate decision. This is when the bank warned that rate hikes may be on the horizon in the effort of stemming the continued growth in inflation. Shortly after comments from Mr. Mark Carney of the BoE indicated that a hawkish move may be in the cards, GBP/USD ran-up to fresh yearly highs to find resistance around 1.3650. This is where the descending trend-line on the above chart came into play, helping to set near-term resistance as the move digested.

But what initially started as a higher-low support test turned into a bull flag; and then eventually a direct sell-off as prices made a fast approach towards the 1.3000 psychological level. It was around the NFP report on October 6th that a low set-in, and this is when an abysmal NFP print helped to bring USD-weakness back into the fray. In short order, GBP/USD climbed back above the big zone of support/resistance.

GBP/USD Four-Hour: Unable to Hold Support at 50% Retracement, Sell-Off Ensues

GBP/USD Technical Analysis: Clinging to Longer-Term Support Zone

Chart prepared by James Stanley

As we walked into this week, a couple of key drivers sat on the calendar for the British Pound. Yesterday brought comments from Mr. Mark Carney as he testified in front of parliament, and this came out around the same time as UK inflation for the month of September. Inflation printed at 3%, which is the highest rate of price increases in the UK since April of 2012. This is also something that would normally bring strength into a currency that’s recently been bid on the basis of tighter policy out of the respective Central Bank. That didn’t happen yesterday, as GBP/USD moved deeper within this support zone as Mr. Carney offered comments throughout the morning.

GBP/USD Hourly: Deeper Dig into Support Zone During Carney Commentary

GBP/USD Technical Analysis: Clinging to Longer-Term Support Zone

Chart prepared by James Stanley

The big question, at this point, is whether bulls will return ahead of the BoE’s rate decision in early-November. The bank has exhibited a pattern of making moves around Super Thursday events so that any new actions could be supported with updated forecasts and an accompanying press conference. The date of the next Super Thursday event is November 2nd, and if we don’t get a move at that meeting and the BoE sticks to this pattern, we’ll have to wait until February for the next one.

However, given how messy near-term price action has been, a directional theme is currently unavailable in GBP/USD. Traders would likely want to let price action pick a direction before looking to institute any directional biases. If near-term support does hold in this zone, and if the prior swing-low around 1.3120 remains respected, bullish continuation can be in order. Traders can use a top-side break of the prior swing-high at 1.3338 to denote as such.

On the bearish side, traders would likely want to allow prices to drive below the psychological level of 1.3000 before entertaining any such themes. The prospect of a longer-term run of USD-strength certainly exists, as we outlined earlier this morning; but for traders looking to work with that theme, they’d likely want to allow for proper confirmation before looking to chase the move (USD-higher, GBP/USD-lower).

GBP/USD Four-Hour: Resistance (Blue), Support (Red) Breaks to Open Door for Directional Strategies

GBP/USD Technical Analysis: Clinging to Longer-Term Support Zone

Chart prepared by James Stanley

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

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USD/CHF Technical Analysis: Dollar-Driven Strength Begins to Wane

Price action and Macro.

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Talking Points:

- USD/CHF set a fresh four-month high earlier in the month as USD-strength continued into Q4.

- Price action fell back-below a key level last week, and we’re now seeing resistance show around prior support.

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

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While much of the world has been watching Euros, U.S. Dollars and British Pounds, the Swiss Franc has begun to show a series of interesting setups. In USD/CHF, the pair finally broke above resistance at .9770 earlier in the month as USD-strength continued into the open of Q4. Bulls were unable to sustain the top-side break, however, and after prices retraced back below that prior point of resistance, a range had developed over the final few days of the week.

USD/CHF Hourly: Dollar-Driven Bullish Run Loses Steam Above .9770 Resistance

USD/CHF Technical Analysis: Dollar-Driven Strength Begins to Wane

Chart prepared by James Stanley

Given the prior proclivity of the pair to stick to range-like, mean-reversion tendencies; combined with the prior support and resistance structure that had set-in, this could become usable for traders forward-looking approaches in USD/CHF.

USD/CHF Daily: Bulls Unable to Sustain Breakout Above .9770

USD/CHF Technical Analysis: Dollar-Driven Strength Begins to Wane

Chart prepared by James Stanley

Continued resistance around the .9770 level opens the door for short-side setups. Traders can look at stops above either of the two recent swing highs, with aggressive stances looking above .9808 while more conservative takes will likely want to look above .9737. Short-side targets can be investigated at the prior swing-low around .9707, at the Fibonacci level around .9684, the prior swing around .9650 and then .9575.

USD/CHF Hourly: Lower-High, Resistance at .9770 Opens Door for Short-Side Setups

USD/CHF Technical Analysis: Dollar-Driven Strength Begins to Wane

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Down Trend Resumption in the Works?

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar recovery stalls ahead of 0.79 threshold vs. US counterpart
  • Confirmation of down trend resumption needed before re-entering short

A spirited Australian Dollar recovery against its US counterpart stalled ahead of the 0.79 figure, hinting that the down trend started in early September may soon resume. The series of higher highs and lows defining the upswing from October lows remains intact for now however.

A daily close below the 14.6% Fibonacci expansion at 0.7840 sees the next downside barrier at 0.7805, the 23.6% level. Alternatively, a rebound above resistance in the 0.7883-98 area (38.2% Fib retracement, October 13 high) paves the way for a test of the 50% threshold at 0.7929.

Profit was booked on the second half of an AUD/USD short trade initiated at 0.7970 after the first half of the position was closed upon hitting its first objective. Confirmation of down trend resumption and acceptable risk/reward parameters will be sought to re-enter the trade in the days ahead.

What do retail traders’ buy/sell decisions hint about coming AUD/USD moves? Find out here!

AUD/USD Technical Analysis: Down Trend Resumption in the Works?

CAD Weakness becomes an October Theme as Hawkish BoC Pulls Back

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

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Talking Points:

  • USD/CAD Technical Strategy: strong resistance at 1.2778, awaiting sell opportunities
  • USD/CAD ST support focus at 1.2438approaching key resistance near 1.19 figure after spirited recovery
  • Sentiment Highlight: overall selling bias provides ST bullish outlook

The Canadian Dollar has continued to fall away from the impressive strengthening that took many by surprise over the summer. The rally from early May was driven by the Bank of Canada forecasting and fulfilling rate hikes in 2017 that previously were not priced into the market. This relationship showed up first between the narrowing yields of US and Canadian two-year sovereign yield spreads.

At the beginning of October, the market was pricing in a 2/3 chance of another BoC hike before the calendar turned, and now the probability has dropped to 46% with an 80% chance of a hike in January. At the same time, since late August, Canadian economic data has underwhelmed economist’s expectations.

The under-performance of economic data is important and Canadian Dollar weakness has accelerated since Bank of Canada Governor Stephen Poloz has said that the bank is in “intense data-dependent mode” on future hikes and that growth will moderate. These comments on Monday took the Canadian Dollar across the board losing the most to the Japanese Yen and was worth a 0.6% drop against the USD that gave way to CAD falling to 1.2545 to the US Dollar

The technical outlook is focusing on further rises against the broader downtrend that began in early May. Short-term support is the 1.2520-1.2468 zone (Oct 13 high, 55-DMA.) Below this zone, a daily close below the 1.2433 figure (Oct. 12 low) opens the door for a return to the downtrend. Currently, a hold above the 1.2433 area favors a march toward 1.2723-78 zone (38.2% retracement of May-Sept. range, Aug 15 high.)

Unlock our Q4 forecast to learn what will drive trends for the US Dollar through year-end!

CAD Weakness becomes an October Theme as Hawkish BoC Pulls Back

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

USD/CAD Insight from IG Client Positioning: overall selling bias provides ST bullish outlook

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.

CAD Weakness becomes an October Theme as Hawkish BoC Pulls Back

USDCAD: Retail trader data shows 48.3% of traders are net-long with the ratio of traders short to long at 1.07 to 1. The number of traders net-long is 4.4% higher than yesterday and 9.7% lower from last week, while the number of traders net-short is 4.2% lower than yesterday and 45.7% higher from last week.

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

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

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Contact and discuss markets with Tyler on Twitter: @ForexYell


NZD/USD Technical Analysis: NZ Dollar Ready to Turn Higher Again?

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Bullish candlestick pattern hints Kiwi Dollar may be bottoming vs. US namesake
  • Technical confirmation, improved risk/reward needed for actionable trade setup

The New Zealand Dollar put in a bullish Morning Star candlestick pattern, hinting that a reversal higher against its US counterpart may be in the works. Interestingly, the currency seems to be finding strength despite continued political uncertainty after an inconclusive general election.

Near-term resistance is in the 0.7132-40 area (August 31 low, 23.6% Fibonacci retracement), with a daily close above that opening the door for a test of the 38.2% level at 0.7196. Alternatively, a reversal back below the 14.6% Fib at 0.7105 paves the way for another challenge of resistance-turned-support at 0.7054.

Prices are too close to resistance to justify entering long from a risk/reward perspective. Furthermore, the series of lower highs and lows defining the down move from the September 20 swing high is strictly speaking still in place. With that in mind, opting to stand aside seems most prudent for now.

Just getting started trading NZD/USD and need help with your approach? See our beginners’ guide!

NZD/USD Technical Analysis: NZ Dollar Ready to Turn Higher Again?

EUR/GBP Technical Analysis: Euro Down Trend About to Resume?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8896
  • Euro may be resuming down trend started in late August vs British Pound
  • Short position initially aims for a challenge of support above the 0.88 figure

The Euro has broken support guiding the upswing from September lows, hinting that the down trend started in late August against the British Pound may be resuming. A set of bearish candlestick patterns and negative RSI divergence appear to have marked a top, as suspected.

From here, a daily close below the 38.2% Fibonacci expansion at 0.8819 opens the door for a test of the 0.8743-53 area (July 14 low, 50% level). Alternatively, a move back above support-turned-resistance at 0.8934 (October 9 close) paves the way for another challenge of 0.9033 (October 12 high).

A short EUR/GBP position was activated at 0.8896, initially targeting 0.8819. A stop-loss will be activated on a daily close above 0.8934. Profit on half of the trade will be booked and the stop-loss trailed to breakeven when (and if) the first objective is reached.

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EUR/GBP Technical Analysis: Euro Down Trend About to Resume?

EUR/JPY Technical Analysis: Fibonacci Support Holding Higher-Lows

Price action and Macro.

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Talking Points:

- EUR/JPY Technical Strategy: Retracement in bullish trend continues to hold higher-low support.

- The pair has oscillated within a ~140 pip range over the past two weeks, with multiple tests of support holding-up the longer-term trend.

- Want to see how Euro and/or Yen are holding up to our DailyFX Q4 forecasts? Click here for full access.

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In our last article, we looked at EUR/JPY moving-down to a key level of support. The pair put in quite the performance in the middle two quarters of 2017, jumping from a mid-April low below 115.00 to set a fresh 2017 high just a few weeks ago at 134.41. This move, of course, has been driven by a host of fundamental factors revolving around both the Euro and the Japanese Yen, and as we near what’s expected to be a pivotal European Central Bank meeting later in the month, that previously bullish move has continued to digest around higher-low support.

EUR/JPY Daily: Higher Low Holding Around Fibonacci, Trend-Line Support

EUR/JPY Technical Analysis: Fibonacci Support Holding Higher-Lows

Chart prepared by James Stanley

At current, both near-term support and resistance are being defined at least in-part by retracement levels from longer-term Fibonacci studies. The price of 132.05 is the 50% retracement of the 2008-2012 major move and this, along with the prior swing-high at 131.70 is helping to set current support. And on the resistance side, 134.41 is the 61.8% retracement of the 2014-2016 major move; and after two days of testing in mid-September, bears took over and brought prices down to that higher-low.

EUR/JPY Monthly: Long-Term Fibonacci Retracements Helping to Set Near-Term Support, Resistance

EUR/JPY Technical Analysis: Fibonacci Support Holding Higher-Lows

Chart prepared by James Stanley

Continued support around the longer-term retracement at 132.05 opens the door for bullish exposure in the pair. Traders can investigate stops either below 131.71 for a more aggressive approach, or below the prior swing at 130.56 for a more conservative stance with more room to work on the initial entry. For those taking the more aggressive approach, a re-test of the prior swing-high around 133.00 can be used to adjust stops to breakeven. The level of 134.41 is particularly interesting for bullish targets, as this Fib level had offered a couple of days of resistance previously; and if this is taken out, the psychological level at 135.00 becomes attractive for next topside targets.

EUR/JPY Four-Hour: Trend-Line, Fibonacci Support Helping to Hold the Higher-Low

EUR/JPY Technical Analysis: Fibonacci Support Holding Higher-Lows

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Bull Flag After Fresh One-Year Highs

Price action and Macro.

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Talking Points:

- GBP/JPY is attempting to recover from a recent swoon that saw more than 550 pips erased in a short three weeks.

- This brings question to the previously bullish trend, and a bull flag formation has formed as prices have retraced off of those fresh yearly highs.

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

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GBP/JPY is in an interesting spot. After the deluge in the British Pound on the heels of the Brexit referendum, GBP/JPY sank down to a fresh four-year lows around ¥123.00. Just a year earlier, the pair was testing resistance at ¥196.00. That’s 7,300 pips for those of you counting at home, and this accounted for a whopping drop of -37.2% of the pair’s value: And this is for a non-levered currency pair; not a stock of some small-cap company or a futures contract that’s usually prone to such rampant volatility.

After the flash crash in early-October, a semblance of support began to show in the pair, and after the U.S. Presidential Election in early-November, GBP/JPY ripped-higher as we approached the December rate hike from the Fed. Prices ran-up to the 61.8% retracement of the prior major move (taking the May 2016 high down to the October low), at which point resistance set-in and then held for the next nine months. Recurrent attempts to take out that high in May and again in July fell-short, with lower-highs printing during each instance.

GBP/JPY Daily: 61.8% Fibonacci Resistance Helped to Set the Top for Much of 2017

GBP/JPY Technical Analysis: Bull Flag After Fresh One-Year Highs

Chart prepared by James Stanley

In latter-August, that bullish theme began to show again in the British Pound, and in early-September, we heard the BoE warn that rate hikes might be on the horizon. In quick order, shorts were getting squeezed and prices were running higher towards the ¥150.00 psychological level.

After setting a new one-year high above the 152.50 psychological level, digestion began to show as prices moved-lower, falling below a number of key short-term support levels in the process. While this was happening, a bearish trend-channel formed during the retracement, giving us a bull flag formation in GBP/JPY.

GBP/JPY Four-Hour: Bull Flag in GBP/JPY

GBP/JPY Technical Analysis: Bull Flag After Fresh One-Year Highs

Chart prepared by James Stanley

At this stage, with price attempting to re-cross above that 61.8% Fibonacci retracement while also threatening a top-side break of the bearish channel, long positions can begin to look attractive. However, traders will likely want to remain cautious here, as the rate at which the sell-off in GBP/JPY showed-up suggests that something more than a garden variety pullback may be at work here.

There is a key zone of potential resistance just ahead of the ¥150.00 psychological level, and traders can use this in their forward-looking approaches on the pair. As long as price remains sub-¥150.00, bullish strategies should remain cautious. A top-side break of this level opens the door to continuation plays with eyes on a re-test of the ¥152.50 psychological level. On the bearish side of the pair, traders can look to today’s swing-low at ¥147.71 to open the door for short-side strategies. Short-side targets can be entertained at ¥146.90 and/or ¥146.00 even, as a projected trend-line taken from the initial ignition of the bullish move projects around this area. If we do see a down-side break of that trend-line, the bears are back and deeper targets can be accorded at ¥145.00 and then ¥143.47.

GBP/JPY Technical Analysis: Bull Flag After Fresh One-Year Highs

Chart prepared by James Stanley

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

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

Price action and Macro.

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Talking Points:

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

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

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

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

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

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

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

Chart prepared by James Stanley

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

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

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

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

Chart prepared by James Stanley

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

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CAC 40 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)

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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

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Crude Oil Price Strengthens on Geopolitical Risk, Positioning

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

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Talking Points:

  • WTI Crude Oil Technical Strategy: Buying Dips Above
  • Crude Oil may approach 100% Fib extension at $53.94/bbl
  • Sentiment Highlight: positioning continues to favor a broadly bullish bias in the near term

The price of WTI Crude Oil has mounted a strong recovery after testing the polarity point on the chart between $49/51 per barrel. A polarity point is where prior resistance may act as future support. Oil traders should look to see if the price can continue to find support near the $50/bbl figure. Since summer, the dominant trend bias favors price appreciation. Near-term positioning per IGCScontinues to be defined by a series of lower highs and lows of net-long positions, which may pave the way for new longs to enter the market and chase price higher (at least for now).

Geopolitical tensions have arisen while many Intermarket correlations have broken down for Crude Oil. The geopolitical tensions are focused on US President, Donald Trump and the Iraq-Kurdistan tensions. The former may threaten to block a portion of exports from OPEC’s third largest producer while the latter brings concerns of disrupted flow as Chinese demand is at near-record levels. Both components are leading to buying pressure in the energy market.

From current pricing, a hold of a daily close above the $50.18 figure (Oct. 12 low) opens the door for a challenge of $52.83-53.94/bbl (September high, 100% Fib extension). Alternatively, a reversal and close back below $50.18 exposes $49.13 (October low, trend line pivot).

Unlock our Q4 forecast to learn what will drive trends for Crude Oil through year-end!

Crude Oil Price Strengthens on Geopolitical Risk, Positioning

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

WTI Crude Oil Insight from IG Client Positioning:positioning continues to favor a broadly bullish bias in the near term

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.

Crude Oil Price Strengthens on Geopolitical Risk, Positioning

Oil - US Crude: Retail trader data shows 50.9% of traders are net-long with the ratio of traders long to short at 1.04 to 1. The number of traders net-long is 4.4% higher than yesterday and 15.4% lower from last week, while the number of traders net-short is 10.1% higher than yesterday and 21.0% higher from last week.

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

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

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Gold Prices Fall Back to Fibonacci Support as USD Re-Approaches Highs

Price action and Macro.

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Talking Points:

- Gold previously drove above $1,300 as USD-weakness showed-up after Non-Farm Payrolls earlier in the month.

- That theme of Gold strength came unraveled this week as USD-strength showed-up following last week’s CPI report.

- Want to see the DailyFX Q4 Forecast on Gold and the U.S. Dollar? Click here for full access.

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In our last article, we looked at Gold prices slipping back-below the $1,300 psychological level after bullish drive showed-up on the heels of the October NFP report. That print saw an abysmal number of -33k, and this led to a continuation of the USD-weakness that had become so commonplace in the first three quarters of the year. In short order, prices ran from a low just above $1,260 to a high above $1,305; but as we had written on Monday, if buyers were unable to hold support above the key figure of $1,300, a bearish retracement was likely around-the-corner. That’s what showed for most of this week as prices moved down to find support around the Fibonacci level at $1,278.76.

Gold Daily: Current Support at 61.8% Retracement of July-December, 2016 Bearish Move

Gold Prices Fall Back to Fibonacci Support as USD Re-Approaches Highs

Chart prepared by James Stanley

In our previous article, we looked at down-side targets at $1,296, $1,289, $1,284 and then $1,277.83; all of which have cleared. We had also mentioned that for bullish approaches, traders would likely want some element of a higher-low to show in order to confirm the potential for that theme’s attractiveness. That hasn’t happened yet, and this leaves Gold prices in a rather unworkable spot as we approach the weekend.

For next week, traders can look for a break of near-term support around $1,278.76 to open the door to for bearish continuation. Down-side targets can be cast towards prior points of swing-support at: $1,275, $1,267.50, $1,261, $1,254.06 followed by another run at the $1,250 psychological level. The prior swing-high around $1,291 obviates the bearish stance, and opens the door to the possibility of top-side setups as a re-test of $1,300 would appear likely.

Gold Prices Fall Back to Fibonacci Support as USD Re-Approaches Highs

Chart prepared by James Stanley

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

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Silver Prices Targeting Low-16s, Gold 1260-ish

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

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What’s inside:

  • Silver’s engulfing bar on Monday puts pressure on the metal as long as it stays below 17.46
  • Gold shift lower puts sellers in control as long as the recent swing-high is maintained
  • Silver targeting support around 16.33/07, gold looking towards support near 1260

What will drive Gold this quarter? Check out our Q4 Forecast for our outlook.

Precious metals got a nice lift on Friday, marking the 6th consecutive up-day, with the help of poor U.S. economic data, weaker dollar. But since then a lot has changed already with Monday’s selloff setting in motion downside momentum, and in the case of silver prices a bearish engulfing day formed to start the week.

Silver to end last week took out an area of resistance we viewed as important in the low-17s; it comes by way of horizontal prices back to August along with the 200-day MA. But with Monday’s sudden reversal we are already seeing sellers step up in earnest as the metal drops back below the low-17s. Staying below the recent swing-high at 17.46 should keep the pressure on. The recent swing-low at 16.33 is eyed as a potential target, along with the 16.07/13-area.

Silver: Daily

Silver Prices Targeting Low-16s, Gold 1260-ish

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

The six-day rally took gold up beyond resistance we had penciled in around 1296/300, but it was a brief stay as Monday selling quickly pushed momentum into reverse. Stay below 1306 and focus will continue to be on gold trading down to the trend-line from December, 200-day MA. These two levels could be in confluence with the earlier-month low at 1261.

Gold: Daily

Silver Prices Targeting Low-16s, Gold 1260-ish

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.


Dollar Index Continues Choppy Rise with Yellen Guessing On Inflation

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

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Talking Points:

  • US Dollar Index Technical Strategy: Anticipating further counter-trend rally above 92.55/82
  • US Dollar Index rejected strongly recently at 94.19; focus will remain there for LT bias
  • Sentiment Highlight: EUR/USD bearish bias from retail gives warning for further DXY weakness

On October 6, DXY capped off a 3.5% rally after being sold for much of 2017, but the price of the US Dollar has struggled to find life since. Over the weekend, current Fed chairwoman, Janet Yellen shared that her “best guess” is that inflation will rebound after unexpected underperformance of US inflation data.

Recently, the US Dollar has traded lower after being rejected at a confluence of resistance near 94.20. The zone around there combined three different technical focuses. First, the mid-August corrective/lower high was at 94.15 followed by a 161.8% extension at 94.20 of the initial move higher when the DXY was seen as too oversold in early September given possible rate hikes at 91.01 to the September 14 high of 92.65. Lastly, a price channel that has framed price action for most of 2017 also predicted price pressure developing above 94.

From here, only a daily close above the 94.20 figure (importance outlined above) opens the door for a challenge of the 2017 downtrend. The first key upside focus would be 95.25 (61.8% retracement of the June-September range.) Alternatively, a reversal back below the 92.82/55 exposes a likely continuation of the downtrend that would first target 91.53 (Sept. 20 low, first corrective higher low.)

Unlock our Q4 forecast to learn what will drive trends for the US Dollar through year-end!

Dollar Index Continues Choppy Rise with Yellen Guessing On Inflation

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

Insight from IG Client Positioning: Pickup in long positioning favors resistance on price advance

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.

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

Dollar Index Continues Choppy Rise with Yellen Guessing On Inflation

EURUSD: Retail trader data shows 38.3% of traders are net-long with the ratio of traders short to long at 1.61 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.08123; theprice has moved 9.2% higher since then. The number of traders net-long is 4.5% higher than yesterday and 10.5% lower from last week, while the number of traders net-short is 9.9% higher than yesterday and 10.5% 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 added.)

---

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

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S&P 500 – Slow Motion Melt-up Threatened but Remains Intact (For Now)

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

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What’s inside:

  • S&P 500 gaps lower, but finds support around confluence of trend-lines to keep upward grind intact
  • Tentatively bullish bias remains as long as support holds, will abandon bias on a sharp change in momentum
  • Nasdaq 100 offers a bit more volatility, looking to 6k as support, top-side trend-line near 6170 as resistance

Find out what is expected to drive markets into year-end in the DailyFX Quarterly Forecasts.

The S&P 500 has been rising in impressively slow fashion, and if you’ve been buying every little single-digit decline then you’re probably happy, but overall the trading is lacking good two-way direction as realized volatility remains in single-digit percentages. Yesterday, the market started off on its heels with a gap lower, the largest since August 10, but was able to shortly after the open begin recovering losses and close the session with a tiny gain.

The low came at a trend-line off the August 29 low and just below the top-side trend-line extending higher since June. There is good confluence between these two angles of support. We’ve recently (on 10/9) seen the June trend-line hold, so it is beginning to make its mark as noteworthy support. As long as both trend-lines maintain then so will a cautiously bullish bias. But should we see a blast lower similar to other times in the past few months which marked short-term tops, we’ll be quick to abandon that bias in favor of a ‘correction’ bias.

S&P 500: Daily

S&P 500 – Slow Motion Melt-up Threatened but Remains Intact (For Now)

Paul conducts webinars Tuesday-Friday. See the Webinar Calendar for details and a schedule of all upcoming live events.

The Nasdaq 100 gapped sharply lower yesterday and was unable to make its way back into positive territory, but looks poised to make up the remaining losses soon. Support comes in right around 6k, while resistance arrives at a top-side trend-line near 6170. As far as an index with some volatility, this is the best the U.S. has to offer across the group. You could throw in the Russell 2k, but it’s been a rather tight range recently, and the Dow, the grind higher is offering very little at the moment in terms of opportunity. Low volatility environments are a common cause of frustration, check out this discussion from yesterday on how to handle it.

Nasdaq 100: Daily

S&P 500 – Slow Motion Melt-up Threatened but Remains Intact (For Now)

---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 Extends into Top-Side Trend-lines, Reversal Underway

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

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What’s inside:

  • DAX high-level consolidation pattern broke to the top-side, but failing as anticipated
  • Reversal taking shape from long-term top-side trend-lines (2000-present, 2015-2017)
  • A break below 12909 puts the index at risk of a drop back below 12700 in the near-term

Find out what’s driving the DAX in our Q4 Forecast.

On Tuesday, we were discussing the DAX and the high-level consolidation pattern under construction, making note that between the extended nature of the market and narrowness of the range a breakout was at risk of a failure. To add further to this notion is the fact that running just across the top of the consolidation is a pair of top-side trend-lines (2000-present, 2015-2017).

Yesterday, the DAX traded higher but found sellers and reversed. It wasn’t a ‘nasty’ reversal-day but the intra-day range of about 90 handles was the largest since the last trading day of September. It’s been a difficult little stretch indeed, with minimal volatility. That could be about to change.

The mini surge higher and reversal out of the high-level consolidation formation is the kind of price action we were looking for as a sign-post a pullback may be in store. A drop below the consolidation low at 12909 will undermine not only the congestion pattern but also put the index back below the record high recorded in June. In this case it is reasonable to expect at the least we see a move towards the swing-high from July beneath 12700. Even if the DAX is to trade to new heights the market is in need of a pullback.

Next week, the ECB meets on Thursday and we’ll learn more about the path Draghi and company want to take with regard to its QE program. For details on timing, expectations please see the economic calendar.

Check out this new guide on trading psychology – Building Confidence in Trading

DAX: Daily

DAX Extends into Top-Side Trend-lines, Reversal Underway

---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: At Last The Super Range Is History

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The ASX 200 has put in a steady run of gains
  • In the process it has managed to close above a notable resistance point
  • Could the year’s highs come back into range?

Just getting started in the trading world? Our beginners’ guide is here for you. Do check it out.

Last week could have been quietly crucial for the ASX 200.

Without fanfare the Australian equity benchmark managed a Friday close above what we I have taken to calling its Super Range. That’s the narrow, 150-point trading band which had contained all the action on a daily close basis since May 17. Hard to believe? You can see it clearly in the chart below.

ASX 200 Technical Analysis: At Last The Super Range Is History

And if we zoom in we can see that the bulls have managed to engineer the first decisive range break we have seen.

ASX 200 Technical Analysis: At Last The Super Range Is History

Can they make it stick? Well, as you might expect after an impressive run of nine straight higher closes, they are looking a little exhausted, at least for the time being. The ASX’s Relative Strength Index has nudged into the overbought danger zone above the 70 level (it’s now around 74). This suggests that the benchmark could probably do with a period of consolidation and it will be fascinating to see where the lower boundary of this process proves to be.

At present the index can probably look to support at the Super Range’s old maximum altitude -June 14’s intraday top of 5842.3. Below that there’s its highest daily close, the same day’s 5807.7. However, while those points are clearly interesting ones for Super Range followers, they are a little distant now, historically speaking. So retracements may instead come back as far as more recent props. That could mean that more recent highs are the ones to conjure with, such as those of mid-August in the 5785 area.

ASX 200 Technical Analysis: At Last The Super Range Is History

We can’t know yet of course whether the index will have the legs to push on back to its 2017 peak just under 6,000. But an upside Super Range break was a necessary first step- a first step which has now been taken.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Bulls Keep Momentum, Need a Rest

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Talking Points

  • The Nikkei has put in an astonishing winning streak
  • It rose for twelve straight trading days
  • The signs remain bullish, but some consolidation would probably be a good thing

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

Just look at the Nikkei 225 go.

The Tokyo equity benchmark is at two-decade highs and rose for twelve consecutive days as of Thursday. That’s the longest winning streak since May-June 2015 and it equals the lengthiest since the program of economic reforms instituted by Prime Minister Shinzo Abe and named “Abenomics” was introduced back in 2012. Now hopes for Abe’s return with an outright majority in this weekend’s election is adding fuel to an already roaring Nikkei fire.

Nikkei 225 Technical Analysis: Bulls Keep Momentum, Need a Rest

The question now of course is how long can that fire keep burning? The chart above suggests that plenty of fuel remains, with the index right in the middle of a strep uptrend chanel which has faced and survived valid tests of both its upper and lower bounds.

The moving averages tell a positive story too. Mid September saw one bullish crossover, when the 20-day moving average crossed above the 50-day. Now it has been joined by another one. The 50-day was threatening to cross above the 100-day when I took a technical look at the index last week. It has now done so conclusively.

Nikkei 225 Technical Analysis: Bulls Keep Momentum, Need a Rest

Of course after such a breathless charge higher it would be natural to expect at least a pause. Sure enough the Nikkei’s Relative Strength Index suggests that the index is now throughly and possibly dangerously overbought. On Thursday the RSI came in at a panting 83. That’s well above the 70 level which usually rings alarm bells.

Still, for as long as that uptrend looks safe, the bulls haven’t got a lot to worry about even if a period of reflective consolidation probably ought to come soon.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


FTSE in a Fist Fight Around Record Highs

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

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What’s inside:

  • FTSE closes at new record highs, but yet to break intra-day record high
  • Market falling back towards big trend-line off the Feb ’16 low
  • If support holds, look for the 7599 intra-day high to be challenged soon

We have updated guides, this is one of them we suggest checking out – Building Confidence in Trading

Last week on Thursday the FTSE followed in the footsteps of a couple of other major global equity indices (S&P 500, DAX) and closed at a new all-time high. Time to be excited, right? Despite the close in record territory there are still intra-day levels standing in the way of the index trading freely to new highs, and even then, buying into new record highs hasn’t proven to be much of a fruitful venture in the past. New highs, trade a little higher, then dip has been the pattern for quite some time.

It was only a single day on this trip into record territory before finding sellers, but the decline unfolding in slow fashion so far suggests there aren’t a great deal of sellers in the vicinity. A spot we’re watching as support is soon to arrive with a little more weakness; it comes in by way of the February 2016 trend-line which the UK index regained claim on back on the 3rd of the month. It's been an influential trend-line since the latter part of August, and why not? The two connecting points – major global equity market low in February 2016 & ‘Brexit’ low – are important ones. The trend-line held successfully in August before busting, can it provide support this time around?

If the noted trend-line can hold then look for the footsie to make an attempt on busting through the intra-day record high at 7599. If the trend-line doesn’t hold, then the first level of support arrives around 7435/60, the top of a range from August-September. Holding this after breaching the Feb ’16 trend-line would be important. For now, that isn’t under threat so we’ll keep an eye on how price reacts to the two-significant top and bottom-side thresholds in front of us.

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

FTSE: Daily

FTSE in a Fist Fight Around Record Highs

---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.