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: An Intermarket and Technical Powderkeg

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

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Talking Points:

USD/JPY should have everything going for it right now as the US Equity market continues to push higher, and the Federal Reserve looks awfully close if not already at its dual-mandate target of ~2% inflation and full employment. However, USD/JPY is struggling near 114 and has recently been offered as UST 10Yr yields look a bit shaky and Gold remains on a Bullish course along with other commodities.

As a trader who looks around for clues on themes to trade and sees what could be around the corner, it can be almost as valuable to find what the market is not doing (i.e. buying USD) as it is doing when a certain backdrop appears.

Looking around at the broad market landscape, there could be a technical and Intermarket powderkeg developing that is worth watching and if a proverbial spark is lit, it could lead to a large amount of JPY strength. For now, the weak and unwanted USD is unlikely to stand in its way. Per Bloomberg, Short exposure for the ETF tracking the S&P 500 has historically high assets with an aggressive rise in bearish bets despite the 10% run-up post-election. This rise in Bearish bets could show anticipation that we’re about to see a risk-off move that would likely align with further JPY strength.

I mentioned in yesterday’s DXY piece that Janet Yellen’s comments on her suspicions about the current administration being able to pass through all of the fiscal policy and the possible harm that proposed and passed immigration reform could do to destabilize the labor market may be to blame.

However you want to look at it, Traders seem suspect that even if the Fed follows through with their anticipated three hikes in 2017 that the USD is worth bidding up. One reason could be is that all the positive assumptions are priced into the USD at this point, and we’re unlikely to get a further USD boost from already known monetary policy divergence. If that’s the case, we could soon see the surprises leaning more to the upside for JPY and EUR should their Yield Curve begin to steepen due to inflation pressures showing up.

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The chart below shows what looked to be an honest breakout on the swing charts, and there is still no proof that we’re definitively heading lower. The short ETF exposure, continued strength in Gold and persistently weak USD do not help the upside argument, but they do not seal the downside argument either. You can see that the price and momentum component of Ichimoku (green line) has recently broken above the cloud. This could mean that a deep correction was in the works, but it could also mean that a reversal or breakout is forming, and we should be on the watch for both.

A break above Wednesday’s high at 114.92 will likely be the entry point for many Bulls to enter long in the belief we’re resuming the 5-year uptrend and the stop loss point for many Bears who feel the 2017 trend of USD weakness is set to continue. Either way, I do not see a clear picture on the charts alone, and the background information that is USD Bullish isn’t appearing to encourage the bidders to come out and buy.

The persistent USD weakness in 2017, and the inability of USD to go bid on such an encouraging backdrop of economic news releases have been favoring a breakdown, which would appear more likely on a daily close below the 61.8% retracement of the February range of 111.594-114.924 at 112.866. Additionally, a break and close below the drawn Andrew’s Pitchfork would encourage the argument that we have not been able to hold a Bullish structure and would also encourage the 2017 trend continuation lower. A hold of this level and a subsequent break above 114.924 could show that the aligning forces of JPY strength may remain on the sideline for now.

When considering the background and the Technical Picture, it may be helpful to know that given the positive US data, a downturn would likely continue to push USD/JPY much lower as many positively correlated markets to USD/JPY are considerably elevated and a breakdown in those correlated markets may align with aggressive downside in USD/JPY toward 110 or lower.

H4 USD/JPY Chart: USD/JPY Breaks Above Counter-Trend Bearish Channel & H4 Ichimoku Cloud

USD/JPY Technical Analysis: An Intermarket and Technical Powderkeg

Chart Created by Tyler Yell, CMT

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Shorter-Term USD/JPY Technical Levels: February 16, 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: An Intermarket and Technical Powderkeg

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GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Intermediate-term mixed; Near-term mixed.
  • The big driver for the top-side cable move will likely be inflationary pressure, moving the BoE away from dovishness and, perhaps even to a hawkish move in the not-too-distant future. This appears less-relevant, for now, after the most recent BoE Super Thursday.
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In our last article, we looked at the move-lower in the British Pound after the Bank of England’s Super Thursday batch of announcements. And while the BoE added a healthy increase to their growth forecasts, they coupled this with a cut to inflation forecasts; which removed some of the bullish motivation that was previously-showing in the pair.

At this point, price action on the daily chart of Cable is looking rather direction-less with little to work with while prices hover around the 1.2500-psychological level.

GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Chart prepared by James Stanley

The fact that the U.S. Dollar has been rather strong for much of February while Cable has been congested could denote the fact that the British Pound has exhibited at least some strength during the month. But this also highlights an issue with the bullish side of the pair at the moment, and that’s one of drivers, or perhaps more accurately, a lack thereof.

What makes the prospect of top-side in Cable really attractive is the idea of rising inflationary after the ‘sharp repricing’ in the British Pound around Brexit and the ensuing dovish-campaign from the Bank of England. While this is all very logical, and has even begun to show, the BoE has appeared unmoved by the threat of rising inflation; indicated most recently when the bank actually downgraded inflation forecasts for 2017 while dramatically increasing their expectations for GDP-growth. And this doesn’t even include the prospect of short-USD exposure that would come-along with long GBP/USD exposure; as Dollar strength has begun to show prominently again throughout February.

So, while this theme, or at least the potential for this theme remains very much alive (given the fact that we’ve seen continued support while USD has been ripping-higher), it does not appear to be a hot-button at the moment and traders would likely want to wait for price action to denote bullish continuation potential before looking to press long-exposure. For such an approach, a top-side break of 1.2580 could open the door for such a theme.

GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Chart prepared by James Stanley

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

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USD/CHF Technical Analysis: Bullish Channel, Parity for Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the breakdown of the prior up-trend in USD/CHF, as the robust bullish move in the second half of Q4, 2016 was facing continued retracement throughout the month of January. But as we advised, the bearish move was beginning to look a bit stale and stretched; and RSI divergence had already begun to show.

Since that article, we’ve seen a relatively smooth bullish trend channel appear as buyers have been able to push prices-higher by ~265 pips off of the lows, highlighted on the hourly chart below:

USD/CHF Technical Analysis: Bullish Channel, Parity for Support

Chart prepared by James Stanley

The big point of contention in USD/CHF at the moment appears to rest with more broad-based U.S. Dollar themes. After the Greenback saw a near-historic run in the second half of Q4, 2016, the first month of 2017 saw an outsized retracement (which led to that stretched, bearish state we discussed in our last article). But with strength again showing in the Dollar in February, the prospect of bullish continuation can remain attractive in USD/CHF.

For top-side approaches, the level of parity is particularly interesting. This is a major psychological level that’s exhibited quite a bit of support and resistance action as USD/CHF has traded around this zone in the recent past. For those looking to gain bullish exposure, this can be a usable level in a couple of different ways. For more aggressive approaches, traders can look at lodging stops below this level with more near-term iterations of support, perhaps around the 1.0038 level. For those looking to exercise a bit more prudence or patience, waiting for support to show up around parity can open the door for top-side approaches with stops lodged below the .9900 zone of potential support.

USD/CHF Technical Analysis: Bullish Channel, Parity for Support

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

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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: Aiming Below 0.84 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8462
  • Euro breaks range floor, drops to 6-week low vs. Pound
  • Sellers now aiming to test the water below 0.84 figure

The Euro managed to break below January’s swing bottom against the British Pound, hinting that sellers are preparing to test the water below the 0.84 figure. In broader terms, the breakdown suggests that the down trend initially launched in early October 2016 may be resuming after a two-week pause.

From here, a daily close below support in the 0.8334-70 area (September 6 low, 50% Fibonacci expansion) opens the door for a challenge of the 61.8% level at 0.8256. Alternatively, a reversal back above the 38.2% Fib at 0.8484 paves the way for a retest of the 0.8624-43 zone (23.6% expansion, February 6 high).

Risk/reward considerations appear acceptable and a short position has been activated at 0.8462, initially targeting 0.8370. A stop-loss will be activated on a daily close above 0.8506. Profit on half of the position will be taken and the stop moved to breakeven upon hitting the first objective.

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

EUR/GBP Technical Analysis: Aiming Below 0.84 Figure

EUR/JPY Technical Analysis: Resisting at Old Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the continued range-bound price action in EUR/JPY with eyes on the vaulted psychological level at ¥120.00. But as we had written, until the longer-term zone of support between 118.50-119.00 was traded through, traders would likely want to avoid getting too bearish on the pair, with the potential for top-side range entries using that 120-level zone as support.

And after a quick breach of ¥120.00 last week, with one daily close below this zone, price action has run-higher, giving the appearance that the bullish side of the range may be trying to come back into the market.

But more recently, we’ve seen sellers showing quite a bit of response at the 121-handle; which was a prior support level. And this, coupled with the fact that we’ve had a recent lower-low, gives the appearance that this range may be nearing a down-side break. This should give pause to bullish approaches until more confirmation is had, perhaps using the confluent zone of potential resistance around 121.65 as an initiator for bullish-continuation.

On the bearish side of the pair, there could be an aggressive short-term setup to be worked with utilizing that zone of potential resistance. Stops above this level could account for ~70 pips of risk, and an initial target cast towards that zone of support around 120.20 could allow for ~80 pips of potential upside to the initial target.

EUR/JPY Technical Analysis: Resisting at Old Support

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Persistent Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Intermediate-term: Mixed, near-term bullish.
  • GBP/JPY is showing signs of congestion, which can be dangerous for such a pair as that congestion can lead to out-sized and, at times, chaotic moves.
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In our last article, we looked at the prior up-trend in GBP/JPY as price action exhibited signs of congestion by building into a longer-term symmetrical wedge pattern. But given the veracity of the prior up-trend, also combined with the fact that the bearish retracement in GBP/JPY caught support off of the 50% retracement of that prior bullish move, and the prospect for continued bullishness was very much alive.

Since then, we’ve seen a bit more congestion after a down-side break found support on a projected trend-line that had previously functioned as resistance. Buyers returned shortly thereafter, running prices higher by more than 400 pips since that support-check came in a little over a week ago.

GBP/JPY Technical Analysis: Persistent Resistance

Chart prepared by James Stanley

While GBP/JPY still carries potential for bullish-continuation, traders would likely want to await a bit of additional confirmation before looking to chase this theme-higher. For traders looking to add long exposure, awaiting a break of this zone of resistance between ¥142.45-¥142.88 could make the prospect of bullish continuation a bit more attractive. Should this take place, traders can then re-assign this zone of old resistance as support in the effort of top-side, bullish entries.

GBP/JPY Technical Analysis: Persistent Resistance

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

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CAC 40 Attempts to Trend Higher

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

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Talking Points:

CAC 40 is attempting to trend higher this morning, and now up +0.24% for today’s session. European markets as a whole are trading higher as well, with little data on the horizon for this week’s economic calendar. Top winners for the CAC 40 include Engie SA (+1.35%) and TOTAL (+1.32%). Losers for the session include Unibail-Rodamco (-0.75%) and Essilor International (-0.60%).

Technically, the CAC 40 has been range bound. The Index has been trading on its 10 Day EMA (exponential moving average) for three consecutive sessions. This average is found at 4,870.93 and traders should look for a definitive breakout of this line to help determine the markets next short term trend. Traders should note that the CAC 40’s long term trend remains pointed upward, with the Index well above its 200 Day MVA (simple moving average) found at 4,571.46.

CAC 40, Daily Chart with Range

CAC 40 Attempts to Trend Higher

(Created Using IG Charts)

Intraday the CAC 40 is trading back at its central pivot, after initially bouncing from support found at today’s S1 pivot at 4,847.10. A move above the central pivot at 4,876.30 may be interpreted as bullish, then exposing points of intraday resistance. This includes today’s R1 and R2 pivots, found at 4,896.90 and 4,926.10 respectively.

It should be noted that if prices turn lower later in today’s session, a breakout below the S1 pivot exposes the CAC 40 to new weekly lows. At which point, the next values of support would include the S2 and S3 pivot found at 4,826.50 and 4,797.30.

CAC 40, 30 Minute Chart with Pivots

CAC 40 Attempts to Trend Higher

(Created Using IG Charts)

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

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Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

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

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Talking Points:

Crude Oil has been absent of any decent volatility, but that doesn’t stop the fact that the background picture developing could still be favoring a strong rise before the end of Q1 2017. We have had two back-to-back weeks of massive US Inventory builds out of Cushing OK, but the price of Crude Oil remains above our key support zone highlighted as a yellow rectangle on the chart below in the $50/52 price range.

The background behind what is happening in Crude is much more encouraging than what you see currently on the Crude Chart. The price of other industrial commodities like Copper and Iron Ore has led the view of the Reflation Trade, which shows that growth and possibly inflations expectations are on the rise, which could boost Oil.

The price of Copper recently broke above the early November high, when many Commodities, namely Gold turned tail and eventually dropped in H2 2016 by nearly 16%. The move higher in other commodities alongside the price stability in Crude Oil could be indicative that there is amarket belief that the cuts that OPEC is currently adhering to are doing long term good to the stability of the Oil market. While we do not forecast a $100/bl of oil, the technical picture and Intermarketanalysis do seem to show that a move to the lower $60/bbl range is believed to be very feasible.

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We still need to see a breakout above the current triangulation pattern or sideways consolidation that has been taking place since we rang in the New Year. The price level that we continue to watch is a corrective lower high, and likely a Triangle ‘B’ wave near $54.30. A break above this level would show that a strong price move could be underway as we’ve seen in other commodities and could be even more pronounced if the recent break higher in the USD on Janet Yellen comments fails to holdrecent support.

A break below the $50/52 zone would cause me to reconsider the Bullish view. However, consolidation continues to favor eventual continuation of a trend, which has been higher since the handle of the Pitchfork in August 2016.

When a market fails to drop in light of seemingly Bearish news like massive US inventories, it could be the fuel is spilled and the bullish move is just waiting for the right spark, which could cause the price to move higher with volatility not yet seen in 2017. That would be a common play out of a triangle pattern, which tends to drain the enthusiasm of the prior move by consuming time in the consolidation pattern before eventually advancing the trend.

Bottom line, while the price is wallowing in the low-volatility environment, keep alerts on a daily close above $54.30 or below $50/ bbl. Either break could be indicative of the next big move in Oil with a decent bit of long-waiting volatility to add.

D1 Crude Oil Price Chart: Crude Oil Volatility Is Subdued, Price Bounce From Support Favors Upside

Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

Chart Created by Tyler Yell, CMT Courtesy of TradingView

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Key Levels Over the Next 48-hrs of Trading as of Wednesday, February 15, 2017

Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

T.Y.

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Gold Prices Are Testing Support: Is Breakdown Imminent?

Price Action, Swing & Short Term Trade Setups

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In our last article, we looked at the continued run-higher in Gold prices that started around the Federal Reserve’s December rate hike and had run all the way-in to the beginning of February. And while this was a significant move that brought in more than $100 of gains to Gold prices over a month-and-a-half, this was still relatively minor in consideration of the previous bearish trend that began on the night of the elections and drove Gold prices lower by more than $210.

But since the beginning of February, strength in the U.S. Dollar has begun to show again, highlighted with yesterday’s Humphrey-Hawkins testimony from Fed Chair Janet Yellen, in which she commented that it’d be better to raise rates sooner rather than later. This helped to expedite some additional strength into the Greenback, and Gold prices have been tipping deeper into support as this strength has started to show more prominently.

At this stage, Gold prices are in an interesting zone of support from $1,215.17-$1,219.02, with $1,219.02 functioning as the 38.2% retracement of July-December bearish move. Also of interest for this zone is the two separate iterations of resistance that it offered to the top-side move in January, first on January 17th and then again on January 22/23. The 50% retracement of that same July-December move is at $1,248.83, and given the fact that bulls were unable to overtake this level, the long-term setup in Gold prices could still be classified as bearish, with January being but a retracement of the bearish trend.

Gold Prices Are Testing Support: Is Breakdown Imminent?

Chart prepared by James Stanley

For timing the bearish trend: Traders will likely want to await a break of this support zone to indicate that the bigger-picture bearish move may be on the way back. Given that this current zone of support functioned as resistance on two separate occasions, this could be a novel area for bulls to re-load; and while many currency pairs are driving down to fresh lows to account for this recent rush of Dollar strength, Gold prices are still catching support, and, at the very least this is deductively ‘not bearish’.

So, while a bigger-picture breakdown isn’t yet imminent in Gold prices, the prospect for continuation is there, particularly if the theme of U.S. Dollar strength continues in the coming weeks which will likely usher in a break of this support zone, at which point traders can look to sell ‘lower-high’ resistance in the vicinity of prior support.

Gold Prices Are Testing Support: Is Breakdown Imminent?

Chart prepared by James Stanley

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

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Silver Price: Steady Advance Keeps Bullish Outlook Intact

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

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What’s inside:

  • Silver continues to head higher from inverse H&S formation
  • Riding higher within parallels
  • 18.50-ish next area in focus with further strength

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The other day when we looked at silver it was trading right around the 200-day MA; a form of resistance we viewed as minor when considering the broader forces at work following the breakout from the two-month-long inverse head-and-shoulders pattern.

The US dollar is helping (now), but not sure how much it matters at the moment. Just a couple of days ago the two-week correlation between the dollar and silver stood at a positive 78%. Fancy that. The two can move together. This is why watching correlations out of the corner of your eye is a good thing, and not getting overly caught up in them; especially in the short-term.

Silver is riding higher along an upper parallel just above the 200-day. The upward sloping level of resistance shouldn’t be much of a factor if we are to see the eventual target at 19; this is not only the November peak, but also the measured move target based on the depth of the H&S formation. The concern is the area around 18.50, as we’ve discussed before, where lies the biggest threat to stopping the advance prior to reaching the target. The low from August and several daily closes in November have made 18.50-ish important.

Short-term, there is a parallel to the top-side line which is helping keep silver moving ‘neatly’ higher. A break below there and an undercut of the most recent swing low on 2/15 at 17.73 would bring the short-term picture into question. But overall, it would require an aggressive reversal lower to hit pause on the broader advance.

Silver: Daily

Silver Price: Steady Advance Keeps Bullish Outlook Intact

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at@PaulRobinonFX.


Dollar Technical Analysis: YTD Highs In 2-Yr Yields Fail To Lift DXY

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Talking Points:

-Dollar Technical Strategy: rebound after six-weeks of new lows may be running out of steam

-Previous Post: Dollar Technical Analysis: You Should Watch This DXY Bounce

-Broader trend still higher, but doubts mount as bullish fundamentals don’t push price up

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

The US Dollar appeared to have everything going for it on Wednesday, but you would not know that by looking at the price. The Consumer Price Index surpassed economist’s expectations, which pushed higher the probability of the next rate hike in March to 42% as of Wednesday afternoon. Janet Yellen, in her testimony to Congress also continued her tone from Tuesday that appeared more hawkish than recent testimonies to Congress, but none of this was able to keep the DXY bid.

The trend in positive economic news developments in the UShasbeen visualized in the Citi Economic Surprise Index for the USD. Citi’s Surprise Index places a value on actual news releases relative to economists expectations, and the move higher from -20 in October to currently over +40. The rise in this index helps to visualize why the fall in Treasuries as investors and traders prepare for higher yields due to Federal Reserve action of raising interest rates. On Wednesday, the 2yr Treasury Yield traded at 2017 highs as the on the run issues were sold off. Since the election in November, there has been a strong positive correlation between the USD and the US 2YR Yield, but that may be breaking down.

It’s too early to tell, but it should be noted that it is possible the the USD has simply been unable to keep up with all the expectations placed on it following the election. Even Janet Yellen has voiced a concern or doubts about the ability of all the fiscal programs promised by President Trump to be enacted as well as voiced concern over proposed and some passed immigration policies could have on destabilizing the “full” employment market.

Despite this week's positive developments, the DXY failed to hold the bid that many likely anticipated. In our last technical note on the DXY, we noted that the recent bounce was important to watch, and the bounce itself should not be surprising. The bounce is important to watch because it happened at a confluence of support but should not have been surprising because after six straight weeks of new lows starting in late December, a bounce, even a tepid one is expected.

Looking at the chart below, the most important component is that the overall trend since mid-2016 is higher and the bias should overall be given to the Bullish view. In other words, the burden of proof still rests largely on the shoulder of the Bears despite the USD being the weakest G8 currency over recent weeks.

Regarding the potential for Bearish continuation of the 2017 trend, you should also note that we look to be making lower highs on the RSI(5) on the Daily Chart, which could show that we’re continuing to get less momentum behind the Bullish moves that could open up the view that we’re about to see a breakdown. If we break below the February low of 99.23, it’s fair to say that a larger breakdown is upon us.

What will likely be a painful new experience to many is that the breakdown (should it develop) could take place among a hawkish Fed or an environment of rising interest rates. The markets are a world built upon expectations, and it could be that the expectations became too much for the USD to live up to. We’ll have to wait for the next big move to build a firmer bias on this view.

For now, we’ll watch the three key zones of resistance. The main forms of resistance, for now, are the Fibonacci zone that comprises the 61.8-38.2% retracement of the 2017 range that occupies 102.07-100.99. We’re currently trading in that zone now, and a break above this zone could show that the broadertrend is soon to resume. A hold of resistance here along with the other forms of resistance, which are comprised of the Median Line of the rising pitchfork (LT Bullish) and the Daily Ichimoku Cloud followed by a break below the 99.23 February low would turn the focus definitively lower.

You may find it helpful to remember that the Median Dot Plot forecast at the December FOMC for the Fed to hike in 2017 was three hikes, anything that falls short of that and that sheds doubt on the potential inflation-inducing policies of President Trump could weight on the USD. In addition to the inability of the USD to support the momentum that it rode into 2017 on is the relative strength that is appearing from Europe & Japan.

There are major elections coming up in Europe that could have long-lasting political ramifications, but if the European yield curve continues to steepen as it has lately, there could be evidence that the future inflation in Europe that many thoughts had no chance of showing up is arriving.

These themes are not tradable yet, but should be watched as there are a multitude of ramifications here, least of which would be ECB tapering that could lift EUR. However distant, these possibility aligning with DXY price action should be watched.

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Dollar Technical Analysis: YTD Highs In 2-Yr Yields Fail To Lift DXY

Chart created by Tyler Yell, CMT

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Shorter-Term DXY Technical Levels for Wednesday, February 15, 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: YTD Highs In 2-Yr Yields Fail To Lift DXY

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: New Highs Around the Bend

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

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What’s inside:

  • DAX maintaining its bullish posturing
  • Support and resistance outlined
  • Limited market moving data due out this week; Euro-zone CPI, FOMC minutes tomorrow

Looking for trading ideas? See our Trading Guides.

On Friday, we looked at the DAX and said some weakness could set in over the very short-term but overall the index was supported on any decline it may experience. Weakness turned out to be very, very short-term with a swing low forming in less than a couple of hours of posting. In the weekly forecast, the focus for a breakout was on 11848 (above there now) and then the real level of interest coming in at the Jan 26 high of 11893. The market is supported by the December trend-line and Friday low at 11694.

The market could find itself ping-ponging around before making a move in either direction, but we continue to run with higher over lower when all is said and done. A breakout above the Jan high will quickly bring into play the levels from 2015 we’ve discussed on numerous occasions – 11920 and 12079 would be first up.

On the data front, tomorrow at 10 GMT Euro-zone CPI for Jan is due out; seems likely it will be more of an FX/rates-mover than equities, but noteworthy nonetheless for the very short-term minded trader. Otherwise it’s a fairly quiet week. FOMC minutes from the Jan/Feb meeting are also later in the day tomorrow, while the market is closed, but could have an impact on the open Thursday should U.S. equities experience a big move. (Full econ calendar here.)

DAX: Daily

DAX: New Highs Around the Bend

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.


ASX 200 Technical Analysis: January Peak Back in View

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The ASX 200 loitered worryingly under January 9’s 19-month peak for nearly three weeks
  • Now the bulls have girded themselves for another crack at it, and they are getting close
  • What will happen if they get there will be key

For a while there Australia’s ASX 200 equity benchmark looked like an index in need of new direction.

Sure, it joined in the New Year optimists’ equity rally with a will. The ASX enjoyed a buying boost which took it up to 19-month highs on January 9. But that was more than 20 trading days ago. The index hasn’t slipped very far since, but it hadn’t shown much appetite to revisit those highs either.

Things changed five days back. Since then, Wall Street’s record-breaking vigor has helped the ASX chalk up five straight days of gains. That’s a line of green we haven’t seen for the Aussie index since its climb to that January peak of 5829.7.

Will it have the stomach to assault that peak again?

Well, it’s looking more and more like it. The bulls dealt with near-term technical resistance at 5739.80 on Monday. As long as the index can stay above there, then 5759.00 and 5796.60 will be the next hurdles to overcome. That second level would take it above January 9’s closing level, but still leave the index shy of the 5829.1 high traded on that day.

Can it get there? Well, this is likely to be a case of “one resistance at a time,” but the moving averages look supportive. At present 200-day moving average is some way below the 100-day (see chart below). These signals are not infallible, but a higher shorter term average is usually a bullish indicator.

Getting back to the peak: ASX 200

ASX 200 Technical Analysis: January Peak Back in View

Chart Compiled Using TradingView

Technically speaking, a return to January 9’s peak probably looks more likely than not. However, what the ASX does if and when it gets there will be fascinating. A meaningful push higher will probably embolden the bulls, but another failure at that top will only see it become a more formidable barrier.

OK, so it’s your favorite currency, but is it anyone else’s? Check out the DailyFX sentiment page to find out.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The Nikkei has risen nicely since September, but seems to have hit an impasse
  • The 19600 level seems beyond it; the bulls have failed there four times
  • However, there may yet be reason for hope

Like many of its global peers, Japan’s Nikkei 225 equity benchmark has been rising quite consistently since September 2016. However, it appears to have hit something of a barrier.

For the last four weeks, the index has failed repeatedly to get above the 19600 level for any length of time, despite repeated assaults on that summit. For times the bulls have tried, and four times they have failed.

Is this barrier becoming significant, or will it too fall in time?

Well, a look at the moving averages for the index might well suggest the latter. The shorter-term, 100-day average has been above the 200-day since they crossed over back in mid-December. That sort of cross is held to be a bullish signal, and so it proved. The Nikkei is not around 19,300. Back then it was at 18416 or so.

As you can see from the chart below the two moving averages continue to diverge, which suggests that the index could still have more upside to give. It has already given plenty since that bullish crossover but the two have diverged more sharply since, which might give the bulls reason to hope.

The Nikkei may need to overcome resistance at the 19584 level to convince investors that it has what it takes for another leg higher. Above that, the next level to conjure with will be resistance at 20,012. The Nikkei hasn’t been that high since last November.

That sort of level would also offer investors the considerable psychological support of seeing the index back above 20,000. However recent history suggests that it doesn’t stay up there for long.

Still sending bullish signals. Nikkei moving averages.

Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX


FTSE 100 Tech Update: ST Trend Weakening, but Still Intact (For Now)

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

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What’s inside:

  • FTSE continues to move higher out of inverse head-and-shoulders
  • Watching trend sequence for signs of fracturing
  • Hourly chart in view

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We continue to run with the inverse head-and-shoulders pattern the FTSE 100 broke free from last week, with the target remaining set at the January high of 7354. Bringing the hourly chart into perspective, a series of higher highs and higher lows is underway, but could come under fire with a drop below the low on Tuesday. This would bring the short-term trend sequence into question, and trade back down to the neckline of the H&S formation could be in order. At that juncture, while the pattern would still be in play, it would become a point where the market needs to hold or else a more aggressive decline might be get underway. There is additional support at the trend-line running up from the head of the pattern. It would require a break of both the neckline and trend-line for real concern from the long-side to set in.

But as long as we don’t see a lower low and a break of noted support levels, we continue to favor more upside within a developing upward channel. It might not be pretty, which is why (in consistent fashion) the preferred approach is to buy on dips as long as the trend sequence maintains its integrity. Chasing momentum in equity indices is often a losing endeavor, unless it’s U.S. indices recently which have gone on a rampage in recent sessions. But typically; pullbacks for buys, bounces for shorts tend to offer up the best risk/reward scenarios.

FTSE: Hourly

FTSE 100 Tech Update: ST Trend Weakening, but Still Intact (For Now)

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.