Support & Resistance

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EUR/USD Technical Analysis: Aiming Below 1.11 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1317
  • Euro issues the largest daily drop in a month against the US Dollar
  • Partial profits taken after short position hits first target above 1.12

The Euro resumed its decline against the US Dollar following a brief digestion period, with the exchange rate now aiming to test below the 1.11 figure. The single currency marked a top as expectedafter prices produced a dramatic Shooting Star candlestick near the 1.16 threshold.

Near-term support is at 1.1067, the 50% Fibonacci retracement, with a break below that confirmed on a daily closing basis exposing the 61.8% level at 1.0937. Alternatively, a reversal back above support-turned-resistance marked by the April 25 low at 1.1215 exposes the 23.6% Fib at 1.1357.

A short EUR/USD position was activated at 1.1317. Subsequently, partial profits were taken as prices met the setup’s initial objective. The rest of the trade remains active, looking to capture deeper losses in the days ahead. The stop-loss has been adjusted to the breakeven level.

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EUR/USD Technical Analysis: Aiming Below 1.11 Figure



USD/JPY Technical Analysis: Clearly Defined Support & Resistance To Help Traders

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

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Talking Points:

  • USD/JPY Technical Strategy: Pushing Off Of Strong Resistance, Still Like Upside Break
  • JPY Falling From Strongest G10 Currency. JPY Bearish Sentiment May Pick Up If Risk Does Too
  • US Dollar Rebound Shows Bearish Sentiment May Have Gone Too Far

Unevenly Distributed Dollar Strength Has JPY Weakness In Question

USD/JPY has moved cleanly lower from the 110.50, which aligns with a multitude of resistance that we’ll unpack later. Over the weekend events, which included the G-7 meeting and Japan’s Trade Surplus that swelled unexpectedly to the largest amount since 2010 when the JPY was in an environment of persistence strength. The economic surprise brought short-term JPY strength, but that may not be long lasting.

Many had discounted the probability of BoJ intervention ahead of the G-7 Summit last weekend that Japan hosted. However, now that the G-7 meeting is in the rearview mirror, many traders think that all bets are off, and we could see renewed vigor from the BoJ to not let JPY buyers enjoy their JPY strength for as long as they have. The other possible scenario is renewed US Dollar strength on the back of renewed belief that the Fed will hike rates, and set the Dollar off on a path of policy divergence of other currencies.

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The problem with the above scenarios is that they’re potential scenarios at best. Policy makers in the United States & Japan have mentioned their intentions. However, so far they have been long on words and short on actions of late. In times like this, it’s helpful to look at the charts.

USD/JPY Has Run Into Strong Ichimoku Cloud Resistance

USD/JPY Technical Analysis: Clearly Defined Support & Resistance To Help Traders

On the chart above, you’ll notice we’ve found long-term bearish resistance. The different technical tools and indicators that met price at near 110.50 were (listed in order of Importance) the Daily Ichimoku Cloud, the 55-DMA, and the 78.6% Fibonacci Retracement of the late-April to May Range.

If the fundamental story plays out even half-as-well as it could, with either the BoJ easing or Fed hiking beyond what is currently priced, I like the former scenario more of the two; we could see a move through resistance mentioned below that could make USD/JPY longs jump for joy this summer.

Additionally, the recent high may (not a trade recommendation) be an ideal spot for a stop and reverse if someone is currently holding short-exposure on USD/JPY. As mentioned earlier, the scenario that favors upside based on Central Bank action is reliant on a few scenarios playing and therefore, someone may prefer holding short-exposure, and the major equity markets may look like they’re about to collapse before they rocket higher. However, if we do break through these resistance levels, holding short USD/JPY would be ill advised and flipping on the trade may allow you to participate in a move that might resemble some of the previous breakouts.

A Sustained Break Above 110.578 Could Open a Strong Case for USD/JPY Bulls Everywhere

USD/JPY Technical Analysis: Clearly Defined Support & Resistance To Help Traders

Key USD/JPY Technical Levels:

For those familiar with Elliott Wave Trend and Cycle Analysis, the move off the 105.53 low looks distinctly impulsive. Initial impulse waves have been labeled on the chart above, and the recent short-term top at 110.57 (a 500+ pip move), could be either the completion of an ‘a’ or ‘1’-wave in a more bullish scenario.

Given that a completed fives waves of a smaller degree wave have been labeled on the chart above, we should be on the lookout for a corrective move that now appears to be underway as we’ve fallen ~130 pips from last week’s high. Given the move higher, there is a distinct zone that I’d be watching for a corrective (higher-low) and that is between 38.2-61.8% of the move off 105.54. This zone encompasses 108.65-107.45 (peak of wave ‘i’) and 61.8% of the move higher.

If we can limit downside to these levels and then turn through the heavy zone of resistance that includes the Ichimoku Cloud, 55-DMA & the 78.6% Fibonacci Retracement, we may be about to embark on one of the largest USD/JPY rallies in over a year.

Therefore, the short-term view is bearish, as we haven’t entered the corrective zone yet. However, within the corrective zone, I’ll be looking for a turnaround, and subsequently watching for a break of 110.57 to get bullish. Naturally, a break below 105.539 would change the current bullish view and more than likely would be the result of either a ‘Brexit’ or a larger risk-on event grabbing the market’s attention.

USD/JPY SentimentShould Be on Watch Of Resistance Holding

USD/JPY Technical Analysis: Clearly Defined Support & Resistance To Help Traders

As of mid-day Monday, the ratio of long to short positions in the USDJPY stands at 1.64, as 62% of traders are long. Long positions are 12.5% higher than yesterday and 3.5% above levels seen last week. Short positions are 18.7% above levels seen last week. Open interest is 6.7% higher than yesterday and 3.4% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USDJPY may continue lower. The trading crowd has grown further net-long from yesterday but moderated since last week.

Shorter-Term USD/JPY Technical Levels

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: Clearly Defined Support & Resistance To Help Traders



GBP/USD Technical Analysis: Braced with Bullishness, 2016 High in Sight

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the vertical-like price movements being seen in the Cable as the up-trend continued to take further hold. As we had written, traders would likely want to wait for price to move down to support before looking to get long, as the fear of chasing new highs turned out to be well-founded as the pair turned lower shortly thereafter. Price action on Friday of last week, leading into Monday and then Tuesday of this week produced a morning star formation with support right off of the 38.2% retracement of the prior major move at 1.4443, and this ‘higher-low’ further confirms the up-trend in GBP/USD.

At this stage, the Cable is but 55 pips away from the 2016 high, and this could make profit targets for long positions unattractive given that the most recent swing-low on the daily chart is more than 260 pips away from current price action.

Traders looking to trigger long can look for price to move to support before triggering top-side positions. There are four support levels nearby and underneath price action that may come into play for such a strategy. In the 1.4668 vicinity, we have the February top in the pair, and this had also furnished support after GBP/USD ran to new highs in early May. At 1.4640, we have the prior swing high, and this was a very short-term inflection, so traders would likely want to confirm support before acting off of such a level so near to current price action. At 1.4600 we have the previous swing-low, and at 1.4572 we have the 61.8% retracement of the ‘big picture’ move in GBP/USD, taking the low of 1.0500 up to the 2007 high of 2.1160.

Each of these levels could be potential ‘higher-lows’ for those looking to get long on the prospect of continued Sterling-bullishness. If price action falls below the prior ‘higher-low’ at 1.4443, the bigger picture up-trend in GBP/USD comes into question; and this could be an operable level for traders to investigate stop placement for long positions.

GBP/USD Technical Analysis: Braced with Bullishness, 2016 High in Sight

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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US DOLLAR Technical Analysis: A Fitting Finish To May

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

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Talking Points:

  • US Dollar Technical Strategy: Declining ATR into Resistance Remains A Worry
  • US Dollar’s Has Cleared Its Biggest Technical Test of April Highs, Now Onto 12,001
  • Who Will Win Between Hedge Funds & The Fed on the US Dollar?

At the beginning of the month, we found it fitting to share you that you might want to be aware of the seasonal bias for Dollar Bullishness in May. Sentiment had grown amazingly bearish to end the month of April for the Greenback, and few were sure we’d see a rate hike in the next 12-months. In fact, going into last week, the interest rate probabilities for the US Dollar to be subject to a rate hike at the June 16 FOMC meeting were at 4%. Fast forward, seven days, and we’re sitting at ~30% probability of a June rate hike.

What a difference a week makes.

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Recently, the most hawkish comments have come from San Francisco Federal Reserve President, John Williams, who said that 2-3 hikes in 2016 and 3-4 hikes in 2017 seemed about right. That range of 6-8 hikes over the next 18 months may be a sincere warning from the Federal Reserve that they are not as scared of US Dollar Strength that others thought there were. Either way, there are a few technical levels to watch that can help us track this move as it develops.

Good News: We Broke Resistance. Bad News: We’re Staring At Significant New Resistance

US DOLLAR Technical Analysis: A Fitting Finish To May

The above chart shows price data on the US Dollar Index since the January 29 top. Since then, we’ve seen an aggressive decline that put the US Dollar as one of the worst performing asset classes of 2016 at the end of April.

For now, there is only one technical resistance worth alerting you to, and that is 12,001, which was the February opening range low as well as a confluence of Fibonacci levels. The price pattern over the last five days looks to be forming a bearish rising wedge. However, it is uncertain if that is setting up to provide a small (<1%) pullback before breaking out or for a larger correction.

The macro-picture mentioned above favors the former, and the break above the 12,001 level could leave bears what happened to the beautiful world of US Dollar weakness they had in February-April.

Should a more significant breakdown develop, the ST support is currently the weekly opening range low of 11,943. Should the weekly low break, there is a confluence of support at 11,873/60. 11,860 is the 38.2% of the May Range, and should be the first focus of any trend setback. 11,873 is the 21-DMA that has provided strong directional bias since summer of last year.

The Dollar Is Strong But Pick Your Poison Wisely

The strong move in May that we warned about has shown up in force, and if 2015 is any guide, we could continue in this move for months. However, the index is sitting below important resistance, and until the level of 12,001 breaks, it is hard to take this rally too seriously, yet.

For those braver or more confident than most that the US Dollar breakout is in its embryonic stage, it may be helpful also to look at opportunities to buy USD vs. weaker currencies some of the commodity currencies:

US DOLLAR Technical Analysis: A Fitting Finish To May

Shorter-Term US Dollar Technical Levels

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.

US DOLLAR Technical Analysis: A Fitting Finish To May

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T.Y.




USD/CHF Technical Analysis: The Range within the Trend

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the building up-trend being seen in USD/CHF after a fresh two-month-high had taken out out the prior swing at .9795. And while much of this move was related to the resurgence in the Greenback that’s been seen since the beginning of May, few pairs have reflected this USD strength as cleanly as the Swissy.

But looming just ~35 pips away we have a major Fibonacci level that’s shown a tendency to support and resist prices in the four-plus years since its formation. This is the level of .9948, and it’s the 38.2% retracement of the ‘secondary move’ in USD/CHF, which takes the 2010 high to the 2011 low. This level had provided the swing high in the year 2012, and didn’t become eclipsed again until early 2015. This is a significant price level on USD/CHF, and given the near-term bias in the pair (up-trend), traders may want to approach such a resistance level with caution, particularly for longer-term strategies.

For those looking to establish longer-term positions, observe price action behavior around this key level. As in, if we can get a clean break above .9948, we have the parity level just a little higher. This could be ample opportunity to look for a ‘lower high’ around this zone of prior resistance should new highs come into play.

Conversely, for traders comfortable playing shorter-term strategies, they can look at playing the shorter-term range that’s developed; looking to buy support or, in essence, looking to apply range-bound logic to a trending pair. This would entail getting long after a support inflection off of the .9887 Fibonacci support level, which is the 61.8% retracement of the prior major move, taking the January 2016 high to the February 2016 low (this retracement is shown in green on the below chart). Key would be stop placement, as a target to .9948 may offer less than 50 pips of possible upside after that support confirms, which would mean a stop of less than 25 pips for those looking to get a minimum 1-2 risk-reward ratio.

USD/CHF Technical Analysis: The Range within the Trend

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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AUD/USD Technical Analysis: Trying to Lay Path Below 0.71

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Australian Dollar resumes down trend vs. USD after brief consolidation
  • Daily close confirmation of support break to lay a path below 0.71 figure

The Australian Dollar is under pressure once again after brief consolidative period, with prices attempting to pave the way for a move below the 0.71 figure. A top was established as expected with the formation of a bearish Evening Star candlestick pattern above the 0.78 mark.

Confirmation of a breach of support at 0.7212, the 61.8% Fibonacci retracement, on a daily closing basis paves the way for a challenge of the 76.4% level at 0.7065. Alternatively, a reversal above the 50% Fib at 0.7331 sees the next upside barrier at 0.450, the 38.2% retracement.

An actionable short setup is absent for the time being, pending validation of a support break. If a close below 0.7212 is secured, risk/reward considerations imply a short entry no lower than 0.7163. In the meantime, patience seems to be warranted.

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AUD/USD Technical Analysis: Trying to Lay Path Below 0.71



USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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

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Talking Points:

Wednesday saw a move lower after the Bank of Canada kept rates unchanged. The Bank of Canada policy was balanced with encouraging marks as well, and disappointment spread throughout. Most notably for disappointment, the Alberta Wildfires are expected to cut 1.25 percentage points off Canada’s real GDP growth in Q2 2016 due to "fire-related destruction" and "associated halt to oil production." Additionally, there are increased vulnerabilities to Canadian Households, presumably similar to other Energy Reliance areas where leverage comes under scrutiny when revenue from resources dries up. Lastly, The Bank of Canada noted that business investment and intentions (commitments for future investment remain a disappointment.

Why then did the Canadian Dollar rise right after the report? First, there was a positive note regarding inflation that stated CPI inflation had risen recently; inflation is still slightly below the 2.0% target. Additionally, the Bank of Canada expects the economy to rebound in Q3 thanks to WTI Crude Oil price rebound should align with reconstruction in Alberta and production coming back online.

Therefore, it was a balanced statement, and for now, USD/CAD looks similarly balanced. In other words, while we’ve pushed into relative trend resistance via Ichimoku (explained below), there appears an Intermarket capability with WTI Crude Oil price steady near $50/bbl, and the US Dollar under strong resistance to pivot either way.

USD/CAD Has a Multitude of Strong Support at ~1.2750/1.2900 (H4 Chart)

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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The chart above tells a story about what’s happened in USD/CAD from February to April, which was distinctly a mean-reversion in CAD & WTI Crude Oil and US Dollar Downtrend and the month of May. May provided a reversal of fortunes that had developed over the prior three months as the US Dollar began to rally, even as the hedge funds sold it as per the CFTC’s CoT report. Per the last report, the fight goes on as Hedge Funds and large speculators increased bets on Canadian dollar gains to the highest since 2013 earlier this month.

Either way, you’ll note that we’ve now seen a flip on the chart from bearish to bullish, at least on the H4 chart above. First, we’ve moved above the H4 Ichimoku Cloud and the 21-day moving average that currently sits below 1.2900. However, looking over the May Range, you can see the current May move from 1.2458-1.3188 or ~6% is now supported by the Fibonacci 38.2-61.8% retracement range. Given the change in central bank rhetoric and market pricing in of Fed Action, this short-term support should give hope for the Bulls who hope to go the distance to the mid-1.3000s and beyond.

Key Support Levels from Here (Visual Map Below)

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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The daily chart above should help you get a sense for the divergence of long-term bearishness and swing-trader bullishness. Long-Term Resistance via the 100-DMA shown above at 1.3376 and the Ichimoku Cloud top near 1.3320 and the price channel ceiling are expected by the USD/CAD bears to hold price back. However, if it does not, there may be little that can hold the US Dollar and USD/CAD back from retracing much of the January 20-May 2 decline.

Shorter-term resistance is seen at the week’s high of 1.3180 and the pre-BoC high of 1.3140. A break above these levels, especially on a closing basis could show the previously mentioned resistance levels may soon be tested for significance.

Support, as noted above is easier to define on the swing chart. However, the Daily Chart provide 3-helpul levels to keep on watch. First, the May trend-line aligns nicely with the Weekly Pivot point at 1.3047. Within an ATR of .0097 is the Ichimoku Trigger Line (9-day midpoint or (high+ low for previous nine periods)/2) that stands at 1.3010.

Below here, we find a confluence of support between the 38.2-61.8% retracement of May’s 6% rally. Sticking with Ichimoku, the Base Line (26-day midpoint or (high + low for previous 26 periods)/2) current sits at 1.2823. Additionally, the Weekly S1 support aligns with the 38.2% retracement and May 18 open at 1.2908.

The steady-hand of the US Dollar and the lack of Canadian Dollar upside through May despite Oil’s rally would encourage me to look for a move to initial support at 1.3047/10 followed by 1.2908 as buying opportunities (not a trade recommendation).

Should one believe that the CAD is soon to return to its former glory displayed in February-April, weaker currencies that may trade well vs. the Canadian Dollar could be the Japanese Yen and the Euro, which have recently slide down the relative rankings at the end of May.

Canadian Dollar Has Lost Favor per Sentiment

When looking at sentiment, crowd positioning has neutralized after a strong downtrend. For those familiar with our model, USD/CAD provided one of the strongest signals for downtrend continuation from late February to May. We use our Speculative Sentiment Index as a contrarian indicator to price action. Therefore, with that the majority of traders at a near net-flat bull: bear positioning of 1.06 as 51% of traders are long could be saying that we’re on the cusp of another big move even through the direction is less certain.

Short positions are 5.7% lower than yesterday and 3.8% below levels seen last week. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USDCAD may continue lower. The trading crowd has flipped from net-short to net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further bearish trading bias.

USD/CAD Speculative Sentiment Index as of Wednesday, May 25, 2016

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis support further warns of more CAD gains ahead against the US Dollar.

Key Levels as of Wednesday, May 25, 2016

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

T.Y.




NZD/USD Technical Analysis: Short Trade Confirmation Sought

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar attempting to break range bottom support once more
  • Reversal validation, acceptable risk/reward sought to enter short

The New Zealand Dollar is attempting to break below range support above the 0.67 figure against its US counterpart after re-testing a recently broken trend line. Prices have struggled to build downside momentum after seemingly overturning the upswing from January’s swing lows, but sellers seem intent on trying anew.

A daily close below the May 10 low at 0.6716 paves the way for a test of a horizontal pivot at 0.6576. Alternatively, a move back above trend line support-turned- resistance at 0.6779 opens the door for a challenge of the April 27 close at 0.6823.

Entering shortwould be consistent with expected 2016 fundamental themes but the absence of a validated support break makes taking a trade at current levels appear premature. A better-formed setup with adequate confirmation and acceptable risk/reward parameters will be sought before establishing exposure.

Losing money trading NZD/USD? This might be why.

NZD/USD Technical Analysis: Short Trade Confirmation Sought



EUR/GBP Technical Analysis: Euro Sinks to 4-Month Low

Fundamental analysis, economic and market themes

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Talking Points:

The Euro resumed its decline against the British Pound after a brief corrective recovery, plunging to the lowest level in nearly four months. Prices appear to have completed a large Head and Shoulders top, hinting at the resumption of the multi-year down trend established in late 2008.

A daily close below the 50% Fibonacci retracement at 0.7549 paves the way for a test of the 61.8% level at 0.7415. Alternatively, a reversal above the 38.2% Fib at 0.7683 opens the door for another challenge of support-turned-resistance at 0.7748.

A short EUR/GBP trade was triggered at 0.7876 and partial profits were subsequently booked as prices hit the first downside objective. Remaining exposure continues to be in play, aiming to capture follow-on weakness. The stop-loss has been adjusted to the breakeven level. Positive RSI divergence hints a bounce may be due before the selling resumes.

Losing money trading EUR/GBP? This might be why.

EUR/GBP Technical Analysis: Euro Sinks to 4-Month Low



EUR/JPY Technical Analysis: Prior Support, New Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Flat. Short setup identified.
  • EUR/JPY is currently showing resistance
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article, we looked at middling price action in EUR/JPY as the pair dug deeper within a symmetrical wedge pattern. As we mentioned, the level at 123.08 could prove compelling for short-side strategies should price action break below this zone, as this is the 38.2% Fibonacci retracement of the secondary move in the pair, taking the 2008 high to the 2012 low.

On Monday we finally saw the bottom-side of that symmetrical wedge pattern give way to falling prices, and this opens the door for short-side continuation moves. The level of 123.08 had also previously functioned as prior support, so this could be an illustration of using old support values as new levels of resistance for down-side continuation plays.

Stops on short positions could be set above the prior swing-high of 124.06; with targets set to the prior price action swing low around the major psychological level at 122.50, followed by 121.94, which is the 50% Fibonacci retracement of the most recent major move, taking the 2012 low to the 2014 high. Below that, we have another price action swing in the 121.50 neighborhood that could function as a tertiary profit target; and should that become broken then the psychological level at 120 becomes an attractive target; as just 10 pips below that major psychological level of 120 we have the 61.8% retracement of the ‘big picture move’ at 119.90 in EUR/JPY, taking the low from the year 2000 all the way up to the 2008 high.

EUR/JPY Technical Analysis: Prior Support, New Resistance

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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GBP/JPY Technical Analysis: Third Time a Charm with This Resistance?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY has lurched up to a familiar psychological resistance level at 162.50.
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

The British Pound continues to impress as it appears that Brexit risks/fears have been getting more and more priced-out of the Sterling. We looked at the building up-trend in GBP/JPY in our last article just ahead of the Super Thursday batch of announcements; and since then that bullish structure has only furthered as the pair has put in even more higher-highs and higher-lows.

But this morning saw a critical price action level come in to play, as this is the major psychological level that’s capped GBP/JPY price action for the better part of the past two months at 162.50. We’ve had two different major resistance inflections off of this level of recent, first on March 29-30th and then again on April 27-28th. Each instance led to a decline of at least 800 pips.

But this isn’t entirely a one-sided thesis, as the pair has also been building in higher-lows since the beginning of April; so a case for further bullishness could certainly be made.

At this point, traders are likely going to want to observe price action’s behavior around this level. If we can get a significant break above 162.50 (specifically a high above 162.80), then we have a fresh two-month high in the pair; and at that point traders can then begin to strategize long positions by looking to trigger as price moves down to a higher-low support value.

Conversely, should price action show resistance at this level over the next day, printing a doji or spinning top for Thursday’s daily bar, then we have the thesis that traders are selling off of this level and this may, again, come in as resistance. At that point, the short-side setup could be investigated with the thesis of trading a reversal in the pair.

GBP/JPY Technical Analysis: Third Time a Charm with This Resistance?

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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USD/CNH Technical Analysis: Volatility Hits 8-Month Low

Fundamental analysis, economic and market themes

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Talking Points:

  • USD/CNH Technical Strategy: Flat
  • US Dollar treading water after hitting one-month high vs. Chinese Yuan
  • Ebbing momentum, absence of actionable trade setup calls for patience

The US Dollar is in digestion mode against the Chinese Yuan in offshore trade after prices advanced to the highest level in a month. Volatility continues to ebb, with the ATR measure of momentum dropping to the lowest level since August 2015 (on rolling 20-day studies).

From here, a daily close above the March 25 high at 6.5291 opens the door for a challenge of the 38.2% Fibonacci retracement at 6.5589. Alternatively, a move below resistance-turned-support at 6.4937 clears the way for a test of the 6.4529-4705 area (23.6% Fib expansion, rising trend line).

A clear-cut trade signal is unavailable at this point. Upside continuation has failed to materialize but an actionable bearish reversal setup is likewise absent. With that in mind, we will remain on the sidelines and wait for positioning to deliver something more compelling before committing to a directional bias.

How do Chinese assets fit into DailyFX analysts’ Q2 outlook? Find out here!

USD/CNH Technical Analysis: Volatility Hits 8-Month Low



CAC 40 Advances Higher as Brexit Fears Ease

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

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Talking Points

  • CAC 40 Prices End 13 Days of Consolidation as Brexit Fears Ease
  • CAC 40 Prices Reach New Weekly Highs as Prices Trade up 1.48%
  • Sentiment Readings Continue to Decline, SSI Reads at +1.16

CAC 40 Daily Chart

CAC 40 Advances Higher as Brexit Fears Ease

(Created using Marketscope 2.0 Charts)

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The CAC 40 has surged to a new weekly high this morning, with the Index trading up 1.48% on the day. All 40 listed stocks are trading higher, with Societe General leading the group trading up 3.05%. With a lack of European data on this week’s economic calendar, most of the volatility generated from UK news on the forthcoming Brexit referendum. So far, equities markets have generally been reacting positively to recent Brexit polling that suggests that the Remain campaign remains in the lead.

Price action for the CAC 40 is now trading above a key value of (previous) resistance at 4,350. This bullish breakout has effectively ended 13 days of consolidation for the Index. While it is still to be determined whether today’s breakout constitutes a new trend, or simply a retracement, bullish traders may begin looking for the CAC 40 to move towards higher highs. Areas of resistance may include a 61.8% Fibonacci retracement found at 4,469.85, and the April 2016 high at 4,616.50. A move to this value would be significant, as it would further make the technical case that the yearly low is potentially in place at 3,890.50.

Alternatively, if prices break back inside of the range, it would suggest that this morning’s move is a retracement in a broader downtrend. In this scenario, traders may look for prices to test the range low at 4,244.50. A breakout below this value of support would suggest a resumption of the CAC 40’s downtrend, with traders looking for prices to challenge the low at 3,890.50.

CAC 40 Advances Higher as Brexit Fears Ease

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Sentiment data for the CAC 40 (Ticker: FRA40) continues to decline as prices advance. SSI (speculative sentiment index) now stands at +1.16, which is down from the last reported reading of +1.43. If SSI flips negative, it may suggest further advances in price for the CAC 40. Alternatively, if the CAC 40 begins to decline through values of support, traders should look for SSI to move back towards positive extremes.

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WTI Crude Oil Price Forecast: Support Holds As Supply Fears Fade

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Talking Points:

The US Dollar and Crude Oil are both higher on the day along with SPX500. Much of what happened on Tuesday appears to be fueled by a risk-on rally as even the European Stoxx 600 rose by the most in six weeks at 2.2% on ~110% of its average monthly volume.

The risk-on sentiment appears to be bringing to favor the view that the supply imbalance that impaled Bulls in 2015 and the beginning of 2016 is dissipating.

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On Wednesday, the EIA inventory data and Cushing Stock will be looked to confirm recent sentiment that there are large draws on current supplies that are aligning with disruptions of supply in Nigeria to further support price toward $50/bbl. Tomorrow’s EIA numbers are expected to come in at 2.25m bbl decline in crude stockpiles. Thankfully, the disruptions in Crude from the Canadian Wildfires don’t appear to be long-lasting as Canadian oil-sands facilities that workers evacuated last week due to wildfires are being allowed to prepare for the restart.

Long-Term Oil Trendline (Chart from Jamie Saettele, CMT, Sr. Technical Strategist)

WTI Crude Oil Price Forecast: Support Holds As Supply Fears Fade

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The larger technical picture aligns nicely with the sentiment of the larger fundamental pressure. In short, there is an overwhelming question about whether the market will instantly become over-supplied as high prices force producers to bring new supply to the market. Similarly, there is a question about the charts, and whether or not price can clear $50/bbl for WTI Crude Oil.

Key Support & Resistance Levels from Here (Visual Map Below)

WTI Crude Oil Price Forecast: Support Holds As Supply Fears Fade

Looking at the chart, since bouncing off the $43 level to almost piercing $50/bbl, the market appears determined to buy dips toward multi-day lows. The recent low worth focusing on appears to be the May 19 low of $47.26 followed by the May 12 low of $46.34 per barrel. The weekly pivot is close to $48 and appears to be a good support to favor staying long above or to not pay attention to getting short until it breaks.

Current Resistance is the 2016 high of $49.26 followed by the Weekly R1 Pivot resistance at $49.77. While $50/bbl is a good psychological level, there is a potential that with the risk-on rally in 2016 benefiting commodities the most that Oil could easily get bid-up through $50 on money moving from not only risk-off assets to Oil but also from lower performing risk-on assets like stocks. Either way, the layers of support should be watching to hold Oil up on its way to and possibly through $50/bbl.

Contrarian System Warns of Further Upside As of 5/24/16

WTI Crude Oil Price Forecast: Support Holds As Supply Fears Fade

In addition to the technical focus around multiple support-zones, we should keep an eye on retail sentiment, which favors more upside price action. Further upside is currently aligned with our Speculative Sentiment Index or SSI for now.

According to client positions at FXCM, the ratio of long to short positions in the US Oil stands at -1.83 as 35% of traders are long. Short positions are 23.1% higher than levels seen last week. Open interest is 36.2% higher than yesterday and 3.0% below its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives a signal that the US Oil may continue higher.

Key Levels Over the Next 48-hrs As of Monday, May 24, 2016

WTI Crude Oil Price Forecast: Support Holds As Supply Fears Fade

T.Y.

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Gold Prices: Don’t Fight the Fed

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Previous long stopped out on break below $1,250
  • Gold is putting in a massive reversal of the prior up-trend on the back of rising expectations for a Fed rate hike in June.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at a long position in the effort of catching a continuation move in Gold. The motivation for the trade was both technical and fundmental, as, at least at the time, it appeared unlikely that we’d be anywhere near a rate hike out of the United States anytime soon. But that prospect has changed markedly after the release of the April FOMC minutes, as the Fed basically communicated that they felt markets were under-pricing the probability of a rate hike in June. Since then, we’ve heard numerous Fed members speak on a similar theme, and expectations for a hike in June have continued to rise.

When the underlying facts of a hypothesis change, so must the trader’s approach on the matter.

While this doesn’t mean that a hike is definitely coming in June (or July or even September for that matter), it does mean that we can see some continued reversion of the prior up-trend as markets wrestle with rate hike odds out of the Fed for the remainder of the year. But longer-term, the technical structure of Gold remains bullish; and until support levels at $1,217.26 (38.2% retracement of the prior move) and then at $1,200.41 (61.8% of the ‘big picture move’ from the 1999 low to the 2011 high) become violated, that will remain the case.

Given the aggressiveness with which prices have fallen, traders would likely want to avoid looking to play direct reversals off of the $1,217.26 level; instead waiting for near-term price action to indicate further bullishness (higher-highs, higher-lows on the four-hour chart) before looking for long positions. Should price action form support at or around the $1,200 level, that may become attractive for top-side reversal plays.

The short-side of Gold may become more attractive as we move nearer to that June rate hike decision out of the United States. Traders would likely want to wait for price action to show some element of resistance before looking to get short, as Gold just put in a bounce off of a ‘lower-low’ support level. The prior swing low is nearly $20 higher on the chart around $1,245, and should price action move up to find resistance in this zone, short-side plays could become attractive with stops above the prior swing high in the $1,260-area.

Gold Prices: Don't Fight the Fed

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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Silver Prices: Lower by 9.11% Since May High


Talking Points

  • The trend remains bearish below the May 23 high of $16.43.
  • A near term resistance level is this morning’s high of $16.29, while the current support levels are yesterday’s low of $16.14, followed by the April 18 low of $16.09.
  • A Bloomberg News survey projects that the Markit U.S. Services PMI will rise to 53 from 52.8. If it does indeed gain, then it would be the third month of doing so for the index.

Silver prices drifted lower yesterday evening and reached a low of $16.14, in line with the short-term bearish trend, which has been in place over the last few days. The trend is now bearish below the May 23 high of $16.43, and the trend is bearish below this high given that it is a lower high in relation to the previous high of $16.63 formed on May 20. In a downtrend similar to the current, the norm is for price to drift lower, creating lower highs and lower lows, according to classical technical analysis.

A near term resistance level is this morning’s high of $16.29, while the current support levels are yesterday’s low of $16.14, followed by the April 18 low of $16.09.

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Silver Price | CFD: XAG/USD

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

The Markit U.S. Services PMI may rise to 53 from 52.8 according to a Bloomberg News survey. If the outcome were indeed as expected, then it would be a third month of gains for the index. On February 2016, the index reached a cyclical low of 49.7, but relative to the high of 61 in mid-2014, the index is at the lower end of the last few years range.

A better than expected outcome could be important for silver prices and the dollar going forward. This is due to the U.S. economy being dependent on a strong service sector following a faltering manufacturing sector and that such a turning soft may trigger a delay to the Federal Reserve’s plan to raise rates. It is this speculation of the Fed raising rates on June 15 coupled with the stronger dollar, which have been the primary drivers behind softer silver prices.

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00




SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • S&P 500 Technical Strategy: Long triggered with FIbonacci support at 2,065.45.
  • Another top-side, directional trend entry is available with current ‘higher-low’ support; but a Doji on the recently-finished monthly bar could highlight reversal potential for later in the week/month.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at the S&P working on what could’ve been ‘higher-low’ support at a previously resistant area on the chart. As we had written, traders would likely want to approach trend-resumption entries with caution as we sat ahead of a large group of data for the remainder of the week. We had instead looked for a deeper retracement off of one of three potential support levels using prior price action structure.

The first of those levels came into play on Friday of last week when the S&P crossed below 2,065.45; and this was in the midst of some aggressive selling; it didn’t look like support was going to hold. But by the end of the trading session, pricse had moved back above 2,065, thereby denoting this as potential higher-low support. This could open the door for top-side re-entries using the Friday low for stop placement. But, one area of note that may become relevant later in the week, or perhaps deeper into May:

The Monthly SPX500 chart just posted a Doji formation, which will often show up near the top of a swing. April’s Doji also comes in at a lower-high from the previous swing-high, thereby further denoting reversal potential.

SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

Created with Marketscope/Trading Station II; prepared by James Stanley

This is still a very early observation as we’re in the first trading day after that monthly candle completed, but should price action begin to show lower-lows on the 4-hour chart, a reversal setup may be afoot. The levels of interest to denote those lower-lows would be the same support zones we’ve been investigating at 2,040 and again at 2,021.12.

For now, the daily chart is still showing up-trend, and traders can use the low from Friday to base a stop below 2,052 (the Friday low), with eyes on 2,100 for initial profit targets. This would set up a 1-to-1.5 risk-reward ratio, with secondary profit targets cast towards previous highs at 2,111, and then again at 2,133.

SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

Created with Marketscope/Trading Station II; prepared by James Stanley

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

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DAX 30 Gains But Only Within Most Recent Range


Talking Points

  • The DAX 30 is trapped between the May 6 low of 9739 and the May 10 high of 10,111.
  • The nearest support level below the May 6 low of 9739 is the April 12 low of 9617, while the nearest resistance level above the May 10 high of 10,111 is the May 2 high of 10,154.
  • The German ZEW Expectations declined to 6.4 from the 11.2 prior, lower than the 12 expected as per a Bloomberg News survey.

It appears that each time price fails to trade lower, traders attempt to test the overhead resistance. This has been the norm as of late for the DAX 30, confined to the narrow range of 9776-9973 since Wednesday of last week. Looking beyond the narrow range mentioned above, price is also trapped between the May 6 low of 9739 and the May 10 high of 10,111. These levels are more important as price spent almost four weeks trading sideways between them.

Support levels below the May 6 low of 9739 are the April 12 low of 9617, the April 11 low of 9528 and the April 7 low of 9447. Resistance levels above the May 10 high of 10,111 are the May 2 high of 10,154, the April 29 high of 10,254 and the April 28 high of 10,333. A break to the above-mentioned range is probably needed for a strong trend to develop.

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DAX 30 | CFD: GER30

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

The final estimate of first quarter GDP showed that the German economy had risen by 1.3% YoY, unchanged from the 1.3% experienced in the fourth quarter.

The German ZEW Expectations declined to 6.4 from the 11.2 prior, lower than the 12 expected as per a Bloomberg News survey. The index has a mild correlation to year-on-year changes of the DAX 30 as seen in the chart below. In fact, the German ZEW expectations index (black line) will sometimes lead the YoY change to the DAX 30 (red line).

The German ZEW Expectations index (Economic Sentiment), queries 300 financial experts about their view on the German economy 6 months into the future. The index experienced a steep decline since March 2015, the same time as the DAX 30 peaked last year. However, since late 2015, the index has stabilized and the DAX 30 has followed a similar pattern. Today’s decline in the German ZEW Expectations suggests that the DAX 30 should remain range bound if the correlation remains intact. The DAX was little changed following the news.

DAX 30 YoY vs. ZEW Expectations index

Please add a description for the image.

Data source: Bloomberg

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100 Ends Stalemate


Talking Points

  • FTSE 100 rises sharply following gains in the Financial Sector.
  • The short-term trend is bullish above yesterday’s low of 6108.5, and the next nearest support level could be the May 12 high of 6195.
  • The nearest resistance level is the May figure of 6285.

The FTSE 100 (CFD: UK100) had more or less reached the May 3 high of 6285 this morning, a level we have been highlighting over the last few days as the first important resistance level above the May 12 high of 6195. The short-term trend is now bullish above yesterday’s low of 6108.5, and the trend is bullish above this level given that it is a higher low in relation to the May 19 low of 6051. Price has also been creating higher highs since May 19, with today’s high being the most recent one.

As the short-term trend is bullish above yesterday’s low of 6108.5, the price should be creating higher highs and higher lows according to the rules of classic technical analysis. The May 12 high, the level that had kept price capped for more than two weeks, may now have turned into support while the May 3 figure is the closest resistance level followed by the April 28 high of 6325 and April 27 high of 6342.

On the price trading below yesterday’s low of 6108.5, the next support level will be the May 19 low of 6051. Yesterday’s strong rise to the FTSE was primarily attributed to the Financials sector and it is here that the median share rose by 2.88%. The Consumer services sector followed with a median share return of 1.51%.

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FTSE 100 | CFD: UK100

Please add a description for the image.

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

There is no U.K. data on deck this morning, but the German IFO Business Climate index published earlier rose to 107.7 from 106.6, and beat the 106.8 expected as per a Bloomberg News survey. The IFO Expectation index rose to 101.6 from 100.4. The FTSE 100 rose slightly following the news, but given the strong gains over the last 24 hours, traders appear to be reluctant to lift the index to higher levels.

The German IFO Business Climate index has been rising over the last two months and indicates slightly higher German economic growth from the lows that were seen in February.

--- Written by Alejandro Zambrano, Market Analyst for DailyFX.com

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Technical Analysis: Index Nudging Lower, Held Above 5,300


Talking Points:

- The ASX 200 appears to have rejected prices above the range top resistance at 5,380

- The index might need to clear short term support at 5,300 for further momentum

- Long term up-trend may be resuming if the index finds upside conviction

The ASX 200 is nudging lower (at the time this report was written) as price continues to trade below the long term range top resistance at about 5,380-5,400.

The price has been trading for the past 9 months in a well-defined range between the 5,380 resistance and the 4,750 support, which coincided with the 0.618 Fib level of the long term up trend from 2012.

The index appears to have rejected prices above the 5,380 range top resistance at the moment, but may need to clear short term support at 5,300 on a daily closing basis to gather further downside momentum. If conviction is found, focus might be put on the 5,200 support zone, from which it appears the move to the upside was initiated.

However, should the index continue to hold above 5,300, this might imply buying pressure which may signal further tests of the range top resistance are ahead.

A break above 5,380 might signal that the bulls have taken control, and that the long term up trend is resuming.

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ASX 200 Daily Chart: May 24, 2016

ASX 200 Technical Analysis: Index Nudging Lower, Held Above 5,300

--- Written by Oded Shimoni, DailyFX Research

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




Nikkei 225 Technical Analysis: Index Above Short Term Resistance


Talking Points:

- Nikkei 225 currently above the 16,776 resistance level after nine days of congestion

- A hold above 16,776 might imply a move higher to test the longer term range top

- Short term resistance at the 17,000 may cap gains

The Nikkei 225 is trading higher (at the time this report was written) as price moved above the 16,776 resistance level, which is the 0.50 Fib as measured from the April 22 high at 17,769.

The index seemed to be contained inside a narrow range (on a higher time frame perspective) around 16,776 and 16,500 for the last nine trading days, after failing to move above 16,776 on a daily close basis.

The price has been ranging between the well-defined 18,000 resistance zone and the 15,000 support since the start of the year, with gains appearing to be corrective in the context of the near term down trend.

With that being said, the attempt for the break above the shorter term resistance might imply a move to the upside is of higher likelihood, if the price remains above 16,776 and further momentum is found. Upside levels of interest may be the 17,000 handle, which may cap gains, followed by the 18,000 range top resistance zone (around 17,680-18,000).

However, if buyers can’t hold the price higher, levels of interest on a move lower may be the 16,500 level, which seemed influential for the last weeks, followed by the 16,000 handle, and the prior support at around 15,800.

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Nikkei 225 Daily Chart: May 25, 2016

Nikkei 225 Technical Analysis: Index Above Short Term Resistance

--- Written by Oded Shimoni, DailyFX Research

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