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EUR/USD Technical Analysis: Near-Term Down Trend at Risk

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro gains for fifth straight day, aims to break down trend from mid-April
  • Gains seen as corrective within the context of a long-term structural decline

The Euro is poised to break the near-term down trend established from mid-April highs as prices work to secure a fifth consecutive daily gain. The structural long-term trend remains points downward however, painting further gains from here as ultimately corrective.

A daily close above the 14.6% Fibonacci expansion at 1.1353 opens the door for a test of the 23.6% level at 1.1439. Alternatively, a move below the April 25 low at 1.1215 clears the way for a challenge of the 38.2% Fib retracement at 1.1103.

We sold EUR/USD at 1.1390 and subsequently booked profit on half of the position. The remainder of the trade has now stopped out at breakeven. We will move to the sidelines for the time being, waiting for a new selling opportunity in line with the long-term down trend to present itself.

What do FXCM traders’ bets on the Euro say about where it’s going? Find out here!

EUR/USD Technical Analysis: Near-Term Down Trend at Risk



USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

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

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Talking Points:

  • USD/JPY Technical Strategy: Watching To See Further Resistance Breaks
  • Other JPY Crosses Providing More Excitement Due To Lack of Dollar Demand
  • Markets Look For Confirmation on Negative Loans to Banks at Upcoming BoJ

Unevenly Distributed Gains in JPY Weakness

USD/JPY Bulls may be feeling pip-envy, and that’s understandable. Since Bloomberg reported a source that the BoJ was considering providing Negative Interest Rate Loans to Banks to spur lending on April 21, the JPY has nearly weakened across the board.

GBP/JPY & CAD/JPY have risen since the announcement by 3.31% & & 2.5% respectively. However, the USD has only risen 1.68%, and a few commodity crosses have not held the gains at all against the JPY. Therefore, if you want to play JPY weakness, US Dollar may not be the preferred way to do so unless the Federal Reserve unexpectedly takes a hawkish tone.

Central Bank Game Theory

While many eyes on whether or not the Bank of Japan will announce new stimulus or not, which would expectedly drop the JPY further, USD/JPY Bulls could continue to feel pip-envy from other JPY bears if the Federal Reserve doesn’t play ball. In other words, If the Federal Reserve stays the course from the March meeting with a neutral stance while watching negative developments, the downtrend in the US Dollar may be reinforced.

The ideal scenario for a buyer of USD/JPY would be for the Fed to signal an increase is likely at an upcoming meeting while encouraged by global developments in the commodities market. If this bullish rhetoric favoring policy normalization was to be produced alongside new stimulus from the BoJ, the next great Bull Run might be just getting started. For that, let’s look at the charts.

Strong Move Off LT Channel & Previously Mentioned Support:

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

Key Technical Levels:

The chart above goes back to the 2011 low and has Andrew’s Pitchfork drawn of 3-key pivots in 2012. As you can see, the price has gone from extreme optimism in May 2013 & December 2014 to now traveling to an extension of the bullish channel. After looking for 3-waves down from the 2015 high, we recently bounced off of the 161.8% extension of A multiple times at ~108. This level aligns with the 100% lower pitchfork extension that caught the recent low.

From a technical perspective, If this plays out as expected, it would either favor immense US Dollar strength or in my preferred view, a new wave of extreme JPY weakness few are expecting. The appropriate filter for this view to engage would be a break above the daily Ichimoku Cloud, which aligns with the congestion of late Q1 price resistance near 114.

Price Action of Recent Decline:

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

Shorter-Term, my attention is drawn to 55-DMA (Orange Line) near 111.90. A break above 111.90 would open up the labeled ‘4’ near 114, which has been firm resistance. Further, you can see that 38.2% of the bearish impulse move caught the dead-ball high of proposed wave ‘4.’ Therefore, that could add to the significance of a break above this level, and at least, could open up 117.50 if not a much higher move back into the 120s.

Such a Move Could Have Significant Implications For Risk

The implications if this plays out as expected with JPY weakness would likely be a major move higher continuing in risk-assets. The clearest plays in this view alongside JPY weakness would be developed market equities much higher such as the GER30, SPX500, & JPN225. Currently, that view is most likely supported by the further improvements in China.

If we fail to break above the resistance levels mentioned, it could indicate that USD/JPY had a sugar high reaction, just like it did on January 29 (labeled ‘2’ on the chart above), and we could soon test and break the recent low around 107.90. This would be an about-face of what I mentioned, and could indicate much more aggressive JPY strength that the BoJ would not likely be prepared to accept.

A failure to push higher and a turnaround below 107.90 may also align with delayed BoJ easing. The support behind BOJ delaying easing is to wait for more of an impact from negative rates, which one would expect to lead to JPY strength across the board. Recently, we heard from Ex-board member Nakahara, a close economic adviser to PM Shinzo Abe, who said the Bank of Japan should not add stimulus now, but rather they should take more time to gauge the impact of negative rate strategy they implemented on January 29. Another argument states that if an accord was reached by Central Banks not to engage in currency weakening that the BOJ may wait to add stimulus until after the G-7 summit, which will be hosted by Abe in May.

USD/JPY Sentiment Should Be on Watch As Longs Back Off Fighting The Trend

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

As of mid-day Friday, the ratio of long to short positions in the USDJPY stands at 1.80, as 64% of traders are long. Yesterday the ratio was 1.98; 66% of open positions were long. Long positions have scaled back week over week by 7.0%. Another sentiment index, the Commitment of Traders Index released by the CFTC shows speculators by large institutions would likely fight this move. In both the US Dollar & JPY the COT Index, which is the difference between net speculative positioning and net commercial positioning measured is at its largest in over a year. The argument made by the CoT Index is that speculators for institutions are pushing the US Dollar lower & JPY higher or USD/JPY down.




GBP/USD Technical Analysis: Pound Pops into Confluent Zone; Reversal Afoot?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the coagulated price action that was being seen in GBP/USD. As we had alluded to, when those situations arise there are really only two options, and they are somewhat related: Either a) walk away or b) outline a conditional setup and wait for price to meet your parameters.

We looked at a conditional setup derived from Fibonacci, and the top-side setup was triggered in the days following that most recent article; looking for support at the 1.4152 level.

The primary point of resistance was at 1.4251, and that level has been soundly broken with very little signs of selling as prices were rising. Price action has ascended through the next batch of resistance at 1.4349-1.4375, and is now trying to find support in this key area on the chart.

This could have the hallmarks of a new trend, with new support being established at old resistance; but rather than push the top-side move, I’m going to close the remainder of the position at market, as we may be seeing a short-side reversal setup beginning to show.

Five of the past seven four-hour candles are showing wicks at 1.4400, a clear sign of selling off of this resistance level; and the daily chart is working on a non-completed spinning top formation. A spinning top or Doji after a big move is indicative of a potential reversal, so this is somewhat trying to prelude a bearish harami setup.

Now, with that being said, there aren’t yet enough clear signs of reversal to trigger the short just yet; merely enough to obviate the preexisting long position. To plot for a short position, traders can watch the current batch of confluent support between 1.4349-1.4371, which includes three different Fibonacci levels over various time frames, as well as a projected trend-line. Should this batch of support yield, traders can then begin looking for resistance to develop in this area before triggering the short position.

Targets for prospective short positions could be set to prior support values at 1.4304, 1.4251, and then again off of 1.4152.

GBP/USD Technical Analysis: Pound Pops into Confluent Zone; Reversal Afoot?

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: Score One For Seasonality

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

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Talking Points:

  • US Dollar Technical Strategy: Short Bias Favored Below 11,895
  • 21-DMA Continues To Act As Firm Resistance on Move Lower
  • Macro Environment Shifting To a Dollar Negative Narrative

April has shaped up to be a rough month for the US Dollar, again. Last April, many were convinced the US Dollar had topped, but that sentiment only lasted until Mid-May where the US Dollar would then go on a 8 Month Run to top out again in January on a Negative Interest Rate Announcement by the Bank of Japan.

The question for all traders is, what’s next? While some would like to think that a May Rally, May is a seasonally bullish month for the Dollar for what it’s worth, there are a few reasons this may not come to pass.

First, Central Bank rhetoric has fundamentally changed in the last year, and really in the last two months. Specifically, we’ve seen the Federal Reserve become relatively dovish to where they’ve stood in the past whereas other central banks like the European Central Bank, Bank of Japan, and recently the Reserve Bank of New Zealand have stood pat on monetary policy. The non-US Central Banks have favored waiting to engage in more stimulus, which was currency strengthening because of what was priced in while the Fed is slowly convincing the market that their four rate hike prediction via the dot plot at the December meeting may only come half-true at best. This new narrative has led to multiple re-adjustments as to the appropriate narrative to trade in the markets.

We’ve Just Hit A Corrective Equality Point with the March 2015 Correction

US DOLLAR Technical Analysis: Score One For Seasonality

Lastly, it’s important to note that a driving force for the US Dollar had been hedge funds and other institutional speculators. This source of support has all but dried up. Looking at the recent Commitment of Traders report from the CFTC, the difference between the Commercial Hedgers and Institutional Speculators is at a 52-week extreme with hedgers long, and speculators short as speculators are the shortest they’ve been since Summer of 2014.

Additionally, one environment that has favored US Dollar strength has been volatile environments. Recent Macro Events have passed with eyes now focusing on Brexit as the next key event risk, which is nearly 2-months away. Ironically, to the note above, we could be entering a grind lower in the US Dollar like we also saw in the low-volatility environment of 2014.

Therefore, the Fed and the large traders in the market do not appear to support a higher US Dollar. At least, for now.

Shorter-Term US Dollar Chart Favors Focus on 21-DMA & 11,907

US DOLLAR Technical Analysis: Score One For Seasonality

In the chart above, you’ll note that the top line of the channel hasn’t been touched apart from the later February high where the channel was originated. The upper channel line aligns with the April 27, 2016, high around 11,907, which is also the FOMC high and should be respected as resistance. The Thursday morning low aligned perfectly with the 2016 low at 11,784, which will be the key support in focus.

Beyond these recent extremes of 11,907 and 11,784 traders can look to two key pivots. On the top side, the recent aggressive move lower was seen at 12,030. A break above 11,907 followed by 12,030 could well signal that a significant correction or a resurgence of Dollar Bullishness, which would align with the May Seasonality patterns.

Below the current 2016 low of 11,784, traders can look to the June 18 low of 11,732 followed by the May 15 low of 11,634. You’ll also see on the first chart that US Dollar is resting on the floor of a 1-year channel. Given the environment we see now, a break below appears to be the higher probability view as opposed to Dollar buying beginning aggressively.

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: Score One For Seasonality

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T.Y.




USD/CHF Technical Analysis: Double-Doji Sets Up Short-Side Swing

Price Action, Swing & Short Term Trade Setups

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Talking Points:

Over the past two articles we’ve been plotting a re-entry into USD/CHF. Two articles ago we outlined the zone of potential resistance from .9660-.9700 that may be interesting for fresh short positions. And in our most recent article, we tapped the breaks as the price action that got us into that resistance zone was exuberantly strong, printing a Marubozu candlestick that traders should be cautious towards fading.

But as we outlined, should price action have stalled in this vicinity over the next couple of days, the short entry could become attractive given the realization of resistance in this price zone. That’s precisely what we had over the past two days of price action with Dojis printing on the daily chart, and this opens the door for short-side swing positions lower.

Traders looking to get short USD/CHF can look to post stops above the batch of resistance between .9660 and .9700, with targets set towards previous support levels of .9550 (38.2% Fibonacci retracement of the most recent major move, shown in maroon below), .9500 (major psychological level) which is confluent with the 27.2% extension of the prior major move, followed by .9441 (shown in blue below, 61.8% of the ‘big picture’ move, taking the 2005 high to the 2011 low), and then .9398 (shown in orange below, 50% of the secondary move, taking the 2010 high to the 2011 low).

USD/CHF Technical Analysis: Double-Doji Sets Up Short-Side Swing

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: Selloff Stalls at Key Support

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar selloff stalls as prices meet two-month trend line support
  • Looking for a compelling opportunity to sell in line with long-term trend

The Australian Dollar has found interim support at trend support set from early march after falling against its US counterpart as expected. The decline followed the formation of a bearish Evening Star candlestick pattern and was catalyzed by soft first-quarter CPI figures.

From here, a daily close above the 14.6% Fibonacci expansion at 0.7696 opens the door for a test of the 0.7786-7835 area marked by the 23.6% level and the April 21 high. Alternatively, a push below the intersection of trend line support and the April 27 low at 0.7548 exposes the 38.2% Fib retracement at 0.7450.

We are keen to enter short AUD/USD in line with our 2016 fundamental forecast. An actionable trigger for a short position is absent at the moment however, arguing for patience. With that in mind, we will remain on the sidelines until a more compelling opportunity presents itself.

Are you making this common mistake trading AUD/USD? Find out here!

AUD/USD Technical Analysis: Selloff Stalls at Key Support



USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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

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Talking Points:

What a difference a few months make! As we head into the close of the April, though we still have FOMC coming up, the Canadian Dollar is the strongest G10 currency of the year. So far, the CAD has bested the US Dollar by nearly 10%. For the month, the Canadian Dollar is up nearly 4% against the US Dollar, which is second to the British Pound, which is the second-best performing currency in the G10 for April.

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On Tuesday morning, we heard from Bank of Canada Governor, Stephen Poloz, who sounded understandably confident. Now, if you look at short-term interest rates markets in Canada, they are now pricing in rate hikes. While a lot was out of the hands of the Bank of Canada, they appeared to have played the commodity carnage the most effectively of major central banks.

USD/CAD (H4) Chart Shows A Trend That Continues To Hold Well Within A Bearish Channel

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

Key Support Levels from Here (Visual Map Below)

On the chart above, the four-hour Ichimoku cloud allows you to see resistance that has not been worth fighting aggressively. The term “sell the rip”, does a fine job of encapsulating the environment we’re in where strength has been short-term and simply provides more attractive levels to sell as opposed to signs of a reversal. The Canadian Dollar is the clear strongest currency in G10FX, so it makes sense that not fighting this trend is the wise play.

Regarding resistance, we recently pivoted from 1.2750, which is the top of the H4 Ichimoku Cloud and the Weekly Pivot Point. Above 1.2750, should we get a break above there, the next level of focus will be at the 34-DMA. The 34-DMA has been solid resistance and currently sits 1.2970, which was the –mid-April high, and the corrective top of a three-wave move that eventually led to an impulsive decline that we’re in right now.

Given the strength of the trend, recognizing support seems like more of a formality. This is because most firm levels of support have been aggressively broken. The next levels of support I’m watching are the June 01 high at 1.2561 and the June 18 low and 50% retracement of the 2012-2016 range of 1.2160/26. In 64 days, marking the 2016 high of January 20, USD/CAD has reversed 2,060 pips so saying something needs to slow down or reverse course is too subjective for my taste. Furthermore, a break below the two support levels would turn attention to the May low of 1.19186.

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

Canadian Dollar Rally Looks Steady per Sentiment

When looking at sentiment, crowd positioning has continued to fight the trend aggressively providing a favor for more downside. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are net-long at a bull: bear of 2.06 as 67% of traders are long means that a bearish USD/CAD signal remains at play. This signal has been working itself out since late January, and as you can see in the charts above, the fervor of the fight is growing. Now that the price has broken back below the 1.2600 level, we’ll continue to favor trend continuation toward the Weekly S1 Pivot at 1.2508. A break below these new key support metrics and a move further into positive territory on the SSI would favor further downside towards downside targets mentioned above.

USD/CAD Speculative Sentiment Index as of 4/27/2016

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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

Key Levels As Of Tuesday, April 27, 2016

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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T.Y.




NZD/USD Technical Analysis: Top Below 0.71 Intact for Now

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar surge negates trend line break but top sub-0.71 intact for now
  • Waiting to re-establish short when another attractive opportunity emerges

The New Zealand Dollar launched aggressively higher against its US counterpart, issuing the largest daily advance in nearly three months. Prices negated a break of monthly trend support from earlier in the week but the top established by a bearish Dark Cloud Cover candle pattern below 0.71 remains in place for now.

A daily close above the 23.6% Fibonacci expansion at 0.6974 exposes the 0.705477 area, marked by the April 19 high and the 38.2% level. Alternatively, a turn below the 14.6% Fib at 0.6910 paves the way for a test of the 0.6784-6807 area (38.2% Fib retracement, April 27 low).

We entered short NZD/USD at 0.6895. The trade hit its first objective after the FOMC rate decision and we booked partial profits. The remainder of the position was stopped out at breakeven after the RBNZ policy announcement. We will take to the sidelines from here, waiting for a new selling opportunity to emerge.

What do FXCM traders’ NZD/USD bets imply about the price trend? Find out here!

NZD/USD Technical Analysis: Top Below 0.71 Intact for Now



EUR/GBP Technical Analysis: Looking to Sell at 0.78 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Pending short at 0.7800
  • Euro accelerates lower, issuing the largest decline in six months vs. Pound
  • Short entry order at 0.78 established for improved risk/reward parameters

The Euro accelerated lower against the British Pound, putting in the largest daily loss in six months and exposing the 0.77 figure. Prices established a top with the formation of a Bearish Engulfing candlestick pattern as expected, with subsequent losses hinting the long-term down trend may be resuming.

Near-term support is in the 0.7683-0.7703 area, marked by a horizontal pivot and the 38.2% Fibonacci retracement. A break below this barrier on a daily closing basis exposes the 50% level at 0.7549. Alternatively, a reversal above the 23.6% Fib at 0.7849 paves the way for a test of the 14.6% retracement at 0.7951.

Prices are too close to support to justify entering short at current levels in line with our 2016 fundamental outlook. With that in mind, we will set an entry order to sell EUR/GBP at 0.7800. If triggered, the trade will initially target 0.7703and carry a stop-loss activated on a daily close above 0.7849.

Are FXCM traders long or short the Euro and the British Pound? Find out here!

EUR/GBP Technical Analysis: Looking to Sell at 0.78 Figure



EUR/JPY Technical Analysis: Bullish Structure Continues

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Flat.
  • EUR/JPY continues to run higher with a recent higher-low point of support established at ~125.00
  • 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 the continued retracement in EUR/JPY as yet another downward sloping trend-line faced a test from bullish price action. Since that article was published, EUR/JPY has continued its bullish run, showing additional iterations of higher-highs and higher-lows. With a widely anticipated Bank of Japan meeting set for later in the week, traders will want to be cautious chasing any short-term trends; but given recent support and resistance structure, traders may be able to line up setups on both sides of EUR/JPY.

The near-term move in EUR/JPY has been markedly bullish as seen on the 4-hour chart below. This morning saw confirmation of the most recent higher low, which took place at an interesting level of 125, which is a major psychological level while also being the 50% retracement of the most recent major move. This price had also functioned as prior resistance, so we have an example of old resistance becoming new support, and that can further solidify the bull thesis with near-term price action in EUR/JPY.

Traders looking to act on the near-term structure of EUR/JPY could look at long positions with stops below the recent batch of higher-lows (denoted with a blue box on the below chart), and targets set to 125.50 (recent price action swing high), 126.67 (76.4% of the most recent major move), and then 127.50 (major psychological level).

On the short side, traders would likely want to wait for this recent batch of support at 125 to be violated before embarking on a bearish thesis. This could, at the very least, indicate that bears may be able to continue pushing prices lower. At that point, traders looking to get short could look for resistance on the hourly or 4-hour chart; but until 125 yields, be careful of pushing the short-side of EUR/JPY.

EUR/JPY Technical Analysis: Bullish Structure Continues

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:160 Is the Line in the Sand

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY continues to run higher after hitting support off of the 27.2% extension of the prior major move.
  • 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 wrote about the Fibonacci extension on GBP/JPY at 151.61 that provided near-term support as the basis for a retracement in the longer-running down-trend. Since that article, the retracement hasn’t really calmed much, as price action has continually throttled up to higher-highs and higher-lows. This retracement extended on Friday, as rumors of a negative rate loans out of the Bank of Japan being issued to banks elicited further Yen weakness.

Price action for this week gapped higher, right into the 38.2% retracement of the prior major move; and this is the same Fibonacci retracement whose extension provided that near-term bounce that we discussed in our last article. This presents a quandary in the identification of the near-term trend. While this recent bout of strength has been notable, we’re still well below previously-established highs. This morning’s test of 160.04 offers a higher-low that could be used to denominate stance for the next week; and given that this is a major psychological level, this can be used to denote near-term biases.

For traders looking to get short, waiting for breaks of this support could allude to the potential for the return of the down-trend; while those looking to buy can use this as a basis level for stop placement.

The four-hour chart may provide usable structure for a week in which heavy volatility is expected on the back of an outsized slate of announcements. On the 4-hour chart below, we’re looking at near-term price action structure to illustrate how traders might be able to approach GBP/JPY moving forward.

GBP/JPY Technical Analysis:160 Is the Line in the Sand

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




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 Declines on European CPI Data

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

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Talking Points

  • The CAC 40 is Trading Down -1.91% on CPI Figures
  • Bearish Breakouts for Today Begin Under 4,453
  • Sentiment has Shifted Positive, Reading +1.91

CAC 40 30 Minute Chart

CAC 40 Declines on European CPI Data

(Created using Marketscope 2.0 Charts)

What’s next for the stock market? Find out more with our analysts Free forecast!

The CAC 40 is trading down -1.91%, after Euro-Zone CPI figures were released worse than expected this morning. Expectations were set at -0.1% (YoY) (APR). However, this estimated was missed with a release of -0.2%, causing stocks to decline. At this point, most major European indices are trading down for the day. This includes the DAX 30 and FTSE 100, which are all poised to close lower on the session. For the CAC 40, BNP Pariabs is leading today’s decline trading down -3.39% on the day.

Technically, the CAC 40 is now trading near its daily S4 Camarilla pivot at a price of 4,453. If prices continue to decline beneath this value, traders may look for potential breakout entries near this point. By extrapolating a 1X extension of today’s 48 point range, initial bearish breakout targets may be found near 4,405. In the event that support holds, traders may alternatively look for prices to bounce back inside of today’s pivot range. This range begins near 4,477 with the S3 pivot and ends at the R3 pivot at a price of 4,525. In this scenario, any current bearish momentum would be considered invalidated.

Find out real time sentiment data with the DailyFX’s sentiment page.

SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) currently reads at +1.91. This is a major shift from Wednesday’s reading of -1.28. With over 65% of positions long, traders looking at SSI as a contrarian indicator may look for further price declines on the Index. If prices do continue to drop, it would be expected to see SSI to reach an extreme of +2.0 or more. Alternative, in the event of a bullish reversal, SSI would be expected to decline back towards more neutral readings.

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WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

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

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Talking Points:

WTI Crude Oil broke above $45/bbl on a mixture of factors including a weak US Dollar, strong demand out of China, and a more balanced supply and demand picture than we’ve had in nearly two years. Now that we’ve crossed above the 200-DMA, which acted as such strong resistance since crossing below in early 2014, it appears there is little looking back. This change in market sentiment is significant because a move above $50 would likely start to see the low number of active rigs, a number that declined to balance the global supply glut, could start to rise again.

A Continual Change In Narrative Leaves Crude Bears In Doubt

A key factor in all the surge of Oil since mid-February has been the weak Dollar. While the US Dollar has been stubborn around the 11,800 level, a further push lower could take Oil closer and closer to the key $50 level.

Learn more about the breakdown of oil production – click here.

What few appreciate is how aggressively market dynamics can change in a quarter. While commodity bullishness, along with Emerging Markets was contentious at the end of Q4 and beginning of Q1, that sentiment is now ubiquitous.

As a telling sign of sentiment, Dennis Gartman said in January in his “Garman Letter” that Crude Oil wouldn’t trade back above $44/bb “in my lifetime,” though he did see it as oversold at the time, and boy was it ever. As we’ve since risen 73% off the lows, it is clear that a lot of narratives as to how 2016 would play out have been annihilated.

A Pull-Back Shouldn’t Concern Bulls. The H4 Ichimoku Cloud & 200DMA Will Be Firm Support

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

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The above chart is a medium-term price channel via Andrew’s Pitchfork tool with sliding parallels drawn with the slope of the median line off of key pivots. The lower handle is drawn off the February 11 low at 26.03. You’ll notice on the bottom-left of the chart; the sliding parallels have acted as key pivot support zones into Q2. Now that we have seen a break above the 200-DMA (currently near $40/bbl), our focus turns higher to the upper median line around $47.50.

Key Support Levels from Here (Visual Map Below)

The Support Zone in focus is the H4 Ichimoku Cloud, which aligns with the prior low near $45/bbl. Below here, there could be a quick drop to the 200-DMA, which would take a strong move lower down to ~$40/bbl. Given the significance of the Intermarket factors that have shifted since Oil broke above $40/ 200-DMA, only a move below there would change my bullish model.

Contrarian System Warns of Further Upside

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

In addition to the technical focus around Andrew’s Pitchfork, the sliding parallels, and the Intermarket relationship of US Dollar weakness, we should keep an eye on retail sentiment, which could be warning of more upside price action. Further upside is aligned with our Speculative Sentiment Index or SSI.

According to client positions at FXCM, the ratio of long to short positions in the US Oil stands at -1.70 as 37% of traders are long. Short positions are 9.1% higher than yesterday and 59.6% above levels seen last week. Open interest is 13.2% higher than yesterday and 30.2% above 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 WTI Crude Oil may continue higher. If the trading crowd grows further net-short, we could be in the works of an upside extension taking us closer to $50/bbl.

Key Levels Over the Next 48-hrs As of Monday, April 27, 2016

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

T.Y.

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Gold Prices: Evening Star Urges Caution to Bulls

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article we looked at another long entry in Gold as the recent bull flag was seeing more aggressive top-side tests. The big question that we asked was rather this recent bout of digestion after a strong top-side move may be nearing an end; and given the breakout, it would appear that to be the case. But even with the prospect of another leg of bullishness, entry is of the upmost importance as we’ve traveled far away from the support that was being used to substantiate the stop on the previous setup. That level is at $1,200.41, and this is the 61.8% retracement of the ‘big picture’ move in Gold (shown in black on the chart below).

After a new short-term high was set yesterday at $1,262.60, we’ve seen some pullback in the move; and that pullback went even deeper today. This gives us an evening star setup on the Daily chart should today’s candle close near current levels, and given that this is a bearish-reversal formation, this could be just enough to caution bulls from jumping the gun on the long setup to, instead, wait for a cleaner entry.

For those that do want to push the top-side of the move, there are motives for support at current levels. $1,240.78 is the 61.8% retracement of the most recent move, and there is also a mid-line of a recently developed up-ward sloping channel (shown on the chart below in blue). Today’s price action appears to have given some bounce to this area of the chart, but it would still be too early to consider this support as being confirmed. Traders that do want to act on this setup would likely want to keep stops tight in the event of a deeper retracement. For those that are already long, this could be an opportune time to adjust stops to break-even on the remainder of the position.

Moving forward, confirmation of support in the $1,240 area could open the door for additional top-side entries, as could a higher-high/higher-low setup off of $1,251.74.

Gold Prices: Evening Star Urges Caution to Bulls

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

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

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Silver Prices Trade Above Their May 2015 High

Global Macro and Momentum Trading

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Talking Points

  • Silver breaches major high.
  • The trend is bullish above the April 27 low of $17.08, as it is the most recent swing low.
  • Potential market moving events on deck today are U.S. Employment Cost Index, PCE Deflator, and Chicago PMI.

Overnight, silver prices breached last week’s high of $17.71 and the May 2015 high of $17.80. Softer stock markets and US Dollar triggered the push higher.

The next major resistance level is now the 2015 high of $18.51, a level that is 3.7% higher than the current price.

In the near term, the psychological level of $18 may act as resistance and followed by the January 27, 2015 high of $18.23.

Short-term support levels are the psychological level of $17.50, followed by the April 27 low of $17.08 and the April 25 low of $16.82.

The trend is bullish above the April 27 low of $17.08 low as it is the most recent swing low and a higher low in relation to this week’s low of $16.82.

Potential market moving events on deck today are U.S. Employment Cost Index, PCE Deflator, and Chicago PMI. The inflation readings are important for the Federal Reserve as they try to steer inflation towards 2 percent by either lowering or raising their policy rate. The Fed policy rate will in turn affect the USD.

If the PCE Deflator and Core PCE picks up more than expected it may prompt Dollar strength, which may lower the price of silver. On softer-than-expected readings the opposite may happen.

U.S. Employment Cost Index measures costs such as wages and bonuses, but also indirect costs as social security contributions. The market's focus on this measure may increase going forward as it offers another glimpse of slack in the labor market and inflation.

Silver Price | CFD: XAG/USD

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




SPX500 Technical Analysis: Higher-Low Ahead of US Earnings

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • S&P 500 Technical Strategy: Limited out of previous setup; currently flat.
  • A heavy week of data may bring in a deeper retracement that could potentially be used for top-side reentries.
  • 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 another trend-side entry in the S&P, using recent support structure to plot potential re-entries. The support structure looked at in our last article utlized the move seen last year, taking the top at 2,137.10 to the ‘Chinese Black Monday’ low on August 24th. And while a lower-low was printed in January and again in February, that Fibonacci retracement has continued to offer usable levels for traders, most recently offering a top-side re-entry off of the 76.4% retracement at 2,065.45.

As of right now, price actionappears to be carving out a higher-low point of support at the same level that set the high on 12/29-12/30 of 2015; just before price action began the deluge to kick off a whole new stream of worries in the new year. This is a pivotal level at 2,082.10, and over the past week we’ve seen price action find resistance, break above, and now set support at this level; giving the appearance of yet another higher-low.

But before chasing the up-trend, traders would likely want to peruse the economic calendar to see the headline risk for the week ahead: One-third of the S&P 500 is reporting earnings this week, with a heavy emphasis on tech companies, which can often have a leading quality for shares as technology investments usually go hand in hand with bullish economic forecasts. If tech earnings disappoint, if guidance is downgraded and, in-turn, if shares move lower in response to this batch of earnings reports, traders may be able to look for a deeper retracement within the pre-defined Fibonacci structure, looking for support at 2,065.45, or 2,021.12 (the 38.2% retracement of that prior major move).

The likely determinant as to whether this uptrend remains or whether it takes a down-side turn will be FOMC on Wednesday. Should the Fed successfully do what they’ve been doing, provide support to markets by offering dovish implications around down-graded forecasts, the up-trend in the S&P could certainly continue, with eyes on prior resistance points of 2,111.37 (near-term swing high), 2,116.40 (prior swing-high), 2,125 (minor psychological level) and then the all-time high of 2,137.10.

SPX500 Technical Analysis: Higher-Low Ahead of US Earnings

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

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

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DAX 30 Remains Bearish Ahead of Eurozone Inflation and GDP

Global Macro and Momentum Trading

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Talking Points

  • This morning the DAX 30 trend remained bearish below the April 27 close price of 10,346.
  • The April 14 high of 10,110 is still a support level and followed by the psychological level of 10,000 and the April 18 low of 9906.
  • Eurozone unemployment, inflation, and GDP figures are on deck today. In addition, ECB Governing Council’s Weidmann speaks.

Yesterday, the DAX 30 (CFD: GER30) swiftly recuperated most of its losses as it found support when it reached the April 14 high of 10,110. However, it was not good enough, and this morning the trend remained bearish below the April 27 close price of 10,346. The trend is bearish below the April 27 closing price as it is a lower high in relation to last week’s high of 10,488. The price has also been creating lower lows since April 21 (Thursday of last week).

Today the April 14 high of 10,110 is still a support level and followed by the psychological level of 10,000 and the April 18 low of 9906. Near term, resistance levels are the April 27 close price of 10,346 and last week’s high of 10,448.

We note the April 18 low, mentioned above, is crucial for the trend in place since early April. On April 7 price bottomed out at 9437 and after a push to 10,110 (April 14 high), price created a new higher low (the April 18 low of 9906). On price trading below the April 18 low of 9906, the sequence of higher low since early April would end, leaving the price without a bullish bias. However, as long as the price trades above the April 18 low, the April trend will remain bullish and the price could potentially trend higher in the next few weeks.

Eurozone unemployment, inflation, and GDP figures are on deck today. In addition, ECB Governing Council’s Weidmann speaks. The inflation and GDP figures should draw most of the attention.

A Bloomberg News survey projects inflation to decline by 0.1% YoY and thereby matching the growth rate of last month. Low inflation forced the ECB to ease their monetary policy on March 10 and persistently low inflation could keep the monetary policy easier for longer, which may promote Eurozone economic growth.

Eurozone first quarter GDP is expected to increase by 1.4%, which is a slower pace that the 1.6% of the fourth quarter. In the recent decade, the DAX 30 has lead the Eurozone GDP growth rather than followed it. Nevertheless, a slightly higher than the expected GDP reading may exert some bullish bias to the DAX 30 while a slower than expected growth may have the opposite effect.

Our forecasts for Q2 2016 are now live on the site. Download them for free.

DAX 30 | CFD: GER30

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100 Remains Flat Following Batch of Eurozone Data

Global Macro and Momentum Trading

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Talking Points

  • The FTSE 100 remains capped by Wednesday’s high of 6343.
  • A resistance level above Wednesday’s high of 6343 is last week’s high of 6432.
  • Support levels are yesterday’s low of 6221, followed by the April 7 low of 6106
  • U.S. PCE Core, Chicago PMI and Final U. of Michigan Sentiment are on deck.

This morning the FTSE 100 remained capped by Wednesday’s high of 6343. Price has been trading lower after it reached the April 21 high of 6432 and Wednesday’s high of 6343 is the last swing high of this short-term downtrend.

Resistance levels above Wednesday’s high of 6343 are last week’s high of 6432 and the November 11 high of 6461. Support levels are yesterday’s low of 6221, followed by the April 7 low of 6106 and the April monthly low of 6060.

We note that price has been choppy over the last few days. The choppy price action could be linked to the short-term down trend in place since April 21 now has met up the bullish trend in place since February.

On February 11, the FTSE 100 bounced from 5496 and then on February 24 created the higher low of 5845. The most recent swing in this series of higher lows is April low of 6060. As a short-term and long-term trend meet, the price could turn choppy as traders figure out which trend should dominate.

Eurozone Inflation failed to meet a Bloomberg news projection as inflation declined by 0.2% vs. the -0.1% expected. This may keep the ECB under pressure to keep rates low for longer. On the other hand, the Unemployment rate improved from 10.3% to 10.2%, beating estimates of a 10.3% reading, and first quarter GDP rose by 1.6% vs. the 1.4% estimated.

The FTSE 100 was little changed following the release of the Eurozone data. We note that low inflation and higher than expected economic growth tends to be viewed positively by stock market traders.

This afternoon the spotlight turns to US PCE figures and to Chicago PMI, read Ilya Spivak, Currency Strategist’s take on the PCE figures.

Our Stock Market forecasts for Q2 2016 are now live on the site. Download them for free.

FTSE 100 | CFD: UK100

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Sustains Advance above 3-Month High


Talking Points:

  • Strategy: Be mindful of a retracement below the 3-month high
  • Upward momentum showed sign of exhaustion
  • The index remained range-bound with the upper bound being 50% Fibonacci

The ASX 200 successfully broke above a 3-month high and resistance level at 5227. However, the upward momentum showed sign of exhaustion, as we predicted in the previous article. Downside risk may develop if momentum signals continue to wane into next week.

Investors may take caution with their stop loss and target levels, in case the ASX retraces below 5227 level once more. Upside potential remains limited, with a firm resistance and 50% Fibonacci at 5391.5. The index remains largely range-bound.

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ASX 200 Sustains Advance above 3-Month High

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Strategist for DailyFX.com

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Nikkei 225 Retraces below 50% Fibonacci


Talking Points:

  • Strategy: Prepare for further declines under 50% Fibonacci
  • Upward momentum has waned
  • Support levels are 17,141 then 16,461.5, and resistance level is 61.8% Fibonacci at 18045.8

Nikkei 225 returned to the area below 50% Fibonacci at 17,438.5 on the second day of declines. A waning momentum indicates that further fall may be possible. A downward reversal would face a firm support level at 16461.5 which held throug March.

Investors with long position may consider to revise their strategy if the index extends lower and away from 50% Fibonacci, especially if it falls below the 17141 mark which capped the index for two weeks during late March. On the other hand, any rebound from here may face firm resistance around 61.8% Fibonacci at 18045.8.

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Nikkei 225 Retraces below 50% Fibonacci

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Strategist for DailyFX.com

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