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EUR/USD Technical Analysis: Down Trend May Be Resuming

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1207
  • Euro breaks monthly uptrend, hints dominant down move is resuming
  • Short position triggered, targeting just below 1.11 figure vs. US Dollar

The Euro declined against the US Dollar as expected after putting in a bearish Harami candlestick pattern following a test of trend line support-turned-resistance. A break of support guiding prices higher since late July now hints the longer-term down trend is resuming.

From here, a break below the 38.2% Fibonacci expansion at 1.1097 opens the door for a test of the 50% level at 11014. Alternatively, a daily close above resistance in the 1.1200-15 area (23.6% Fib, trend line) sees the next upside barrier at 1.1263, the 14.6% expansion.

An intraday gap-filling bounce has offered acceptable risk/reward parameters and a short trade has been triggered at 1.1207, initially targeting 1.1097. A stop-loss will be activated on a daily close above 1.1263. Half of the position will be booked and the stop-loss trailed to breakeven when the first objective is met.

What do past EUR/USD price patterns hint about where prices are going? Find out here!

EUR/USD Technical Analysis: Down Trend May Be Resuming



USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

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

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Talking Points:

  • USJ/JPY Technical Strategy: 100 Still Feeling Like Thin Support, Bias Lower
  • September Likely To Bring Central Bank Fireworks
  • Sentiment Shows Further Signs of Further JPY Strength

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Quiet Now, But Traders Are Bracing For Large Moves Ahead

USD/JPY, along with other markets like the S&P 500 (CFD: SPX500) has been looking at historic lows. Based on trader’s sentiment per SSI, traders are expecting or hoping for a large move higher in USD/JPY off the perceived floor of 100.

While we await Jackson Hole’s culmination of Janet Yellen’s speech titled, ‘The Federal Reserve’s Monetary Policy Toolkit,’ traders have their sites more focused on September 20-21 where the Bank of Japan will meet with some continuing to speculate about the possibility of Helicopter Money or another new form of Quantitative Easing.

The focus on the possibilities of the late-September BoJ meeting followed by the Federal Reserve meeting where recent Fed Presidents have encouraged traders to be on alert for a possible rate hike. This combination of events has brought one-month implied volatility to one-month highs, which has put the probability of a December rate hike above 50% per Bloomberg and a 30% probability of a September 21 hike.

As of Thursday, there is a ~4% premium of 1-month implied volatility to 1-week volatility that can help you see what is anticipated to traders on possible central bank action. In addition, Friday will combine Janet Yellen’s speech as well Japan’s inflation data, which will likely spike the anticipation of the upcoming meetings.

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USD/JPY Continues Below Heavy Resistance on Unrelenting JPY Strength

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

Looking above, you can see what appears to be a very clear downtrend alongside a 55-DMA (currently at 103.09). You will also notice that Andrew’s Pitchfork (Red) and the MVA provide clarity to prefer the downside continuation. What has surprised many is that the low-volatility continues to persist.

A famous quote from Hyman Minsky, the noted economist stated that stability begets instability, and the low-ATR looks show signs of stability. Naturally, looking at the implied volatility, such low-volatility environment are unlikely to last.

We will touch on the sentiment picture more below, but it’s worth noting that the contrarian indicators are showing retail is continuing to buy aggressively, which also seems to favor trend continuation.

For now, shorter-term resistance will be at the Opening Range high of August at 102.645. This resistance, if broken would be followed by the 55-DMA. Regarding near-term support, the August 16 low of 99.522 will be watched to hold to see if there is any hope for JPY bears.

Below there, you can look to the H2 2013 Support at ~¥97 followed by the 61.8% Fibonacci Retracement of the 2011-2015 range at 94.83. Given the recent thin market conditions, a new breakdown could easily bring us to these levels. Should we break below these levels, expect to hear from the Bank of Japan.

However, USD/JPY Sentiment Shows Traders Still Have Hope For Upside as ¥100 Holds

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

When looking at sentiment, the most pressing development is a rise in new short positions. As of Thursday, the ratio of long to short positions in the USDJPY stands at 4.27, as 81% of traders are long.

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Yesterday the ratio was 4.29; 81% of open positions were long. Long positions are 0.5% higher than yesterday and 15.5% above levels seen last week. Short positions are 1.2% higher than yesterday and 13.7% above levels seen last week. Open interest is 0.6% higher than yesterday and 27.2% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the USDJPY may continue lower. The trading crowd has grown less net-long from yesterday but further long since last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Shorter-Term USD/JPY Technical Levels: August 25, 2016

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: Implied Vol Shows Trader’s Nerves

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GBP/USD Technical Analysis: Cable Poses a Bullish Run

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Longer-term bearish trend still in-tact with price action below 1.3371.
  • The past week has seen considerable bullishness in GBP/USD as USD has continued to weaken; retail positioning has flipped short, and this is a bullish indication in GBP/USD.
  • SSI - 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. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

In our last article, we looked at GBP/USD in the midst of another turn lower. But as we warned, this market was looking quite oversold, and traders looking to voice a bearish bias on the pair would likely want to wait for a cleaner setup or more attractive risk-reward ratio before looking for continuation of that down-trend.

Since then, GBP/USD set higher-low support at 1.2864; above the post-Brexit low of 1.2788, and this was after the bazooka of stimulus posed by the Bank of England from the prior week. This opens the door for an extended top-side move as the repercussions of the Brexit-move in the Sterling have begun to show in British data; and that’s primarily speaking to the prospect of continued inflationary pressure brought upon by the out-sized move lower in the British Pound. With a weaker Sterling, import prices will likely be moving up in the U.K., and this can continue to prod inflationary pressure that may complicate future rate cuts that the Bank of England might be investigating. So the fundamental back-drop could certainly support a continued move higher here in GBP/USD, and this could give caution to shorts or those carrying a bearish bias in the near-term.

However, the longer-term bearish structure is still intact with price action below 1.3371, which was the prior swing-high on the Daily chart of GBP/USD. Just 14 pips below is the 76.4% retracement of the post-Brexit move in the pair, and this is just another reason to watch for price action’s response should this level come into-play. This could be an interesting zone to evaluate for potential bearish reversals of the near-term move higher, or, on the other side, for continued reversal plays should price action eclipse this level.

For traders looking to initiate a bearish stance on the Cable, they can watch for resistance to form around this price zone from 1.3350-1.3375 in order to look for that short entry. But for those looking to play the up-side of the pair, letting this level first break to prove continued bullishness could provide confirmation that buyers may be able to continue pushing price action higher. For that approach, the major psychological level, and the ‘Financial Collapse’ swing-low at 1.3500 could become an attractive near-term target.

GBP/USD Technical Analysis: Cable Poses a Bullish Run

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: Yellen Gives USD Bears A Layup

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

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Talking Points:

  • US Dollar Technical Strategy: USDOLLAR Falling Away From Median Line
  • Anti-Dollar Assets Continue To Rally [EMFX, Commodities, & Equities]
  • Yellen Speech Stirs Market, Bull US Dollar Bears Prevail On Lack of Hawkish Guidance

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On Friday morning, in Jackson Hole, Janet Yellen spoke on the “The Federal Reserve’s Monetary Policy Toolkit.” At this closed-door speech with no Q&A, Yellen confirmed forward guidance and quantitative easing would be called upon if another crisis were to arise. At first, Bulls seemed encouraged by the argument that the case for rate hikes “has strengthened,” but in the end, there seemed to be more time spent about how the Dollar could weaken over the coming years.

One key point that seemed to turn the US Dollar lower was the note about the short-term neutral rate falling with little understanding of the forces behind the falling neutral rate. The neutral rate is economic speak for the dividing line between accommodative and restrictive policy according to the Fed’s reference rate. Given the current Fed Funds Rate at 0.375, a falling neutral rate seems to argue that there will be fewer hikes in the future than anticipated.

The fireworks are not done yet from Jackson Hole. On Saturday, there will be a panel discussion with Bank of Japan Governor Haruhiko Kuroda, as well as ECB Executive Board Member, Benoit Coeure.

For more on what may be ahead, let’s go to the charts.

D1 USDOLLAR Index Chart / New Nine-Week Lows

US DOLLAR Technical Analysis: Yellen Gives USD Bears A Layup

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The simple way to look at the chart above is to see that the slope of the lines that have guided price action since Q32015 are downward sloping. While there have been pockets of US Dollar strength in January post the initial rate high and post-Brexit, the US Dollar Index has failed to find month over month gains with any consistency. The price action of US Dollar post-Yellen’s Jackson Hole speech touched a fresh nine-week low.

The simplified key levels that should be watched should US Dollar strength emerge is the 12,000/100 zone. However, the price action is falling further and further away from these levels.

A break higher through these levels would take the price of US Dollar Index above the channel resistance, and could be a first clear sign since Q12015 that a Dollar breakout environment has arrived. Absent such a breakout, the preference will remain to sell rallies.

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Strong/Weak View of G8 FX for Friday, August 26, 2016: A Very Weak USD

Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, the US Dollar has been the clear laggard. However, the JPY seemed to weaken against other currencies, except USD initially after Janet Yellen’s Jackson Hole speech.

US DOLLAR Technical Analysis: Yellen Gives USD Bears A Layup

Shorter-Term US Dollar Technical Levels for Friday, August 26, 2016

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

US DOLLAR Technical Analysis: Yellen Gives USD Bears A Layup

T.Y.

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USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Bearish breakdown on weak-USD; longer-term bullish structure in-tact above .9398.
  • U.S. Dollar weakness has driven the Swissy towards the June ‘Brexit-low’ in the pair, also near the .9500 psychological level.
  • SSI - 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. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

Last week we warned of a deeper retracement in the prior up-trend of USD/CHF after the currency pair had posed a ‘lower high’ inflection of resistance. And while that prior up-trend was attractive from both a fundamental and a technical view, the risk-reward of the setup was utterly unattractive for chasing long positions, and we drew attention to deeper support levels in the effort of planning-around longer-term bullish positions.

Over the past three weeks, the US Dollar has put in a considerable bout of weakness as markets have grown increasingly skeptical that the Fed may be nearing rate hikes anytime soon, and as this rather pervasive theme has continued to permeate through financial markets, US Dollar weakness has been visible against most currencies, including the Swiss Franc. This has driven price action in the pair down towards those longer-term levels of support, and thus far on the day, the pair is responding with strength.

Swissy is nearing a very attractive zone of support just below the 95-handle. From the level of .9398-.9450, there are numerous iterations of support that could provide motivation for longer-term bullish entries. On the chart below, we look at these various levels of support.

USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

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

But this may not be something that traders yet want to chase, as near-term support is still continuing to build, and if we investigate this morning’s strength on a shorter-term basis, it highlights a shorter-term bear-flag formation. Earlier in the week we had a similar such technical scenario, and as you can see on the below chart, that bear flag eventually broke around the release of FOMC minutes on Wednesday.

USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

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

Bear flag formations can often show up as retracements in a continued down-trend, so this can become usable to traders as they await those deeper support levels in the .9398-.9450 zone; and should this show up over the next week traders can investigate attractive top-side setups in the Swissy.

At this early stage, Swissy price action appears to be working on a retracement in the down-trend. But the potential up-side of bearish plays will likely be limited given the robust support structure sitting below price action, so rather than looking at continuation of the near-term bearishness, traders can keep a watchful eye on support in the effort of looking for the ‘bigger picture’ bullish scenario.

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

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AUD/USD Technical Analysis: Three-Month Uptrend Broken

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Pending Short at 0.7597
  • Aussie Dollar breaks three-month trend support vs. US counterpart
  • Short entry order set, looking for improved risk/reward parameters

The Australian Dollar has broken rising trend line support guiding prices higher since late May against its US namesake, hinting the long-term down trend is resuming. The pair marked a top with the formation of a bearish Evening Star candlestick pattern below the 0.78 figure and found fuel for a breakdown in hawkish comments from Fed Chair Janet Yellen.

Near-term support is at 0.7496, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a challenge of the 50% level at 0.7415. Alternatively, a reversal above the 0.7597-0.7647 area (23.6% Fib, June 24 high) paves the way for a retest of the August 11 high at 0.7760

Prices are too close to near-term support to justify entering short at market from a risk/reward perspective. With that in mind, a short entry order has been established to sell the pair at 0.7597. If triggered, the position will initially target 0.7496 and carry a stop-loss activate on a daily close above 0.7647.

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AUD/USD Technical Analysis: Three-Month Uptrend Broken



USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

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

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Talking Points:

-USD/CAD Technical Strategy: On Watch for Strength > 21-DMA at 1.3008

-Trader Sentiment Warns a Move Lower Could Still Be In The Works

-Looking For Clear Short-Term USD/CAD Levels Updating In Real-Time? Check Out GSI

Quick Fundamental Take:

The Canadian Dollar has had a rough week against the US Dollar and overall has found a patch of weak data. Recently, we’ve seen the price of the Canadian Dollar break from the price of Crude Oil, which historically held a strong positive correlation.

The weakness of fundamental data in Canada has steadily underperformed economists expectations since late April as shown via the Economic Surprise Index for Canada. The Citi Economic Surprise Index for the Canadian Economy recently showed its worst reading, meaning consistent underperformance, since January when the price of USD/CAD was in the mid-1.4000s. Much of the recent Canadian Dollar stability has had more to do with the subdued US Dollar more so than Canadian Dollar strength.

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The price of the Canadian Dollar vs. the US Dollar will likely be volatile heading into the end of the year. While the correlation has been weaker than historical averages, a price breakout in the Crude Oil market would support the Canadian Dollar or a persistently dovish Fed about market expectations could continue to drag the down USD/CAD.

To get a feel for where we stand, and where we could be heading, let’s go to the charts:

Technical Focus:

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

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The chart above is a good explanation on the difference between a price and time correction. The move from late January to early May was a classic and strong price correction. In shortorder, the price of USD/CAD dropped ~15% in a bit more than four months, which many felt was a long-overdue move given the recent rally and other attributed more to the strong move higher in Oil.

Having a Hard Time Trading USD/CAD? This May Be Why

However, since May, we’ve seen the price of USD/CAD move sideways. What catches my attention is that such a sideways move or consolidation tends to be a sign that the prior move / trend, which was lower is not down. If that’s the case, we should identify points that would help validate a strong down move as well as resistance that if broken, would invalidate a short-term focus on the downside.

Resistance looks to be firm at ~1.3000. Specifically, 1.3008 marks the 21-DMA, and there is a lot of structural support at the 1.3000 zone. If price breaks above 1.3000/08, it appears there is little resistance until we see a retest at the top of the channel at ~1.3200. Such a move above 1.3000/08 would nullify my short-term focus on the downside, and could, in fact, be a prelude to a new multi-month high.

Regarding support to break, I would like to see a break below the August low before getting excited that the late-January to early-May trend could resume lower. The August low at 1.2762 would likely only break on a strong market shift in the US Dollar or a return to economic resilience in the Canadian Economy that may or may not be helped with a move higher in the price of Crude Oil.

Bottom Line:

Given the sideways price action, the price brackets I am watching is 1.3008 and 1.2762. A break of either would turn my medium-term outlook toward the direction of the break.

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It appears now that focus should be if we’re about to move into another phase of a price correction similar, albeit likely weaker than the January-May move. A break below the H2 2016 Macro Opening Range Low of 1.2840 would be the first indication that this move could be under way.

Canadian Dollar Has Regained Favorper Sentiment

USD/CAD Speculative Sentiment Index as of Thursday, August 25, 2016

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis, there continues to be evidence for a possible breakdown if USD/CAD can break below 1.2762.

The ratio of long to short positions in the USDCAD stands at 1.48 as 60% of traders are long. Yesterday the ratio was 1.52; 60% of open positions were long. Long positions are 0.6% higher than yesterday and 3.0% below levels seen last week. Short positions are 3.6% higher than yesterday and 18.0% above levels seen last week. Open interest is 1.8% higher than yesterday and 10.9% 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 asignal that the USDCAD may continue lower. The trading crowd has grown less net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Key Levels as of Thursday, August 25, 2016

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

T.Y.

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NZD/USD Technical Analysis: Six-Week Trend Line Broken

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar breaks near-term trend support, hinting at bearish reversal
  • Risk./reward considerations argue against triggering short trade for now

The New Zealand Dollar broke rising trend support set from late July, hinting a downward trend reversal against its US counterpart may be in progress. Follow-through has been limited however, with sellers unable to produce meaningful momentum thus far.

Near-term support is at 0.7214, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 0.7111. Alternatively, a recovery above trend line support-turned-resistance at 0.7278 paves the way for a challenge of 0.7325, the July 12 high.

Prices are too close to immediate support to justify entering short from a risk/reward perspective. With that in mind, opting to remain on the sidelines appears prudent for the time being until the pair offers an actionable opportunity to establish exposure.

What do past NZD/USD price patterns hint about current trends? Find out here!

NZD/USD Technical Analysis: Six-Week Trend Line Broken



EUR/GBP Technical Analysis: Euro Drops to 2-Week Low

Fundamental analysis, economic and market themes

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Talking Points:

The Euro turned lower against the British Pound as expected after prices put in a bearish Dark Cloud Cover candlestick pattern, dropping to a two-week low. The pair has overturned the break above July’s swing high, seemingly pointing to something more significant than just a corrective pullback in progress and warning of further weakness ahead.

From here, a daily close below the 23.6% Fibonacci retracementat 0.8459 paves the way for a challenge of rising trend line support at 0.8390, followed by the 38.2% level at 0.8295. Alternatively, a move back above support-turned-resistance at 0.8584, the July 6 close,opens the door for a retest of the August 16 high at 0.8725.

A short EUR/GBP trade was triggered at 0.8631.The trade remains in play, initially targeting 0.8459 with a stop-loss to be triggered on a daily close above 0.8725. Half one position will be booked and the stop-loss moved to breakeven when the first objective is hit.

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EUR/GBP Technical Analysis: Euro Drops to 2-Week Low



EUR/JPY Technical Analysis: Sticking to the Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Longer-term down-trend still intact, near-term range developed over the past three weeks.
  • EUR/JPY is still near longer-term support values after the out-sized move lower post-Brexit.
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In our last article, we looked at the down-trend in EUR/JPY being at a ‘decision point’ after price action had posed a vigorous bounce off of the prior swing-low. As we noted, the fact that this swing-low came-in higher than the prior swing-low highlighted the down-trend in EUR/JPY may be nearing a reversal as sellers were unable to drive the pair lower. Since then, we’ve seen back-and-forth price action as EUR/JPY has built-in to a fairly consistent range through the month of August (shown below).

EUR/JPY Technical Analysis: Sticking to the Range

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

Traders can handle such a scenario in one of two ways; either a) trade the range or b) await the break. For those looking to trade an eventual break of this range, the likely culprits will probably come from Central Bank innuendo, primarily speaking of Japan as the European Central Bank appears to be in somewhat of a holding pattern after their recent increases to their already-outsized stimulus efforts.

For those looking to utilize such an approach, they’d likely want to wait for the range to break before assigning any type of a directional bias to EUR/JPY. On the resistance side for prospective bullish plays, the level of 114.09 could be interesting as this is the 38.2% retracement of the Brexit-move in the pair. And this level has seen quite a few price action inflections, as the previous swing low had caught support off of this level, and the recent range is appearing to resist just shy of the same level.

On the bottom-side of price action in the effort of bearish plays, a longer-term Fibonacci level at the 112.00 area, just below the 23.6% retracement of the Brexit-move, could provide that litmus for setting up short- positions.

EUR/JPY Technical Analysis: Sticking to the Range

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: Tug-of-War at the ’Brexit-Low’

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Longer-term down-trend attempting to carve-out higher-low support.
  • After the out-sized reversal in the Yen followed by the monetary bazooka triggered by the BOE, GBP/JPY saw a big move lower, but respected the longer-term lows that printed in the week following the Brexit referendum.
  • 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 GBP/JPY price action near a confluent support-zone in the 135-region. And given that a large portion of that movement-lower took place after the Bank of Japan had underwhelmed at their most recent rate decision, it made sense that we were likely seeing stimulus bets come out of the Yen. But with a Bank of England rate decision carrying a near-100% probability of a rate cut in the days following, it also made sense not to push a ‘square peg into a round hole’ by trying to buy GBP-assets ahead of that announcement.

The Bank of England did not disappoint: They unrolled a veritable bazooka of stimulus with more than even the most aggressive forecasts were looking for. And as many would expect, this brought-on a quick dose of GBP-weakness, sending GBP/JPY flying below the ‘Brexit low’ at 133.20; which had held as ‘swing-low’ support in GBP/JPY until the week following Brexit, in which Mark Carney drove the Sterling lower by talking-up proactive rate-cuts for the economy on the heels of the referendum.

To close last week, price action in GBP/JPY had trickled back up to 133.20 to find near-term resistance. And the open this week saw prices gap above this level, only to move down to find short-term support at old resistance.

While many are still extremely bearish on GBP given the expectation for even more rate cuts down-the-road, the possibility still exists for the Bank of Japan to ramp-up their stimulus program, and any clues, hints or innuendo of such a theme from Japanese politicians/Central Bankers will likely re-fire this prospect. This was a large driver behind the theme of Yen-weakness in the first half of July, and while the BoJ underwhelmed at their most recent meeting, this certainly does not preclude the bank from doing more in the future; and we’ll likely see market participants building expectations for such a theme as we move towards the bank’s next meeting in September.

GBP/JPY Technical Analysis: Tug-of-War at the ‘Brexit-Low’

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: 6.7000 The Hurdle After Swing Higher

Short-Term trading, Price Action Analysis, Trader Psychology.

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Talking Points:

- USD/CNH surged to the 6.7 handle after 6.6500 held on a retest

- Clear break and a hold above 6.7 might be required for further bullish conviction

- A short term hold above 6.6860 might be indicative of a tentative breakout attempt

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The US Dollar is nudging lower versus the Chinese Yuan in offshore trade, after the pair surged to the 6.7 resistance level following the Yellen speech this past Friday.

Indeed, after the index held the 6.6500 level on a retest, is seemed likely that focus will shift to 6.6860 followed shortly by the 6.7 figure.

At this stage, the pair is having difficulties cracking the level, and further upside conviction might require a clear break and a hold above, potentially exposing the January high at 6.7584.

A higher hold than 6.6500 might suggest further attempts at a break down the line. This seems likely to shift focus to two potential intermediate support levels: 6.6860 and 6.6750.

If the pair manages to hold above one of those levels, further breakout attempts appear likely.

With that said, stronger conviction to the downside may target the 6.6500 level again, followed by the July lows at 6.6224.

USD/CNH Daily Chart: August 29, 2016

USD/CNH Technical Analysis: 6.7000 The Hurdle After Swing Higher

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

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

Follow him on Twitter at @OdedShimoni




CAC 40 Set to Close Week in Range

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

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Talking Points

  • CAC 40 Remains in Range for Fridays Session
  • Key CAC 40 Support Remains at 4,375
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The CAC 40 is set to close the week inside of an ongoing daily range, as French equities remain little changed. Of all the CA 40 listed components, Renault is leading the way with a gain of +1.37% on the session. Equity market traders should remain interested in this afternoons Jackson Hole event, but withstanding a major market movement the CAC 40 appears set to close inside of the 75 point range depicted below.

CAC 40, Daily Chart

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

Intraday price levels for the CAC 40 include todays R3 resistance pivot at 4,409. So far price action has attempted and failed to breakout from this value once. If price action breaches this point, it opens the CAC 40 to test the R4 line of resistance found at 4,426 and then finally the previously mentioned point of daily resistance at 4,450. Alternatively, the S3 pivot is an acting value of support at 4,378. This value resides directly above the previously mentioned daily value of support at 4,375. A breakout below this point will first expose today’s S4 pivot which is found at 4,362.

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

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WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

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

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Talking Points:

Access Our Free Q3 Oil Outlook As Oil's Best Quarter Looks For Confirmation

Dollar demand has increased dramatically since Friday afternoon where Federal Reserve Vice President Stanley Fischer encouraged markets to be on the watch for the upcoming Non-Farm Payroll announcement on September 2 that could play a role in whether the Fed hikes soon. The price and price trends of Oil, which is priced in USD is inversely correlated to the USD so recent USD strength over the last 72 hours has put pressure on the energy market.

Track short-term Crude Oil price levels and patterns with the GSI indicator!

There are still a handful of encouraging developments in the Oil market that could accelerate the price appreciation of Crude should the Fed fail to hike, or the US Data take another turn lower, and the US Dollar weakness continues.

Wood Mackenzie recently informed markets that Oil discoveries are at their lowest since 1947 per conventional oil discovered. There is still solid production due to technologies like shale, but this could be setting the stage for a supply shortage in years to come, though we must be patience. As the old saying goes, nothing cures low prices like low prices and the lack of spending due to Oil’s collapse has set the stage for E&P companies only to stay with the winning areas like the Permian Basin in the United States.

Another development that has been overshadowed by a very strong US Dollar is that Iraq threw their support behind an OPEC freeze. Iran looks to be supportive of a freeze, but there is still doubt as to whether a unanimous agreement can come together.

H4 Crude Oil Price Chart Moving Lower In Price Channel, Awaiting Strength Later

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

The chart above shows the price action in US Oil over the summer. For now, the price looks to be ranging from support of ~$40/bbl and resistance of ~$50/bbl. The price also looks to be trading in a corrective price channel since peaking on August 21. A break above corrective resistance at $48.43 would be enough to encourage technically based traders to rejoin the Bull trend.

Last note, we discussed how on a longer-term / weekly chart, a framework for a Bullish Head & Shoulder Pattern has looked set. A legitimate breakout would be validated by a break of the price of Crude Oil above $51.64/bbl. If the price broke out and sustained above the highlighted range near ~$50/bbl, we would favor a move to $66.16, which would be 61.8% extension of the Head & Shoulder’s range and $75.60/bbl, a 100% extension, and traditional Head & Shoulder’s target.

For now, the stronger US Dollar will likely provide better prices to buy (read: likely heading lower) with a support zone in focus between $~46-$44/bbl. Only a move below there and a stronger US Dollar would put our medium term Bullishness on the shelf.

The key support that would deflate the confidence of the 20%+ August trend would be a break below the higher low of $41.08/bbl from August 11. A breakdown below there could be the first confident sign that price will continue to wallow lower in the falling channel drawn on the chart.

Bottom Line:

The US Dollar is not going to allow the next big move in the price of US Oil to be higher without a fight. The price of Oil is now trading at two-week lows after a week of sideways price action due to the uncertainty of the OPEC outcome and Dollar direction post-Jackson Hole.

Given that the majority of rhetoric at Jackson Hole was net USD Bullish, the Oil market will need to see increasing demand in real figures that was projected by the IEA if there are any hopes for a sustained move to and through $50/bbl.

Contrarian System Losing Favor of Upside Risk as of 8/30/16

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

In addition to the technical focus, we should keep an eye on retail sentiment. The upside is beginning to align with our Speculative Sentiment Index or SSI for now.

As of mid-day Friday, The ratio of long to short positions in the USOil stands at -1.14, as 47% of traders are long. Yesterday the ratio was -1.32; 43% of open positions were long. Long positions are 14.6% higher than yesterday and 64.2% above levels seen last week. Short positions are 1.4% lower than yesterday and 4.1% below levels seen last week. Open interest is 5.5% higher than yesterday and 30.0% 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 signal that the USOil may continue higher. The trading crowd has grown less net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Key Levels Over the Next 48-hrs of Trading As of Tuesday, August 30, 2016

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

T.Y.

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Gold Prices Sink to Deeper Support, is More Pain to Follow?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Longer-term up-trend still alive, near-term bearish on Strong USD/higher U.S. rate expectations.
  • Gold prices are continuing to face pressure as rate hike bets further firm the Dollar.
  • 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 uptrend in Gold prices after having just moved down to support. But as we warned, with the Jackson Hole Economic Symposium later in the week and after numerous Fed members had already come-out to talk up higher rates, Gold prices could face further pressure as rate hike bets for the United States continued to increase.

And since Friday’s outlay of Federal Reserve dialog, USD strength has been all the vogue as markets have been pricing-in a higher probability of a rate hike from the Fed in the coming months. But this isn’t the first time that this has happened is it? Even this year, we’ve seen a very similar scenario play-out in April/May after the Federal Reserve a) posed a less dovish statement at their non-press conference rate decision and b) saw a continuation of hawkish dialog after the meeting as multilpe Fed members talked up higher rates. Gold prices have swung along with these rate expectations; with more than $100 coming off in the month, bouncing off of a key support level at $1,200 before ascending to fresh 2-year highs.

With USD-strength showing prospects of continuation, Gold prices may be in for a deeper retracement before bullish positions become attractive again. In our last article, we outlined three different support zones to watch for price action to move towards. These support levels integrate a Fibonacci retracement that can be found by charting the major move from the swing-low of $1,250.11 to the high of $1,375.04. The 50% retracement of this move at $1,312.57 had provided prior support in the month of July, and now price action is in the process of sliding below this level.

This highlights deeper support levels for potential top-side reentries should this current bout of USD-strength continue. At the level of $1,297.59 we have the 61.8% retracement of that same major move, and with the psychological level at $1,300, this could produce a ‘zone’ of support for traders to watch. And just below that, we have another confluent zone of support with two different Fibonacci levels around the ~$1,280 area.

Gold Prices Sink to Deeper Support, is More Pain to Follow?

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

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

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Silver Prices: Price Action Contracting, Follow the Break

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

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What’s inside:

  • Silver near-term trend remains pointed lower despite long-term support
  • Triangle developing within descending channel
  • Waiting for a break of the pattern before taking action

In yesterday’s commentary, we noted the conflict between long-term support at hand and the short-term trend which suggested a further drop in silver prices before possibly finding a bottom. Not a lot has changed since yesterday other than the potential for a triangle formation within the downward channel developing on the intra-day time-frame.

A break of a nicely developed triangle would lead to either further downside channel-building by finding support on the lower parallel or a capitulation-style move of the decline dating back to the very beginning of the month.

The height of the triangle formation suggests about a 60 cent move once it breaks. Should it break to the downside, a decline of that size will push silver to the May swing high at 17.99.

Keep in mind, while the trend is lower and suggestive of a continuation lower out of the triangle, these patterns can break in either direction; triangles are simply contractions in volatility indicative of pending expansion. On that note, it is important to wait for the pattern to develop and break, first, before taking an entry.

If the pattern breaks against the trend, then the area between 19 and 19.20 will quickly come into focus as resistance to contend with. This will make for a more difficult trade in the short-run, but be consistent with the current long-term support zone silver is presently in.

For now, we will remain patient in waiting for an outcome to the contraction in price before taking a trade.

Silver 2-hr/Daily

Silver Prices: Price Action Contracting, Follow the Break

Slow late summer trading conditions make for an excellent time to hone one’s skillsets. Check out one of our many free trading guides designed to help traders of all experience levels.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be reached via email at probinson@fxcm.com with any questions or comments.




S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

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

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What’s inside:

  • Yellen sparks volatility on Friday
  • Double-top leads to support break
  • Will use old support as new resistance, other levels outlined

On Friday, the S&P 500 experienced outsized volatility as a result of Yellen’s speech at the Jackson Hole Symposium. The nearly 30 handle range for the day was the largest since the second trading day of the month.

The net result wasn’t significant as the market closed only a few handles away from where it began the day, but the price action in between certainly wasn’t boring, as it gave day-traders a crack at a few good fade-trades.

It was a welcomed spat of volatility, but don’t be surprised if that is all it was for now. The unofficial end to the summer season comes after the Labor Day holiday (next Monday). Heading up to and even the week of, trading volumes and volatility often times remain light without any major catalysts.

Friday, the monthly jobs report for August will be released, presenting another possible pocket of volatility, but until we move on past the summer doldrums we remain content in keeping our trading size low and trade selectivity high.

The double-top formation we have been discussing in recent commentary further developed on a break below the 2168/72 area. As said last week, given the current choppy market conditions, the preferred scenario was to see the S&P drop below the neckline and then retest before looking for another drop lower.

Support was indeed broken on Friday (support now turns into resistance) and as of this morning the market is trading back in the thick of it. As long as there is no sustained trade above 2172, we will look for the market to struggle to gain further traction and favor sellers. On a move lower, support comes in at Friday’s low at 2159, then the 8/2 low of 2147.

If the S&P moves back above the 2168/2172 support zone, we may be in for more two-way sloppy trade.

S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

The summer lull presents a good time to sharpen your skills before markets pick back up again. Get started today by checking out one of our free trading guides.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at probinson@fxcm.com with any questions or comments.




DAX: Slowly Turning Higher, Line in the Sand Drawn

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

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What’s inside:

  • The DAX is slowly turning up from support
  • Higher prices anticipated, but…
  • Choppy trading could be the biggest risk to this view right now, not sellers

The DAX continues to slowly turn higher after last Monday’s test of old resistance turned support. The confluence of previous peaks from April through June and trend-line are proving to be rather significant, leaving traders with a fairly clean line in the sand. Hold above the 8/22 low at 10386 and the bias is bullish, close below and a further retracement or worse becomes the risk.

Continued trade higher from the late June low will bring the 8/15 swing high into play, then a December swing high near 10900 and upper parallel of the trend-line running higher off the Feb lows (~11000).

DAX Daily

DAX: Slowly Turning Higher, Line in the Sand Drawn

The biggest risk in the very near-term appears not to be sellers stepping in and bullying the market lower, but rather a lack of good movement as we work our way through the remainder of the dog days of summer. With that in mind, there is a good chance trading will be choppy. Keeping trade size small and very selective is a prudent approach until market participants file back in from late summer vacation time.

Find out what characteristics separate successful traders from the rest in our free trading guide, "Traits of Successful Traders".

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be reached via email at probinson@fxcm.com with any questions or comments.




FTSE 100: Pivots at Support, Working on Bull-flag Breakout

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

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What’s inside:

  • The FTSE 100 was closed yesterday in observance of public holiday
  • Index turning higher from confluence of support
  • Attempting to trade higher out of bull-flag formation

Yesterday, the FTSE 100 was closed in observance of the ‘Late Summer Bank Holiday’. Nothing was missed by the traders in London, as global markets were quiet and trading volumes low. To start off the day, the FTSE is relatively quiet, currently trading near the unchanged line.

The UK index (UK100) is in the process of turning higher from the confluence of support we noted on Friday; the lower parallel extending back to early July along with the late July peak. Friday’s low could turn out to be the low pivot of another lower high within the ongoing sequence of higher highs and higher lows.

Additionally, in the absence of sellers, a bull-flag has been forming as the market gradually falls back into the intersecting levels of support. Overall, this is construed bullish until support and the pattern are broken.

A push above the top-side trend-line of the bull-flag formation will help pave the way for a move back to the 8/15 high at 6956. However, with the dog days of summer upon us, conviction is low in the notion we will see a powerful move develop, in either direction, as many market participants remain away from their desk.

FTSE (UK100) Daily

FTSE 100: Pivots at Support, Working on Bull-flag Breakout

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at probinson@fxcm.com with any questions or comments.




ASX 200 Technical Analysis: Index Trading At a Crucial Support Area

Short-Term trading, Price Action Analysis, Trader Psychology.

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Talking Points:

- Index trading at potential support after a push to the downside

- Key for current levels to hold if bullish control is to remain

- A break below 5,380-5,400 could be interpreted as a bearish sign

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The ASX 200 is trading lower for the sixth consecutive day, after the index failed to hold above a support area around 5,500.

The Index was trading sideways since the beginning of the month, between the 5,500 support and the 5,600 resistance area, which meant that a break below 5,500 could see participants focus on the 5,380-5,400 zone for potential support.

Indeed, the index seems to have found a slight pause to the decline around May swing highs at 5,431.

At this stage, keen buyers might attempt to re-enter the market, which means that reversal signs at this general area may still imply that the downside move was corrective.

A break and hold below 5,380 could be interpreted as a bearish sign with buyers failing to regain control.

It’s important to note that volatility is still printing its lowest levels since September 2014 (based on a 20-day ATR study).

ASX 200 Daily Chart: August 31, 2016

ASX 200 Technical Analysis: Index Trading At a Crucial Support Area

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

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

Follow him on Twitter at @OdedShimoni




Nikkei 225 Technical Analysis: Index Approaching Key Resistance

Short-Term trading, Price Action Analysis, Trader Psychology.

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Talking Points:

- 16,500 held as support with a bullish short term technical sign

- Index now trading near potential resistance after four days of gains

- A break above 17,000 could prove key going forward

Showcase your trading skills against your peers in FXCM's $10,000 Monthly Challenge Here, but learn good trading habits with the “Traits of successful traders” series

The Nikkei 225 is trading higher for the fourth consecutive day, alongside declining Yen prices, after the index formed a bullish “Hammer” formation on the 16,500 support.

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 from June 2015 highs

The move to the upside has seen the index trade to a resistance area below 17,000; a confluence resistance zone with the 17,000 handle, 200-day SMA and the last swing highs.

At this stage, a break and a hold above 17,000 seems key for further upside gains, potentially exposing the longer term range top.

If the index reverses from this zone, focus might shift to 16,500 again for support, anda break lower could put the spotlight on the 16,000 level.

Volatility continues to become even more subdued, with 20-day ATR volatility measures now indicating the lowest levels since late 2014.

Nikkei 225 Daily Chart (With USD/JPY overlay): August 31, 2016

Nikkei 225 Technical Analysis: Index Approaching Key Resistance

--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com

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

Follow him on Twitter at @OdedShimoni