Support & Resistance

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EUR/USD Technical Analysis: Waiting for Range Breakout

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro remains confined to a familiar range above 1.10 vs. US Dollar
  • Waiting for a breakout to trade in line with dominant bearish trend

The Euro continues to wait for new direction cues as prices tread water in a now-familiar range above the 1.10 figure against the US Dollar. News-flow highlighting the currency’s vulnerability to Brexit spillover may breathe new life into the dominant down trend.

Near-term support is at 1.1018, the 50% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a descent to the 1.0876-1.0912 area (61.8% level, June 24 low). Alternatively, a turn above the 38.2% Fib at 1.1159 paves the way for a retest of trend line support-turned-resistance at 1.1234.

Positioning is inconclusive at this point. The dominant trend continues to appear bearish but follow-through is lackluster and prices are too close to support to justify entering short from a risk/reward perspective. Opting for the sidelines seems prudent until something more actionable presents itself.

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EUR/USD Technical Analysis: Waiting for Range Breakout



USD/JPY Chops in Corrective Fashion; Eyes BOJ Next Week

Swing Trading, Forex Technical Analysis, Chart Pattern Set Ups, Breakout Trading

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Talking Points

-BOJ releases monetary statement July 29, traders anticipate stimulus or talk of helicopter money

-Technical structure appears bullish medium term, a break above 107.50 is significant

-If the correction lower continues, support may be found near 104.63, 103.90 or 103.50

Traders are talking about potential helicopter money flying over Japan. Though we don’t know if that will happen, mere talks about it has placed USD/JPY on trader’s radars.

BOJ meets at the end of next week and there is an anticipation of more stimulus arriving out of Japan. Should helicopter money (or other stimulus) be disbursed, it could potentially weaken the Yen and USD/JPY may take flight.

From a technical perspective, the picture is simple. It appears the pair is building a bullish pattern that could lead to much higher prices.

We wrote in our previous article how there is a cluster of resistance in the 106.30-107.30 price zone. If prices were successful in breaking higher and holding, this would be a significant technical development.

USD/JPY Chops in Corrective Fashion; Eyes BOJ Next Week

Using Elliott Wave analysis, it appears we have 5 waves higher and prices are correcting sideways to lower in 3 waves. This is a bullish sequence that often pre-empts another 5 waves higher of similar size and magnitude as we saw with the July 8 to July 14 increase.

Therefore, a break above the July 20 high of 107.50 could signal a continuation of the uptrend and that the correction is over.

We do think there is a higher probability chance of a move to slightly lower levels. If the correction is still in place, then the wave ‘a’ low of 104.63 is a potential target. Additionally, the 38.2% retracement level of 103.90 is another target. Lastly, we wouldn’t be surprised to see USD/JPY possibly trade down to 103.50. This last zone represents the distance of the ‘b’ wave overshoot in excess of wave ‘v’ and displaces it as a overshoot of the ‘a’ wave low.

How do we know which level is likely to hold?

Though we don’t know if the 107.50 level to the topside or 104.63, 103.90, and 103.50 to the downside will hold, we can use the Grid Sight Indicator to provide an indication of intraday momentum as price presses into one of these levels.

GSI is a big data indicator that compares the current price action to historical patterns and seeks out any matches. Based on those matches it sill share how many of the historical patterns moved higher ‘x’ pips and how many moved lower ‘y’ pips.

In the end, you can see if similar historic patterns produced support or resistance and use that in conjunction with your other analytical tools.

Learn more about GSI or use GSI on USDJPY ‘m3’ or ‘m5’ here.

Bottom line, if medium term technical pattern looks bullish up towards 111-115.

Having trouble trading USD/JPY? This may be why.

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---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Bigger-picture trend still bearish, shorter-term chop building near support.
  • GBP/USD is stabilizing above the 1.3000 psychological level, but rips-higher will likely face pressure given the expectation for future rate cuts out of the Bank of England.
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In our last article, we looked at the British Pound shortly after the most recent Bank of England rate decision. And as we mentioned, even though the bank held rates flat at that meeting, the world would likely be looking for another rate cut in the month ahead as the BOE wades through another Super Thursday batch of announcements. Traditionally, adjustments to rates from the BOE have been coupled with fresh inflation projections to provide proper context of the move; so after Mark Carney began talking up the prospect of rate cuts just days after the Brexit referendum, August became a likely expectation to see that next rate cut.

However, that being said many were still looking for a cut, with as high a probability as 86% ahead of that BOE meeting. So when the bank didn’t cut, we saw quite a few rate-cut bets jump out of the market, leading to bullish near-term price action. As we advised in our last article, traders can let GBP/USD rip-higher to a more comfortable level of resistance before looking to trigger-in to the short trade in anticpation of next month’s rate cut.

Since then, the Cable has meandered in a choppy downward-sloping channel, but has remained well-above prior lows set earlier in the month of July. And while price action on the 4-hour chart may be offering down-side continuation entries, scaling back to the daily highlights the juxtaposition facing trend chasers currently in the Cable. The most recent swing-high on the daily chart is the same identified in our last article, right around the 1.3500 psychological ‘big figure’ that also happened to be the financial collapse low in the pair. This has been a massively important level in the pair for well over 6 years now, and traders looking to chase the pair lower from here would likely want to investigate stop placement above this level; which with current prices would amount to a stop of more than 325 pips. And for a situation that only has 385 pips until we reach that multi-year low, the risk-reward of the setup could be seen as utterly unappealing right now.

GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

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

Moving forward the stance will remain the same, looking for a better level of resistance that could offer a more appealing entry on the down-side move. We’ve kept the same price action zones as last week, and have added another more aggressive area of potential resistance from 1.3335-1.3350. This would be a level for short-term approaches with targets set towards the most recent swing-low at the 1.3064-vicinity. Should price action rip higher to find resistance in this zone, attractive risk levels could be instituted for shorter-term approaches.

GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

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: Struggling To Mount Resistance

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

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Talking Points:

  • US Dollar Technical Strategy: So Close, Yet So Far From A Significant Break
  • The Major Known Event Risk Is Behind Us, What Comes Next?
  • What Is Needed For a USD Breakout?

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The US Dollar has had the fundamental backdrop for a breakout even the most optimistic US Dollar Bulls should be thankful. However, after the Brexit vote was confirmed on June 24, the US Dollar has failed to make significant headway. A lack of upside appears worrisome because what the market is not doing can be as significant (if not more so) than what is doing because investors, therefore, do not see the value in bidding up an asset with an ideal fundamental backdrop.

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Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, only the AUD had a great run post-Brexit that could help make the argument that there was a better purchase over the US Dollar. The JPY initially strengthened to 98.77 on the Brexit confirmation but has since weakened to ~106 JPY per USD. GBP has been volatile as expected, though it has firmed post-Theresa May’s appointment as PM along with her cabinet.

If the US Dollar cannot find lift-off here, it’s tough to imagine the scenario that it will. Thankfully, we can look to the charts for guidance from here.

The Fundamentals And Technical Picture May Be Aligning to US Dollar Strength

US DOLLAR Technical Analysis: Struggling To Mount Resistance

Given the technical picture on the charts, we are now seeing fault lines before the ceiling breaks on US Dollar. Currently, we have resistance at 12,050/53 (post-Brexit high). A breakout above the H2 Opening range high would favor the USD is beginning to flex its muscle as a reserve currency despite the Fed’s wishes. Below, we’ll discuss what levels to watch, and what other markets could complement such a strong move.

The Bearish channel (red) has done a fine job of framing price action. When combining the bearish price channel with the 200-Day Moving Average (12,023), you can begin to see that we are still in a corrective price channel. Therefore, we must await a breakout before we celebrate the strength of the US Dollar and only a break above resistance should favor the Bulls well into Q3.

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Support & Resistance Levels As of July 7, 2016

We’ve warned that even a dire fundamental picture in the US regarding expected interest rate hikes (a fundamental driver of currency strength) could be swept aside with a break above the 12,050 zone. The price appears to have found resistance for now, but a break higher should turn focus on further US Dollar upside.

While resistance is clustered in the 12,023 (200 DMA) and the post-Brexit higher of 12,053, the support levels are more dispersed. Post-Brexit, initial Support has been found in the 11950/60 zone. A break below initial support would favor a move toward the 38.2% Fibonacci Retracement zone of the post-Brexit range at 11,911. Below there, the Weekly S2 Support sits at 11,897. If we’re going to see a breakout higher, these levels should hold.

A break below the 11,900 level would favor a larger Dollar-negative shift that could put us on the watch for a retest of the May/June lows ~11,670/680.

One thing to be on the lookout for are the implications of the announcement that former Chairman of the Federal Reserve, Ben Bernanke would be advising the Bank of Japan. He was a proponent of ‘Helicopter Money’ as a last resort if QE efforts and effects have reached their limit and the government is unwilling to create a fiscal policy to stimulate aggregate demand.

Such a move would likely bring a lot of volatility in the JPY as well as the entire global financial system if a new step is taken by the Bank of Japan to accelerate growth.

Shorter-Term US Dollar Technical Levels for Thursday, July 14, 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: Struggling To Mount Resistance

T.Y.

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USD/CHF Technical Analysis: Swissy Sticking with the Channel

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Bullish near-term price action structure continues to build.
  • As the US Dollar continues to trade within a range, CHF may remain as an attractive candidate to voice long-USD themes.
  • 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 the continued bullish structure showing in USD/CHF, with a warning about the longer-term, bigger picture wedge in the pair (shown below).

USD/CHF Technical Analysis: Swissy Sticking with the Channel

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

And given the amount of resistance at the projection on the top-side of that wedge, with two different Fibonacci retracement levels within a few pips of that price, traders would likely want to cap top-end profit targets around this region.

But the reasons for bullish continuation in USD/CHF continue to be attractive, with the US Dollar printing fresh near-term highs as we approach the Federal Reserve meeting next week. And while no hike is expected at next week’s meeting, the fact that U.S. equities remain at all-time highs means that, at the very least, we’ll likely hear the bank talk up the prospect of a rate hike in the second half of this year (perhaps even two, which would be very bullish USD). Combine this with the fact that the Swiss National Bank is on-guard against excessive Franc strength, and this could provide for continuation of the top-side move.

On a shorter-term basis, the channel that we discussed last week in USD/CHF remains alive and well. The support level we had mentioned just above .9750 offered yet another inflection before the top-side move had resumed. At this stage, traders can look for support in the .9850 region in the effort of continuation. For traders wanting to tread a bit more conservatively, deeper support could be sought out in the region around .9800, as this is the 76.4% retracement of the prior major move.

USD/CHF Technical Analysis: Swissy Sticking with the Channel

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: Short Trade Triggered Above 0.75

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Short at 0.7516
  • Aussie Dollar breaks support set from post-Brexit lows
  • Short trade triggered aiming for down trend resumption

The Australian Dollar issued the largest daily decline in a month against its US namesake, breaking the near-term rising trend carved from lows set after the Brexit referendum. The reversal hints that the dominant longer-term down trend may have resumed.

Near-term support is at 0.7413, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 50% level at 0.7332. Alternatively, a reversal back above the 23.6% Fib at 0.7514 sees the next upside barrier at 0.7576, the 14.6% expansion.

A short AUD/USD position was triggered at 0.7516, initially targeting 0.7413 with a stop-loss to be activated on a daily close above 0.7576. Profit on half of the position will be booked when the first objective is met. The remaining exposure left in play to capture any follow-on weakness with a stop-loss adjusted to the breakeven level.

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AUD/USD Technical Analysis: Short Trade Triggered Above 0.75



USD/CAD Technical Analysis: Ripe Environment For Macro Opening Range Breakout

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

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Talking Points:

Quick Fundamental Take:

The second Half Macro-Opening Range is coming to a close, and the Canadian Dollar put up a respectable fight. However, after the Bank of Canada announced a rate hold, and depressed expectations for rate cuts later this year, the US Dollar has still failed to weaken as many had expected. Part of this is due to stronger than expected US Economic data that has caused markets to pull forward rate hike expectations. Either way, US Dollar stability and Canadian Dollar’s inability to capture strong gains against the US Dollar may set up an environment that looks ripe for a breakout.

A key development worth watching as Q3 and H2 2016 get under way is the directional bias in WTI Crude Oil (CFD: USOil). So far, Oil looks to have found strong resistance near ~$49/bbl at a time when the US Dollar is showing resilience. If the US Dollar can start to lift higher as the price of WTI Crude Oil begins to fall, we could see the resurgence of the trend that took USD/CAD from ~0.94 in 2011 up to 1.4688 in January providing a ~52% rise.

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Technical Focus:

USD/CAD Is Holding Above Support, Watching For a Breakout If Trendline Holds

USD/CAD Technical Analysis: Ripe Environment For Macro Opening Range Breakout

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USD/CAD looks to be setting up for a breakout from a period of consolidation as the US Dollar’s strength may resume if it can break its respective resistance of ~12,050. In such a case, we’d expect to see an aggressive move higher toward the 38.2-61.8% Fibonacci Retracement of the January 20-May 3 Range, which could push USD/CAD up to ~1.3311-1.3837 respectively.

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

However, before we can break into that zone, we should look at the resistance that USD/CAD is currently respecting. First, we have seen an original high a few weeks after the May low at 1.3187 that has yet to break over nearly two months later. In the subsequent trading days from the late May high, we’ve found resistance a bit lower in the ~1.3120 zone. If you are looking for an easy to locate resistance, you can utilize the price range of May 24 between ~1.3190/3090.

Therefore, if USD/CAD will resume a Bull-Run, a break above 1.3090/3190 will be the first indication that we could be on our way to multi-100 pip rally.

For now, 1.2650 is key support. However, we do have a trend line drawn off the closing lows from early May to mid-July that has also supported price rather well. Given the macro backdrop, until that level is broken, either consolidation or waiting for a breakout higher will remain in focus.

Tighter levels of support can be found at the Weekly S1 at 1.2880 and the 61.8% of the Thursday-Monday range post-Brexit at 1.2845. However, these levels are likely more beneficial for shorter-term traders that are looking for shorter-term levels for intraday opportunities.

Canadian Dollar Has Lost Favor per Sentiment

When looking at sentiment, crowd positioning has begun to favor further downside. For those familiar with our model, USD/CAD provided one of the strongest signals for downtrend continuation from late February to May. We use our Speculative Sentiment Index as a contrarian indicator to price action.

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As of mid-day Friday, the ratio of long to short positions in the USDCAD stands at 1.63, as 62% of traders are long. Yesterday the ratio was 1.30; 57% of open positions were long. Long positions are 1.8% higher than yesterday and 5.7% above levels seen last week. Short positions are 18.4% lower than yesterday and 22.6% below levels seen last week.

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

USD/CAD Speculative Sentiment Index as of Tuesday, July 15, 2016

USD/CAD Technical Analysis: Ripe Environment For Macro Opening Range Breakout

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis, there continues to be evidence for a possible breakout if USD/CAD can surmount 1.3090.

Key Levels as of Tuesday, July 15, 2016

USD/CAD Technical Analysis: Ripe Environment For Macro Opening Range Breakout

T.Y.

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NZD/USD Technical Analysis: Sinking to 2-Month Low

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • New Zealand Dollar working on 7th consecutive decline vs. US counterpart
  • Chart setup, risk/reward parameters argue against a trade at current levels

The New Zealand Dollar declined against its US namesake as expected, sinking to the lowest level in nearly two months as sellers attempt to breach the 0.70 figure. Prices are working on their seventh consecutive decline, which would make for the longest losing streak since early January.

A daily close below the June 15 low at 0.6963 opens the door for a challenge of the 61.8% Fibonacci retracement at 0.6923. Alternatively, a reversal back above the 38.2% level at 0.7077 paves the way for a retest of the 23.6% Fib at 0.7171.

Taking a trade seems unattractive at this stage. On one hand, prices are too close to support to justify entering short from a risk/reward perspective. On the other, the absence of a defined bullish reversal signal hints taking up the long side is premature. It seems prudent to stand aside until something better-defined emerges.

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NZD/USD Technical Analysis: Sinking to 2-Month Low



EUR/GBP Technical Analysis: Forming Head and Shoulders Top?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro may be carving out Head and Shoulders top vs. British Pound
  • Waiting for confirmation, improved risk/reward before entering short

The Euro may be carving out a top against the British Pound after rising to the highest level in three years in the wake of last month’s UK Brexit referendum. Prices are showing the makings of a bearish Head and Shoulders (H&S) topping pattern which – if confirmed – may precede a downturn.

Completion of the H&S setup on a daily close below the pattern’s neckline at 0.8324 sees the next downside barrier at 0.8234, the 38.2% Fibonacci retracement. Alternatively a push above the 23.6% Fib expansion at 0.8491 paves the way for a challenge of the 0.8627-41 area (38.2% threshold, July 6 high).

Confirmation of the H&S setup on a daily closing basis is needed before the setup is actionable. Furthermore, proximity to support argues against entering short from a risk/reward perspective. With that in mind, standing aside seems prudent for the time being.

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EUR/GBP Technical Analysis: Forming Head and Shoulders Top?



EUR/JPY Technical Analysis: 4-Hour Chart Showing Fresh Trend Potential

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Aggressive top-side reaction showing higher highs and lows on the 4-hour chart.
  • After recent events in Japanese elections, pressure may be removed from the long-side of the Yen, at least temporarily.
  • 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 each month for certain account holders. Click here for full details.

In our last article, we looked at the aggressive down-trend showing in EUR/JPY with a caution towards chasing the move much lower without at least some evidence of resistance showing. That resistance never showed up, and over the weekend a significant win in Japanese elections gave Prime Minister Shinzo Abe a super-majority in the upper-house of parliament. As we discussed on Tuesday, this could be a game-changer, at least in the near-term for Japan and the Yen, as the threat of a massive increase in stimulus from the country with lessened political resistance could be enough to offset risk aversion flows.

Price action in the Yen has been extremely bearish this week on the heels of those election results, and given that we’ll likely see investors continuing to attempt to position-in ahead of any potential BoJ action, this move of Yen weakness could have near-term staying power.

On EUR/JPY, the level of 115.37 is especially interesting. This is the 61.8% retracement of the ‘Abe-nomics’ move in EUR/JPY, taking the low set in 2012 just before he recapture the PM post, to the highs in 2014. This price area had also offered swing-support in the post-Brexit referendum, we had discussed using this level as potential resistance a couple of weeks ago, but that never showed up. And when price action finally did cross above this line-in-the-sand, it ended up becoming support shortly thereafter.

Also of interest in this zone of potential support is a projected trend-line that can be found by connecting the low from the year 2000 to the low of March 12th, 2011 (shown in purple on the below chart).

Moving forward, traders can look for top-side entries by waiting on higher-lows to develop. Between 116.20-116.50 is an area nearby current price action in which traders with aggressive stances could investigate for bullish entries; and a bit below we have the zone between 115.00-115.50 straddling that Fibonacci level at 115.37. Should support develop in either of these regions, traders can look at top-side triggers with targets cast towards the psychological level at 117.50, the price action swing high at 118.00, and then the Fibonacci level at 119.90, which is just 10 pips shy of the 120-big figure while also being the 61.8% retracement of the ‘big picture’ move in the pair, taking the low from the year 2000 to the highs of 2014.

EUR/JPY Technical Analysis: 4-Hour Chart Showing Fresh Trend Potential

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: Five Days of Res at the 61.8, but Not Quite Bearish

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Intermediate-term price action appearing to make an attempt at a bullish move.
  • GBP/JPY has continued to claw-back Brexit losses, and is now seeing higher-lows come-in with horizontal resistance (ascending wedge pattern).
  • If you’re looking for additional trade ideas, check out our Trading Guide and if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article, we warned that the recent top-side move in GBP/JPY might have room to run. This was based upon the two-pronged impact of a) no rate cut out of the BOE and b) the prospect of additional stimulus coming from Japan. So despite the veracity of the previous down-trend, such significant changes in the macroeconomic backdrop in GBP/JPY made for the prospect of a continuation of the reversal until, eventually, we may see a new trend develop.

Since that last article, we’ve seen GBP/JPY continuing to carve-out higher-lows, further confirming this thesis. But gains have continued to be tempered by near-term resistance at 140.63, which is the 61.8% of the ‘Brexit-move’ in GBP/JPY. This horizontal level of resistance to go along with inclining lows highlights an ascending wedge formation on the daily chart (shown below).

GBP/JPY Technical Analysis: Five Days of Res at the 61.8, but Not Quite Bearish

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

The type of congestion seen in a wedge pattern often preludes a big move. This type of digestion will often take place around trend-changes, as sellers that are late to the party get offset by buyers looking to jump on the new trend’s direction. Given the amount of resistance seen at this 61.8% level, the point of control for sellers becomes obvious; but it’s the higher-lows that make the setup interesting as buyers are getting increasingly more aggressive and incrementally less-patient as they try to get long in GBP/JPY.

Given that we have a fairly well-heeled form of near-term resistance, traders can wait for the wedge to actually break before looking to get long. To do this, traders would want to wait for price action to find near-term support on this current level of resistance. This would necessitate a top-side burst higher before the long entry could be taken off of support, but if this move in GBP/JPY truly becomes a new trend, there are numerous top-side levels to look to for profit targets; and traders would likely be able to get more amenable risk levels by placing stops underneath the next iteration of ‘higher-low’ support.

GBP/JPY Technical Analysis: Five Days of Res at the 61.8, but Not Quite Bearish

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: Pair Could Test 6.6500 Next

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

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Talking Points:

- USD/CNH broke below the 6.7 handle and short term support at 6.6860

-The failure to hole above might put focus on possible support at 6.6500

- A hold above 6.6500 could signal that the bulls are still in control

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The US Dollar is trading lower versus the Chinese Yuan in offshore trade as the pair broke below key support levels at the 6.7 handle and 6.6860.

As we mentioned in the prior report, price failing to hold above 6.7 and 6.6860 might put the focus on the 6.6500 level which could potentially act as support again.

A hold above the level appears crucial from a technical perspective in order to see that the bulls are still in control. A break below the level may imply that the 6.6 handle could be tested.

A move higher seems likely to have eyes at the 6.7 handle for possible resistance.

USD/CNH Daily Chart: July 21, 2016

USD/CNH Technical Analysis: Pair Could Test 6.6500 Next

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

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




CAC 40 Trades Sideways Into the Weekly Close

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

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Talking Points

  • CAC 40 Consolidates in a 100 Point Range
  • Current Resistance for the CAC 40 is Found at 4,400
  • If you are looking for more trading ideas for equities markets, check out our Trading Guides

The CAC 40 is little changed in today’s trading and is up just .09% on the session. Orange telecom is leading the Index, trading up +2.36 %. Today’s minor advance marks the fifth consecutive day of consolidation for the CAC 40. Pending an aggressive move into the weekly close, the Index will remain inside of key values of daily support at 4,300 and resistance at 4,400.

CAC 40, Daily Chart

CAC 40 Trades Sideways Into the Weekly Close

(Created using Marketscope 2.0 Charts)

Technically the CAC 40 is finding intraday resistance at the R4 Camarilla pivot point, at 4,384. If price breaks above this value, it opens the Index up to make an attempt on the daily point of resistance mentioned previously. If the CAC 40 is rejected here, traders should look for price action to fall back inside of today’s trading range. This range is depicted below and begins at 4,369. A move under the R3 pivot here suggests that the CAC 40 may continue to decline and then continue to test values of support. S3 support is found at 4,342, and the S4 pivot resides at 4,327 for the session.

CAC 40, 30 Minute Chart

CAC 40 Trades Sideways Into the Weekly Close

(Created using Marketscope 2.0 Charts)

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

Sentiment for the CAC 40 (Ticker: FRA40) is practically flat with SSI (speculative sentiment index) reading at -1.14. This value remains slightly negative with 53% of positioning short relative to 47% long. If SSI remains neutral, it may suggest further consolidation for the CAC 40. Alternatively, if prices breakout higher, SSI may shift towards a more negative extreme. Alternatively, if prices break under support, traders may look for SSI to flip to a positive reading.

CAC 40 Trades Sideways Into the Weekly Close

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WTI Crude Oil Price Forecast: Late Week Breakout Exposes New Lows

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

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Talking Points

  • Crude Oil Technical Strategy: Favoring Downside Under $44.70
  • Critical Daily Support Found at $43.00
  • Sentiment Points Toward Price Declines; 56% of Positioning is Long

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The price of WTI Crude Oil (CFD: USOil) is breaking lower this Friday, ending a significant period of consolidation for the commodity. Crude Oil prices had previously been range bound between resistance at $46.90 and support at $44.47. With this morning’s breakout, prices are now trading off new weekly and monthly lows, which currently reside at $43.90.

WTI Crude Oil Price (UsOil), Daily Chart

WTI Crude Oil Price Forecast: Late Week Breakout Exposes New Lows

(Created using Marketscope 2.0)

This daily breakout lower, has signaled a resumption of bearish momentum that has been developing since Crude Oil put in its 2016 high at $51.64. This high is still working as a value of resistance for the commodity, but next support may be found near the May 2016 low at a price of $43.00. A move through this value next week would be significant. It would suggest that the 2016 rally has indeed faltered, and open the commodity up to further speculation on further price declines.

Traders should note that if prices rally above $43.00, it opens Crude Oil prices to technically trade in a series of consolidating price patterns. In this scenario, traders should continue to monitor the market for the creation of new highs to symbolically represent the resumption of Crude Oil’s bullish trend.

WTI Crude Oil (UsOil) Daily Chart

WTI Crude Oil Price Forecast: Late Week Breakout Exposes New Lows

Sentiment for WTI Crude Oil (Ticker: USOil) has flipped positive with SSI (speculative sentiment index) reading at +1.30. With 56% of positioning net long, this may indicate further losses for Crude Oil prices. In the event that Crude Oil prices break lower, traders may look for SSI to move towards a positive extreme of +2.0 or greater. Alternatively, if Crude Oil bounces from support, SSI may flip back to a negative reading.

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WTI Crude Oil Price Forecast: Late Week Breakout Exposes New Lows

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Gold Prices Are Attempting to Carve Out Higher-Low Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the continued up-trend in Gold and the fact that despite its recent bout of strength, the move was looking quite overbought as indicated by diverging relative strength on the 4-hour chart. And given the way that the top-side move has built in Gold of recent, with strong and quick bursts in the trend-side direction followed by slower, grinding yet bearish price action on retracements; looking for a deeper retracement could be a far more attractive way of trying to catch the top-side move rather than chasing whilst near highs.

Since the short-term top was set last week just .01 above the prior swing high of the previous week, price action in Gold has continued in a bearish short-term pattern of lower-lows and lower-highs on the 4-hour chart. This set a fresh near-term low on Thursday of last week at $1,320, which is near the top-end of the ‘S2’ support zone that we had identified in our previous article; and since that short-term low was set, we’ve seen multiple instances of buyers coming in to further support gold prices above this level, producing a series of short-term higher-lows on the 4-hour chart (indicated below by the up-ward sloping red line).

On the chart below, we’re looking at the 4-hour variation in Gold prices; and notice how the blue box indicates numerous iterations of support as indicated by elongated wicks, signaling buyers coming-in to the market, helping to produce the series of higher-lows that’s been showing of recent.

Gold Prices Are Attempting to Carve Out Higher-Low Support

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

Traders looking to treat the Gold setup aggressively could look at this attempt to carve-out higher-low support as a potential top-side entry.

For traders that want to tread a bit more conservatively, a deeper retracement could be sought to the more well-heeled, better tested zone of longer-term support/resistance in the $1,283.82-$1,301.61 range, with each of those price levels being derived from longer-term Fibonacci studies. The area around $1,283.82 has two relevant Fibonacci levels within $2 of each other, while $1,301.61 is the 50% retracement of the post-Financial Collapse move in Gold prices.

Gold Prices Are Attempting to Carve Out Higher-Low Support

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

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

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Silver Prices: Holds Support, but Not Buying It Yet

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

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What’s inside:

  • Silver bounces off NFP-day lows
  • Market very long silver, making it difficult to get onboard
  • Short-term series of lower highs and lower lows remains in place until it doesn’t

Yesterday, silver prices tagged the NFP-day low almost to the penny before reversing strongly higher to take back most of the prior day losses. But we aren’t buying that it will hold just yet.

Silver still has a fully-loaded boat of large silver traders long in the futures market (record long), of which their net position may have been reduced this week, but we won’t likely find that out in today’s COT report given it is for the week ending on Tuesday. The real meaty move lower came on Wednesday. At any rate, crowded trades are not where we want to be, but if price action suggests the crowd is right, though, then they are, at least until they aren’t. So far, broadly speaking they have been right, minus the newly minted long positions in the past three weeks.

The short-term chart still points lower since peaking on 7/11. During the Asian session, silver turned lower off a trend-line which runs off that peak created nearly two weeks back at 20.66. Lower lows and lower highs have been marking the trend lower.

At this time a move above the trend-line will be required to break the series of lower highs and lower lows, and until then silver leans bearish, neutral at best. A breakout above may not lead to a new leg higher, but the 20.66 area could be achieved as a broader daily range continues to build.

The support right around 19.20 will be pivotal; if the metal breaks below there, then a move into the mid-18s becomes the risk. Which is a spot that holds significant as long-term support. Perhaps by then some of the speculative longs will have puked out their positons and a possible reload for another shot higher could take shape. It is still too soon to discuss that, so we will stick with the short-term structure suggesting some work needs to be done by the bulls to turn the technical structure positive.

Silver (XAGUSD) 2-hour w/weekly inlays

Silver Prices: Holds Support, but Not Buying It Yet

Follow trader positioning in real-time via the ‘Speculative Sentiment Index’ (SSI).

---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.




S&P 500: Market Conditions Ripe for a Decline, Price Confirmation Needed

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

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What’s inside:

  • Market conditions remain ripe for a decline, but…
  • Price action needs to validate these conditions first
  • Support and resistance levels outlined

Yesterday, we discussed some factors which suggest the market is due for a pullback at the least: high level of complacency, signs of waning breadth, and the market’s unkind treatment of buyers who enter after achieving new record highs. For details, check out yesterday’s commentary.

So conditions are set for a decline, right? But it doesn’t mean anything until price action validates those conditions. At the present moment there are no signs of sellers stepping in aggressively. Yesterday, we saw sellers come in at one point, but a late day rebound made it nothing more than a very modest day down. It could be the beginning, but there is support below which needs to be cleared before we can think about gaining traction from the short-side.

The short-term, hourly chart shows us nothing more than sideways chop between roughly 2155 and 2176. Until the lower bound at 2155 can be undercut then the market will remain neutral to positive. A break below 2155 will open the door up for a move towards minor support at 2146, then the old record high at 2137, and below there the important pre-EU referendum high at 2127. Resistance is fairly steadfast at this time in the 2174/76 vicinity.

S&P 500: Market Conditions Ripe for a Decline, Price Confirmation Needed

For now, to reiterate, market conditions are set for a decline, but until price action moves in line with these conditions then our interest in shorts remains contained. For those who may be holding onto a long position, the short-term line in the sand is 2155. A breakout above 2176 at this time will likely have a difficult time garnering much interest.

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---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: Fails to Hold Above Monday Reversal High, Short-term Formation in Sights

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

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What’s inside:

  • ECB does/says nothing to spark volatility
  • Failed on attempt to break above the Monday key reversal day
  • Trend still up, but price instability suggests it could end soon

Yesterday, the ECB left monetary policy unchanged as expected, and largely disappointed by providing a vague outlook as to any additional measures it could take later this year or early next. The lack of any strong indication one way or another left markets relatively unchanged following the meeting. The DAX and other Eurozone equity markets and the euro all closed the day near the unchanged line.

The resulting close in the DAX formed a Doji-like reversal bar, with another failed attempt to stay above the key reversal day etched out on Monday. This indicates that sellers are in the vicinity, but the trend is still higher since the retest of the referendum lows.

The broadening top formation we have been discussing this week is working its way closer to becoming a reality. The pattern amounts to a reverse ascending wedge, which suggests growing instability as price swings increase in size with no material net gain with each new higher high. A swift move below 10100 will likely put the pattern in play and 9900 should arrive quickly. But as long as ~10100 support holds, then we must continue to respect the upward bias still in place.

DAX: Fails to Hold Above Monday Reversal High, Short-term Formation in Sights

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




FTSE 100: Continues to Maintain a Bid, Top-side Levels in Focus

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

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What’s inside:

  • FTSE 100 holding up well despite shove lower from resistance last week
  • Daily support and resistance levels outlined.
  • FTSE 100 and the British pound trade inversely

On Thursday of last week when we examined the price behavior of the FTSE 100, we noted the bearish daily bar off resistance extending back to August. It was a nice ‘pin’ bar reversal day, but the subsequent day the FTSE dropped down into the peak created on July 4 and reversed higher. It was our first area of support the market needed to undermine for the reversal day to be validated. So far that has not been the case, and to the contrary the FTSE is pushing back towards resistance once again. The Index could move into a range-bound period as it often does following strong moves, but the trend is higher until it isn’t. We will need to see another strong turn lower before we can consider becoming bearish.

Upside and down-side levels to be mindful of: Resistance comes in at the Thursday high of 6744. Beyond there, a couple of more peaks created last summer will come into focus should the market continue its post-Brexit rally; the July peak at 6813 and then the June high at 6874. Support comes in by way of the Friday low at 6610, and then nothing ready visible until the market moves back into the one-year resistance zone turned support in the 6400s.

FTSE 100: Continues to Maintain a Bid, Top-side Levels in Focus

Worth noting: Given the BoE’s ‘ready to take action’ stance the pound remains heavy as rates may soon be reduced to a record low 0.25% (August?) and perhaps other stimulus measures if the UK central bank feels it’s necessary. The FTSE 100 consists largely of international companies, so a weaker pound provides a boost to corporate profits. Prior to the EU referendum the one-year correlation between the FTSE 100 and GBPUSD was +61%, since the vote it has it moved to -50%. A relationship worth keeping tabs on, even if just from a risk management standpoint should one consider holding simultaneous positions in the FTSE 100 and GBP-related pairs.

Follow trader positioning in real-time with the ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




ASX 200 Technical Analysis: Rally Stalls at 5,500

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

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Talking Points:

- 5,500 acts as resistance to see a halt to the rally

- Index might need a “higher low” above 5,380-5,400 to confirms bulls are back in control

- A hold above those levels appears crucial for continued bullish conviction

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The ASX 200 appears to be seeing a halt to its latest upside surge, as the index seems to have found some resistance around the 5,500 figure.

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

After moving above the range top resistance, the index printed new 2016 highs, and upside conviction appears strong at the time of writing.

If the index manages to clear the 5,500 level, further upside gains may face resistance around 5,570-5,600.

With that said, the index might need to see a correction lower and find support around the 5,380-5,400 area to form a “higher low” in order to confirm the bullish momentum is here to stay.

A failure to hold above 5,380 may be seen as a bearish signal and put the focus initially on the 5,300 figure, which could act as support.

ASX 200 Daily Chart: July 22, 2016

ASX 200 Technical Analysis: Rally Stalls at 5,500

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

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




Nikkei 225 Technical Analysis: Recovery Might be Losing Traction

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

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Talking Points:

- Gains appearing to be corrective in the context of the near term downtrend, OBV divergence

- The 17,000 handle might be in focus as price edges higher

- Clear push below 16,500 may indicate downside momentum

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The Nikkei 225 is nudging higher after posting what seems to be a break above the 16,500 level.

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 16,500 figure is at about 50% of the 2016 trading range and seemed influential in the past for deciding short term directional conviction.

In this context, if price manages to stay above 16,500, short term momentum appears to be leaning to the upside, which might put focus on the 17,000 handle for possible resistance, before the 2016 range highs below 18,000.

With that said, OBV is showing a slight short term divergence on the move higher, while volatility is seeing a significant shift lower after the Brexit surge. Taken together, this might imply that the recovery is losing some momentum, and with reduced volatility resistance may be able to hold.

A clear move below 16,500 could signal that short term momentum favors the downside, which might put the focus on the 16,000 area for possible support.

A move below the 16,000 area could expose the 15,000 range lows once again.

Nikkei 225 Daily Chart: July 20, 2016

Nikkei 225 Technical Analysis: Recovery Might be Losing Traction

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

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