Support & Resistance

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EUR/USD Technical Analysis: Aiming to Extend Win Streak

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro on pace to deliver longest win streak since December 2013 vs. US Dollar
  • Looking for corrective gains to clear opening to sell in line with long-term trend

The Euro continues to push higher against the US Dollar, with prices poised to deliver the seventh consecutive day of gains. If strength continues into the daily close, this would make for the longest winning streak since December 2013 for the single currency.

Finishing the day above the 38.2% Fibonacci expansion at 1.1577 exposes the next upside barrier in the 1.1689-1714 area, marked by the 50% level and the August 24 swing high. Alternatively, a reversal below the 1.1439-65 zone (April 12 high, 23.6% Fib) paves the way for a test of the 14.6% expansion at 1.1353.

The long-term EUR/USD trend continues to look broadly bearish, painting recent gains as corrective. With that in mind, an actionable short trade setup is absent for the time being. As such, we will remain on the sidelines sand wait for signs of topping to offer a compelling selling opportunity.

Are FXCM traders buying or selling the Euro? Find out here!

EUR/USD Technical Analysis: Aiming to Extend Win Streak



USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

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

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Talking Points:

  • USD/JPY Technical Strategy: Burden Of Proof Squarely On Bulls, Selling Rips
  • Other JPY Crosses Providing More Excitement Due To Lack of Dollar Demand
  • BoJ Failure Brings Sharpest Move Higher To The Delight of Hedge Funds

Unevenly Distributed Gains in JPY Weakness

Nothing was the most bullish thing the Bank of Japan could have done on Thursday, and they did exactly that. Last week, an aggressive move off key support on rumors that the BoJ would bring negative interest rate loans as the next component of Abenomics. When a new form of easing failed to materialize, JPY bears capitulated by exiting their position and pushing some JPY crosses lower by ~4-5% over the last five days as we’ve see in the United States & Australian Dollar.

The reason given for the BoJ to hold off on new forms of easing was to wait and see how the January 29 announcement was impacting markets. Given the rather dovish Federal Reserve rate announcement on Wednesday, the JPY jumped by the most since 2010. Additionally, the Bank of Japan also appears to no longer be interested in meeting market demands, which is usually more easing, and more interested in a wait-and-see approach that could lead to more JPY strength throughout the summer.

Happy Hedge Funds:

Recently, we noted that the Commitment of Traders Index released by the CFTC shows speculators in large institutions are heavily biased in the direction of lower USD via DXY and long JPY futures or bearish USD/JPY.

In both the US Dollar & JPY the COT Index, which is the difference between net speculative positioning and net commercial positioning measured is at its largest in over a year. The argument made by the CoT Index is that speculators for institutions are pushing the US Dollar lower & JPY higher or USD/JPY down.

Now The 108 Failed to Hold, We Could Be Heading Toward 106.30-105.18:

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

Key Technical Levels:

The chart above zones in on the chart we showed you on Wednesday’s post where we discussed the importances of the 55-DMA. Earlier this week, the 55-DMA, which is sitting around 111.80, acted as ideal resistance on the move from 107.93 to 111.87 before pushing aggressively lower to touch new 18-month lows.

Therefore, strong trend-defining resistance is very clear at the 55-DMA. Traders who understandably want more confirmation can wait for a break above the Ichimoku cloud to signal a trend change may be under way. Support becomes a bit more tricky when looking at 18-month lows, but we’re not without a few good targets.

First, the Bearish Head & Shoulder’s target for a full move, 100% of the neckline to pattern apex sits around 106.30. As of Friday morning, USD/JPY is sitting ~100 pips away from that target. Beyond the long-term Bearish Head & Shoulder’s target lies the October 15, 2014, low. This level is marked on the chart above and is at 105.18. A breakdown below this level, once thought impossible would turn focus to the big 100 figure and the Hedge Funds would be in a state of sheer jubilation.

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

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

As of mid-day Friday, the ratio of long to short positions in the USDJPY stands at 2.78 as 74% of traders are long. Yesterday the ratio was 1.98; 66% of open positions were long. Long positions are 6.5% higher than yesterday and 31.8% above levels seen last week. Short positions are 10.0% higher than yesterday and 26.1% 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 USDJPY may continue lower.

Shorter-Term USD/JPY Technical Levels

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

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?



GBP/USD Technical Analysis: RSI Divergence on the 4-Hour

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at a potential bearish reversal pattern in GBP/USD after the pair had run into a stubborn Fibonacci resistance level. As we had written, there weren’t yet enough signs of a turn to trigger the bearish position; but there were enough warning signs to allow for a market closure of the previous bullish position.

Since then, the Cable has continued to run higher, breaking above the pivotal swing-high at 1.4668, and coming within 120 pips of the 2016 high in the pair (set on January 4th). The pair is overbought by many metrics, and 4-hour RSI has begun to show signs of divergence as higher-highs are printing on price action while lower-highs are showing on the indicator (shown below).

Again, this is a bearish signal potentially highlighting a nearby turn: RSI divergence is indicative of a waning trend. But at this point, price action does not agree as we’ve seen continued higher-highs and higher-lows. The level of interest for top-side re-entries is 1.4572, which is the 61.8% retracement of the 30-year move in GBP/USD, using the low of 1.0500 when George Soros ‘broke’ the Bank of England with the high set in 2008 just before the Financial Collapse.

Traders could look for top-side re-entries should price action move down to find support at this level. Or for those that wanted to look to get long at a slightly more conservative level could wait for support to show at the 1.4471 zone, which is the 23.6% retracement of the most recent major move. If prices put in a concerted break below this support (highlighted with a daily close below this level); then bearish positions may be shortly on the horizon as price action would be in the early stages of showing bearish formations.

GBP/USD Technical Analysis: RSI Divergence on the 4-Hour

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: Why You Should Watch This Opening Range

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

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Talking Points:

  • US Dollar Technical Strategy: Short Bias Favored Below 11,850
  • 21-DMA Continues To Act As Firm Resistance on Move Lower
  • Opening Range Breakout Would Offer Enticing Value Breakout/ Buy

After printing a 14-year high on January 29 when the Bank of Japan announced negative interest rates, the US Dollar Index has fallen by a little more than 5%. While Momentum can be a self-sustaining phenomenon, it's worth paying special attention to the US Dollar this Month. Specifically, the May Opening Range and keep on alert for a bullish breakout.

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

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

To some, the chart may appear to show the US Dollar may have topped. Unfortunately, we’re not sure if that’s the case. However, you will be able to note on the chart going back to Sprint 2003 that the US Dollar has recently turned lower off resistance and has now found support. Additionally, US Dollar typically from a seasonal point of view (a strategy that played well in April) outperforms in May.

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

A theme that we’ve continued to track, and that doesn’t appear to be letting up is the driving force for US Dollar bearishness with hedge funds and other institutional speculators. Such a development of an institutional bias to sell-USD shows that the path of least resistance continues to favor more downside. Looking at the recent Commitment of Traders report from the CFTC, the difference between the Commercial Hedgers and Institutional Speculators is at a 52-week extreme with hedgers long, and speculators short as speculators are the shortest they’ve been since Summer of 2014.

Additionally, one environment that has favored US Dollar strength has been volatile environments. Recent Macro Events have passed leaving little fear now and focus turning to the EU Referendum and the potential Brexit outcome as the next key event risk. The only problem for those wanting volatility (and wanting it now) is that the referendum vote is nearly 2-months away. One scenario to be on the watch for if May doesn’t bring out the USD Bulls is that we could be entering a grind lower in the US Dollar like we also saw in the low-volatility environment of 2014, which did ultimately lead to a breakout. However, the breakdown took place after many speculators left the Dollar position out of boredom only to be nearly forced back in due to the velocity of the move.

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

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

In the chart above, you’ll note that the top line of the short-term bearish (red) channel hasn’t been touched apart from the later February high where the channel was originated. The upper channel line aligns with the 21-DMA around 11,847. Earlier, we spoke about the significance of an opening range breakout for the month of May, a move above the 21-DMA would also be significant as the price of the US Dollar has failed to sustain itself above the 21-DMA since early March. The Monday morning low aligned nicely with the median line of the channel discussed earlier that has provided trend- support in the current move.

Below the current 2016 low on Monday of 11,716, traders can look to the May 15 low of 11,634. You’ll also see on the first chart that US Dollar is resting on the floor of a 13-year channel support line. Given the environment, we see now, a break below the channel support line and May 2015 low at 11,634 appears to be the higher probability view as opposed to Dollar buying beginning aggressively.

Shorter-Term US Dollar Technical Levels

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

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

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

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T.Y.




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

Price Action, Swing & Short Term Trade Setups

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Talking Points:

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

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

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

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

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

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

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AUD/USD Technical Analysis: Selloff Stalls at Key Support

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

AUD/USD Technical Analysis: Selloff Stalls at Key Support



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

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

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Talking Points:

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

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

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

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

Key Support Levels from Here (Visual Map Below)

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

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

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

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

Canadian Dollar Rally Looks Steady per Sentiment

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

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

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

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

Key Levels As Of Tuesday, April 27, 2016

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

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T.Y.




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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

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



EUR/GBP Technical Analysis: Eyeing Resistance Above 0.79

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro breaks monthly channel resistance, hints at move above 0.79 vs. Pound
  • Dominant long-term trend still points downward, painting gains as corrective

The Euro is attempting to rebuild upside momentum against the British Poundafter prices found support above the 0.77 figure. The pair has broken out of the falling channel established from swing highs set in early April, seemingly shifting the near-term bias back in favor of the upside.

A daily close above the 38.2% Fibonacci expansion at 0.7913 opens the door for a challenge of the 50% level at 0.7968. Alternatively, a reversal back below the 23.6% Fib at 0.7845 clears the way for a test of the 14.6% expansion at 0.7803.

Our entry order to sell EUR/GBP at 0.7800 was triggered but prices subsequently stopped out the position on a close above 0.7849. We will move to the sidelines from here, waiting for another opportunity to sell in line with the long-term down trend when the opportunity to do so presents itself.

What do DailyFX analysts expect from the Euro and Pound in 2016? Find out here!

EUR/GBP Technical Analysis: Eyeing Resistance Above 0.79



EUR/JPY Technical Analysis: Bullish Structure Continues

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Flat.
  • EUR/JPY continues to run higher with a recent higher-low point of support established at ~125.00
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

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

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

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

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

EUR/JPY Technical Analysis: Bullish Structure Continues

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

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

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

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY continues to run higher after hitting support off of the 27.2% extension of the prior major move.
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article we wrote about the Fibonacci extension on GBP/JPY at 151.61 that provided near-term support as the basis for a retracement in the longer-running down-trend. Since that article, the retracement hasn’t really calmed much, as price action has continually throttled up to higher-highs and higher-lows. This retracement extended on Friday, as rumors of a negative rate loans out of the Bank of Japan being issued to banks elicited further Yen weakness.

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

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

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

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

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




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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

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



CAC 40 Declines on European CPI Data

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

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Talking Points

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

CAC 40 30 Minute Chart

CAC 40 Declines on European CPI Data

(Created using Marketscope 2.0 Charts)

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

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

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

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

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

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

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

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Talking Points:

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

A Continual Change In Narrative Leaves Crude Bears In Doubt

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

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

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

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

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

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

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

Key Support Levels from Here (Visual Map Below)

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

Contrarian System Warns of Further Upside

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

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

According to client positions at FXCM, the ratio of long to short positions in the US Oil stands at -1.70 as 37% of traders are long. Short positions are 9.1% higher than yesterday and 59.6% above levels seen last week. Open interest is 13.2% higher than yesterday and 30.2% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives a signal that the WTI Crude Oil may continue higher. If the trading crowd grows further net-short, we could be in the works of an upside extension taking us closer to $50/bbl.

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

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

T.Y.

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Gold Prices: Too Hot to Handle, Too Shiny to Ignore

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article we looked for another top-side entry in the Gold market. As we had just printed an evening star formation on the daily chart while still remaining constrained within the prior area of congestion, it was likely wise to wait for support to become more confirmed before pressing another top-side entry. That support came in a bit deeper 24 hours later, and since then Gold has caught a major bid to break up to new highs; giving the appearance that the past 2.5 months of congestion may be giving way to a legitimate top-side breakout.

A large contributing factor to this recent run has been the aggressive moves of weakness in the US Dollar, and this has sent many major pairings flying higher (like GBP/USD, and even EUR/USD).

Now traders have the challenging prospect of looking for fresh top-side re-entries after Gold has staged yet another bullish breakout. And given the scope of extreme USD-weakness over the past week, and to a greater degree over the past three months, it would likely behoove the trader to wait for a more attractive entry while USD drops down to deeper and deeper support levels.

On the chart below, we look at three different support zones in Gold that could be helpful for plotting that re-entry. At $1,283.82, we have the 38.2% Fibonacci retracement of the ‘big picture’ move in Gold, and this is the level that had provided a clear swing high in March. A little deeper at $1,270, we have a very recent price action swing high that could become usable, and a little below that at $1,251.74 we have a well-tested level that was 23.6% of the prior major move.

Traders would want to wait for support to show at each of these intervals before triggering, and for those that want to avoid aggressive entries, the level at $1,270 would likely be optimal for that next long position given the more recent tests of resistance at this interval (swing high on 4/21/2016).

Targets for top-side entries can be cast towards prior levels of interest, with $1,283.82 becoming an active target for $1,270 entries or below; after which $1,301.61 becomes a secondary target, as this is the 50% Fibonacci retracement of the 2008-2011 move; followed by $1,307.49 (the 2015 high). If we eclipse that, we’d be looking at a 20-month high in the Gold market, at which point breakout trade management could be utilized on any remainder of the lot.

Gold Prices: Too Hot to Handle, Too Shiny to Ignore

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

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

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Silver Prices Give Back Some of Last Week’s Gains

Global Macro and Momentum Trading

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Talking Points

  • Silver prices give back some of last week’s gains.
  • The very short-term trend is bearish below this London morning’s high of $17.70.
  • There are no key data reports on deck today.

Silver prices were correcting against a multi-day bullish trend at the time of writing.

Prices reached a high of $18 on May 2 and created a new lower swing low at the $17.70 level this London morning. This leaves the very short-term tend bearish since May 2. However, for now this is a short-term trend within a longer-term bullish trend.

The longer-term trend is bullish above the April 27 low of $17.03 as it is a higher swing low in relation to the April 21 swing low of $16.73. It could be that prices may turn a bit choppy when the two trends meet.

The next short-term support level could be the April 27 high of $17.40, followed by the April 27 low of $17.03 and the April 21 swing low of $16.73. Short-term resistance levels are this morning’s high of $17.70, followed by last week’s high of $18 and the 2015 high of $18.46.

Drivers of price action as of late have been a soft USD and softer stock markets, which has kept precious metals such as silver and gold supported.

Yesterday, the U.S. ISM Manufacturing index slipped to 50.8 from 51.8 and below the economist consensus estimate of 51.4. This highlights that the manufacturing sector is indeed soft, something which the Fed already pointed out as a trouble spot for the U.S. economy. On the other hand, the inflation gauge of the ISM indicator, ISM Prices Paid, rose to 59 from 51.5 and beat the 52.0 expected. This strong rise to Prices Paid may hint of higher than expected inflation in the U.S. economy and could pose a dilemma for the Fed; should the focus on sluggish growth hold back any rate hikes or should the approach be one of combating rising inflation? This is an important question for silver prices as historically a move toward a rate hike has often softened silver prices whilst the USD has gained.

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

Silver Price | CFD: XAG/USD

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




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

Price Action, Swing & Short Term Trade Setups

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Talking Points:

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

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

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

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

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

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

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

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

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

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

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

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DAX 30 Slides, Caixin China PMI Manufacturing Disappoints

Global Macro and Momentum Trading

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Talking Points

  • The DAX 30 slips as Auto manufacturers and Basic Material Sectors trade lower.
  • Caixin China PMI Mfg. for April declined to 49.4 from 49.7 and thereby failed to meet the Bloomberg news projection of 49.8.
  • The trend of the DAX 30 is downwards and the April 29 high of 10,253 is the last swing high of importance.

The DAX 30 (CFD: GER30) was lower by 1.89% at the time of writing. The softest sectors are Basic Material and “Consumer, Cyclical” (Auto manufacturers and related firms), while Financials and Consumer, Non-cyclical are outperforming.

At this stage, there is no strong consensus behind the trigger of today’s decline, but we note that overnight, the Caixin China PMI Mfg. for April declined to 49.4 from 49.7 and thereby failed to meet the Bloomberg news projection of 49.8. The soft Chinese data reports tend to affect the Basic Material sector, which is today’s biggest loser in the DAX 30 and the FTSE 100.

This morning, Markit UK PMI Manufacturing for April declined to 49.2 from 51 and vs. the 51.2 projected per a Bloomberg News survey.

Technically, the DAX 30 is short-term bearish as the price has been creating lower lows and lower highs following the April high of 10,488. The last swing low of importance for this short-term bearish trend is the April 29 high of 10,253.

The next support level is the April 18 low of 9910, followed by the April 11 high of 9750 and the April 12 low of 9619. Resistance levels are yesterday’s high of 10,155 followed by the April 29 high of 10,253 and the April 28 high of 10,334.

The next data report on deck, which might affect the DAX 30, is Eurozone Producer Price Index. It is a relevant indicator as changes to the Producer Price Index may affect the Consumer Prices Index, which in turn affects the monetary policy of the ECB. A Bloomberg economist’s survey projected a decline of 4.3% YoY from 4.2% in February.

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

DAX 30 | CFD: GER30

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100 Trades Lower Ahead of UK Manufacturing PMI

Global Macro and Momentum Trading

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Talking Points

  • The FTSE 100 trades sluggish as it is trapped between strong support and strong resistance.
  • In the short-term, the trend is bearish because following the April high of 6432, price has created a lower high on April 27 at the 6344 level.
  • This morning, Markit UK PMI Manufacturing for April is on deck and expected to rise from 51 to 51.2.

The FTSE 100 (CFD:UK100) remains sluggish as the April low of 6060 supports price and the November 4 high of 6461 caps it.

Price spent a considerable time supported and limited, by the 6060 and 6461 levels respectively. Between late February and early April, the 6060 level supported the FTSE 100, while price spent two months last year trying to breach the November 4 high of 6461.

It appears now that market participants are hesitating to act and are waiting for a breach to either the 6060 support level or the 6461 resistance level. As strong support and resistance trap price it could explain the sluggish price action since April.

In the short-term, the trend is bearish because following the April high of 6432, price created a lower high on April 27 at the 6344 level. Lower highs and lower lows create a downtrend. Short-term support levels ahead of the April 6060 low are last week’s low of 6222, the April 11 low of 6163, and the April 7 low of 6108.

The April 24 high of 6344 is a short-term resistance level, followed by the April high of 6432 and the November 4 high of 6461.

Overnight, the Caixin China PMI Mfg. for April declined to 49.4 from 49.7 and thereby failed to meet the Bloomberg news projection of 49.8. The business press cited this as a drag on Asian stock market indices, while the FTSE 100 has so far appeared to ignore this news. This morning, Markit UK PMI Manufacturing for April is on deck and expected to rise from 51 to 51.2.

With the UK PMI at level 51 in March, the output growth remained unchanged from February’s seven-month low and manufacturing job losses have been recorded for a third straight month. Rob Dobson, Senior Economist at Markit said that with the industry hovering close to the stagnation mark, it would struggle to make a meaningful contribution to GDP.

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

FTSE 100 | CFD: UK100

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Sustains Advance above 3-Month High


Talking Points:

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

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

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

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ASX 200 Sustains Advance above 3-Month High

Daily Chart - Created Using FXCM Marketscope

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

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Nikkei 225 Retraces below 50% Fibonacci


Talking Points:

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

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

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

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Nikkei 225 Retraces below 50% Fibonacci

Daily Chart - Created Using FXCM Marketscope

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

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Contact and follow Nathalie on Twitter: @nathuynh