Support & Resistance

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EUR/USD Technical Analysis: Short Trade Hits First Target

Fundamental analysis, economic and market themes

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Talking Points:

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

The Euro turned sharply lower against the US Dollar, with prices issuing the largest one-day decline in a month and establishing a foothold below the 1.13 figure. The single currency established a top after producing a Shooting Star candlestick on a test of the 1.16 mark, as expected.

From here, a daily close below the 1.1196-1.1215 area (38.2% Fibonacci retracement, April 25 low) clears the way for a challenge of the 50% level at 1.1067. Near-term support is at 1.1357, the 23.6% Fib, with a move back above that seeing the next upside barrier at 1.1456 marked by the 14.6% retracement.

A short EUR/USD trade was triggered at 1.1317. Prices have now hit the initial target at 1.1215 and half of the position has been booked. The remainder of the trade will remain active to capture any further weakness. The stop-loss has been adjusted to the breakeven level.

Retail traders are net-short the Euro.What does that mean for the trend? Find out here!

EUR/USD Technical Analysis: Short Trade Hits First Target



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

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

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Talking Points:

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

Unevenly Distributed Dollar Strength Has JPY Weakness In Question

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

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

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

USD/JPY Has Run Into Strong Ichimoku Cloud Resistance

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

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

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

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

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

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

Key USD/JPY Technical Levels:

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

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

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

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

USD/JPY SentimentShould Be on Watch Of Resistance Holding

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

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

Shorter-Term USD/JPY Technical Levels

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

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



GBP/USD Technical Analysis: Straight Up, No Chaser

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the continued bullish structure in GBP/USD despite the fact that we had just seen five consecutive days of softer prices. As we had written, price action staying above the Fibonacci support level at 1.4302, or the most recent ‘higher-low’ in the pair maintained the bullish structure in the pair. We pointed to the upcoming batch of announcements set to come out during Super Thursday, when the Bank of England had a rate decision while also releasing the minutes from that meeting along with Quarterly Inflation Forecasts as the potential driver behind the next wave of Sterling volatility. Such an event is an opportune time for trends to confirm or die-out; and as we wrote shortly after the announcement the GBP/USD would likely remain a viable candidate for those looking to sell US Dollars despite the fact that the Bank of England reduced growth and inflation forecasts.

Since last Thursday, we’ve seen a major gust of strength in the Cable, and this only furthers the bullish structure that’s been building in the pair for the better part of the past 2.5 months. The obfuscation at this point is one of entry, as we’re more than 200 pips away from that most recent support inflection at 1.4412, and the 2016 high in the pair is a mere ~50 pips away. So risk-reward may be a challeng on continuation setups at this point. Also of interest is price action behavior once we approach that 2016 high; and whether we can punch through to the other side or whether we make a higher-low before investigating reversal setups.

For traders looking to get long, there are two support levels to watch for that next batch of ‘higher-low’ support. The price zone between 1.4550 to 1.4572 could be a key area of interest. The price of 1.4572 is the 61.8% retracement of the 31-year move in the pair, taking the 1985 low of 1.0500 to the 2008 high of 2.1160 (shown in black on the below chart). Perhaps more importantly, this level has seen quite a few price action inflections since that high was made just before the Financial Collapse, and so far on the trading day price action has broken through that price with little regards for resistance. Twenty-five pips below that level we have the 23.6% retracement of the most recent move, taking the February low to the May high in the Cable (shown in purple below). Traders can look for price action to develop support in this zone before triggering long with targets cast towards that 2016 high of 1.4769.

For traders that want to approach a bit more conservatively, there’s another batch of potential support to watch in the 1.4371-1.4412 vicinity. The 1.4371 level is 76.4% retracement of the 2009-2014 move and 1.4412 is the 38.2% retracement of that same most recent major move.

GBP/USD Technical Analysis: Straight Up, No Chaser

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: Is a Weak Dollar Frustrating the Fed?

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

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Talking Points:

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

The April minutes on Wednesday afternoon provided fuel for the May trend to continue aggressively. After the meeting, the probability of a rate hiked in June jumped to 23% after sitting at less than 5% probability earlier in the week.

Recently, we’ve seen an unusual environment where the Federal Reserve Presidents try to be convincing the market that they’re serious about two rate hikes in 2016. Earlier this week, the probability of a June Rate Increase per Bloomberg sat at a measly 4% probability the first “price-in” hike, not until December.

Today, that number has moved up to as high as 16% and could continue to rise into the June Meeting, which inconveniently lands a little more than a week before the EU Referendum. On Tuesday, Dallas Federal Reserve President Robert Kaplan noted that the EU Referendum would play into the Fed’s decision on rates in June.

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After, the stalwart showing from the American Consumer last week, we’ve continue to see the US Dollar sit near the highs 8-week highs. The seasonality has favored US Dollar strength, and so far, that appears to be aligning with the May 2015 lift-off in the US Dollar. However, the burden of proof for correct market view currently lays on US Dollar Bulls, which may now include the Fed. The US data will continue to be filtered through the lenses of the recent April FOMC minutes, however, if the data doesn’t pick up significantly, it seems unlike that the Fed would try and shock the market awake with a rate hike just to show they were serious. Especially, as Kaplan noted, ahead of a significant potential risk like ‘Brexit.'

Hedge Funds Still Hate the US Dollar, And That’s Starting To Hurt

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

The above chart shows a little over a year’s worth of price data on the US Dollar Index. Earlier, I shared that one of the valuable technical tricks I’ve picked up over the years was to keep an eye on the price range of an extreme day for a potential pivot in price. The bottom rectangle shows the price range for the May 14, 2015, low, with a price range of 11,680/34. Looking to the far right of the chart, you’ll see that we came to that price range while within the corrective channel (red) and then aggressively moved higher by ~2.65% or 309 points on the index.

One thing the chart doesn’t show you is that the amount of Dollar bears among hedge funds sit near 52-week lows. To me, this means the breakout risk is high if the Fed continues to rattle their rate-hike stick at the market and hedge funds are forced to cover their short trade by buying. Here’s a helpful chart put together by Jamie Saettele that shows ~10 years of positioning in the US Dollar Futures market (DXY), and the red line on the bottom shows you net positioning by institutional speculators:

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

Swing US Dollar Chart Favors Focus on April Pivots of 11,953 & 11,907

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

In the chart above, you’ll note that the top line of the bearish channel has been broken. Given the seasonal tendencies, this is undeniably bullish. However, we still sit under important resistance that you should keep on watch.

First, for good measure, I drew a 25% extension sliding parallel off the upper parallel line of the 3-month channel that has held price so well. The sliding parallel sits right below the current monthly high of 11,956 and the 50% retracement of the February-May range at 11,945. The significant resistance that if broken would open the door to new highs is 12,001, which was the February Opening Range low.

Since we’ve now taken out the April highs that we mentioned in the last technical note, support is of less interest to us than resistance as the wind may be at the Bull’s back. ST support is currently the weekly opening range low of 11,893, which was a double-tapped level on Tuesday before pushing higher into the FOMC Minutes release.

Should the weekly low break, there is a confluence of significance at 11,850/55. 11,850 is the 38.2% of the May Range, and should be the first focus of any trend set-back. 11,855 is the May 11 low that was the first setback above the 21-DMA, also near 11,850 that eventually gave way to a 100+ move higher.

The Dollar Is Strong But Pick Your Poison Wisely

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

Shorter-Term US Dollar Technical Levels

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

US DOLLAR Technical Analysis: Is a Weak Dollar Frustrating the Fed?

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T.Y.




USD/CHF Technical Analysis: New Two-Month High Furthers Bullish Structure

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at old resistance becoming new higher-low support in USD/CHF. The fact that this took place around the key Fibonacci level of .9681 made it all the more compelling, as this is the 50% Fibonacci retracement of the 2008 high to the 2011 low in the pair. This is also a level that’s seen considerable price action in the nearly five years since it’s completion; so it rightfully remains as a key area for traders to work with in the current price vicinity on USD/CHF.

We’re seeing another instance of old resistance becoming an interesting level at .9800, as this is the 76.4% retracement of the prior major move, taking the January high the February low in the pair. This is also the level that stalled-out the April advance in the pair, as the prior swing high was less than five pips away from this Fibonacci level.

For traders looking to re-load on the long-side of the move, the major psychological level of .9750 could be particularly interesting. This price caught a quick inflection yesterday morning, and continued support north of this level could highlight the potential for top-side continuation. Traders looking to get long can wait for support to build in this region between .9750-.9800 before triggering the top-side position.

For traders looking to implement a short-side thesis in the pair, waiting for a break of the .9660 level could open the door for bearish positions as this key support level giving way could indicate the potential for continued bearishness in the pair.

USD/CHF Technical Analysis: New Two-Month High Furthers Bullish Structure

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

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

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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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



USD/CAD Technical Analysis: Can The Bulls Go The Distance?

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

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Talking Points:

Wednesday saw a strong break higher in USD/CAD. First, the move higher off the weekly pivot developed on volatility in WTI Crude Oil (CFD: US Oil), but followed through with the resilient US Dollar getting more fuel for the potential road ahead at the hands of the Federal Reserve’s release of April FOMC Minutes.

Surprising to many, WTI Crude Oil has recently broken away from many prior correlations that held at the beginning of the year. As of today, the 30-day correlation of SPX500 to Oil hit YTD low of +0.18 on a correlation coefficient reading whereas +1.00 is a perfectly positive correlation.

Today’s DOE Inventory data surprised investors as the EIA reported that there was a surprisingly large build of North American inventories to the tune of ~1.3mn/bbl. Many were expecting a large drop due to the devastating wildfires in the Oil-rich are of Alberta Canada. Much of the gain in inventories were at the hands of Iraq supply coming at its highest clip in ~2yrs.

In addition to the divergence of the Oil correlation and US Dollar strength, directional guidance can be found in the US/CA 2-yr sovereign yield. In addition to sentiment, explained below, US/CA 2-yr yield spreads have been helpful to see which Dollar has the upper-hand. Today’s move aligns with the widest yield spread favoring USD strength in a month, and we’ve moved to the 3-month average spread at -26.8, which could mean a further reversion to the mean (i.e. higher) could be in the works.

USD/CAD Is Breaking Out Of Multi-Month Bear Channel (H4 Chart)

USD/CAD Technical Analysis: Can The Bulls Go The Distance?

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Even with the above information, it appears now that USD/CAD is in a state of flux. You will see below that our proprietary Sentiment System shows a nearly flat market. Therefore, the potential for a breakdown or breakout from a positioning standpoint seems equally likely. However, Wednesday’s break above 1.3015 could entice mean reversion traders to jump in and try to chase and push USD/CAD toward 1.3250/33.

Key Support Levels from Here (Visual Map Below)

Regarding resistance, the important 1.3015 level has been taken out on the post-FOMC USD move. Recently, we warned of a bullish falling wedge breaking out toward the start of the wedge near 1.3250. Now that the price has broken above the recent weekly high of 1.3015, we could soon see a strong break toward ~1.3250-1.3300 that also aligns with the 38.2% Fibonacci Retracement of the January 20 to early May Range.

Two checkpoints that Bulls can keep an eye on is the Weekly Resistance levels from classical pivot points. The R1 sits at 1.3042, which is within an earshot of the price near the close on Wednesday. The Weekly R2 sits well within the Daily Ichimoku Cloud at 1.3150.

As of Mid-Day Wednesday, the LoD is near the weekly pivot, which shows the Bears never had control this week or for that matter, most of the month. Should the weekly pivot fail to hold up the price once again and start acting like resistance, we could see the downtrend regain its steam. Beyond the Weekly Pivot at 1.2905, recent price action support is aligned with recent corrective lows near 1.2775. The 34-DMA in yellow on the chart above aligns with the weekly low at 1.2830. Therefore, there is a lot of support between 1.2775-1.2906 that could bring nice levels for value buyers to load into a potential risk-adjusted trade.

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Canadian Dollar Has Lost Favor per Sentiment

When looking at sentiment, crowd positioning has neutralized after a strong downtrend. For those familiar with our model, USD/CAD provided one of the strongest signals for downtrend continuation from late February to May. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are near net-flat at a bull: bear of 1.12 as 53% of traders are long shows us a larger shift may be underway.

Long positions are 3.0% higher than yesterday and 12.6% above levels seen last week. Short positions are 4.7% higher than yesterday and 11.1% above levels seen last week. Open interest is 3.8% higher than yesterday and 3.9% below its monthly average. The neutralized positioning signal keeps us on high alert for the next big bias shift. As you can see, SSI has been particularly helpful with catching the big moves in USD/CAD.

USD/CAD Speculative Sentiment Index as of Wednesday, May 18, 2016

USD/CAD Technical Analysis: Can The Bulls Go The Distance?

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

Key Levels as of Wednesday, May 18, 2016

USD/CAD Technical Analysis: Can The Bulls Go The Distance?

T.Y.




NZD/USD Technical Analysis: Short Trade Confirmation Sought

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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NZD/USD Technical Analysis: Short Trade Confirmation Sought



EUR/GBP Technical Analysis: Euro Drops Most in 7 Months

Fundamental analysis, economic and market themes

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Talking Points:

The Euro plunged against the British Pound, issuing the largest one-day drop in seven months and taking out April’s swing bottom. Prices sit within a hair of confirming a large Head and Shoulders topping pattern that may mark the end of the upswing from mid-November and the resumption of the long-term decline in play since late 2008.

Near-term support is at 0.7683, the 38.2% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 50% level at 0.7549. The first significant level of resistance comes in at 0.7849, the 23.6% Fib, with a reversal back above that paving the way for a challenge of a horizontal pivot at 0.7928.

A short EUR/GBP position was entered at 0.7876.The trade has now hits its initial target at 0.7735 and profits have been booked on half of exposure. The remainder will stay open to capture any further weakness. The stop-loss has been adjusted to the breakeven level.

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EUR/GBP Technical Analysis: Euro Drops Most in 7 Months



EUR/JPY Technical Analysis: Digging Deeper into the Wedge

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the congested structure in EUR/JPY as a near-term bullish up-trend was complicated by an extremely bearish longer-term move. And while a congested trend isn’t necessarily enough to nullify a trade setup in and of itself, the fact that price action was so far away from any recent support or resistance inflections made stance moving forward rather complicated.

In the week since that last article, directional bias in EUR/JPY hasn’t become any clearer. While we did ‘technically’ see a higher-high above the 124.40 level we had pointed out last week, sellers came in near-immediately to fade the move. And then support dug-in beyond the 123.08 level that had provided so much resistance over the previous month; and this is a key level as the 38.2% Fibonacci retracement of the 2008 high to the 2012 low. So, this isn’t the bullish scenario that usually gets traders excited to load up the long-side of the move.

Moving forward, the levels at 124.40 (resistance) and 123.08 (support) remain viable for directional stance. Traders can wait for concerted breaks of either level to indicate forward-positioning. Should 124.40 finally give way, traders can look for higher low support above the 123.50 Fibonacci level before triggering top-side positions. Should price action drive below 123.08, traders can begin looking to line up the short side of the move by selling the ‘lower high’ after support gives way.

EUR/JPY Technical Analysis: Digging Deeper into the Wedge

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: Primed to Move Ahead of Super Thursday

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Previous long stopped out.
  • GBP/JPY has broken out of last week’s range, finding near-term support around old resistance.
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article, we looked at a bullish harami setup in GBP/JPY in the effort of playing a ‘bigger picture’ reversal in the pair. And while that reversal eventually came to fruition, the 80 pip stop in that previous setup was triggered before the rip-higher came into GBP/JPY. And with Super Thursday less than 24 hours away, it’s likely that the GBP/JPY will remain volatile in the near-term.

The trend, at this point, is rather obfuscated. Short-term, we’re seeing a recent support inflection coming in just around old resistance, which is right near the 156.35 Fibonacci level. This is the 50% retracement of the 2011 low to the 2015 high in the pair, and this level has given quite a few price action inflections of recent. Longer-term, the trend is still decidedly bearish in the pair, and this will likely remain until, at the very least, we see a price of 164 print. This was the January swing-low in the pair, and this low preceded a rip of over 1,100 pips, so this is likely going to remain a level of relevance until more information becomes clear.

For traders looking to execute near-term bullish strategies in the pair, continued support at the 156.35 level is critical. Stops could be investigated below this area, and potential resistance can be sought out at 157.21, which is a confluent Fibonacci level as the 27.2% extension of the previous major move (Nov 2015 high to the January low), as well as being the 76.4% retracement of the prior major move, with that 27.2% extension calling the bottom at 151.61 (February 2016 high to low, shown in purple below). Beyond that, 159.05 (61.8% of the prior move), and then 160.16 could become relevant resistance levels.

For traders looking to get short, they’d likely want to wait for lower-high resistance to confirm below the prior swing high of 158. Alternatively, a break below 156.35 could open the door for down-side continuation, at which point traders can look to sell resistance at prior zones or areas of support, such as this critical 156.35 level.

GBP/JPY Technical Analysis: Primed to Move Ahead of Super Thursday

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

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

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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

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



The CAC 40 Fails to Make a Significant Change in Price

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

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Talking Points

  • The CAC 40 is set to close Thursdays trading with an Inside Bar
  • Price action continues to consolidate for the 11th consecutive session
  • SSI readings neutralize, with the index reading +1.48

CAC 40 Daily Chart, Inside Bar

The CAC 40 Fails to Make a Significant Change in Price

(Created using Marketscope 2.0 Charts)

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The CAC 40 has failed to make any significant price changes today, and is set to close the session with an inside bar. This pattern has been created by using yesterday high and low as a reference. This means, Wednesdays high of 4,331 is currently acting as a value of resistance for the Index. Wednesdays low at 4,266 s also acting as support. With prices failing to breakout from these values today, traders will look to see if tomorrows trading breaks the CAC 40 from its current pattern of consolidation.

It should be mentioned that the CAC 40 remains at the bottom of an ongoing daily range. Today marks the 11th trading session without a significant breakout. In the event that prices breakout from the previously mentioned inside bar pattern, traders may look at this momentum to potentially initiate a breakout from this larger consolidation pattern.

CAC 40 Daily Chart

The CAC 40 Fails to Make a Significant Change in Price

(Created using Marketscope 2.0 Charts

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

Sentiment data for the CAC 40 (Ticker: FRA40) has neutralized from yesterday’s extremes. SSI (speculative sentiment index) is no reading at +1.48. With SSI still reading positive, it suggests the Index may be preparing for further declines. If prices breakout lower, traders may look for SSI to push back to an extreme of +2.0 or higher. Alternatively, in the event that the CAC 40 breaks higher, traders should continue to monitor SSI to see if the Index flips to a negative reading.

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WTI Crude Oil Price Forecast: Up, Up, And Away

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

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Talking Points:

The Equity Rally from March 6, 2009, has been called the most hated market rally in history because so few retail traders took part in the massive rise because many were burned in leverage trade in 2008 that went away. While still young, and in doubt, the ~85% move off the low in WTI Crude Oil (CFD: US Oil) could soon give the amount of hate for the equity rally a run for its money.

Arguments ranging from ‘Oversupply Still Exists’ to ‘Chinese Demand Isn’t Sustainable’ to ‘Wait ‘Til the Real Dollar Rally Begins.' abound. However, either way, you look at it, WTI Crude remains bid.

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Two key things are news worth with today’s move with one potentially much more impactful than the other. First, and less important, Crude Oil rose to a 7-month today and has inched closer to the $50/bbl mark.

What could be more important than a 7-month high, and being closer to the $50? The 200-DMA has risen for the first time since April 2014. Price in relation to the moving averages, and the larger, the better are often a starting point for technical analysis and rightfully so. However, when large moving averages either change the steepness of their slopes or change directions, a major move could be under way.

Given the significance of the 200-DMA, price moving above it in April was significant alone. However, if the MVA Trend is beginning to move higher, that could argue a much larger commodity bull market is beginning to grow roots, strong roots.

WTI Crude Oil Price Forecast: Up, Up, And Away

Long-Term Trend Resistance Continues To Clear

WTI Crude Oil Price Forecast: Up, Up, And Away

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The above chart is a long-term price channel via Andrew’s Pitchfork tool with sliding parallels drawn with the slope of the median line off of key pivots. You’ll notice on the bottom-right of the chart; the sliding parallels and median lines have acted as key pivot support zones over the last 6-months. Now, we have seen a break resistance that along with the move higher in the 200-DMA (currently near $40/bbl), our focus turns higher to the October high of $50.90/bbl.

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

WTI Crude Oil Price Forecast: Up, Up, And Away

The Strong Support Zone of $43.00/30 per bbl remains key before switching the view from Bullish to Neutral. A lot of factors would need to align to turn outright bearish again. Given this week’s price action, a shorter-term pivot of the price action of $45.70/bbl is worth keeping on watch. This level sits just above the Weekly S1 Pivot at $45.35 and was a blast off point to this week’s price action. Only a move below there would show that Monday’s and Tuesday’s gains should be corrected. A breakdown below this level would turn short-term focus neutral and toward the Weekly S1 support at $43.85/bbl.

In a healthy bull market, we should hold the S1. If the S1 fails to hold up the price, we could see a strong drop to the S2 & 200-DMA at $41.44/bbl and $38.78/bbl respectively.

This week’s move took us above the November high and should encourage the Bulls. We have cleared many technical hurdles covered in this Technical Analysis of Oil update. Recently, the ability of crude to close above $45/bbl has shown conviction that a move to the lower $50/bbl region may be under way.

Due to the macro environment, I’m staying bullish for now. Currently, the October high is the next resistance level in focus is the Weekly R2 pivot at $49.43. Beyond there, the October high of $50.90/bbl may soon be tested. However, this all assumes the US Dollar doesn’t follow suit of May 2015.

Contrarian System Warns of Further Upside

WTI Crude Oil Price Forecast: Up, Up, And Away

In addition to the technical focus around Andrew’s Pitchfork, the Polarity Zone holding as support, and the moving averages, we should keep an eye on retail sentiment, which favors more upside price action. Further upside is specifically aligned with our Speculative Sentiment Index or SSI for now.

According to client positions at FXCM, the ratio of long to short positions in the US Oil stands at -2.63 as 28% of traders are long.Long positions are 10.8% higher than yesterday and 25.6% above levels seen last week. Short positions are 2.2% lower than yesterday and 77.1% above levels seen last week. 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 USOil may continue higher.

Key Levels Over the Next 48-hrs As of Monday, May 11, 2016

WTI Crude Oil Price Forecast: Up, Up, And Away

T.Y.

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Gold Prices: Morning Star on D1 Opens Door for Continuation

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Flat. New long entry identified.
  • Gold is working on a non-complete morning star formation on the Daily chart, indicating potential for a bullish reversal of the near-term retracement.
  • 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 continued top-side run in Gold prices as a new near-term high had just printed at $1,303.62. As we advised at the time, pushing the top-side of the move could present challenges as Gold’s price action was considerably distant from any recent support levels. Instead, traders would likely be better served for support to show at a deeper support level before looking to trigger into long Gold positions.

It took a little over a week, but support has finally shown with yesterday’s Doji formation; and today’s daily candle moving more than 50% above the heavy-down candle on Monday opens the door for a potential morning star formation (shown below).

Gold Prices: Morning Star on D1 Opens Door for Continuation

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

The low of yesterday’s Doji came in at the 61.8% retracement of the most recent move in Gold at $1256.47, taking the April 22nd swing low to the May 2nd swing high; and this can be used for stop placement for those looking for top-side resumption moves in Gold.

The primary point of obfuscation with the setup at this point is the US Dollar and the question of whether the down-trend is ready to resume. We discussed that prospect in this morning’s Market Talk, and while it doesn’t look likely that the Dollar drain is done just yet, timing, as usual, will be of the essence in looking for that resumption lower in the Greenback.

To trade the morning star pattern, traders will normally look to lodge stops below the low of the Doji, which would be approximately ~$20 away from current price action. Targets can then be set at $1,295, which is the prior swing high, then $1,301.61, which is the 50% Fibonacci retracement of the 2008-2011 move, and then $1,315 (1-2 risk-reward ratio).

For those that want to take the position a bit more conservatively, stops can be lodged below the $1,251.74 Fibonacci level that has provided numerous instances of support/resistance over the past three months. This wider stop would necessitate larger targets, with an initial target of $1,301.61 offering slightly better than a 1-to-1 risk-reward ratio, but deeper targets can be set towards prior price action swings of $1,321, $1,345, and then $1,391.

Gold 4-hour chart below

Gold Prices: Morning Star on D1 Opens Door for Continuation

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

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

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Silver Prices Test Last Week’s Low

Global Macro and Momentum Trading

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Talking Points

  • The trend of silver prices remains downward below the March 19 high of $16.89.
  • The next support level is last week’s low of $16.32 and below it the April 18 low of $16.09.
  • The Markit U.S. Manufacturing PMI may rise to 51 from 50.8 according to a Bloomberg News poll. However, such a rise would not materially change the PMI trend, which has been drifting lower since it hit a high of 58 in August 2014.

Silver prices were, at the time of writing, bearish below the March 19 high of $16.89 and attempted to breach last week’s low of $16.32. Below last week’s low, the next support level was the April 18 low of $16.09 and the April 14 low of $15.89.

The trend is bearish below the March 19 high of $16.89, as it is one of the several swing highs created following price reaching a high of $17.36 on May 16. The preceding swing high of the March 19 high is the intraday high of $17.15, formed on the afternoon of May 18.

A more recent swing high is the March 20 high of $16.63, however, as it is short-term in nature it is more interesting for short-term traders that we focus on the bigger picture in this article.

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

Silver Price | CFD: XAG/USD

Please add a description for the image.

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

The Markit U.S. Manufacturing PMI may rise to 51 from 50.8 according to a Bloomberg News poll. However, such a gain would not materially change the PMI trend, which has been moving downward since the index hit a high of 58 in August 2014. The last reading of 50.8 highlighted that the sector was putting in the weakest performance since September 2009. A rise to 51 would also suggest that the average of the first two months of the quarter would be 50.9, which is lower than the average of 51.7 seen in the first quarter of 2016; hence, U.S. economic growth may have moved a notch lower in the second quarter.

This report is important for both the price of Dollar and Silver, as soft readings may delay a Fed rate hike and could thereby yield a boost to silver prices while a strong reading may have the opposite effect and trigger further silver losses.

--- 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 Maintains Choppy Trend

Global Macro and Momentum Trading

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Talking Points

  • The DAX 30 keeps on seesawing within the 9,739-10,111 range.
  • Markit German Composite PMI rose to 54.7 from 53.6, highlighting stronger German growth, while the Eurozone Composite PMI suggests that Eurozone GDP growth is slowing.
  • U.S. Markit PMI is on deck this afternoon and may rise to 51 from 50.8 according to a Bloomberg News poll.

The DAX 30 kept on seesawing this morning and price was firmly stuck between the May 6 low of 9739 and the May 10 high of 10,111. Short-term bursts of momentum between these levels have been hard to predict and until a break to the above-mentioned range occurs, it is likely that price will continue to oscillate with no clear bias.

Support levels below the May 6 low of 9739 are the April 12 low of 9617, the April 11 low of 9528 and the April 7 low of 9447. Resistance levels above the May 10 high of 10,111 are the May 2 high of 10,154, the April 29 high of 10,254 and the April 28 high of 10,333.

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

DAX 30 | CFD: GER30

Please add a description for the image.

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

The Markit German Composite PMI rose to 54.7 from 53.6, and thereby beat the 53.9 expected as per a Bloomberg News poll. The gain seen today is the first rise of 2016. The German DAX did not react following the release of this report and instead, the price rose following disclosure of the Markit Eurozone Composite for May.

Contrariwise, the outcome of the Eurozone Composite was soft as the index declined to 52.9 from 53, which is a softer reading than the 53.2 expected as per a Bloomberg Survey. Markit, the complier of the report, says that the lower PMI composite over the last two months suggests a slowing Eurozone GDP in the second quarter. They also highlight that new business growth slid to its lowest level since January 2015, which points towards soft growth in June. As the dust settled and following two hours of trading, the DAX 30 returned to levels seen prior to the publication of the Eurozone Composite.

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

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100: Range Trading Dominates

Global Macro and Momentum Trading

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Talking Points

  • Price lacks a strong bias within the 6053-6195 range.
  • Bank of England’s Carney, Broadbent, Weale, and Vlieghe testify before Parliament today, where they will discuss the May 2016 Inflation Report and Brexit.
  • The ZEW Expectations Index may rise to 12 from 11.2.

The FTSE 100 was range bound this morning, much as it has been since price reached the current levels on May 4.

The May 6 low of 6053 is a strong support and traders have attempted to take out this level over the last few weeks, but buyers have thus far managed to repel such efforts. On the other hand, the May 12 high of 6195 that has kept buyers at bay.

Within the 6053-6195 range, the FTSE 100 lacks a trend and neither bullish nor bearish traders have control. This situation will probably prevail until a break to the range occurs. We note that a similar episode prevailed earlier this year, when the FTSE 100 traded sideways from March 1 to April 11. The only benefit to a ranging market, from a trend trading perspective, is the strong momentum, which tends to follow a break to the range.

Resistance levels above the upper end of the current range at 6195 are the May 17 high of 6217, the May 3 high of 6283, and the April 27 high of 6341. The nearest support levels below the May 6 low of 6053 are the March 10 low of 6006 and the February 24 low of 5843.

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

FTSE 100 | CFD: UK100

Please add a description for the image.

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

Bank of England’s Carney, Broadbent, Weale, and Vlieghe testify at Parliament today, where they will discuss the May 2016 Inflation Report and Brexit. However, given the Bank of England’s warning as to potential Brexit risks coupled with its (already public) monetary policy, today's German ZEW Expectations Index could have a bigger impact on the FTSE 100.

The ZEW Expectations index has a mild correlation to year-on-year changes of the DAX 30, which in turn has a high correlation to the FTSE 100. The current correlation between the DAX 30 and FTSE 100 is 0.709 when using daily data covering the last six months. Today’s ZEW Expectations Index may therefore provide clues about what to expect from the FTSE 100 given that correlations between the DAX 30 and FTSE 100 remain strong.

The German ZEW Expectations index (Economic Sentiment), queries 300 financial experts about their view on the German economy 6 months into the future. The index experienced a steep decline since March 2015, which was at the same time as the FTSE 100 peaked last year. However, since late 2015, the index has stabilized and the FTSE 100 has followed a similar pattern.

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

Contact and follow Alejandro on Twitter: @AlexFX00




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


Talking Points:

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

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

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

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

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

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

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

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

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ASX 200 Daily Chart: May 24, 2016

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

--- Written by Oded Shimoni, DailyFX Research

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




Nikkei 225 Technical Analysis: Price Contained Below 16,776


Talking Points:

- Nikkei 225 held below the 16,776 resistance level on continuous tests

- Price seems to pivot around the 16,500 level

- The index appears lacking in directional conviction at the time.

The Nikkei 225 is treading water as price remains contained below the 16,776 resistance level, which is the 0.50 Fib as measured from the April 22 high at 17,769. The 16,776 level has been tested on a number of occasion throughout the trading week, but the price appears to fail closing above it at the moment.

With that being said, the index seems to pivot around the 16,500 level, which also appears to act as support, thus containing price within a narrow range (on a higher time frame perspective) around 16,776 and 16,500.

The Nikkei has been ranging between the well-defined 18,000 resistance zone and the 15,000 support since the start of the year. On shorter term basis, it seems as if the price might need to find some conviction above 16,776 or below 16,500 for further momentum.

Upside levels of interest may be the 17,000 handle followed by the 18,000 range top resistance zone (around 17,680-18,000).

Levels of interest on a move lower may be the 16,000 handle followed by the prior support at around 15,800, with the range bottom at 15,000. Interim support might be found at the April 7 low at around 15,380.

Learn about the proper tenets of risk management with FXCM’s “Traits of Successful Traders” series.

Nikkei 225 Daily Chart: May 20, 2016

Nikkei 225 Technical Analysis: Price Contained Below 16,776

--- Written by Oded Shimoni, DailyFX Research

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