Support & Resistance

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EUR/USD Technical Analysis: Near-Term Bias Remains Bearish

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1207
  • Euro back at familiar range support near 1.11 figure vs. US Dollar
  • Technical setup hints near-term trend bias remains bearish for now

The Euro slid back to the bottom half of its recent range near 1.11 against the US Dollar after an expected rebound fizzled above the 1.12 figure. Positioning seems to suggest that the break of the uptrend from late-July lows remains valid, arguing for a cautiously bearish bias in the near term.

Immediate support is in the 1.1097-1.1123 area (August 31 low, 38.2% Fibonacci expansion). A break below that on a daily closing basis opens the door for a challenge of the 50% level at 1.1014. Alternatively, a turn back above the 23.6% Fib at 1.1200 paves the way for another test of the 14.6% expansion at 1.1263.

A short EUR/USD trade was triggered at 1.1207. While progress has been slow, the path of least resistance continues to favor the downside. As such, the position will remain in play with an initial target at 1.1097 and a stop-loss activated on a daily close above 1.1263.

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EUR/USD Technical Analysis: Near-Term Bias Remains Bearish



USD/JPY Technical Analysis: Fed & BoJ Bring The Pain To Bulls

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

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Talking Points:

  • USJ/JPY Technical Strategy: USD remains a little match for strong JPY
  • September’s Central Bank fireworks was a dud all-around
  • Bank of Japan chooses “yield curve control,” which encouraged JPY buying

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After the Federal Reserve had announced that they would hold rates on Wednesday, USD/JPY traded as low as 100.36. Wednesday included both the Bank of Japan, which many hoped would bring in a stop to the JPY strength with a new form of easing, as well as the Federal Reserve making it one of the more hotly anticipated trading days of 2016.

However, the market didn’t get what it apparently wanted in the form of JPY weakness or USD strength. Instead, the Bank of Japan is now dealing with a stronger JPY that is trading against the USD at ~100. Now, Bank strategists are thinking this morning’s, “whatever it takes moment,” from the BoJ landed on deaf (or numb) ears, and we could be on our way to 94 by year-end.

For those unfamiliar with the direction the Bank of Japan shifted policy from mainly bond purchases and negative rates to targeting the Yield Curve, you’re not along. The move is a new venture for central banks that are seen as running out of room and assets to stimulate the economy to reach their inflation targets for all the trillions that have spent. By seeking to control the yield curve, and specifically, they are looking to target the 10-year Japanese Government Yield at 0%, Japan is hoping to put an end to deflation while at the same time helping those that were hurt most with the negative interest rate announcement on January 29, the banks.

While “yield curve control,” is new territory for the Bank of Japan, it rhymes with actions taken by the Federal Reserve in 2011-2012 when they engaged in “Operation Twist.” Operation Twist was focused on swapping out shorter-dated Treasuries for longer-term Treasuries to flatten the yield curve, which banks and borrowers look to see what is expected in terms of growth and inflation. Since the Fed engaged in such actions, the US Dollar has risen nearly 30%, and yields across the curve have remained depressed. Many expect Japan to avoid a similar fate.

USD/JPY Continues Below Heavy Resistance (Median Line) on Unrelenting JPY Strength

USD/JPY Technical Analysis: Fed & BoJ Bring The Pain To Bulls

Looking above, you can see what appears to be a very clear downtrend alongside the Ichimoku Cloud, and Andrew’s Pitchfork (Red).

The price continues to revolve barely above 100. Of the Indicators above, Ichimoku Cloud would be one of the first to register a Bullish signal on a break and close above 103.20 on the daily chart.

Lastly, the Andrew’s Pitchfork (Red) would not concede that the Bear Run is likely over until a break above the upper parallel line that aligns nicely with the 38.2% retracement of the 12-Month Range at ~109.

Shorter-Term USD/JPY Technical Levels: September 21, 2016

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

USD/JPY Technical Analysis: Fed & BoJ Bring The Pain To Bulls

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GBP/USD Technical Analysis: Bullishly Adhering to Fibonacci Structure

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Longer-term price action remains subdued below historically low levels; near-term bullish structure.
  • The Cable continues to show support/resistance inflections using the Fibonacci retracement around the post-Brexit move in the pair.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at the bullish price action structure in GBP/USD as a pivotal resistance structure around the major psychological level at 1.3500 neared. As we noted, traders looking to get long would likely want to wait for a deeper retracement in the effort of buying ‘higher-low’ support. We had discussed the reasons behind such a move two weeks ago in the article, Carney’s Lament, and should inflationary pressure continue to be a concern for the U.K. after the ‘sharp repricing’ in the British Pound in the wake of the Brexit referendum, this could lead to continued bullishness in the Sterling.

The post-Brexit range in the Cable continues to show support and resistance with a Fibonacci retracement drawn over the range; taking the high of 1.3523 that came in on 6/29 to the 1.2788 low that showed up a few days later. This was just after Mark Carney warned of impending rate cuts in response to Brexit, and helped to ramp up rate-cut bets in anticipation of a proactive response to Brexit. That swing-low has yet to give way, even after the BOE delivered considerably more than what markets were looking for at their August meeting; and when price action doesn’t make a lower-low after an extremely bearish driver, that could be telling us something (extremely oversold).

As prices in GBP/USD began sliding lower last week after approaching the confluent batch of resistance around 1.3500, price action found resistance off of the 76.4% retracement, support at the 61.8% retracement, and now support at the 50% level; and each of these instances are not the first iteration of these levels coming in as support or resistance. The prior swing-low of the move showed up at the 38.2% retracement, so traders could continue to build approaches utilizing this Fibonacci structure.

Traders looking to get long ahead of tomorrow’s BOE meeting would likely want to investigate stops based on this structure of support/resistance; with aggressive approaches looking to place risk levels below today’s low of 1.3137, and more conservative approaches looking to place stops below the prior swing around 1.3050. On the upside, traders could target levels at 1.3357 (76.4% retracement of the post-Brexit move), followed by 1.3430 (most recent swing-high), followed by 1.3500 (the Financial Collapse low).

GBP/USD Technical Analysis: Bullishly Adhering to Fibonacci Structure

Chart prepared by James Stanley

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

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US DOLLAR Technical Analysis: Understanding 3M LIBOR’s 7-Yr High

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

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Talking Points:

  • US Dollar Technical Strategy: Another Test at Key Resistance Deserves Our Attention
  • 3M USD LIBOR 7-Year Highs May Be Indicative Of Increasing USD Strength
  • Blackout Period For Fed Ahead of September 21 FOMC Likely Pushes Up Volatility

The US Dollar has had a very volatile September. After a highly anticipated NFP that was disappointing on the headline, many had discounted action by the Federal Reserve, and the US Dollar sold off. However, institutions are not sure that’s the best play for the US Dollar, and a few funding markets are showing this to be the case as well.

Many banks are looking at the US Dollar as one of the more undervalued currencies in the G8 because of the market, as per the UST 2YR Yield is only pricing in one and a half rate hikes through 2018. Naturally, this is in contrast with the rather optimistic Federal Reserve Vice President Stanley Fisher who noted that two were possible in 2016. The Federal Reserve is now in Blackout-Mode so external markets like Fixed Income may drive USD in the short-term.

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One key development that is warranting a lot of attention away from the spot-FX market is the sharp increase in 3M USD London Interbank Offered Rate or LIBOR. Looking at the chart above, you can see the sharp rise that has taken place over the past year. The LIBOR rate is taken daily from a set of banks with the outliers canceled. The rate is used to set the unsecured borrowing costs in the London Interbank Market over different periods, and a spread is typically added to create the borrowing rate for short-term borrowing that is common in capital and money (short-term) markets.

5-Year USD 3M LIBOR Chart [USD Interbank Funding Costs]

US DOLLAR Technical Analysis: Understanding 3M LIBOR’s 7-Yr High

The increase or slope is predicted by JPMorgan to end the year at ~0.95bps, which would be another ~11% rise. Many perceive this to be important because it indicates that the lending market may be tightening up ahead of the fall season of FOMC meetings where the Federal Reserve is expected to raise rates. Such an increase may give the Federal Reserve the open door needed to hike, and this could bring the US Dollar through the key resistance of ~12,000/100 that we’ve been watching for so long.

However, if the LIBOR continues to rise, that could mean that the Fed does not need to hike to have a stronger US Dollar, which is something many hedge fund managers have been waiting on for a while now.

D1 USDOLLAR Index Chart / Sharp Reversal Appears Able To Surmount Resistance

US DOLLAR Technical Analysis: Understanding 3M LIBOR’s 7-Yr High

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The US Dollar index has come back to the first key resistance level mentioned in recent posts at 12,000. One bearish development we pointed out is that the 8/30-9/1 price action looks like a clean evening star pattern. The internal doji high is 12,027, which can also be seen as internal resistance. A break above 12,027 in the coming days would turn attention to the last level of key resistance at 12,114. If the lower parallel line (blue) fails to hold, we won’t hold our breath for either resistance level to get triggered. However, if the price remains above the lower parallel line, we could see a steady move towards 12,114 where the Bullish Pitchfork median line lies.

You’ll also not that the Ichimoku Cloud aligns with the pitchfork, which could be showing that support is building up above the US Dollar. Strong support for the US Dollar, for now, appears at 11,849, which is the 61.8% Fibonacci Retracement of the pre-Brexit to July high in the US Dollar in addition to the Andrew’s Pitchfork and Ichimoku Cloud floor. Should a break below 11,849 emerge, we will default to continue using the Bearish Pitchfork as a frame to anticipate price action.

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Shorter-Term US Dollar Technical Levels for Wednesday, September 14, 2016

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

US DOLLAR Technical Analysis: Understanding 3M LIBOR’s 7-Yr High

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USD/CHF Technical Analysis: The Range within the Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: The range continues; choppy, indecisive price action over the past week.
  • The Swissy has seen a tighter range build over the past week, within the larger, longer-term range of the past six months.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

In our last article, we looked at USD/CHF after a quick run down to the support-side of the range that’s been building in the pair over the past six months. And as we noted, traders would likely want to wait for price to move to either support or resistance before acting in regards to new positions.

Since then USD/CHF has been extremely choppy, and over the past four trading days another, tighter, much more short-term range has developed that traders may want to eschew in favor of the longer-term channel formation. On the chart below, we’re looking at both of these ranges in the effort of showing why traders may want to steer more attention to the longer-term formation:

USD/CHF Technical Analysis: The Range within the Range

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

Much of the longer-term technical structure in the ‘bigger picture’ range of USD/CHF can be defined with Fibonacci levels set from the May high-low in the pair; and helping to define that May high is an even longer-term Fibonacci level of the 61.8% retracement of the 2010 high to the 2011 low in USD/CHF; coming in right at .9948 which helped to set that recent top in price action. Given the confluence of resistance in this zone, should USD/CHF rally up to this value, longer-term short positions could become attractive.

On the bullish side of the pair, the support zone from .9442-.9563 could be an interesting level to begin investigating long positions with the goal of trading range continuation. Traders can look for stops below this point of support with targets cast towards the resistance zone of the longer-term range. We look at the same range as above on the chart below, but we’ve applied applicable Fibonacci retracements to help highlight potential support and resistance around each side of the range.

USD/CHF Technical Analysis: The Range within the Range

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: Eyeing Resistance Near 0.77 Again

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Australian Dollar eyeing resistance near 0.77 vs. USD yet again
  • Opting to wait for confirmation before committing to a position

The Australian Dollar is setting its sights on a test of key resistance near 0.77 against its US namesake having found support at long-standing trend line. Still, the as-yet unbroken series of lower highs and lows since mid-August suggests the near-term bias broadly favors weakness.

A daily close above the 0.7677-97 area (38.2% Fibonacci expansion, double top) opens the door for a challenge of the 0.7749-60 zone (50% level, August 11 high). Alternatively, a reversal back below the 23.6% Fib at 0.7587 paves the way for a retest of the 14.6% expansion at 0.7532.

Positioning seems unattractive to take a trade at this point. The absence of an actionable sell signal warns that entering short in line with the near-term bias is premature. On the other hand, entering long and chasing the pair higher without clear invalidation of recent bearish tendencies seems reckless.

What do past AUD/USD price patterns hint about on-coming trends? Find out here!

AUD/USD Technical Analysis: Eyeing Resistance Near 0.77 Again



USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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

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Talking Points:

Quick Fundamental Take:

The Canadian Dollar has very little reasons to go bid. Recently, we heard the Bank of Canada note that the risks for inflation had, “tilted somewhat to the downside.” The lower inflation expectations align with the weaker economic data coming from Canada and the potential for a re-emergence of policy divergence, and current account divergence from Canada from other developed economies.

For now, the most notable focus is on USD/CAD and EUR/CAD. Both pairs favor upside given the fundamental and technical development in September. One helpful component of the Canadian Economy has been their exposure to Emerging Markets and how exports were expected to help Canada come out of its economic slump that is shown through the Citi Economic Surprise Index for Canada that is showing its worst rating since January when USD/CAD was trading in the mid-1.4000s.

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As markets await the final week before the Central bank combination of September 21 of the Bank of Japan, Federal Reserve, and Reserve Bank of New Zealand we see a clear shift toward Commodity FX and EMFX selling.

The risk-off tone has weakened the Canadian Dollar across majors, and USD/CAD could soon be trading at 6-month highs if 1.3253 is broken.

Technical Focus:

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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The Canadian Dollar has fallen by 1% on Tuesday, but what is more attention-grabbing are the technical developments, in addition to the Fundamental components described above that are behind the move. First, you’ll notice the rising trendline that has supported the price of USD/CAD, which has recently pushed the pair above the Ichimoku Cloud.

The Daily Chart with Ichimoku applied shows what could be a fierce breakout. Currently, the price and momentum (green line) are above the cloud which means the path of least resistance is higher. One level that is standing in the way of USD/CAD upside appears to be the July high of 1.3253. If USD/CAD can see a daily close above 1.3253, we could be well on our way to the 38.2%-61.8% Fibonacci Retracement zone of the January-May decline. This zone stretches from 1.3311 up to 1.3837.

Another component worth mentioning is that the 100-DMA (1.2955) is currently turning higher and supporting price. If the price of USD/CAD can remain above 1.2955, there would be building technical evidence to favor an upside bias while looking for opportunities to buy dips.

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

USD/CAD Speculative Sentiment Index as of Tuesday, September 13, 2016

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

As of mid-day Tuesday, the ratio of long to short positions in the USDCAD stands at -1.61 as 38% of traders are long. Yesterday the ratio was -1.23; 45% of open positions were long. Long positions are 23.2% lower than yesterday and 44.5% below levels seen last week. Short positions are 0.6% higher than yesterday and 43.0% above levels seen last week. Open interest is 10.1% lower than yesterday and 6.7% below its monthly average.

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

Key Levels as of Tuesday, September 13, 2016

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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NZD/USD Technical Analysis: Trend Reversal May Be at Hand

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Short at 0.7273
  • Trend reversal may be at hand after NZ Dollar breaks key support
  • Short position triggered, initially targeting drop below 0.72 figure

The New Zealand Dollar has broken below support marked by a rising trend line guiding the currency higher since late May, hinting a bearish trend reversal is afoot. Prices established a top after putting in a Bearish Engulfing candlestick pattern below the 0.75 figure, as expected.

Near-term support is now at 0.7176, the 38.2% Fibonacci retracement, with a break below that opening the door for a test of the 0.7080-0.7102 area (50% level, horizontal pivot). Alternatively, adaily close back above the trend line – now at 0.7283 – paves the way for a challenge of the September 22 high at 0.7370.

A bounce to retest trend line support-turned-resistance after the initial breakdown offered improved risk/reward parameters and a short trade was triggered at 0.7273, initially targeting 0.7176. A stop-loss will be activated on a daily close above 0.7338. Half of open will be booked and the stop-loss trailed to breakeven once the first objective is met.

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

NZD/USD Technical Analysis: Trend Reversal May Be at Hand



EUR/GBP Technical Analysis: Double Top May Be Taking Shape

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro may be carving out a double top below 0.88 versus British Pound
  • Confirmation of reversal needed for actionable short trade opportunity

The Euro may be preparing to turn lower against the British Pound as the appearance of a Shooting Star candlestick hints at ebbing upside momentum. A reversal could ultimately lead to the formation of a double top below the 0.88 figure.

Near-term supportis in the 0.8582-0.8607 area (trend line, 23.6% Fibonacci expansion), with a break below that on a daily closing basis exposing the 14.6% level at 0.8503. Alternatively, a push above the 0.8725-77 zone (August 16 high, 38.2% Fib) opens the door for a test of the 50% expansion at 0.8914.

An actionable trade setup is absent for now.A reversal lower is in line with the expected fundamental narrativebut a Shooting Star is insufficient as a stand-alone reversal signal without further confirmation. As such, opting for the sidelines seems prudent for the time being.

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EUR/GBP Technical Analysis: Double Top May Be Taking Shape



EUR/JPY Technical Analysis: BoJ Brings Range Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Long-term down-trend, intermediate-term range-bound with recent move down to support.
  • EUR/JPY has stayed within a 450-pip range for the past month and a half, and this compression of volatility may be preluding a ‘big’ move in the not-too-distant future.
  • 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 continue range in EUR/JPY with price action working a Fibonacci retracement from the ‘Brexit range’ on the pair that had seen numerous support and resistance inflections. But as we advised, an upcoming BoJ decision had the potential to add considerable volatility to the mix with a strong probability of the range finally giving way.

And while that BoJ announcement did bring on considerable volatility in the Yen, but this merely brought in prior range support in EUR/JPY. The zone of support around the 112-handle is interesting as there are at least three different mechanisms of support at work around this level. At 112.02 we have the 23.6% retracement of the 2008 high to the 2012 low, and at 112.47 we have the 23.6% retracement of the Brexit-move in the pair, and this level saw multiple support inflections in August; and just a few pips above that we have the 112.50 psychological level on the pair.

Of interest on the longer-term setup is whether or not support holds here above the prior swing-low in July at the 110.85 area, which was above the ‘Brexit low’ at 109.54. Should this support hold at 112, top-side plays could be attractive in the effort of trading a longer-term reversal in the pair to look for an eventual break of range resistance. On a near-term basis, traders could investigate bullish positions in the effort of trading the range up to resistance. On the top-side of price action, traders can look for resistance at the 114.30 level which was the swing-high yesterday as well as being the 38.2% retracement of the Brexit move. Just above that we have the 61.8% retracement of the ‘Abe move’ in the pair, taking the 2012 low to the 2015 high.

EUR/JPY Technical Analysis: BoJ Brings Range Support

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Bending Support Above the Brexit Low

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Prior bullish move continuing to congest; near-term choppiness.
  • With Central Bank meetings on the docket from both the U.K. and Japan in the coming week, this pair will likely see heightened volatility.
  • 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 confluent support structure showing in GBP/JPY as a rising trend-channel’s lower-boundary aligned with a batch of Fibonacci levels north of the 135-psychological figure in the pair. And while price action was unable to keep up with the torrid pace of momentum that was showing in that bullish channel, prices have yet to show a definitive down-side break significantly below the 135-handle in the pair.

As we noted last week, the level at 133.20 has been a key area in GBP/JPY as this was the ‘Brexit swing-low’ in the pair; while also coming in as a swing-high and then swing-low two months later when GBP/JPY was marching higher. While price action resides above this level, traders may want to assign a bullish bias to the pair under the premise that a longer-term top-side reversal may be developing after prices were pushed to historically low levels around the panic of the Brexit referendum.

Traders looking to do anything in GBP/JPY would likely want to take note of upcoming headline risk. Tomorrow brings a BOE rate decision and next week has the Bank of Japan; so both represented currencies in the pair could see a pickup in volatility over the next seven days and in a pair like GBP/JPY, this could be significant.

For traders looking to get long, an aggressive entry could be sought should today’s support confirm with the low around the 135-pscychological level. This would be above the prior swing-low at 134.45, and this early indication of higher-lows could potentially prelude a continued top-side move in the pair. For those wanting to tread a bit more conservatively, awaiting a break of swing-high resistance at 136.61 to prove continuation potential could act as an ‘activator’ for the approach, at which point the trader can look to buy a higher-low near the same batch of confluent support in the 135-135.72 region.

For the bearish side of the pair, the 133.20 level could demarcate the ‘line-in-the-sand’ for such approaches; and should price action break below this level, as driven by either BOE or BOJ, this could open the door for bearish stances.

GBP/JPY Technical Analysis: Bending Support Above the Brexit Low

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

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

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USD/CNH Technical Analysis: Resistance at 6.6860 Proving its Merit

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

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Talking Points:

- USD/CNH found support around 6.6500, formed a “Morning Star” bullish pattern

- Pair trading in a narrow short term range between 6.6700 and 6.6860

- 6.7 breakout key for any real bullish conviction

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The US Dollar remains elevated versus the Chinese Yuan in offshore trade, as the pair currently trades in proximity to the 6.6860 interim resistance level.

Having formed a “Morning Star” bullish technical pattern around support at 6.6500, the pair traded higher until hitting the aforementioned resistance level, which has since capped gains.

At this stage, the pair is trading in a narrow short term range between the 6.6700 short term support level and the 6.6860 resistance.

A break above resistance at 6.6860 might expose the 6.7 handle, which seems key for any real bullish conviction; a break higher might be required to signal a continuation of the bullish trend.

A break below 6.6700 seems likely to shift focus to 6.6500 followed by 6.6224, which also coincides with a long term up trend line.

It’s important to note the both the Yuan’s onshore and offshore borrowing rates may increase ahead of the Chinese “National Day “ holiday.

USD/CNH Daily Chart: September 26, 2016

USD/CNH Technical Analysis: Resistance at 6.6860 Proving its Merit

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

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

Follow him on Twitter at @OdedShimoni




CAC 40 Retraces From Weekly Highs

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

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Talking Points

  • CAC 40 Intraday Support Found at 4,480.75
  • Bearish Breakouts May Begin Under Support at 4,453.19
  • If you are looking for more trading ideas for equities markets, check out our Trading Guides

The CAC 40 is trading lower on the session (-0.55%), and is set to close the weeks trading under the weekly high of 4,530.00. AcelorMittal continues to lead the Index, and is trading up +.1.99%. Alternatively, Safran has the markets largest daily decline of -0.60%. Technically today’s decline in price suggests that the CAC 40 may finally be finding resistance after advancing for the 4 previous sessions this week.

CAC 40, 30 Minute Chart with Pivots

CAC 40 Retraces From Weekly Highs

(Created using Marketscope 2.0 Charts)

Intraday, the CAC 40 is finding support near include today’s S3 pivot found at 4,480.75. If prices remain supported here, it suggests that the index may bounce into the close of trading. If prices begin to rise, traders should note that today’s R3 pivot is providing resistance at 4,535.86. A sustained rally through this value would be significant as the CAC 40 would then be trading at new weekly highs. Alternatively, if prices fail to bounce, bearish breakouts may begin under the final value of support at 4,453.19. A breakout below this point would suggest that this week’s bullish momentum has subsided, allowing traders to begin looking for a further retracement or potential price reversal next week.

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Crude Oil Price Forecast: Clear Technical Focus Ahead of Algiers

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

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Talking Points:

The prospects for higher Oil prices appear to be hanging by an increasingly thinner thread. A host of developments would need to arise for the Bull Market that began in Q1 to carry the price back toward ~$60/bbl.

First, the US Dollar, which is inversely correlated to the price of Oil would need to move lower in a rather aggressive fashion. While such a move is possible, it would likely require the Federal Reserve to underwhelm the market over the coming meetings in 2016. Currently, a stronger Dollar seems to be the path of least resistance as the markets are pricing in one rate-hike in 2016. Such Dollar implied strength is also seen in the 3M LIBOR rate recently hitting 7-year highs.

Should the first domino of a weaker US Dollar develop, we would also need to see the surge in supply reverse or become overtaken by the growth in demand. Naturally, growth in demand for Oil is what many want to see as it would indicator that the forces of economic production are up and running again. However, this has not been the case, and it would seem now that many positive developments would need to arise for this to be the case.

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

Lastly, a move higher appears unlikely if OPEC is unable to reach an agreement to cap production in Algiers next week. The market has been awarding OPEC for rumors of an accord to cap production at current levels, but as we’ve seen in the past if they’re unable to solidify an agreement, further selling pressure likely will arise. To see where the selling pressure may take us, let’s look at the charts.

TradingView D1 Crude Oil Price Chart: Head & Shoulder’s Bullish Pattern Still Validating

Crude Oil Price Forecast: Clear Technical Focus Ahead of Algiers

The chart above shows competing technical stories. As explained earlier, the fundamental pressure appears to be for a push lower, but a reversal of main themes and a price breakout should be on the mind of traders as it could signal a fresh opportunity.

Currently, the price of Crude Oil is sitting on the support of a trendline drawn from the February & August low. In addition to the trend line, we see the price is sitting at the base of the Ichimoku Cloud and is at the 61.8% price retracement ( $42.91/bbl) of the August-September price range. If the price can hold the support mentioned above, and move above the higher low, which is the September opening range high at $47.71, we could be on the cusp of a renewed Bull Market. A failure for the price to break above $47.15 would keep us patiently on the bearish side of the Oil market with a keen focus on fundamental stories.

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

In the last note, we shared about the potential for the head and shoulders breakout, which is a classic bullish price pattern that fails to play out as often as newer traders would hope. The bullish pattern could align with a continuation of the move higher that developed after the extreme low in February. Since February 11, the Oil market has recovered aggressively and is now sitting close to long-term price channel resistance and sitting above the 200-DMA at $40.99/bbl. The 200-DMA also sits very close to the 100% Fibonacci Extention on the move lower, which is at $41.39/bbl. Many eyes are on these levels from an institutional side to see if buyer’s begin to pour into Crude long positions with stops likely at the August low of $39.17/bbl.

Given the recent US Dollar strength, which is emerging against commodity FX like the Canadian Dollar and Emerging Market currencies like the Mexican Peso, we could continue to see a move toward the 200-DMA ($40.99/bbl). A supportive component of US Dollar strength appears to be USD Funding costs on the international interbank stage that are shown with 3M USD LIBOR currently at 7-year highs.

Short-term support remains at the September opening range low at $43.02/bbl. A break below there would turn the focus to the 200-DMA. Short-term resistance favors the September opening range high at $47.71/bbl. From a Global Macro perspective, we may continue to see more stories favoring price moving towards support.

Key Levels Over the Next 48-hrs of Trading As of Monday, September 19, 2016

Crude Oil Price Forecast: Clear Technical Focus Ahead of Algiers

T.Y.




Gold Prices Pop after Fed, But Remain in Bearish Channel

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the bull flag formation that had built in Gold prices over the prior two months; after the aggressive move higher in the first half of the year collected and consolidated in a down-ward sloping trend-channel, producing a bull flag formation. And if we match this up with shifts from the Federal Reserve this year, it makes sense. As the Fed has backed down from near-term rate hikes, happening in February, and March along with an implied shift in June; Gold prices have moved aggressively higher as the US Dollar has weakened. And then as the Fed goes into one of those ‘hawkish commentary’ modes where many Fed officials talk up the prospect of higher rates, and Gold prices move lower as the Dollar strengthens to factor in those higher probabilities of a near-term rate hike.

Yesterday saw a similar such meeting from the Federal Reserve, although the price action emanating from the announcement may not have the staying power that Gold bulls are looking for. The US Dollar tanked around yesterday’s FOMC meeting as the bank adjusted rate expectations for 2017 and thereafter. However, the Fed did remain relatively hawkish for 2016, carrying the expectation that ‘the case for a rate hike has strengthened,’ opening the door for a potential move in December. The really attractive top-side setup in Gold will be when the Fed finally capitulates on this theme, which will likely happen should risk markets wobble as we move towards that December meeting.

The current setup in Gold remains near-term bearish but longer-term bullish, working deeper into the two-month old bull flag formation: And after yesterday’s 2.3% rip off of the lows, chasing Gold prices higher from here could be a daunting prospect, as it seems as though we’re waiting for the next ‘lower-high’ to print within the downward sloping channel.

To set stance moving forward traders can watch for the recent swing levels in order to define stance. The prior swing high from two weeks ago is at $1,352.49; and should price action break above this high we’ll also have a break above the flag/channel formation. This could be assigned bullishly, at which point traders can try to catch a ‘higher low. The 23.6% Fiboancci retracement of the post-Brexit move at $1,345.56 could be an opportune zone to begin watching for this should higher-highs come into the equation.

On the support side of price action, we have a potential higher-low in mid-September, above the prior swing-low set earlier in the month. Should price action revisit this zone around the 50% Fibonacci retracement around $1,312.57, while staying above the $1,306 swing low, a top-side setup could be sought out within the channel formation itself.

Gold Prices Pop after Fed, But Remain in Bearish Channel

Chart prepared by James Stanley

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

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Silver Prices: Turn Lower Furthering Wedge Pattern

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

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What’s inside:

  • Silver prices decline of trend-line resistance
  • Further convergence in price action could lead to explosive move in October
  • Support in the mid to lower 18s is the key to keeping silver macro-bullish, short-term leaves opportunities only for those looking for ‘quick-hitters’

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Last Thursday, when we last took a look at silver prices we noted it was trading at trend-line resistance off the July spike high, and that for now it would act as resistance until it was able to clear above. Silver attempted to push above the trend-line, but found sellers, putting in a small bearish reversal day. This gave would-be shorts a reason to look for the metal to turn back lower into the ongoing contraction in price action between rising the trend-line off the late-August lows above key long-term support (back to 2013) and the top-side trend-line.

At this juncture, with silver trading within the two converging lines there isn’t a whole lot to take away from the current technical structure for those looking to establish a position with intentions beyond the very near-term. Once free from congestion a sustainable move is likely to ensue.

As long as the lower trend-line and support in the mid-18s holds, then the period in recent weeks looks constructive within the uptrend off the December lows. Further contraction in the range could soon lead to an explosive breakout as we head into October.

Should buyers show up prior to the end of a fully developed triangle and push silver beyond the upper trend-line, then we will turn aggressively bullish. This will likely coincide with gold breaking out of a developing bull-flag, and, more importantly, above the 2011 trend-line we discussed last week. (For more on the macro outlook for gold and silver, check out this commentary.)

A drop lower will need to see silver hold onto the trend-line in place since late August, and at worst hold the lower end of long-term support in the mid to lower 18s. A break below those support levels will begin to significantly diminish the bulls’ case, and leave the December to current trend-line as the last line of defense for buyers.

For now, scalps and quick-flips will be the best approach from where we sit until silver can make a break for it from the developing wedge.

Silver Daily

Silver Prices: Turn Lower Furthering Wedge Pattern

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---Written by Paul Robinson, Market Analyst

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S&P 500 Tech Update: Short-term Trend Structure Bullish

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

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What’s inside:

  • The S&P 500 continues to push higher, but…
  • Finds sellers at channel resistance
  • Remaining in the bull-camp as long as current trend structure stays in place

Momentum in the S&P 500 continued yesterday after the rally began Wednesday following the outcome of the FOMC, bringing the index to channel resistance we had penciled in off the 9/14 swing low. The market couldn’t push it through, setting in motion the current decline off yesterday’s high. (Keep the upper parallel of the channel in mind as price action off it highlights its significance.)

The Nasdaq is the leading index right now, and given the riskier nature of the stocks which the index is composed of, it’s a good sign for the market. However, the divergence between the tech-heavy index and the S&P 500/Dow/Russel 2000 can present a concern. Divergences can disappear quickly, though, so unless we see price action give indication it is something to be concerned about, we will keep one eye on it, with most of our attention focused on the trend higher.

Looking for one of a couple of things to happen here: A short period of consolidation before resuming up towards the 2190/94 resistance zone, or a pullback into the 2163/56 support zone/lower parallel of channel. If the latter happens, it will take a little steam out of the bullish thesis, but give us a level from which to assess risk - a defining line of support. If a consolidation emerges we will evaluate it as we go. In the end, as long as higher highs and higher lows are carving themselves out and the S&P stays in the channel, we will remain in the bull-camp.

S&P 500 Tech Update: Short-term Trend Structure Bullish

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---Written by Paul Robinson, Market Analyst

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DAX: Taking a Hit to Start the Week, Probing Support Zone

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

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What’s inside:

  • The DAX taking a hit to start the week
  • Bringing two forms of support into play
  • Above support bias is neutral to bullish, below turns bearish

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This morning the DAX is taking a hit off the swing highs created Thursday on the back of a couple of developments to start the week (details here), causing the German index to test a key area of support. It looked as though momentum built up into the end of last week would result in a push to the 10800 at the least before seeing a decline, but sellers emerged quicker than anticipated.

The current area which the DAX sits is a key area of support dating back to April when the index turned lower from just beneath 10500 and again later in August, before becoming support twice during the same month. If we don’t see a turnaround from current levels, not far below is a trend-line extending higher from the post-Brexit lows.

The trend is still higher following the late June lows, while the more immediate trend since the middle of August is lacking, making drawing conclusions beyond a day or so difficult at this time.

We will operate off the notion that as long as horizontal support or the trend-line holds, then we will continue to give the benefit of the doubt to a neutral to bullish bias. However, a daily close below both angles of support (<~10375) will strengthen the case for shorts.

DAX Daily

DAX: Taking a Hit to Start the Week, Probing Support Zone

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---Written by Paul Robinson, Market Analyst

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FTSE 100 Tech Update: Trades at Crossroads

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

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What’s inside:

  • The FTSE trades at confluence of resistance
  • Market generally postured more bull than bear, watching how any retracement unfolds
  • Tactical considerations for longs and shorts

The push higher in the FTSE 100 continues, with the index pitting itself up against a crossroads of resistance around the 6880 mark. On Tuesday, we only penciled in the top-side trend-line off the 8/15 peak, not including a trend-line broken earlier in the month. (It’s been added.) The confluence of differing angled resistance makes for a challenging hurdle to overcome on the initial approach given the sharp rise already experienced over the past week or so.

At this time, the surge higher and generally buoyant global risk appetite suggests any decline which unfolds from resistance will turn out be nothing more than a pullback. It’s possible we are looking at a second lower higher, which could carve itself out as soon as today, but that is looking like the more remote likelihood at this time.

How any decline unfolds, as we said on Tuesday, is where our interest lies in determining whether it’s a pullback or a bearish progression of a lower high, lower high sequence developing since 8/15.

As ‘they’ say, much is to be learned in the retracement.

If little to no retracement ensues, additional resistance lies not far ahead at 6926 and the August high of 6956. If the market is to cruise on to new heights soon, a pullback taking the FTSE no lower than the mid-6700s would offer a healthy reload for the market to gain the power to push on through to and above the 7k mark.

FTSE 100 Tech Update: Trades at Crossroads

Tactically, those who have been riding the wave higher may look to resistance as a spot to exit or take partial profits, or implement a trailing stop on all or part of their position. For would-be shorts this area offers an attractive spot to sell with the two converging lines of resistance likely to act as a backstop for now; stop placement above the swing high once momentum turns lower.

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---Written by Paul Robinson, Market Analyst

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ASX 200 Technical Analysis: Rally Continues Post Breakout

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

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Talking Points:

- ASX 200 continues its rally after breaking the 5,380 level

- Index found support around 5,200 and formed a bullish reversal pattern

- Key initial resistance ahead seems to be 5,500

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The ASX 200 upside momentum continues after the index managed to break the 5,380 resistance level.

The index was trading in a well-defined range between the 5,380 resistance and the 4,750 support until July saw a breakout higher, followed by a sharp decline back inside that range.

The index formed a bullish “Morning Star” pattern around the 5,200 support, and found clear conviction since to reclaim the 5,380 resistance, with momentum still looking strong.

A hold above 5,380 seems likely to shift focus for potential initial resistance at 5,500 followed by the 5,570-5,600 zone.

With that said, a failure to hold above 5,380 may be interpreted as a bearish development, and might have eyes on the 5,300 support followed by the last swing low.

ASX 200 Daily Chart: September 26, 2016

ASX 200 Technical Analysis: Rally Continues Post Breakout

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

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

Follow him on Twitter at @OdedShimoni




Nikkei 225 Technical Analysis: Trading Sideways Post BOJ

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

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Talking Points:

- Nikkei 225 continues to pivot around 16,500

- Sideways trading still the prevailing trend

- Index nudging lower after initial post BOJ spike

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The Nikkei 225 is trading lower today, after the index posted a spike higher following the BOJ’s monetary policy announcement which saw the index reclaim the 16,500 level.

At this stage, sideways trading is the still very much the order of the day.

Nikkei 225 prices have been ranging between the well-defined 18,000 resistance zone and the 15,000 support since the start of the year, with gains appearing to be corrective in the context of the near term down trend from June 2015 highs.

At the shorter term, the index is trading in a narrower range between 17,000 to the 16,000 handle, with the 16,500 level in the middle indicative of short term momentum.

If the index reverses course following the rest of the day’s developments focus seems likely to shift to the 17,000 level.

The move to the downside might expose the 16,000 level, followed by the range lows around 15,000.

Nikkei 225 Daily Chart: September 26, 2016

Nikkei 225 Technical Analysis: Trading Sideways Post BOJ

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

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

Follow him on Twitter at @OdedShimoni