Support & Resistance

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EUR/USD Technical Analysis: Euro Rebound Hinted Ahead

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1317
  • Euro may correct higher after hitting two-month low vs. US Dollar
  • Gains to be treated as corrective, offering chance to add to short trade

The Euro continues to edge lower against the US Dollar, with prices descending to the lowest level in over two months having topped as expected near 1.16. The emergence of positive RSI divergence now hints at ebbing downside momentum and suggests that a recovery may be brewing ahead.

A reversal back above support-turned-resistance marked at 1.1215, the April 25 low,opens the door for a test of the 23.6% Fibonacci retracement at 1.1357. Alternatively, break below N the 50% level at 1.1067 on a daily closing basis clears the way for a challenge of the 61.8% level at 1.0937.

A EUR/USD short trade at 1.1317hit its initial target at 1.1215, with partial profits takenand the stop-loss trailed to breakeven on remaining exposure. A recovery from current levels will be treated as corrective for the time being, offering an opportunity to add to the short exposure once the upswing fizzles.

FXCM traders are net buyers of the Euro. Find out here what this hints about the price trend!

EUR/USD Technical Analysis: Euro Rebound Hinted Ahead



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: Braced with Bullishness, 2016 High in Sight

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the vertical-like price movements being seen in the Cable as the up-trend continued to take further hold. As we had written, traders would likely want to wait for price to move down to support before looking to get long, as the fear of chasing new highs turned out to be well-founded as the pair turned lower shortly thereafter. Price action on Friday of last week, leading into Monday and then Tuesday of this week produced a morning star formation with support right off of the 38.2% retracement of the prior major move at 1.4443, and this ‘higher-low’ further confirms the up-trend in GBP/USD.

At this stage, the Cable is but 55 pips away from the 2016 high, and this could make profit targets for long positions unattractive given that the most recent swing-low on the daily chart is more than 260 pips away from current price action.

Traders looking to trigger long can look for price to move to support before triggering top-side positions. There are four support levels nearby and underneath price action that may come into play for such a strategy. In the 1.4668 vicinity, we have the February top in the pair, and this had also furnished support after GBP/USD ran to new highs in early May. At 1.4640, we have the prior swing high, and this was a very short-term inflection, so traders would likely want to confirm support before acting off of such a level so near to current price action. At 1.4600 we have the previous swing-low, and at 1.4572 we have the 61.8% retracement of the ‘big picture’ move in GBP/USD, taking the low of 1.0500 up to the 2007 high of 2.1160.

Each of these levels could be potential ‘higher-lows’ for those looking to get long on the prospect of continued Sterling-bullishness. If price action falls below the prior ‘higher-low’ at 1.4443, the bigger picture up-trend in GBP/USD comes into question; and this could be an operable level for traders to investigate stop placement for long positions.

GBP/USD Technical Analysis: Braced with Bullishness, 2016 High in Sight

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: Another Monthly Opening Range Worth Watching

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

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Talking Points:

  • US Dollar Technical Strategy: Resistance Holding, Downside Traction Unlikely
  • Awaiting US Dollar To Overtake 12,001 Before New Exposure Added
  • Pick Your Poison When Trading Individual USD Pairs?

What’s the best thing that could happen to the US Dollar? It’s a question that has no specific answer. However, in terms of what’s probable, I would venture to say that’s it would be the institutional shorts giving up on their US Dollar Bearish Bets (which were aggressive throughout May), and a warming up to the view that we’ll see multiple hikes by the Federal Reserve as one 2016 hike continues to get comfortable priced into the market.

When looking at credit markets, that might be coming to fruition.

In addition to the probability of a rate hike this summer jumping from less than 20% to above 50% (making it considered as ‘priced in’), risk assets haven’t sold off. While some components have been disappointing of the US Economy (which isn’t alone), there seems to be less likeliness of a Fed-induced shock should they hike this summer.

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As of Tuesday morning, US Data went from in-line to an ugly miss. The PCE was in-line alongside personal income, however, a string of late data points that included Consumer Confidence, Dallas Fed Manufacturing, and the Chicago Purchaser’s Index all missed economist’s expectations.

In and of itself, this wasn’t good.

However, at around 10:30 am EST, a new ICM Poll was released by Guardian that showed a phone poll (that had previously favored a remain vote), showed a leave vote pulling ahead. This caused a near-immediate GBP sell-off with EUR following suit, and US Dollar was near the day’s highs even with the data misses. As a reminder, the world of FX is almost always relative.

What Will The June Opening Range Breakout Bring FX Traders?

US DOLLAR Technical Analysis: Another Monthly Opening Range Worth Watching

The above chart shows price data on the US Dollar Index over the last 18-months. Since then, we’ve seen an aggressive decline that put the US Dollar as one of the worst performing asset classes of 2016 at the end of April. However, since the beginning of 2015, the US Dollar is basically flat. While some may think this means the US Dollar has topped, consolidation can be a leading indicator of trend continuation.

If that’s the case, it pays to know what triggers could lead to a break higher to continue the trend.

For now, there is only one technical resistance worth alerting you to, and that is the 12,006/1, which was the February opening range low as well as a confluence of Fibonacci levels. On the chart, you’ll note the 55-DMA and the corrective price channel (red) has recently broken. Therefore, pull-backs toward channel resistance and the moving average (new support points), may better serve as buying opportunities.

The macro-picture mentioned above favors a more steady, yet resilient break above the 12,001/6 level to open the month of June. Should this happen, the US Dollar bears will be left with fewer and fewer arguments for a multi-year Dollar Downtrend they were so confident in developing during February-April.

Should a more significant breakdown develop, the ST support is currently the recent corrective pullback low of 11,921. Should the weekly low break, 55-DMA sits at 11,894 followed by 11,880, which is the 38.2% of the May Range, and should be the first focus of any true trend set-back.

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. Now that the index is sitting at important resistance, of 12,001/6, it is hard to think we’ll move straight higher as we have since May 03 with the heavy data points like Non-Farm Payroll & the European Central Bank to open June.

For those braver or more confident than most that the US Dollar breakout is in its embryonic stage, it may be helpful also to look at opportunities to buy USD vs. weaker currencies some of the commodity currencies or the JPY. Here is a relative strength measure from mid-morning on May 31, 2015:

US DOLLAR Technical Analysis: Another Monthly Opening Range Worth Watching

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: Another Monthly Opening Range Worth Watching

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T.Y.




USD/CHF Technical Analysis: The Range within the Trend

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the building up-trend being seen in USD/CHF after a fresh two-month-high had taken out out the prior swing at .9795. And while much of this move was related to the resurgence in the Greenback that’s been seen since the beginning of May, few pairs have reflected this USD strength as cleanly as the Swissy.

But looming just ~35 pips away we have a major Fibonacci level that’s shown a tendency to support and resist prices in the four-plus years since its formation. This is the level of .9948, and it’s the 38.2% retracement of the ‘secondary move’ in USD/CHF, which takes the 2010 high to the 2011 low. This level had provided the swing high in the year 2012, and didn’t become eclipsed again until early 2015. This is a significant price level on USD/CHF, and given the near-term bias in the pair (up-trend), traders may want to approach such a resistance level with caution, particularly for longer-term strategies.

For those looking to establish longer-term positions, observe price action behavior around this key level. As in, if we can get a clean break above .9948, we have the parity level just a little higher. This could be ample opportunity to look for a ‘lower high’ around this zone of prior resistance should new highs come into play.

Conversely, for traders comfortable playing shorter-term strategies, they can look at playing the shorter-term range that’s developed; looking to buy support or, in essence, looking to apply range-bound logic to a trending pair. This would entail getting long after a support inflection off of the .9887 Fibonacci support level, which is the 61.8% retracement of the prior major move, taking the January 2016 high to the February 2016 low (this retracement is shown in green on the below chart). Key would be stop placement, as a target to .9948 may offer less than 50 pips of possible upside after that support confirms, which would mean a stop of less than 25 pips for those looking to get a minimum 1-2 risk-reward ratio.

USD/CHF Technical Analysis: The Range within the Trend

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

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

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AUD/USD Technical Analysis: Short Trade Targets Sub-0.71

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Short at 0.7187
  • Aussie Dollar in consolidation mode after dropping to three-month low
  • Short position targeting test of support below 0.71 figure remains in play

The Australian Dollar is digesting losses in a narrow range after touching the lowest level in nearly three months against its US counterpart. The pair established a top as expected after putting in a bearish Evening Star candlestick pattern above the 0.78 figure.

Near-term support is at 0.7065, the 76.4% Fibonacci retracement, with a break below that opening the door for a challenge of the January 15 low at 0.6827. Alternatively, a reversal above the 0.7212-43 area (61.8% level, February 4 high) confirmed on a daily closing basis sees the next upside barrier in the 0.7300-31 region (May 10 low, 50% Fib).

A short AUD/USD position was activated at 0.7187, initially targeting 0.7065 and carryinga stop-loss to be triggered on a daily close above 0.7243. Profit on half of open exposure will be booked and the stop-loss trailed to breakeven when the first objective has been reached.

Is the Australian Dollar matching DailyFX analysts’ 2016 expectations? Find out here!

AUD/USD Technical Analysis: Short Trade Targets Sub-0.71



USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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

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Talking Points:

Wednesday saw a move lower after the Bank of Canada kept rates unchanged. The Bank of Canada policy was balanced with encouraging marks as well, and disappointment spread throughout. Most notably for disappointment, the Alberta Wildfires are expected to cut 1.25 percentage points off Canada’s real GDP growth in Q2 2016 due to "fire-related destruction" and "associated halt to oil production." Additionally, there are increased vulnerabilities to Canadian Households, presumably similar to other Energy Reliance areas where leverage comes under scrutiny when revenue from resources dries up. Lastly, The Bank of Canada noted that business investment and intentions (commitments for future investment remain a disappointment.

Why then did the Canadian Dollar rise right after the report? First, there was a positive note regarding inflation that stated CPI inflation had risen recently; inflation is still slightly below the 2.0% target. Additionally, the Bank of Canada expects the economy to rebound in Q3 thanks to WTI Crude Oil price rebound should align with reconstruction in Alberta and production coming back online.

Therefore, it was a balanced statement, and for now, USD/CAD looks similarly balanced. In other words, while we’ve pushed into relative trend resistance via Ichimoku (explained below), there appears an Intermarket capability with WTI Crude Oil price steady near $50/bbl, and the US Dollar under strong resistance to pivot either way.

USD/CAD Has a Multitude of Strong Support at ~1.2750/1.2900 (H4 Chart)

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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The chart above tells a story about what’s happened in USD/CAD from February to April, which was distinctly a mean-reversion in CAD & WTI Crude Oil and US Dollar Downtrend and the month of May. May provided a reversal of fortunes that had developed over the prior three months as the US Dollar began to rally, even as the hedge funds sold it as per the CFTC’s CoT report. Per the last report, the fight goes on as Hedge Funds and large speculators increased bets on Canadian dollar gains to the highest since 2013 earlier this month.

Either way, you’ll note that we’ve now seen a flip on the chart from bearish to bullish, at least on the H4 chart above. First, we’ve moved above the H4 Ichimoku Cloud and the 21-day moving average that currently sits below 1.2900. However, looking over the May Range, you can see the current May move from 1.2458-1.3188 or ~6% is now supported by the Fibonacci 38.2-61.8% retracement range. Given the change in central bank rhetoric and market pricing in of Fed Action, this short-term support should give hope for the Bulls who hope to go the distance to the mid-1.3000s and beyond.

Key Support Levels from Here (Visual Map Below)

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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The daily chart above should help you get a sense for the divergence of long-term bearishness and swing-trader bullishness. Long-Term Resistance via the 100-DMA shown above at 1.3376 and the Ichimoku Cloud top near 1.3320 and the price channel ceiling are expected by the USD/CAD bears to hold price back. However, if it does not, there may be little that can hold the US Dollar and USD/CAD back from retracing much of the January 20-May 2 decline.

Shorter-term resistance is seen at the week’s high of 1.3180 and the pre-BoC high of 1.3140. A break above these levels, especially on a closing basis could show the previously mentioned resistance levels may soon be tested for significance.

Support, as noted above is easier to define on the swing chart. However, the Daily Chart provide 3-helpul levels to keep on watch. First, the May trend-line aligns nicely with the Weekly Pivot point at 1.3047. Within an ATR of .0097 is the Ichimoku Trigger Line (9-day midpoint or (high+ low for previous nine periods)/2) that stands at 1.3010.

Below here, we find a confluence of support between the 38.2-61.8% retracement of May’s 6% rally. Sticking with Ichimoku, the Base Line (26-day midpoint or (high + low for previous 26 periods)/2) current sits at 1.2823. Additionally, the Weekly S1 support aligns with the 38.2% retracement and May 18 open at 1.2908.

The steady-hand of the US Dollar and the lack of Canadian Dollar upside through May despite Oil’s rally would encourage me to look for a move to initial support at 1.3047/10 followed by 1.2908 as buying opportunities (not a trade recommendation).

Should one believe that the CAD is soon to return to its former glory displayed in February-April, weaker currencies that may trade well vs. the Canadian Dollar could be the Japanese Yen and the Euro, which have recently slide down the relative rankings at the end of May.

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. Therefore, with that the majority of traders at a near net-flat bull: bear positioning of 1.06 as 51% of traders are long could be saying that we’re on the cusp of another big move even through the direction is less certain.

Short positions are 5.7% lower than yesterday and 3.8% below levels seen last week. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USDCAD may continue lower. The trading crowd has flipped from net-short to net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further bearish trading bias.

USD/CAD Speculative Sentiment Index as of Wednesday, May 25, 2016

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

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 25, 2016

USD/CAD Technical Analysis: CAD Performance Uneven Post-BoC Hold

T.Y.




NZD/USD Technical Analysis: 3-Week Range Floor Broken

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar breaks range support, hinting at deeper losses ahead
  • Risk/reward setup, theme overexposure argue against short trade

The New Zealand Dollar pushed through long-standing range support above the 0.67 figure against its US namesake, hinting at deeper losses ahead. Prices appeared to break rising trend line support to mark a pivotal reversal two weeks ago but follow-through proved lacking, with ATR-based volatility readings dropping to the lowest in eight months.

Near-term support is at 0.6679, the 50% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 61.8% level at 0.6639. Alternatively, a reversal back above the 38.2% Fib at 0.6719 – now recast as resistance – paves the way for a challenge of the 23.6% expansion at 0.6768.

Expected 2016 fundamental trendsargue in favor of a short position but the available trading range is too narrow to justify entering the position at this time from a risk/reward perspective.Furthermore, theme overexposure is a deterrent considering existing AUD/USD exposure given the strong correlation between the Aussie and Kiwi Dollars (0.93 on rolling 20-day studies). Opting for the sidelines seems prudent.

Losing money trading NZD/USD? This might be why.

NZD/USD Technical Analysis: 3-Week Range Floor Broken



EUR/GBP Technical Analysis: Digesting Near 4-Month Low

Fundamental analysis, economic and market themes

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Talking Points:

The Euro is consolidating in a narrow range against the British Pound after falling to the lowest level in nearly four months. The appearance of positive RSI divergence hints at ebbing selling pressure and suggests that a corrective recovery may be in the cards ahead.

A push above the 38.2% Fibonacci retracement at 0.7683 sees the next upside barrier at 0.7748, a former support level now recast as resistance.Alternatively, a break of the 50% level at 0.7549 confirmed on a daily closing basis clears the way for a test of the 61.8% Fib at 0.7415.

EUR/GBP was sold at 0.7876 and prices have subsequently hit the trade’s initial target, triggering partial profits to be taken while the stop-loss was adjusted to breakeven. As of now, any on-coming gains from here will be looked at in the context as an opportunity to add to short exposure.

Losing money trading EUR/GBP? This might be why.

EUR/GBP Technical Analysis: Digesting Near 4-Month Low



EUR/JPY Technical Analysis: Prior Support, New Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Flat. Short setup identified.
  • EUR/JPY is currently showing 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 middling price action in EUR/JPY as the pair dug deeper within a symmetrical wedge pattern. As we mentioned, the level at 123.08 could prove compelling for short-side strategies should price action break below this zone, as this is the 38.2% Fibonacci retracement of the secondary move in the pair, taking the 2008 high to the 2012 low.

On Monday we finally saw the bottom-side of that symmetrical wedge pattern give way to falling prices, and this opens the door for short-side continuation moves. The level of 123.08 had also previously functioned as prior support, so this could be an illustration of using old support values as new levels of resistance for down-side continuation plays.

Stops on short positions could be set above the prior swing-high of 124.06; with targets set to the prior price action swing low around the major psychological level at 122.50, followed by 121.94, which is the 50% Fibonacci retracement of the most recent major move, taking the 2012 low to the 2014 high. Below that, we have another price action swing in the 121.50 neighborhood that could function as a tertiary profit target; and should that become broken then the psychological level at 120 becomes an attractive target; as just 10 pips below that major psychological level of 120 we have the 61.8% retracement of the ‘big picture move’ at 119.90 in EUR/JPY, taking the low from the year 2000 all the way up to the 2008 high.

EUR/JPY Technical Analysis: Prior Support, New Resistance

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: Third Time a Charm with This Resistance?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY has lurched up to a familiar psychological resistance level at 162.50.
  • 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.

The British Pound continues to impress as it appears that Brexit risks/fears have been getting more and more priced-out of the Sterling. We looked at the building up-trend in GBP/JPY in our last article just ahead of the Super Thursday batch of announcements; and since then that bullish structure has only furthered as the pair has put in even more higher-highs and higher-lows.

But this morning saw a critical price action level come in to play, as this is the major psychological level that’s capped GBP/JPY price action for the better part of the past two months at 162.50. We’ve had two different major resistance inflections off of this level of recent, first on March 29-30th and then again on April 27-28th. Each instance led to a decline of at least 800 pips.

But this isn’t entirely a one-sided thesis, as the pair has also been building in higher-lows since the beginning of April; so a case for further bullishness could certainly be made.

At this point, traders are likely going to want to observe price action’s behavior around this level. If we can get a significant break above 162.50 (specifically a high above 162.80), then we have a fresh two-month high in the pair; and at that point traders can then begin to strategize long positions by looking to trigger as price moves down to a higher-low support value.

Conversely, should price action show resistance at this level over the next day, printing a doji or spinning top for Thursday’s daily bar, then we have the thesis that traders are selling off of this level and this may, again, come in as resistance. At that point, the short-side setup could be investigated with the thesis of trading a reversal in the pair.

GBP/JPY Technical Analysis: Third Time a Charm with This Resistance?

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



CAC 40 Stalls at Resistance

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

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Talking Points

  • CAC 40 Stalls at Resistance Near 4,536
  • Markets Await Both the ECB and NFP Events This Week
  • SSI Reads at -1.10, with 48% of Positioning Net Long

CAC 40 Daily Chart

CAC 40 Stalls at Resistance

(Created using Marketscope 2.0 Charts)

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

The CAC 40 remains little changed today as prices continue to consolidate under resistance. So far the Index is trading down -.25% on the session. Of the 40 listed components, ArcelorMittal again leads the Index trading up 3.29%. European Indices as a whole have paused as markets wait for two key data points this week. First is the European Central Bank rate decision on Thursday. This is immediately followed by U.S. Non-Farm Payroll figures released on Friday. Both of these events have been marked as high importance events, and have the potential to cause volatility in the equities markets.

Price action for the CAC 40 is potentially set to close lower for the first time in the last 6 trading sessions. Today’s move lower occurred after first testing resistance found at a previously mentioned 78.6% retracement value near 4,536.89. Traders looking for a return of bullish market conditions, will monitor this value for a breakout to new highs. Alternatively, if prices turn lower, it suggests that prices maydecline back towards the May 2016 low at 4,244.50.

CAC 40 Stalls at Resistance

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

SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) has flipped negative to read at -1.10. Currently 48% of positions are long, which is congruent with today’s consolidating market conditions. Traders looking for a breakout, may wait to confirm a directional move with SSI. If prices breakout higher, SSI may continue to decline toward a negative extreme. If price moves lower, traders should look for SSI to flip back towards a positive reading.

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WTI Crude Oil Price Forecast: Heading For Four Straight Months of Gains!

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

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Talking Points:

WTI Crude Oil Price came within a whisper of the 2016 high on Tuesday after hitting $50.10 in mid-morning trading ahead of July Contract expiration. Regardless of recent force, the CL1 June contract has seen a May price range of ~14% (43.03-50.21) that may be slowing down but does not appear done.

After being the laughing stock of markets, Oil Bulls are looking at the longest run of gains in five years as they look to add another month to the streak of consecutive gains. While little is expected of the OPEC meeting this week, with some calling it a non-event, there is plenty to be on the watch for this week including the European Central Bank as well as the May Non-Farm Payroll release on Friday morning.

Additionally, escalations in Libya continue to hold Oil trader’s attention. However, larger risk-sentiment as seen via the SPX500 so far has continued to favor the view that the stock of supply as seen in the weekly API & EIA inventory data that is pushed back one day this week due to US Holiday’s on Monday will continue to show a draw due to increased demand.

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While looking at the Average True Range, you can see that the price of Oil has become less volatile. Implied Volatility in Crude Oil ended last week at its lowest levels since August, which may show that Bears do not see a reason to fight the four-month uptrend that could continue. Also, the highest traded options contract on Friday as per Bloomberg was December 2017 $60 calls that also show long-term bullishness.

LT Chart Shows Price Continues To Move Above Resistance / Prior Price Ceilings Denoting Strength

WTI Crude Oil Price Forecast: Heading For Four Straight Months of Gains!

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

WTI Crude Oil Price Forecast: Heading For Four Straight Months of Gains!

Looking at the chart above, since bouncing off the $43 level to piercing $50/bbl on Thursday morning, the market appears determined to buy dips toward multi-day lows despite the retail crowd’s intentions (shown below).

The recent low worth focusing on appears to be near the Weekly Pivot, which is close to $48.71 and appears to be a good support to favor staying long or at least, not to pay attention to getting short until it breaks.

Below $48.71 is the late April high of ~$46.755/bbl that also aligns with the 21-DMA. A break below would not only take out two key levels of support.

Current resistance is the confluence of the Weekly R2 Pivot, the 100% Fibonacci Expansion taken from the April Opening Range Low, and the October High. This range encompasses $50.90-51.09/bbl. Beyond there, price looks only to be targeting higher, and other hard resistance levels appear arbitrary at best though $53.34 & $60.90 do stand out as levels to watch.

While $50/bbl is a good psychological level that may continue to hold down the price, there is a potential that the risk-on rally in 2016 that has benefited commodities the most could have the price move higher still.

Contrarian System Warns of Further Upside As of 5/31/16

WTI Crude Oil Price Forecast: Heading For Four Straight Months of Gains!

In addition to the technical focus around multiple support-zones, we should keep an eye on retail sentiment, which favors more upside price action. Further upside is currently aligned with our Speculative Sentiment Index or SSI for now.

The ratio of long to short positions in the USOil stands -3.09 as 24% of traders are long. Long positions are 15.3% higher than yesterday and 13.5% below levels seen last week. Short positions are 22.1% higher than yesterday and 49.9% above levels seen last week. Open interest is 20.4% higher than yesterday and 26.8% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives a signal that the USOil may continue higher.The trading crowd has grown further net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.

Key Levels Over the Next 48-hrs As of Tuesday, May 31, 2016

WTI Crude Oil Price Forecast: Heading For Four Straight Months of Gains!

T.Y.

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Gold Prices: Don’t Fight the Fed

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Previous long stopped out on break below $1,250
  • Gold is putting in a massive reversal of the prior up-trend on the back of rising expectations for a Fed rate hike in June.
  • 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 a long position in the effort of catching a continuation move in Gold. The motivation for the trade was both technical and fundmental, as, at least at the time, it appeared unlikely that we’d be anywhere near a rate hike out of the United States anytime soon. But that prospect has changed markedly after the release of the April FOMC minutes, as the Fed basically communicated that they felt markets were under-pricing the probability of a rate hike in June. Since then, we’ve heard numerous Fed members speak on a similar theme, and expectations for a hike in June have continued to rise.

When the underlying facts of a hypothesis change, so must the trader’s approach on the matter.

While this doesn’t mean that a hike is definitely coming in June (or July or even September for that matter), it does mean that we can see some continued reversion of the prior up-trend as markets wrestle with rate hike odds out of the Fed for the remainder of the year. But longer-term, the technical structure of Gold remains bullish; and until support levels at $1,217.26 (38.2% retracement of the prior move) and then at $1,200.41 (61.8% of the ‘big picture move’ from the 1999 low to the 2011 high) become violated, that will remain the case.

Given the aggressiveness with which prices have fallen, traders would likely want to avoid looking to play direct reversals off of the $1,217.26 level; instead waiting for near-term price action to indicate further bullishness (higher-highs, higher-lows on the four-hour chart) before looking for long positions. Should price action form support at or around the $1,200 level, that may become attractive for top-side reversal plays.

The short-side of Gold may become more attractive as we move nearer to that June rate hike decision out of the United States. Traders would likely want to wait for price action to show some element of resistance before looking to get short, as Gold just put in a bounce off of a ‘lower-low’ support level. The prior swing low is nearly $20 higher on the chart around $1,245, and should price action move up to find resistance in this zone, short-side plays could become attractive with stops above the prior swing high in the $1,260-area.

Gold Prices: Don't Fight the Fed

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

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

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Silver Prices Testing Support, Trend Lower Remains Strong

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

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What’s inside:

  • Market positioning remains unfavorable for higher prices, but historical extreme moderates
  • Continued weakness in silver prices likely to persist
  • Support around 16 barely holding, looking to January trend-line next

On Thursday, we went over our logic as to why we believe the price of silver will continue to drop, or at the least remain well-offered on rallies; it all stems from an unwinding of the extreme positioning in the futures market. On Friday, the latest COT report showed the largest decline in net speculative longs since the multi-year low in silver prices in December. COT data is based on positioning changes for a one-week period ending on the Tuesday prior to the report released each Friday. With that said, with silver experiencing further weakness since last Tuesday a further unwinding should be seen again in this week’s report. Positioning still has room to correct before we will consider it a neutral, and much further to go before it will be considered a notable positive. (For more details regarding positioning see last week’s piece/graph.)

Looking at the chart: The area around 16 has been viewed as an important support level. Continued trade below, which is looking like the case as buyers are currently showing limited interest, will likely carry silver towards the trend-line (~15.75) running off the January swing low. A move below this trend-line to the 14.60/80 vicinity looks quite possible given the before discussed positioning extreme. Bounces within the descending parallel are likely to be short-lived and viewed as opportunities to sell. An ideal spot to look for a short at this time is at the upper parallel of this channel. If looking to play from the long-side for a counter-trend trade, a strong rejection at support needs to occur before increasing the likelihood of seeing a meaningful bounce. But, again, at this time still working from the short-side until we see a material change in technical posturing and market positioning.

Silver Price Daily

Silver Prices Testing Support, Trend Lower Remains Strong

Looking for longer-term forecasts? Check out our analyst views here.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at probinson@fxcm.com.




S&P 500: Current Landscape Warrants ’Wait-and-See’ Mode

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

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What’s inside:

  • Back to business as usual, S&P 500 starts week with its work cut out
  • Resistance levels at hand from 2100 to 2116
  • ‘Wait-and-see’ mode, watching how market responds at current juncture

Today, it’s back to business as usual following the Monday off in the U.S. for observance of Memorial Day. The last time we chatted up the S&P 500, it was noted that further gains in the short-term could be difficult given its extended state into critical overhead levels.

Ahead of the long weekend, there was no reversal of the earlier week strength, but as this week begins the market faces some key challenges ahead.

The trend-line coming off the 2015 all-time high has yet to have an impact on keeping the S&P suppressed, which brings us to 2100 and then the area between 2111 and 2116 on further strength; 2016 peak and Nov ‘15 highs, respectively. In yesterday’s limited holiday trading hours, the S&P futures traded above 2100, but given how light the volume was we will focus on it from Friday where it closed right at about 2100.

SPX500 Daily

S&P 500: Current Landscape Warrants ‘Wait-and-See’ Mode

Even with resistance in the neighborhood it is still tough to be bearish without first seeing a material reversal in momentum. At the same time, without a consolidation or constructive pullback, it is risky business to buy strength at these levels.

This puts us in wait-and-see’ mode, looking for further clues before initiating any type of trade beyond a day-trade. If we see a further advance into resistance and a sharp reversal, then we may look to take a trade to the down-side, with in mind a double-top or broader range could be developing. However, if the market can digest its recent gains without falling apart, then looking for a continuation trade from the 5/24 bull-flag breakout may be the way to go. If this is the case, then we will be looking for an advance towards the old record highs at 2137 on clearance of before-mentioned levels.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at probinson@fxcm.com.




DAX 30: Breaks Trend-line, Looking to Support on Dips

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

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What’s inside:

  • DAX 30 continues to gain with resistance cleared
  • Prior resistance looked to as support until upside objectives are achieved
  • German employment data better/worse than expected

The DAX 30 continues to maintain above the 10000/100 vicinity, an area which has held importance for several months now. On Friday and Monday, the market was able to tack on further gains above a trend-line of minor importance off the November 2015 swing high.

The hurdling of these levels converts them from areas viewed as resistance into areas we will look to as support on any decline which should unfold. The 10100/000 is most critical, but a back-side retest of the broken trend-line (~10200) will be eyed as the first spot to look for a higher low to develop.

If the recent trend of strengthening global risk appetite can continue, then a push towards our next levels of resistance is likely to unfold in the not-too-distant future. The April 21 peak at 10486 is the next level of contention, and just a short distance above there is the trend-line running off the April 2015 record highs, passing over the November 2015 swing higher mentioned earlier.

DAX 30 Daily

DAX 30: Breaks Trend-line, Looking to Support on Dips

Unemployment data for May showed an increase of 11k, comparing negatively to a Bloomberg survey where analyst expected a decline of 5k; prior was -16k. The unemployment rate ticked lower to 6.1%, below the 6.2% in April and analyst estimate. The unexpected rise in change in unemployment sparked a reaction to the down-side in the DAX futures by about 40 points, but has since recovered most of those losses.

Earlier in the morning, German retail sales rose 2.3% YoY in April, from 0.6% (revised from 0.7%) in March and higher than the 1.7% estimate. Month-over-month sales saw a decline of 0.9%, worse than the 0.9% growth expected, but higher than the decline of 1.4% (revised from -1.1%) seen in March.

For now, we will continue to give the benefit of the doubt to the upward trend as long as key support levels are not clearly violated. Buying dips above or into support once momentum has turned back higher is the preferred strategy at this time.

Start improving your trading today and read our guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at probinson@fxcm.com.




FTSE 100 Ends Stalemate


Talking Points

  • FTSE 100 rises sharply following gains in the Financial Sector.
  • The short-term trend is bullish above yesterday’s low of 6108.5, and the next nearest support level could be the May 12 high of 6195.
  • The nearest resistance level is the May figure of 6285.

The FTSE 100 (CFD: UK100) had more or less reached the May 3 high of 6285 this morning, a level we have been highlighting over the last few days as the first important resistance level above the May 12 high of 6195. The short-term trend is now bullish above yesterday’s low of 6108.5, and the trend is bullish above this level given that it is a higher low in relation to the May 19 low of 6051. Price has also been creating higher highs since May 19, with today’s high being the most recent one.

As the short-term trend is bullish above yesterday’s low of 6108.5, the price should be creating higher highs and higher lows according to the rules of classic technical analysis. The May 12 high, the level that had kept price capped for more than two weeks, may now have turned into support while the May 3 figure is the closest resistance level followed by the April 28 high of 6325 and April 27 high of 6342.

On the price trading below yesterday’s low of 6108.5, the next support level will be the May 19 low of 6051. Yesterday’s strong rise to the FTSE was primarily attributed to the Financials sector and it is here that the median share rose by 2.88%. The Consumer services sector followed with a median share return of 1.51%.

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

There is no U.K. data on deck this morning, but the German IFO Business Climate index published earlier rose to 107.7 from 106.6, and beat the 106.8 expected as per a Bloomberg News survey. The IFO Expectation index rose to 101.6 from 100.4. The FTSE 100 rose slightly following the news, but given the strong gains over the last 24 hours, traders appear to be reluctant to lift the index to higher levels.

The German IFO Business Climate index has been rising over the last two months and indicates slightly higher German economic growth from the lows that were seen in February.

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

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Technical Analysis: 5,300 in Play After Failed Breakout


Talking Points:

- The ASX 200 currently trades below long term range top levels at 5,380-5,400

- Failure to hold above those levels might imply a move lower

- Index now hovering above the short term 5,300 support level

The ASX 200 is trading below key levels at 5,380-5,400 (at the time this report was written) as the index appears to have failed an attempt to break out of a long term range.

The ASX 200 has been trading for the past months in a well-defined range between the 5,380 resistance and the 4,750 support, which coincided with the 0.618 Fib level of the long term up trend from 2012.

After holding above the range top levels for four consecutive days, the index stalled at 2016 highs, before losing conviction and turning lower below 5,380. The failure to hold above the range top might imply further momentum to the downside.

With that being said, the index is now trading near the 5,300 short term support level that proved influential in the last couple of weeks. If buyers come back at that area, it might imply another test higher is ahead.

A clear break and a hold above 2016 highs at 5,431 might signal that the bulls have taken control, and that the long term up trend is resuming.

A move below 5,300 may expose the 5,200 support zone, from which it appears the last leg to the upside was initiated.

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

ASX 200 Daily Chart: June 1, 2016

ASX 200 Technical Analysis: 5,300 in Play After Failed Breakout

--- Written by Oded Shimoni, DailyFX Research

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




Nikkei 225 Technical Analysis: Index Gathering Momentum


Talking Points:

- Nikkei 225 is currently above the 17,000 resistance turned support

- Focus might now be put on the longer term range top

- A break above 18,000 may signal the near term down trend has shifted

The Nikkei 225 is trading above the 17,000 resistance turned support (at the time this report was written) as the index appears to be gathering momentum to the upside.

The price was able to close above 17,000 on a daily basis yesterday, after a move lower appears to have been rejected intra-day. Indeed, it seems like the close above the level might have helped conviction, as the index is trading higher today from a low of 16,976.50.

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

The close above 17,000 might imply higher probability for a test of the 18,000 range top resistance zone (around 17,680-18,000). A break above these levels may suggest that the near term down trend has shifted and that a longer term up trend from 2012 might resume.

However, if buyers can’t hold the price higher, a move below 17,000 may put the focus on the 16,776 support level, followed by the 16,500 level, which seemed influential for the last weeks.

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

Nikkei 225 Daily Chart: May 31, 2016

Nikkei 225 Technical Analysis: Index Gathering Momentum

--- Written by Oded Shimoni, DailyFX Research

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