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EUR/USD Technical Analysis: Signs of Topping Emerge

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro shows signs of topping after retesting trend line from December 2015
  • Waiting for confirmation of Harami candle pattern before entering short

The Euro may be vulnerable to losses after the appearance of a bearish Harami candlestick pattern having advanced to a two-month high against the US Dollar. The setup follows a retest of trend line support-turned-resistance set from December 2015 and hints a corrective rebound may have run its course.

Near-term support is at 1.1234, the August 2 high, with a break below that on a daily closing basis opening the door for a test of the August 5 low at 1.1046. Alternatively, a push above double top resistance at 1.1415, a barrier reinforced by the aforementioned trend line, targets the May 3 top at 1.1616.

A Harami pattern is indicative of indecision and does not amount to an actionable reversal signalwithout further confirmation. With that in mind, taking up a short position appears premature and opting for the sidelines seems prudent for now until a more concrete opportunity presents itself.

What do retail traders’ EUR/USD bets hint about the price trend? Find out here!

EUR/USD Technical Analysis: Signs of Topping Emerge



USD/JPY Technical Analysis: 100 Is Losing Its Intervention Mystique

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

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Talking Points:

  • USJ/JPY Technical Strategy: Consistent Pressure Favors Potential Breakdown
  • Market Looking Comfortable With Consistent JPY Strength
  • Sentiment Flashing Signs of Further JPY Strength

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USD/JPY At 100 Gets BoJ To Speak, But Not Act

On Tuesday, USD/JPY fell back below 100.00 as the US Dollar softened on an article published by San Francisco Federal Reserve President John Williams. In the article titled, Monetary Policy in a Low R-star World, Williams argued that the natural or neutral rate that neither stimulates nor prevents market growth has fallen. Furthermore, there was a call for a new monetary policy framework all of which implies that it will be difficult for the Fed to raise rates credibly.

This brought about strong Dollar selling bringing some even to call ita crash. Either way, we’ve seen a continuation of a ‘barbell strategy’ that gets its name from institutions buying both the riskiest and safest investments. The high-risk side of the barbell has mainly meant a flood into Emerging Markets and commodities on the back of a weakening US Dollar. The safe side of the barbell has been a consistent bid of treasuries and other havens like the JPY, which continue to presson.

As of August 16, the JPY has strengthened by nearly ~20% YTD vs. the USD. An additional narrative that is failing to take hold is a possible rate hike in the coming 12-months from the Federal Reserve. The lack of a Fed-Driven stronger Dollar removes half of the recipe for USD/JPY to push higher and further argues for staying with the downtrend. The other half of the narrative has been a possible “Yen-tervention,” which is always possible, but is looking more distant than earlier perceived.

On Tuesday morning, Japan’s Finance Minister Masatsuga Asakawa noted that while trading was thin (meaning the market is ripe for sharp moves), they are “watching to see if there are any speculative moves.” This statement could mean they would only act on an abrupt strengthening of the JPY by an obvious short-squeeze that could mean a ~5% strengthening in one session. Either way, we do not appear to be there yet.

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USD/JPY Continues Below Heavy Resistance on Unrelenting JPY Strength

USD/JPY Technical Analysis: 100 Is Losing Its Intervention Mystique

Looking above, you can see what appears to be a very clear downtrend alongside a 200-WMA (currently at 107.15). The chart above does not show the long-term significance of the 200-WMA, but the break below favors further downside. Only a sustained break above the 200-WMA would tilt the bias for JPY selling.

You will also notice that Andrew’s Pitchfork (Red) and the Ichimoku Cloud bring further clarity to prefer the downside continuation. What has surprised many is that the low-volatility and high equity environment has failed to put pressure on the JPY. The lack of JPY weakness shows that selling JPY as part of the traditional Carry Trade is dying down.

The two horizontal lines on the charts are Support thresholds that held for months on the way up from ¥77 to ¥125. The top line is ¥100 that held as support in H12014 before the market tookoff again as the US Dollar Bull Market raised without slowing down from July to March. The second line was the H22013 Support at ~¥97, which appears to be a natural support level should the price of USD/JPY begin to break below of 100 more consistently.

We will touch on the sentiment picture more below, but it’s worth noting that the contrarian indicators are showing retail is buying aggressively, which also seems to favor trend continuation.

Shorter-term resistance will be at the Opening Range high of August at 102.645. Regarding near-term support, the Friday, June 24 low of 98.77 will be watched to hold to see if there is any hope for JPY bears.

Below there, you can look to the H2 2013 Support at ~¥97 followed by the 61.8% Fibonacci Retracement of the 2011-2015 range at 94.83. Given the recent thin market conditions, a new breakdown could easily bring us to these levels. Should we break below these levels, expect to hear from the Bank of Japan.

However, USD/JPY Sentiment Shows Traders Still Have Hope For Upside

USD/JPY Technical Analysis: 100 Is Losing Its Intervention Mystique

When looking at sentiment, the most pressing development is arise in new short positions. As of Friday, the ratio of long to short positions in the USDJPY stands at4.18 as 81% of traders are long.

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Yesterday the ratio was 3.64; 78% of open positions were long. Long positions are 3.7% higher than yesterday and 3.6% above levels seen last week. Short positions are 9.6% lower than yesterday and 0.9% below levels seen last week. Open interest is 0.8% higher than yesterday and 5.5% 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 asignal that the USDJPY may continue lower. The trading crowd has grown further net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further bearish trading bias.

Shorter-Term USD/JPY Technical Levels: August 16, 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: 100 Is Losing Its Intervention Mystique

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GBP/USD Technical Analysis: Clinging to the Big Figure at 1.3000

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Bigger-picture trend still bearish, recent price action posed a tepid break of support which may be alluding to an extremely oversold state in the pair.
  • The BOE unloaded a virtual artillery of stimulus at their most recent meeting with hints towards additional rate cuts down-the-road.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

In our last article, we looked at the range that had built in the Cable’s price action as we approached a Bank of England meeting that was carrying expectations for a rate cut at nearly-100%. And as we mentioned, rips higher in the pair would likely be sold as investors attempted to position-in ahead of the Bank of England’s expected cut. What was not expected, however, was how aggressively the Bank of England would move at their most recent meeting; not only cutting rates but increasing QE and even expanding bond purchases to include British Corporate bonds at a tune of £10 billion for a market that has only around £150 billion of face value.

Nonetheless, this bazooka of stimulus merely brought the Cable down to the support-side of that prior range, sticking above the major pscyhological level at 1.3000 in the immediate wake of the announcement. The support side of that range didn’t begin to face tests until after the Non-Farm Payrolls report the following morning, and this is when the U.S. Dollar strengthened significantly on the back of a blowout jobs-print from the U.S. In the follow-thru of that strength, GBP/USD finally sank below the 1.3000 big figure, only to bounce back shortly thereafter.

So while the down-trend here has been extremely strong, particularly if we incorporate the Brexit price action in the pair, this market is significantly oversold. And while that doesn’t necessarily preclude the possibility of continuation, it does denote the necessity of caution around short-side setups. Price action in the cable has had a tendency to reverse as prices dip below this 1.3000 psychological figure, so traders would likely want to moderate their bearishness while so near ‘bigger picture’ support values.

On the bullish side, there are complications here as well: Over the past two days the U.S. Dollar has sold off with aggression, and this has surely contributed somewhat to the bounce in GBP/USD; but the strength in the Cable over this same span of time has been far less than the weakness in the U.S. Dollar, and this alludes to the fact that traders may be using these bounces higher to merely sell the Cable at a better price.

To take advantage of this, traders can merely cast their resistance targets a bit higher to wait for that next inflection before looking to take a short-side swing in the pair. On the chart below, we identify three such levels based upon recent price action structure in GBP/USD.

GBP/USD Technical Analysis: Clinging to the Big Figure at 1.3000

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: FOMC Minutes Drop Dollar

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

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Talking Points:

-US Dollar Technical Strategy: Staying Below 12000 Resistance Remains Focus

-Anti-Dollar Assets Continue To Rally [EMFX, Commodities, & Equities]

-Dollar Dives Post-FOMC Minutes As No Harmonic View Resides Among Fed

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August has been a rough month for US Dollar Bulls. On August 9, the CBOE SPX Volatility Index or VIX hit the lowest level in 12-months, which is usually indicative of a fearless market that would rather be chasing yield. Yield has been found in Emerging Market currencies like the MXN and capital appreciation has been sought in commodities, which both benefit from a weak USD environment.

On Tuesday, there was a rather large speedbump that arose in the form of an interview by NY Fed President William Dudley. President Dudley argues that a September hike is still possible and that the market was underpricing in the possibility of a hike in 2016. The market corrected its US Dollar selling bias on the comments, and going into the minutes Traders appeared still curious as to how serious the statement should be taken.

The minutes of the July 27 FOMC Meeting did not lift the Dollar as some hoped following Dudley’s comments. USD/JPY punched closer to 100 again. The main issue is the view that data will be needed in order to validate a rate hike. However, the data over the last two months, despite the July NFP, has been an underwhelming performance of economic reports, which could mean a rate hike is further off than US Dollar Bulls had hoped.

For more on what may be ahead, let’s go to the charts.

ST H1 USDOLLAR Index Chart / Rising Support Under Pressure

US DOLLAR Technical Analysis: FOMC Minutes Drop Dollar

The short-term chart above shows a bullish channel (Blue) that the US Dollar may be favoring off a possible triple bottom in the ~11,680 zone. After a rather hot run from post-Brexit to late July, the US Dollar has gone soft again and now looks to be sitting on a rather thin support. Should the support fail to hold, we could see an air pocket in the market with a quick repositioning back toward the weak-USD view help pre-Dudley.

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

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

US DOLLAR Technical Analysis: FOMC Minutes Drop Dollar

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The simple way to look at the chart above is to see that the slope of the lines that have guided price action since Q32015 are downward sloping. While there has been pockets of US Dollar strength in January post the initial rate high and post-Brexit, the US Dollar Index has failed to find month over month gains with any consistence.

The simplified key levels that should be watched should US Dollar strength emerge is the 12,000/100 zone. A break higher from these levels would take the price of US Dollar Index above the channel resistance, and could be first clear sign since Q12015 that a Dollar breakout environment has arrived. Absent such a breakout, the preference will remain to sell rallies.

Strong/Weak View of G8 FX for Tuesday, August 17, 2016

Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, the EUR, JPY & AUD have been resilient and have proven to be a better purchase over the US Dollar. The JPY initially strengthened to 98.77 on the Brexit confirmation but has pushed back below ¥100 per USD this week.

US DOLLAR Technical Analysis: FOMC Minutes Drop Dollar

Shorter-Term US Dollar Technical Levels for Tuesday, August 17, 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: FOMC Minutes Drop Dollar

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USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Bearish breakdown on weak-USD; longer-term bullish structure in-tact above .9398.
  • U.S. Dollar weakness has driven the Swissy towards the June ‘Brexit-low’ in the pair, also near the .9500 psychological level.
  • 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.

Last week we warned of a deeper retracement in the prior up-trend of USD/CHF after the currency pair had posed a ‘lower high’ inflection of resistance. And while that prior up-trend was attractive from both a fundamental and a technical view, the risk-reward of the setup was utterly unattractive for chasing long positions, and we drew attention to deeper support levels in the effort of planning-around longer-term bullish positions.

Over the past three weeks, the US Dollar has put in a considerable bout of weakness as markets have grown increasingly skeptical that the Fed may be nearing rate hikes anytime soon, and as this rather pervasive theme has continued to permeate through financial markets, US Dollar weakness has been visible against most currencies, including the Swiss Franc. This has driven price action in the pair down towards those longer-term levels of support, and thus far on the day, the pair is responding with strength.

Swissy is nearing a very attractive zone of support just below the 95-handle. From the level of .9398-.9450, there are numerous iterations of support that could provide motivation for longer-term bullish entries. On the chart below, we look at these various levels of support.

USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

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

But this may not be something that traders yet want to chase, as near-term support is still continuing to build, and if we investigate this morning’s strength on a shorter-term basis, it highlights a shorter-term bear-flag formation. Earlier in the week we had a similar such technical scenario, and as you can see on the below chart, that bear flag eventually broke around the release of FOMC minutes on Wednesday.

USD/CHF Technical Analysis: Bear Flag or Bullish Reversal?

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

Bear flag formations can often show up as retracements in a continued down-trend, so this can become usable to traders as they await those deeper support levels in the .9398-.9450 zone; and should this show up over the next week traders can investigate attractive top-side setups in the Swissy.

At this early stage, Swissy price action appears to be working on a retracement in the down-trend. But the potential up-side of bearish plays will likely be limited given the robust support structure sitting below price action, so rather than looking at continuation of the near-term bearishness, traders can keep a watchful eye on support in the effort of looking for the ‘bigger picture’ bullish scenario.

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

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AUD/USD Technical Analysis: 3-Month Trend Support at Risk

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar edges lower to challenge three-month trend line support
  • Waiting for clear-cut breakout confirmation before opening short trade

The Australian Dollar is attempting to build downside momentum against its US counterpart after signaling a top with the appearance of a bearish Evening Star candlestick pattern. Prices now challenge rising trend line support capping the downside since late May.

From here, a daily close below trend line support – now at 0.75787 – opens the door for a test of the July 27 low at 0.7421. Alternatively, a reversal above the August 11 high at 0.7756 paves the way for a challenge of the August 11 top at 0.7760.

Fundamental considerations appear to favor a bearish AUD/USD bias. Still, confirmation of reversal requires a clear-cut break of trend line support to be actionable. With that in mind, it seems prudent to wait before initiating a short position until a better-defined opportunity presents itself.

What do past AUD/USD trading patterns hint about current price action? Find out here!

AUD/USD Technical Analysis: 3-Month Trend Support at Risk



USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

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

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Talking Points:

-USD/CAD Technical Strategy: On Watch For Down < 1.2841 to Carry Toward 1.25

-Trader Sentiment Warns a Coiled Move Lower Could Be Around the Corner

-Looking For Clear Short-Term USD/CAD Levels Updating In Real-Time? Check Out GSI

Quick Fundamental Take:

Will the price of the Canadian Dollar break or follow the recent breakout in WTI Crude Oil? That is a question worth asking in the second half of August. We recently saw in the Commitment of Traders report from the CFTC that leveraged institutional funds have shifted to a net short CAD position from a net long position the week prior. From an internal perspective of the Canadian Economy, a short CAD position has some credibility.

Economic announcements in Canada have steadily underperformed economists expectations since late April as shown via the Economic Surprise Index for Canada. Recently, we saw housing data out of Vancouver that showed the once-high-flying Real Estate markets now leads the third straight fall month over month in Canadian Home Sales. Earlier this month, the provincial government placed a foreign buyers’ tax for Vancouver home, but inflated prices may have put a dent in sales even before the tax went into effect.

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Another key development worth watching as Q3 and H2 2016 get under way is the directional bias inWTI Crude Oil (CFD: USOil).So far, Oil looks to have found new life and may be pushing back toward resistance near ~$49/bbl at a time when the US Dollar is showing few signs of another Bull Market.

Technical Focus:

Long-Term Chart:

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

A quick note on the long-term (9-Year, Weekly Chart) can be a helpful way to put yourself in the right frame of mind about long-term moves in USD/CAD. On the far right side of the chart, you can see the sideways price action that began in early May, which now represents a Bear Pennant.

The chart below shows the pattern in more detail. A Bear Pennant is a continuation pattern that if we can break below the gang of support below, could open up a flood of selling in the pair. Given the recent strength of Oil, which is positively correlated to the price of Crude Oil with a correlation coefficient over the last month of +0.49. The correlation coefficient is the lowest level in 18-months.

The last point on the chart above is to watch the long-term Median Line that sites at ~1.23. Again, a break below ~1.2840, which is the H2 Macro Opening Range low would immediately turn focus to 1.23 that aligns with the Median Line where USD/CAD bounced in May 2015.

Median Term: USD/CAD Is Now Putting Pressure on Support That May Not Hold

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

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The chart above is a good explanation on the difference between a price and time correction. The move from late January to early May was a classic price correction. In shortorder, the price of USD/CAD dropped ~15% in a bit more than four months, which many felts was a long overdue move given the recent rally and other attributed more to the strong move higher in Oil.

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

In 78.6% of the time consumer as in the initial price drop (as shown with the vertical lines on the chart above), the price of USD/CAD has a little more than ~6%. While a move higher has taken place, the move has been more of time consumption > price consumption.

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It appears now that focus should be if we’re about to move into another phase of a price correction similar, albeit likely weaker than the January-May move. A break below the H2 2016 Macro Opening Range Low of 1.2840 would be the first indication that this move could be under way.

Canadian Dollar Has Regained Favorper Sentiment

USD/CAD Speculative Sentiment Index as of Monday, August 15, 2016

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis, there continues to be evidence for a possible breakdown if USD/CAD can break below 1.2850.

The ratio of long to short positions in the USDCAD stands at 1.48 as 60% of traders are long. Yesterday the ratio was 1.43; 59% of open positions were long. Long positions are 0.6% higher than yesterday and 42.6% above levels seen last week. Short positions are 3.1% lower than yesterday and 20.5% below levels seen last week. Open interest is 0.9% lower than yesterday and 0.1% 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 asignal that the USDCAD may continue lower. The trading crowd has grown further net-long from yesterday but unchanged since last week. The combination of current sentiment and recent changes gives a further bearish trading bias.

Key Levels as of August 15, 2016

USD/CAD Technical Analysis: Macro Now Favoring a Breakdown?

T.Y.

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NZD/USD Technical Analysis: Topping Below 0.73 Figure?

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar continues to tread water near 0.73 vs. US counterpart
  • Negative RSI divergence hints at topping but confirmation is absent

The New Zealand Dollar continues to tread water in a narrow range against its US namesake having repeatedly failed to hold up above the 0.73 figure. Emerging negative RSI divergence hints at ebbing upside momentum and may be signaling a downward reversal on the horizon.

Near-term rising trend line support is now at 0.7225, with a break below that opening the door for a test of a horizontal pivot level at 0.7102. Alternatively, a daily close above the June 24 high at 0.7298 paves the way for a challenge of the 61.8% Fibonacci expansion at 0.7353.

Positioning is inconclusive at this point. While early downside reversal cues appear to be emerging, a clear-cut reversal signal is conspicuously absent. Furthermore, prices are wedged too tightly between immediate support and resistance to justify a trade from a risk/reward perspective. Opting for the sidelines seems prudent.

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

NZD/USD Technical Analysis: Topping Below 0.73 Figure?



EUR/GBP Technical Analysis: Euro Drops to 2-Week Low

Fundamental analysis, economic and market themes

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Talking Points:

The Euro turned lower against the British Pound as expected after prices put in a bearish Dark Cloud Cover candlestick pattern, dropping to a two-week low. The pair has overturned the break above July’s swing high, seemingly pointing to something more significant than just a corrective pullback in progress and warning of further weakness ahead.

From here, a daily close below the 23.6% Fibonacci retracementat 0.8459 paves the way for a challenge of rising trend line support at 0.8390, followed by the 38.2% level at 0.8295. Alternatively, a move back above support-turned-resistance at 0.8584, the July 6 close,opens the door for a retest of the August 16 high at 0.8725.

A short EUR/GBP trade was triggered at 0.8631.The trade remains in play, initially targeting 0.8459 with a stop-loss to be triggered on a daily close above 0.8725. Half one position will be booked and the stop-loss moved to breakeven when the first objective is hit.

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

EUR/GBP Technical Analysis: Euro Drops to 2-Week Low



EUR/JPY Technical Analysis: Down-Trend at ’Decision Point’

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Big-picture down-trend working on higher-lows, very near longer-term base of support.
  • EUR/JPY is up over 100-pips off of last week’s lows and fast approaching prior price action support. Should price action break above this zone + a projected trend-line, top-side strategies could become attractive.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of each month for certain account holders. Click here for full details.

In our last article, we looked at the breakdown in EUR/JPY on the heels of a BoJ rate decision that left many market participants wanting for more. While expectations for enhanced stimulus out of Japan were running extremely high going into the most recent BoJ decision, the bank largely underwhelmed and this created a sharp move of Yen strength as stimulus bets priced-out of Japanese markets. But have we heard the last from the Bank of Japan? Probably not, and more likely, other market participants are harboring the expectation for the BoJ to come to the table with something ‘big’ before the end of the year.

None-the-less, price action in EUR/JPY at this point remains bearish as denoted by a recent series of lower-lows and lower-highs that have come-in post-BoJ. We do have the initial makings of what could be a top-side reversal, as prices have moved more than 100 pips off the lows into an interesting area of potential resistance. Just a few pips above current levels is prior price action swing support at 113.88, and just a few pips above that we have a projected trend-line that can be found by connecting the Brexit low at 109.19 to the July swing low at 110.81. Should price action break above this zone of potential resistance, then traders may be able to look at the long-side of the pair under the premise of trading bullish continuation.

Traders looking to get long would likely want to wait for price action to break above this area of potential resistance in order to confirm top-side sustainability before looking to trigger the position. Should price action break above this area around 113.88, top-side targets could seek out an initial level of 115.37, which is the 61.8% Fibonacci retracement of the ‘Abenomics move,’ taking the low in 2012 to the high in 2014. This level had also seen quite a few swings around the erratic price action during the post-Brexit environment; and above that we have a prior price action zone of resistance around 116.80, followed by the psychological level at 117.50 and then the July high at 118.45.

Alternatively, the short-side of the pair could be attractive for short-term momentum strategies until this zone of resistance at 113.88 becomes broken; but traders utilizing longer-term approaches would likely want to tread cautiously around the prospect of bearish continuation while near the well-established zone of support around the 110-big figure.

EUR/JPY Technical Analysis: Down-Trend at ‘Decision Point’

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: Tug-of-War at the ’Brexit-Low’

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Longer-term down-trend attempting to carve-out higher-low support.
  • After the out-sized reversal in the Yen followed by the monetary bazooka triggered by the BOE, GBP/JPY saw a big move lower, but respected the longer-term lows that printed in the week following the Brexit referendum.
  • 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 GBP/JPY price action near a confluent support-zone in the 135-region. And given that a large portion of that movement-lower took place after the Bank of Japan had underwhelmed at their most recent rate decision, it made sense that we were likely seeing stimulus bets come out of the Yen. But with a Bank of England rate decision carrying a near-100% probability of a rate cut in the days following, it also made sense not to push a ‘square peg into a round hole’ by trying to buy GBP-assets ahead of that announcement.

The Bank of England did not disappoint: They unrolled a veritable bazooka of stimulus with more than even the most aggressive forecasts were looking for. And as many would expect, this brought-on a quick dose of GBP-weakness, sending GBP/JPY flying below the ‘Brexit low’ at 133.20; which had held as ‘swing-low’ support in GBP/JPY until the week following Brexit, in which Mark Carney drove the Sterling lower by talking-up proactive rate-cuts for the economy on the heels of the referendum.

To close last week, price action in GBP/JPY had trickled back up to 133.20 to find near-term resistance. And the open this week saw prices gap above this level, only to move down to find short-term support at old resistance.

While many are still extremely bearish on GBP given the expectation for even more rate cuts down-the-road, the possibility still exists for the Bank of Japan to ramp-up their stimulus program, and any clues, hints or innuendo of such a theme from Japanese politicians/Central Bankers will likely re-fire this prospect. This was a large driver behind the theme of Yen-weakness in the first half of July, and while the BoJ underwhelmed at their most recent meeting, this certainly does not preclude the bank from doing more in the future; and we’ll likely see market participants building expectations for such a theme as we move towards the bank’s next meeting in September.

GBP/JPY Technical Analysis: Tug-of-War at 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: Pair Pointing Higher After Break

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

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Talking Points:

- USD/CNH broke above 6.6500

- A hold above the 6.6500 level may expose recent highs around 6.7

- Another Break higher might be required for bulls to really show strength

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The US Dollar is trading higher versus the Chinese Yuan in offshore trade, as the pair broke above the 6.6500 technical level after finding support at the July lows around 6.6224.

The break above resistance at 6.6500 might now shift focus to intermediate resistance at 6.6860 followed by the 6.7 figure.

For bulls to really show strength, the price might need to break and hold above those recent highs.

A move lower seems likely to shift focus to 6.6500 again for possible support, followed by the aforementioned lows at 6.6224.

USD/CNH Daily Chart: August 22, 2016

USD/CNH Technical Analysis: Pair Pointing Higher After Break

--- 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 Declines for 6th Session

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

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Talking Points

  • CAC 40 Declines For 6th Session
  • The CAC 40 Now Trades Under the 200 Day SMA at 4,417
  • If you are looking for more trading ideas for equities markets, check out our Trading Guides

The CAC 40 is set to close this week’s trading lower, after declining for the 6th consecutive daily session. Currently the CAC 40 is trading down -1.08% for Friday’s trading. Of the 40 listed components, Societe Generale is leading the decline trading down -3.40%. Technical traders should note that prices are now back below their 200 day SMA (Simple Moving Average). This line found at 4,417 and was previously acting as support for the Index. However with the CAC 40 trading below this line, it may now be used as a reference point for resistance.

CAC 40, Daily Chart

CAC 40 Declines for 6th Session

(Created using Marketscope 2.0 Charts)

The CAC 40 is also trading beneath key short term technical values of support. This includes the S4 Camarilla pivot displayed below at 4,411.4. Even with price retracing from the daily low of 4,394.80, this implication is typically bearish. In the event of a continued decline, traders may extrapolate 1X today’s trading range to find initial bearish targets near 4,401.50. In the event of a bullish reversal, it would be expected to see the CAC 40 not only trade back above the S4 pivot, but advance to the S3 pivot at 4,421.85.

CAC 40, 30 Minute Chart with Pivots

CAC 40 Declines for 6th Session

(Created using Marketscope 2.0 Charts)

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WTI Crude Oil Price Forecast: Oil Firm on News of Iranian Support

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

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Talking Points:

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

Tuesday saw the price of WTI Crude Oil turnaround toward August highs on positive news for the industry. Iran is said to be sending positive signals that they may support a joint action by OPEC by limiting production so that demand and supply can even out. In addition to the positive fundamental news, all eyes are on Janet Yellen’s Friday speech that may help investors understand what lays ahead for the US Dollar into year-end. The US Dollar is inversely correlated to the price of US Oil so that a weakening US Dollar would likely benefit the price of WTI Crude Oil even further.

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

If the US Dollar weakness continues, it seems like this trend could just be getting started. For more definitive levels, let’s go to the charts.

Crude Oil Price Chart Rises Toward Well Identified Resistance at $49.25/bbl

WTI Crude Oil Price Forecast: Oil Firm on News of Iranian Support

The chart above has consistently provided a helpful framing price action in WTI Crude Oil. After failing at the top channel in June, the price quickly dropped down to a pre-identified zone provided by the median line and the Fibonacci Retracement levels in focus between $41.85-$35.22/bbl. Given the move in August, which last week registered a Bull Market, the price support that is in focus now is ~$41.27/bbl.

As you can see, the price has moved right back up to formidable resistance that is provided by the Channel Top and the price is now resting at the top of the Ichimoku Cloud. A break above this Andrew’s Pitchfork resistance (Red) could provide real excitement as it would be the first time since summer of 2014 that we’ve seen what looks to be a sustainable bullish break for Crude Oil that could keep the price comfortably above the $50/bbl level for a while.

Before resistance breaks, given the ~17 Months within the price channel (aside from the January/February breakdown,) it’s safer to favor price remaining as opposed to breaking out given the low-volatility environment we find ourselves. However, that would likely need a breakdown in OPEC negotiations and a stronger US Dollar, which currently seem like a remote possibility.

The key support that would deflate the confidence of the 20%+ August trend would be a break below the higher-low of $41.27/bbl from August 11. A breakdown below there could be the first confident sign that price will continue to wallow lower in the falling channel drawn on the chart.

Bottom Line:

The price of US Oil does not seem to be slowing down as it heads toward trend-defining resistance near $49/bbl. Positive signs out of OPEC that may cap production as US production continues to lag may help support prices at higher levels. The potential for potential further US Dollar weakness would likely compound the effects of Iran potentially supporting OPEC action to help the price of Oil surmount and remain above $50/bbl.

Contrarian System Beginning To Favor Upside Risk as of 8/23/16

WTI Crude Oil Price Forecast: Oil Firm on News of Iranian Support

In addition to the technical focus, we should keep an eye on retail sentiment. The upside is beginning to align with our Speculative Sentiment Index or SSI for now.

As of mid-day Tuesday, the ratio of long to short positions in the USOil stands at -3.26, as 23% of traders are long. Yesterday the ratio was -3.16; 24% of open positions were long. Long positions are 53.9% lower than yesterday and 70.8% below levels seen last week. Short positions are 52.5% lower than yesterday and 26.2% below levels seen last week. Open interest is 52.8% lower than yesterday and 54.4% 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 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 of Trading As of Tuesday, August 23, 2016

WTI Crude Oil Price Forecast: Oil Firm on News of Iranian Support

T.Y.

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Gold Prices Chop At Support, but Beware Jackson Hole

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Gold prices continue consolidating near-resistance; under-side of wedge being tested.
  • The longer-term bullish structure of Gold is still in-tact; but as FOMC officials are talking-up higher rates, this could bring a deeper retracement before top-side plays become attractive.
  • 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 wedge formation that had developed in Gold prices after the bullish advance of August stalled below the July high. And connecting that July high to the August high gave a down-ward sloping trend-line that made up the top-side of a symmetrical wedge formation that continues to hold. Given the drivers behind Gold’s price action this year, this wedge-formation near resistance made sense. Gold prices have seen considerable pops-higher on the year as FOMC rate hike expectaitons have gotten kicked further-and-further into the future. And when the Fed does get more aggressive or hawkish, as we saw in May as many members of the bank talked up the prospect of higher rates, Gold prices get hit as investors buy USD in preparation for a ‘potential’ rate hike.

And this is somewhat of the issue with long-Gold scenarios at the current juncture. The July FOMC meeting saw the bank make a hawkish-tweak to their statement, very similar to what was seen at April’s FOMC meeting. And just like we saw in April, the market’s reaction to this ‘less dovish, slightly more hawkish’ statement was one of disbelief as markets continued to expect the Federal Reserve to stay loose and passive. But in the weeks following that April meeting and throughout May, and happening again this August following the July FOMC meeting, we’ve seen follow-thru with multiple Fed members talking up the prospect of higher rates. Last week, we heard from Mr. William Dudley and Mr. Dennis Lockhart, and already this week we’ve heard similar such comments from Vice Chairman Mr. Stanley Fischer. As these comments have come-in, Gold prices have continued to test deeper support levels with a bounce off of the bottom-portion of that symmetrical wedge this morning.

Gold Prices Chop At Support, but Beware Jackson Hole

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

Given the Jackson Hole Economic Symposium on deck for later in the week in which we’ll hear much, much more from many Central Bankers including a keynote speech from Chair Yellen herself, and there is a significant amount of opportunity for even more hawkish commentary on U.S. rate hikes. Such a scenario could bring additional strength into the U.S. Dollar and weakness to Gold prices; but longer-term this could be a beneficial occurrence.

To be sure, we’re not saying that the Fed will be raising rates in September. Rather, it looks as though the Federal Reserve wants to keep markets ‘on their toes’ by assuring that they’re ready to hike rates when the underlying data is strong enough to allow it; but this may be well into 2017 before that actually happens. Instead, we’re looking to play a ‘redux’ of the May scenario, in which a hawkish Federal Reserve drives a deeper retracement in Gold prices so that longer-term positions could be sought near ‘bigger picture’ levels of support.

On the chart below, we look at three such zones of support that could become attractive in a strong-USD type of scenario; allowing for longer-term bullish entries in Gold.

Gold Prices Chop At Support, but Beware Jackson Hole

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

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

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Silver Prices Drop Below 19.20 Level and Multi-Week Range

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

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What’s inside:

  • Short-term sequence of lower highs, lower lows led to selling
  • Bottom of range at 19.20 failed to hold, long-term support zone lies below
  • Futures market likely correcting with move lower

The last time we discussed silver prices (last Wednesday) we made note of the short-term downward trend within the range dating back to the beginning of July. The sequence of lower highs and lower lows seen on the intra-day time-frame (2-hr chart) signified the path of least resistance as being – down. Our ultimate target before possibly seeing buyers step in was at 19.20, or the low-end of the multi-week range.

On Monday, silver tested 19.20, but barely held this level by the close of the session. Yesterday, selling pressure pushed it through with little support from buyers. This was not the test and rejection of support which piques our interest from the long-side. A test or drop below 19.20 and strong close back above would have given indication the bottom of the range was likely to hold. But that was not the case.

The drop below 19.20 exposes silver to further selling, but we need to be mindful of long-term support which exists from current prices down to the low-18s.

Silver Prices Drop Below 19.20 Level and Multi-Week Range

The short-term trend remains lower, and as such a retest of the 19.20 level and failure may offer a good short set-up, even if only for a hit-n-run trade as silver falls into meaningful long-term support.

Silver Prices Drop Below 19.20 Level and Multi-Week Range

From a long to intermediate-term standpoint, we have discussed on several occasions the belief that until record long positioning by large speculators in the futures market corrects with price, we believe silver will find it difficult to move higher. The weekly Commitments of Traders (COT) reports include activity from Wednesday to Tuesday and are released on Friday’s. This most recent drop should show a material decline in long holdings as large speculators have likely reduced their holdings during the past week. We will soon take a look at this dynamic and how it may impact the future direction of silver.

Learn to utilize technical analysis better in your trading through one of our many free trading guides.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




S&P 500: A Look at the Short-term Chart-scape

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

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What’s inside:

  • The S&P 500 breaks wedge, but not support
  • Tough summer trading environment with volume and volatility low
  • Trend remains higher, but one possible bearish formation could develop

In the latest commentary regarding the S&P 500 (FXCM: SPX500) we took note of the downside break in the wedge formation which had been developing since the beginning of the month. Despite its bearish implications we wanted to see a clean drop below all near-term support levels, including the 8/10 low at 2171, before feeling comfortable from the short-side. While on 8/17 the S&P broke below 2171, it was only for a very short period of time before recovering back above.

It remains a difficult environment for traders on all time-frames. The very slow upward grind which began in the middle of July looks likely to continue in the short-term without a major catalyst as the summer vacation period winds down.

The general trend is higher, so we must respect that for now until we see a meaningful break in price and sentiment.

One possible bearish short-term development to watch is the development of a head-and-shoulders pattern. However, trend-line support from the 8/2 low comes in prior to the pattern triggering (break below 2167), which helps keep the trend pointed higher as long as the S&P remains above.

S&amp;P 500: A Look at the Short-term Chart-scape

The best strategy at this time appears to be quick-hitter scalps off horizontal and sloping support levels until volume and volatility move back into the market.

What separates successful traders from the rest? Find out in our free trading guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at probinson@fxcm.com with questions or comments.




DAX: Challenges Critical Area of Support, Finds Buyers

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

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What’s inside:

  • The DAX tests key area of support and holds
  • Risk skewed to upside from here, but consolidation phase may be in order
  • Summer trading environment calls for defensive trading

After several days of declining the DAX (FXCM: Ger30) tested and held a key area of support. The April peak, which we previously considered to be the last line of resistance (now support), was the most important of the levels to get undercut and hold on a daily closing basis. A retest of the 2011 trend-line was also successful, while the May and June highs were not quite tested, but came close enough to be considered a retest (May high was missed by 12 points).

Yesterday’s price demonstrated a solid rejection at support, and given the ability for the DAX to hold on suggests risk has become skewed to the upside. If the market doesn’t begin to rise shortly, a consolidation phase could very well unfold; a development we would welcome given the powerful rise off the post-referendum lows. As long as there are no systemic shocks, a rise to a swing high created back in December just beneath 10900 and the upper parallel matching the one created off the February low (~11000) looks like a reasonable target zone over the next few weeks.

A break below yesterday’s low at 10386 and the May and June peaks (lowest price point at 10348) exposes a deeper decline towards the 2015 trend-line broken earlier in the month.

DAX Daily

DAX: Challenges Critical Area of Support, Finds Buyers

Keep in mind, it’s still the dog-days of summer, with a thin August trading environment dominating trade. This keeps us in defensive trading mode until we move on past the end of summer.

What separates successful traders from the rest? Find out in our free trading guide, “Traits of Successful Traders”.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at probinson@fxcm.com with questions or comments.




FTSE 100 Technical Update: Last Summer Levels Providing Challenge

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

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What’s inside:

  • The FTSE 100 finds challenging resistance from last summer
  • No clear edge from either side of the tape
  • Short-term levels of interest outlined

In recent trade the FTSE 100 has been slowly, one-by-one, challenging peaks created during the summer months of last year. This price action comes following the breakout above the 7/27 peak, which marked the top of a multi-week range. It was noted on Monday that gains could come, but they wouldn’t come easily given not only resistance, but the summer trading environment and general nature of how the FTSE often trades – choppy.

Yesterday, the UK index found the June ’15 peak a bit of a challenge again, reversing lower on the day. Nothing overtly bearish, but sellers were found lying in the 6865 vicinity for a second day in a row. The past two-and-a-half days may turn out to be nothing more than a consolidation, or a pullback could unfold back towards the 7/27 high of 6779.

Playing ping-pong around levels in a low-volatility/volume environment is likely to be the best-suited strategy in this tape. Otherwise, there isn’t a whole lot for us to lean on at the moment from the standpoint of a swing-trade. Risk/reward in either direction isn’t particularly favorable without further signaling.

Levels of short-term interest: Support – 6807/10, 6779, and 6730. Resistance – 6865, then 6900.

FTSE (UK100) Daily

FTSE 100 Technical Update: Last Summer Levels Providing Challenge

Follow trader positioning in real-time with SSI.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

You can email him at probinson@fxcm.com with questions or comments.




ASX 200 Technical Analysis: Sideways Between Well-Defined Levels

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

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Talking Points:

- Index finds resistance around 15,600

- Price trading sideways between 5,500 and 5,570 since the beginning of the month

- 20-day ATR reading at its lowest level since September 2014

If you’re looking for trading ideas, check out our Trading Guides Here

The ASX 200 is trading sideways, between the 5,500 support and the 5,600 resistance area (5,570-5,600).

Volatility has seen a decline to its lowest levels since September 2014 (based on a 20-day ATR study), perhaps due to the “summer lull”.

Against this backdrop, the technical picture appears quite clean, as a break to either side of this trading range could prove influential:

A clear move above 5,600 could indicate the long term uptrend may have resumed and signal further bullish intentions, possibly exposing the 5,700 level for potential resistance initially.

A break below the 5,500 area seems likely to shift focus to possible support around the 5,380-5,400 zone, which might still be seen as corrective within the context of the last months rally higher.

ASX 200 Daily Chart: August 18 2016

ASX 200 Technical Analysis: Sideways Between Well-Defined Levels

--- 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: 16,500 Shows Resilience

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

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Talking Points:

- Index short term rally stalled at the July high

- 16,500 is holding as support, upside momentum seems likely to shift focus to 17,000

- Volatility hits 2016 lows (based on 20-day ATR readings)

If you’re looking for trading ideas, check out our Trading Guides Here

The Nikkei 225 is finding support at 16,500 at the time of writing, after the index edged down from its July highs around 16,929.

At this stage, further upside conviction seems likely to shift focus to a resistance area around 17,000; a confluence resistance zone with the 17,000 handle, 200-day SMA and potential trend line resistance.

A break above 17,000 may be significant and expose the range highs slightly below the 18,000 level.

With that said, if price moves below 16,500, this could potentially put the spotlight on the 16,000 handle for support, and a break lower could expose the 15,000 range lows.

Major swings might not be on the immediate horizon though, unless a catalyst presents itself, as 20-day ATR volatility measures indicate we are currently trading at 2016 volatility lows.

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

Nikkei 225 Daily Chart: August 23, 2016

Nikkei 225 Technical Analysis: 16,500 Shows Resilience

--- 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