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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: Implied Vol Shows Trader’s Nerves

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

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Talking Points:

  • USJ/JPY Technical Strategy: 100 Still Feeling Like Thin Support, Bias Lower
  • September Likely To Bring Central Bank Fireworks
  • Sentiment Shows Further Signs of Further JPY Strength

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Quiet Now, But Traders Are Bracing For Large Moves Ahead

USD/JPY, along with other markets like the S&P 500 (CFD: SPX500) has been looking at historic lows. Based on trader’s sentiment per SSI, traders are expecting or hoping for a large move higher in USD/JPY off the perceived floor of 100.

While we await Jackson Hole’s culmination of Janet Yellen’s speech titled, ‘The Federal Reserve’s Monetary Policy Toolkit,’ traders have their sites more focused on September 20-21 where the Bank of Japan will meet with some continuing to speculate about the possibility of Helicopter Money or another new form of Quantitative Easing.

The focus on the possibilities of the late-September BoJ meeting followed by the Federal Reserve meeting where recent Fed Presidents have encouraged traders to be on alert for a possible rate hike. This combination of events has brought one-month implied volatility to one-month highs, which has put the probability of a December rate hike above 50% per Bloomberg and a 30% probability of a September 21 hike.

As of Thursday, there is a ~4% premium of 1-month implied volatility to 1-week volatility that can help you see what is anticipated to traders on possible central bank action. In addition, Friday will combine Janet Yellen’s speech as well Japan’s inflation data, which will likely spike the anticipation of the upcoming meetings.

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USD/JPY Continues Below Heavy Resistance on Unrelenting JPY Strength

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

Looking above, you can see what appears to be a very clear downtrend alongside a 55-DMA (currently at 103.09). You will also notice that Andrew’s Pitchfork (Red) and the MVA provide clarity to prefer the downside continuation. What has surprised many is that the low-volatility continues to persist.

A famous quote from Hyman Minsky, the noted economist stated that stability begets instability, and the low-ATR looks show signs of stability. Naturally, looking at the implied volatility, such low-volatility environment are unlikely to last.

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

For now, shorter-term resistance will be at the Opening Range high of August at 102.645. This resistance, if broken would be followed by the 55-DMA. Regarding near-term support, the August 16 low of 99.522 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 as ¥100 Holds

USD/JPY Technical Analysis: Implied Vol Shows Trader’s Nerves

When looking at sentiment, the most pressing development is a rise in new short positions. As of Thursday, the ratio of long to short positions in the USDJPY stands at 4.27, as 81% of traders are long.

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Yesterday the ratio was 4.29; 81% of open positions were long. Long positions are 0.5% higher than yesterday and 15.5% above levels seen last week. Short positions are 1.2% higher than yesterday and 13.7% above levels seen last week. Open interest is 0.6% higher than yesterday and 27.2% above its monthly average.

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

Shorter-Term USD/JPY Technical Levels: August 25, 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: Implied Vol Shows Trader’s Nerves

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GBP/USD Technical Analysis: Cable Poses a Bullish Run

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Longer-term bearish trend still in-tact with price action below 1.3371.
  • The past week has seen considerable bullishness in GBP/USD as USD has continued to weaken; retail positioning has flipped short, and this is a bullish indication in GBP/USD.
  • 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 GBP/USD in the midst of another turn lower. But as we warned, this market was looking quite oversold, and traders looking to voice a bearish bias on the pair would likely want to wait for a cleaner setup or more attractive risk-reward ratio before looking for continuation of that down-trend.

Since then, GBP/USD set higher-low support at 1.2864; above the post-Brexit low of 1.2788, and this was after the bazooka of stimulus posed by the Bank of England from the prior week. This opens the door for an extended top-side move as the repercussions of the Brexit-move in the Sterling have begun to show in British data; and that’s primarily speaking to the prospect of continued inflationary pressure brought upon by the out-sized move lower in the British Pound. With a weaker Sterling, import prices will likely be moving up in the U.K., and this can continue to prod inflationary pressure that may complicate future rate cuts that the Bank of England might be investigating. So the fundamental back-drop could certainly support a continued move higher here in GBP/USD, and this could give caution to shorts or those carrying a bearish bias in the near-term.

However, the longer-term bearish structure is still intact with price action below 1.3371, which was the prior swing-high on the Daily chart of GBP/USD. Just 14 pips below is the 76.4% retracement of the post-Brexit move in the pair, and this is just another reason to watch for price action’s response should this level come into-play. This could be an interesting zone to evaluate for potential bearish reversals of the near-term move higher, or, on the other side, for continued reversal plays should price action eclipse this level.

For traders looking to initiate a bearish stance on the Cable, they can watch for resistance to form around this price zone from 1.3350-1.3375 in order to look for that short entry. But for those looking to play the up-side of the pair, letting this level first break to prove continued bullishness could provide confirmation that buyers may be able to continue pushing price action higher. For that approach, the major psychological level, and the ‘Financial Collapse’ swing-low at 1.3500 could become an attractive near-term target.

GBP/USD Technical Analysis: Cable Poses a Bullish Run

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: Yellen Gives USD Bears A Layup

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

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Talking Points:

  • US Dollar Technical Strategy: USDOLLAR Falling Away From Median Line
  • Anti-Dollar Assets Continue To Rally [EMFX, Commodities, & Equities]
  • Yellen Speech Stirs Market, Bull US Dollar Bears Prevail On Lack of Hawkish Guidance

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On Friday morning, in Jackson Hole, Janet Yellen spoke on the “The Federal Reserve’s Monetary Policy Toolkit.” At this closed-door speech with no Q&A, Yellen confirmed forward guidance and quantitative easing would be called upon if another crisis were to arise. At first, Bulls seemed encouraged by the argument that the case for rate hikes “has strengthened,” but in the end, there seemed to be more time spent about how the Dollar could weaken over the coming years.

One key point that seemed to turn the US Dollar lower was the note about the short-term neutral rate falling with little understanding of the forces behind the falling neutral rate. The neutral rate is economic speak for the dividing line between accommodative and restrictive policy according to the Fed’s reference rate. Given the current Fed Funds Rate at 0.375, a falling neutral rate seems to argue that there will be fewer hikes in the future than anticipated.

The fireworks are not done yet from Jackson Hole. On Saturday, there will be a panel discussion with Bank of Japan Governor Haruhiko Kuroda, as well as ECB Executive Board Member, Benoit Coeure.

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

D1 USDOLLAR Index Chart / New Nine-Week Lows

US DOLLAR Technical Analysis: Yellen Gives USD Bears A Layup

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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 have 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 consistency. The price action of US Dollar post-Yellen’s Jackson Hole speech touched a fresh nine-week low.

The simplified key levels that should be watched should US Dollar strength emerge is the 12,000/100 zone. However, the price action is falling further and further away from these levels.

A break higher through these levels would take the price of US Dollar Index above the channel resistance, and could be a first clear sign since Q12015 that a Dollar breakout environment has arrived. Absent such a breakout, the preference will remain to sell rallies.

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Strong/Weak View of G8 FX for Friday, August 26, 2016: A Very Weak USD

Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, the US Dollar has been the clear laggard. However, the JPY seemed to weaken against other currencies, except USD initially after Janet Yellen’s Jackson Hole speech.

US DOLLAR Technical Analysis: Yellen Gives USD Bears A Layup

Shorter-Term US Dollar Technical Levels for Friday, August 26, 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: Yellen Gives USD Bears A Layup

T.Y.

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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: Awaiting Yellen To Break The Range

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

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Talking Points:

-USD/CAD Technical Strategy: On Watch for Strength > 21-DMA at 1.3008

-Trader Sentiment Warns a Move Lower Could Still Be In The Works

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

Quick Fundamental Take:

The Canadian Dollar has had a rough week against the US Dollar and overall has found a patch of weak data. Recently, we’ve seen the price of the Canadian Dollar break from the price of Crude Oil, which historically held a strong positive correlation.

The weakness of fundamental data in Canada has steadily underperformed economists expectations since late April as shown via the Economic Surprise Index for Canada. The Citi Economic Surprise Index for the Canadian Economy recently showed its worst reading, meaning consistent underperformance, since January when the price of USD/CAD was in the mid-1.4000s. Much of the recent Canadian Dollar stability has had more to do with the subdued US Dollar more so than Canadian Dollar strength.

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The price of the Canadian Dollar vs. the US Dollar will likely be volatile heading into the end of the year. While the correlation has been weaker than historical averages, a price breakout in the Crude Oil market would support the Canadian Dollar or a persistently dovish Fed about market expectations could continue to drag the down USD/CAD.

To get a feel for where we stand, and where we could be heading, let’s go to the charts:

Technical Focus:

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

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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 and strong price correction. In shortorder, the price of USD/CAD dropped ~15% in a bit more than four months, which many felt 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

However, since May, we’ve seen the price of USD/CAD move sideways. What catches my attention is that such a sideways move or consolidation tends to be a sign that the prior move / trend, which was lower is not down. If that’s the case, we should identify points that would help validate a strong down move as well as resistance that if broken, would invalidate a short-term focus on the downside.

Resistance looks to be firm at ~1.3000. Specifically, 1.3008 marks the 21-DMA, and there is a lot of structural support at the 1.3000 zone. If price breaks above 1.3000/08, it appears there is little resistance until we see a retest at the top of the channel at ~1.3200. Such a move above 1.3000/08 would nullify my short-term focus on the downside, and could, in fact, be a prelude to a new multi-month high.

Regarding support to break, I would like to see a break below the August low before getting excited that the late-January to early-May trend could resume lower. The August low at 1.2762 would likely only break on a strong market shift in the US Dollar or a return to economic resilience in the Canadian Economy that may or may not be helped with a move higher in the price of Crude Oil.

Bottom Line:

Given the sideways price action, the price brackets I am watching is 1.3008 and 1.2762. A break of either would turn my medium-term outlook toward the direction of the break.

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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 Thursday, August 25, 2016

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

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 1.2762.

The ratio of long to short positions in the USDCAD stands at 1.48 as 60% of traders are long. Yesterday the ratio was 1.52; 60% of open positions were long. Long positions are 0.6% higher than yesterday and 3.0% below levels seen last week. Short positions are 3.6% higher than yesterday and 18.0% above levels seen last week. Open interest is 1.8% higher than yesterday and 10.9% 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 less net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Key Levels as of Thursday, August 25, 2016

USD/CAD Technical Analysis: Awaiting Yellen To Break The Range

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: Sticking to the Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Longer-term down-trend still intact, near-term range developed over the past three weeks.
  • EUR/JPY is still near longer-term support values after the out-sized move lower post-Brexit.
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In our last article, we looked at the down-trend in EUR/JPY being at a ‘decision point’ after price action had posed a vigorous bounce off of the prior swing-low. As we noted, the fact that this swing-low came-in higher than the prior swing-low highlighted the down-trend in EUR/JPY may be nearing a reversal as sellers were unable to drive the pair lower. Since then, we’ve seen back-and-forth price action as EUR/JPY has built-in to a fairly consistent range through the month of August (shown below).

EUR/JPY Technical Analysis: Sticking to the Range

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

Traders can handle such a scenario in one of two ways; either a) trade the range or b) await the break. For those looking to trade an eventual break of this range, the likely culprits will probably come from Central Bank innuendo, primarily speaking of Japan as the European Central Bank appears to be in somewhat of a holding pattern after their recent increases to their already-outsized stimulus efforts.

For those looking to utilize such an approach, they’d likely want to wait for the range to break before assigning any type of a directional bias to EUR/JPY. On the resistance side for prospective bullish plays, the level of 114.09 could be interesting as this is the 38.2% retracement of the Brexit-move in the pair. And this level has seen quite a few price action inflections, as the previous swing low had caught support off of this level, and the recent range is appearing to resist just shy of the same level.

On the bottom-side of price action in the effort of bearish plays, a longer-term Fibonacci level at the 112.00 area, just below the 23.6% retracement of the Brexit-move, could provide that litmus for setting up short- positions.

EUR/JPY Technical Analysis: Sticking to the Range

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: Focus Shifts to 6.7000 After Finding Support

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

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Talking Points:

- USD/CNH broke above 6.6500 and held the level on a retest

- Focus might shift to the 6.7 handle next

- 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, after the pair managed to hold above the 6.6500 level as support on a retest.

The hold above 6.6500 seems likely to shift focus to intermediate resistance at 6.6860 followed by the 6.7 figure.

A break and hold above those recent highs may be required for bulls to really take control again.

A move to the downside may target the 6.6500 level again, followed by the July lows at 6.6224.

USD/CNH Daily Chart: August 24, 2016

USD/CNH Technical Analysis: Focus Shifts to 6.7000 After Finding Support

--- 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 Set to Close Week in Range

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

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Talking Points

  • CAC 40 Remains in Range for Fridays Session
  • Key CAC 40 Support Remains at 4,375
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The CAC 40 is set to close the week inside of an ongoing daily range, as French equities remain little changed. Of all the CA 40 listed components, Renault is leading the way with a gain of +1.37% on the session. Equity market traders should remain interested in this afternoons Jackson Hole event, but withstanding a major market movement the CAC 40 appears set to close inside of the 75 point range depicted below.

CAC 40, Daily Chart

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

Intraday price levels for the CAC 40 include todays R3 resistance pivot at 4,409. So far price action has attempted and failed to breakout from this value once. If price action breaches this point, it opens the CAC 40 to test the R4 line of resistance found at 4,426 and then finally the previously mentioned point of daily resistance at 4,450. Alternatively, the S3 pivot is an acting value of support at 4,378. This value resides directly above the previously mentioned daily value of support at 4,375. A breakout below this point will first expose today’s S4 pivot which is found at 4,362.

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

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WTI Crude Oil Price Forecast: Crude Price Stands At H&S Resistance

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Talking Points:

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

As Jackson Hole’s famous Yellen speech came and went, the price of WTI was volatile but ended up nearly where it began the trading day near $47/bbl. The surprise of Friday’s session came when Janet Yellen’s perceived dovishness was rebranded by Federal Reserve Vice Chairman Stanley Fischer who said that Yellen’s remarks leave open the possibility of a September interest-rate hike. This comment strengthened the US Dollar and brought Oil below its intraday highs of $43.45/bbl.

Absent a late-Friday rally, Oil could be on its way to the first weekly decline in four weeks. The market still seems uncertain as to the long-term direction of the US Dollar as UST 2yr Yields pushed above the 80bp level that seems indicative of a credible rate hike shortly. However, less than 1% for two-year yields in treasuries favor a lower for longer than previously perceived, which the Oil market could easily gain should demand rise to the levels prediction.

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

In addition to future demand growth, positive signs of an OPEC agreement continue to emerge. Iran’s Oil Minister said on Friday that Tehran would work together with OPEC to stability the market.

Another positive sign comes from acquisitions building in the shale basins where extraction is cheaper, and efficient firms can stay profitable in the current environment. We’ve begun to see M&A is on the rise as Wood Mackenzie noted that there had been more than $11 Billion in July. Buyers have been both public and private firms like Exxon Mobil Corp. as well as Blackstone Energy Partners LP.

There a lot of encouraging developments in the Oil market that could accelerate the price appreciation of Crude if the US Dollar weakness continues. For more definitive levels, let’s go to the charts.

Crude Oil Price Weekly Chart Seems to Be Staring down Head & Shoulder’s Resistance

WTI Crude Oil Price Forecast: Crude Price Stands At H&S Resistance

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.

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 Weekly 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 have 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.

You can also see on the chart what looks to be the framework of a Bullish Head & Shoulder’s Pattern. A legitimate breakout would be validated by a break of the price of Crude Oil above $51.64/bbl. If the price broke out and sustained above the highlighted range near ~$50/bbl, we would favor a move to $66.16, which would be 61.8% extension of the Head & Shoulder’s range and $75.60/bbl, a 100% extension, and traditional Head & Shoulder’s target.

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:

A breakout above the bearish channel (red) that would be followed by the price holding above $50/bbl would be an incredibly bullish sign for the Crude Oil Market. Such a development would likely be followed by an increase in aggressive acquisitions in the Oil market with first that have weak balance sheets. Resistance should be respected until broken, but if broken, it may be foolish to fight what could be the strongest move higher yet in 2016.

Contrarian System Beginning To Favor Upside Risk as of 8/26/16

WTI Crude Oil Price Forecast: Crude Price Stands At H&S Resistance

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 Friday, The ratio of long to short positions in the USOil stands at -1.47, as 40% of traders are long. Yesterday the ratio was -1.69; 37% of open positions were long. Long positions are 12.8% higher than yesterday and 6.4% below levels seen last week. Short positions are 1.6% lower than yesterday and 56.7% below levels seen last week. Open interest is 3.7% higher than yesterday and 42.1% below its monthly average.

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

Key Levels Over the Next 48-hrs of Trading As of Friday, August 26, 2016

WTI Crude Oil Price Forecast: Crude Price Stands At H&S Resistance

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 Continue to Erode into Big Picture Support Zone

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

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What’s inside:

  • Trend lower still in place
  • Long-term support zone still has room to go until the bottom
  • Yellen to speak tomorrow at Jackson Hole

After a brief pause and bounce late Monday into Tuesday, silver prices have continued their slide into the long-term support zone (19 down to low-18s) we were discussing earlier this week. Not even the important 19.20 level which held silver up for over a month was retested before resuming the trend lower. The long-term support zone still has room to go before the bottom is met, with right around 18 marking the trough.

The benefit of the doubt remains with the current path of least resistance (down), but we will continue to be mindful that while the shorter-term trend is pointed lower, silver is trading in an area which could attract longer-term buyers. We won’t be interested in longs, though, until price action warrants such; that is, we see a strong shift in momentum. For now, those trading on the intra-day time-frames, continued weakness is probable in the short-run.

Silver Prices Continue to Erode into Big Picture Support ZoneSilver Prices Continue to Erode into Big Picture Support Zone

Tomorrow, Yellen is slated to give a speech at the Jackson Hole Symposium. It is unclear, though, whether the Fed chair will give any strong indications which will have a material impact on markets. Many expect it to be a relatively uneventful round of words, but as per usual, if you are involved in the market you must always be on alert for unexpected.

Follow trader positioning in real-time with FXCM’s ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be emailed at probinson@fxcm.com with any questions or comments.




S&P 500: Short-term Techs Ahead of Yellen Speech

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

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What’s inside:

  • S&P 500 attempted to break support, but bounced modestly, DT scenario still in place
  • Picking spots carefully in this slow summer tape
  • Yellen speech today in Jackson Hole may turn out to be a non-event, but we need to be prepared regardless of expectations

The double-top formation on the short-term chart is still in play, but until support gives way in the 2168/72 vicinity, then the market will remain buoyed. In Thursday’s session, the S&P 500 (FXCM: SPX500) attempted to break down below support until it found minor sponsorship for a bounce. The push higher off support has been weak thus far and doesn’t indicate a strong willingness by the market to hold, however, until it breaks it will remain what it is – support.

Yesterday, we discussed the unsustainability of momentum in the light volume, low volatility summer trading environment. That is best to fade key levels rather than anticipate their break or chase once they have broken. With that said, a clean decline through support doesn’t give the ‘all clear’ to the shorts just yet; again, it’s not a good environment to chase. Instead, we would rather adopt a ‘break-retest-fail’ approach.

S&P 500: Short-term Techs Ahead of Yellen Speech

Today, Janet Yellen will be giving a speech at Jackson Hole. By now, pretty much everyone is aware of this and expectations are somewhat dampened for Yellen to say anything which might cause the markets to go haywire. But even with that being the case, it is our job to still anticipate the unanticipated.

We are continuing to tread cautiously until market participation returns and volume and volatility picks back up. But little ‘dink-and-dunk’ trades off support and resistance levels are presenting themselves for the nimble short-term trader (day-trader).

Dull markets are an excellent time to hone one’s skills. Check out one of our many free trading guides designed to help you do just that.

---Written by Paul Robinson, Market Analyst

You can follow Paul at @PaulRobinsonFX.

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




DAX: New Leg Higher or Consolidation?

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

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What’s inside:

  • DAX trying to bounce after hold of support on Monday
  • Could be in for another leg higher towards target, but consolidation may occur first
  • As long as key intermediate and long-term support holds, then so does upward bias

In Tuesday’s commentary, we made note of the rejection at significant support to start the week. The DAX experienced a little pop yesterday, and today, thus far, is finding a bit of additional follow-through after starting off on a negative note.

This bounce could develop into another leg higher into our projected target zone of 10900/11000, or a period of consolidation could begin to unfold as the 1600+ point rally off the post-Brexit low takes some time to digest. Given the intermediate and long-term levels the DAX cleared in recent weeks, a consolidation, or ‘time correction’, could bode well for the index as we head into one of the busiest parts of the year.

The focus for now is on support; as long as the market can stay above then there is no reason to doubt the current trend off the late June lows. It would require a sharp turn lower and close below the multitude of support levels before we would need to turn neutral to bearish.

To recap, support consists of the 2011 trend-line the DAX spent much of the year beneath, the 2015 trend-line overtaken earlier in the month, and the April, May, and June peaks crossed. We also can’t forget about the inverse H&S pattern and long-term bull-flag, while not the prettiest, which were triggered on the early month thrust higher.

DAX Daily

DAX: New Leg Higher or Consolidation?

To conclude, the trading in the short-run may be choppy, but as long as support maintains, then so does the upward bias. Cross below, regardless of the reasoning, then our bias will shift with the market’s momentum.

Track trader positioning in real-time via FXCM’s ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul at @PaulRobinsonFX.

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




FTSE 100: Arriving at Confluence of Support

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

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What’s inside:

  • The FTSE continues to fall back into support
  • It’s late August, keeping trading size reduced and being more selective
  • Yellen speaking in Jackson Hole today

Since discussing the FTSE 100 (FXCM: UK100) on Tuesday, the index has continued to gradually fall back into support, taking the shape of a bull-flag/channel. The confluence of support in the form of July highs and rising lower parallel from early July is presenting an interesting spot from which the market should begin to turn higher if the recent descent is indeed constructive in nature.

Yesterday, a small reversal was experienced from right around the intersection of support, but a firm press lower into support and shove higher would act as a better signal the market is ready to continue its advance since the ‘Brexit’ lows. A break above the top-side trend-line of the bull-flag/channel formation will confirm the hold of support. Should the FTSE drop with conviction below both the July peak levels and lower parallel, then alternative routes will need to be considered.

FTSE (UK100) Daily

FTSE 100: Arriving at Confluence of Support

It’s late August, so the summer doldrums continue, making trading more difficult for those operating on any time-frame. This means it’s a good idea to continue trading with smaller size and more selectivity until market participation comes back into the market. Volume and volatility at some point will come back into the market, but until then we want to carefully navigate the current environment and keep our powder dry for when conditions are more conducive for making money.

Today, the Fed’s Janet Yellen is speaking in Jackson Hole, Wyoming. It can be a big deal, but not always. The feeling on this end is it will be a rather uneventful event this time around, but, traders should remain on their toes should the Fed-head say something which leans further to the dovish or hawkish side than is expected, and shoves US markets around which in result impacts other global markets as well.

Track trader positioning in real-time via FXCM’s ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul at @PaulRobinsonFX.

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




ASX 200 Technical Analysis: Short Term Range Still Holding

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

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Talking Points:

- Index trading at a resistance zone below 5,600 after a push higher

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

- 20-day ATR readings still at lowest level since September 2014

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The ASX 200 is trading lower at the time of writing, after a resistance area between 5,570 and 5,600 contained price gains, with volatility printing its lowest levels since September 2014 (based on a 20-day ATR study).

The Index is still trading sideways, between the 5,500 support and the 5,600 resistance area, which means that a break to either side of this trading range could prove influential:

At this stage, a break below the 5,500 area might shift focus to possible support around the 5,380-5,400 area.

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 initially for potential resistance.

OBV is showing strength relative to price action.

ASX 200 Daily Chart: August 26 2016

ASX 200 Technical Analysis: Short Term Range Still Holding

--- 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: Edging Lower to Close a Quiet Week

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

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Talking Points:

- 16,500 held as support for the last week, but price is currently trading lower

- A hold below the level might shift focus to 16,000

- Volatility hits 2016 lows (based on 20-day ATR readings), lowest since August last year (pre-China)

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The Nikkei 225 is trading below support at 16,500 at the time of writing, after the index managed to hold the level for the last week.

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

Volatility has been extremely subdued this week, with 20-day ATR volatility measures indicating the lowest levels since August last year, just prior to the China induced plunge.

This might set the stage for potential movement on event risk going forward, starting from the Yellen speech today.

At this stage, a hold below 16,500 could potentially put the spotlight on the 16,000 handle for support, and a break lower could expose the 15,000 range lows.

A rebound and a close above 16,500 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.

Nikkei 225 Daily Chart: August 26, 2016

Nikkei 225 Technical Analysis: Edging Lower to Close a Quiet Week

--- 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