Support & Resistance

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EUR/USD Technical Analysis: Will the Range Bound Conditions Break?

Swing Trading, Forex Technical Analysis, Chart Pattern Set Ups, Breakout Trading

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Talking Points

-EUR/USD trades in the 1.1166-1.1188 resistance zone

-SSI favors a break higher; OBV suggests continued range bound conditions resulting in a mixed technical picture

-Use SSI with GSI to see how the intraday momentum is shifting

EUR/USD has popped higher on today’s weaker than expected US GDP release. The aftermath of the move resulted in broad based US Dollar weakness.

Previously, we wrote how EUR/USD has been trading in a tight range and that we anticipated the range would continue. Prices have subsequently bounced off those lows and are pushing into horizontal resistance near 1.1166-1.1188.

If this level were to break, then the door is opened to the topside of the trend channel near 1.13.

If prices are rejected in the current 1.1166-1.1188 zone, then look for 1.1090 and 1.0960 to be the next levels of potential support.

EUR/USD Technical Analysis: Will the Range Bound Conditions Break?

Chart created using FXCM’s Trading Station

Zooming out for a big picture look, the May 3 – June 23 move is an equal leg zig zag pattern. This pattern typically falls within corrective patterns which suggests the whole pattern is likely to be retraced to the 1.16 high down the road.

There are some instances where the zig zag is found in an actionary move of a motive wave. If that were the case here, then it would suggest a large diagonal pattern to the downside. We are too early into this potential pattern to confidently suggest it as an option. We would need to see more price action to play out.

Looking to other indicators such as sentiment, SSI has plummeted on the price increase today and currently sits at -1.85. This suggests there may be more top side move available. A price break above the 1.1166-1.1188 range would align the trade with SSI.

See EUR/USD trader positioning here.

On the other hand, volume has been muted as noted through On Balance Volume (OBV). OBV has hardly budged for the past month which is indicative of a range bound environment. Even today’s push higher didn’t add much by way of volume.

Bottom line is that we have a mixed bag of technical indicators and no real clear picture is being painted. A trader, therefore, can pull the Grid Sight Index out of their tool box to see what the intraday momentum is looking like in this 1.1166-1.1188 price zone. If momentum appears to be moving higher while SSI is moving lower, then the trader can shift to a breakout strategy.

If GSI is shifting lower while SSI is shifting higher, then the trader can maintain the range bound strategy of selling high and buying low.

Learn more about Grid Sight here.

Biggest reason EUR/USD traders lose? This could be why.

Interested in a quarterly outlook for EUR or USD? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

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USD/JPY Technical Analysis: Bulls Still Haven’t Broken Resistance

Swing Trading, Forex Technical Analysis, Chart Pattern Set Ups, Breakout Trading

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Talking Points

-Japanese fiscal stimulus is anticipated to be announced Thursday night into Friday morning

-USD/JPY has overlapped July 21 low signifying the medium term bias is bullish

-Follow shifts in sentiment for clues on the near term direction of USD/JPY

The next 24-36 hours may see some volatile price swings for USD/JPY. Bank of Japan is scheduled to release their latest round of monetary statements and which may include additional measures of stimulus.

We previously wrote how the medium term bias for USD/JPY is bullish. Tuesday’s break above 105.42 creates overlap with the July 21 low. That overlap is significant because it suggests the move from 107.49 to 103.99 was a corrective consolidation and the prices may fully retrace to above 107.49 in the coming weeks.

USD/JPY Technical Analysis: Bulls Still Haven't Broken Resistance

The pattern that stands out right now is that we have a 5 wave impulsive move from July 8 to July 14 to start a new uptrend. According to Elliott Wave theory, there are two other patterns that start off a new trend with a five wave move and both of those patterns are followed by another move of similar size. Therefore, once support is formed, we can target another 600 pip move higher as that was the distance of the July 8-14 trend.

Should prices find support and move higher, the next top side level of resistance comes in near 106.72 then 107.50. Above these levels opens the door towards 111.

If prices continue to consolidate lower, consider the previous swing lows near 104.00 as support.

From a sentiment perspective, the growth in short traders has been slowing down from the recent 10 month high. The current SSI reading is +1.38 which is slightly lower than yesterday and still favors the bulls. However, if less traders become interested to the short side, then that could indicate top side potential is waning. Use the shifts in SSI to provide near term clues on price direction. See FXCM’s live trader positioning on USD/JPY here.

Suggested Reading:Bulls Aren't Out of the Woods Yet

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Interested in a quarterly outlook for USD and/or JPY? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

To receive additional articles from Jeremy via email, join Jeremy’s distribution list.

Check out the latest standings for the FXCM trading contest HERE.




GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Bigger-picture trend still bearish, shorter-term chop building near support.
  • GBP/USD is stabilizing above the 1.3000 psychological level, but rips-higher will likely face pressure given the expectation for future rate cuts out of the Bank of England.
  • 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 British Pound shortly after the most recent Bank of England rate decision. And as we mentioned, even though the bank held rates flat at that meeting, the world would likely be looking for another rate cut in the month ahead as the BOE wades through another Super Thursday batch of announcements. Traditionally, adjustments to rates from the BOE have been coupled with fresh inflation projections to provide proper context of the move; so after Mark Carney began talking up the prospect of rate cuts just days after the Brexit referendum, August became a likely expectation to see that next rate cut.

However, that being said many were still looking for a cut, with as high a probability as 86% ahead of that BOE meeting. So when the bank didn’t cut, we saw quite a few rate-cut bets jump out of the market, leading to bullish near-term price action. As we advised in our last article, traders can let GBP/USD rip-higher to a more comfortable level of resistance before looking to trigger-in to the short trade in anticpation of next month’s rate cut.

Since then, the Cable has meandered in a choppy downward-sloping channel, but has remained well-above prior lows set earlier in the month of July. And while price action on the 4-hour chart may be offering down-side continuation entries, scaling back to the daily highlights the juxtaposition facing trend chasers currently in the Cable. The most recent swing-high on the daily chart is the same identified in our last article, right around the 1.3500 psychological ‘big figure’ that also happened to be the financial collapse low in the pair. This has been a massively important level in the pair for well over 6 years now, and traders looking to chase the pair lower from here would likely want to investigate stop placement above this level; which with current prices would amount to a stop of more than 325 pips. And for a situation that only has 385 pips until we reach that multi-year low, the risk-reward of the setup could be seen as utterly unappealing right now.

GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

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

Moving forward the stance will remain the same, looking for a better level of resistance that could offer a more appealing entry on the down-side move. We’ve kept the same price action zones as last week, and have added another more aggressive area of potential resistance from 1.3335-1.3350. This would be a level for short-term approaches with targets set towards the most recent swing-low at the 1.3064-vicinity. Should price action rip higher to find resistance in this zone, attractive risk levels could be instituted for shorter-term approaches.

GBP/USD Technical Analysis: Choppy Cable Seeks Resistance

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: Struggling To Mount Resistance

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

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Talking Points:

  • US Dollar Technical Strategy: So Close, Yet So Far From A Significant Break
  • The Major Known Event Risk Is Behind Us, What Comes Next?
  • What Is Needed For a USD Breakout?

Access Our Free Q3 Dollar Outlook As The Fed Appears Cornered Regarding Effective Monetary Policy

The US Dollar has had the fundamental backdrop for a breakout even the most optimistic US Dollar Bulls should be thankful. However, after the Brexit vote was confirmed on June 24, the US Dollar has failed to make significant headway. A lack of upside appears worrisome because what the market is not doing can be as significant (if not more so) than what is doing because investors, therefore, do not see the value in bidding up an asset with an ideal fundamental backdrop.

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Of the four counterparts for the US Dollar of the EUR, GBP, JPY, & AUD, only the AUD had a great run post-Brexit that could help make the argument that there was a better purchase over the US Dollar. The JPY initially strengthened to 98.77 on the Brexit confirmation but has since weakened to ~106 JPY per USD. GBP has been volatile as expected, though it has firmed post-Theresa May’s appointment as PM along with her cabinet.

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: Struggling To Mount Resistance

Given the technical picture on the charts, we are now seeing fault lines before the ceiling breaks on US Dollar. Currently, we have resistance at 12,050/53 (post-Brexit high). A breakout above the H2 Opening range high would favor the USD is beginning to flex its muscle as a reserve currency despite the Fed’s wishes. Below, we’ll discuss what levels to watch, and what other markets could complement such a strong move.

The Bearish channel (red) has done a fine job of framing price action. When combining the bearish price channel with the 200-Day Moving Average (12,023), you can begin to see that we are still in a corrective price channel. Therefore, we must await a breakout before we celebrate the strength of the US Dollar and only a break above resistance should favor the Bulls well into Q3.

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Support & Resistance Levels As of July 7, 2016

We’ve warned that even a dire fundamental picture in the US regarding expected interest rate hikes (a fundamental driver of currency strength) could be swept aside with a break above the 12,050 zone. The price appears to have found resistance for now, but a break higher should turn focus on further US Dollar upside.

While resistance is clustered in the 12,023 (200 DMA) and the post-Brexit higher of 12,053, the support levels are more dispersed. Post-Brexit, initial Support has been found in the 11950/60 zone. A break below initial support would favor a move toward the 38.2% Fibonacci Retracement zone of the post-Brexit range at 11,911. Below there, the Weekly S2 Support sits at 11,897. If we’re going to see a breakout higher, these levels should hold.

A break below the 11,900 level would favor a larger Dollar-negative shift that could put us on the watch for a retest of the May/June lows ~11,670/680.

One thing to be on the lookout for are the implications of the announcement that former Chairman of the Federal Reserve, Ben Bernanke would be advising the Bank of Japan. He was a proponent of ‘Helicopter Money’ as a last resort if QE efforts and effects have reached their limit and the government is unwilling to create a fiscal policy to stimulate aggregate demand.

Such a move would likely bring a lot of volatility in the JPY as well as the entire global financial system if a new step is taken by the Bank of Japan to accelerate growth.

Shorter-Term US Dollar Technical Levels for Thursday, July 14, 2016

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

US DOLLAR Technical Analysis: Struggling To Mount Resistance

T.Y.

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USD/CHF Technical Analysis: Swissy Sticking with the Channel

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Bullish near-term price action structure continues to build.
  • As the US Dollar continues to trade within a range, CHF may remain as an attractive candidate to voice long-USD themes.
  • 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 continued bullish structure showing in USD/CHF, with a warning about the longer-term, bigger picture wedge in the pair (shown below).

USD/CHF Technical Analysis: Swissy Sticking with the Channel

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

And given the amount of resistance at the projection on the top-side of that wedge, with two different Fibonacci retracement levels within a few pips of that price, traders would likely want to cap top-end profit targets around this region.

But the reasons for bullish continuation in USD/CHF continue to be attractive, with the US Dollar printing fresh near-term highs as we approach the Federal Reserve meeting next week. And while no hike is expected at next week’s meeting, the fact that U.S. equities remain at all-time highs means that, at the very least, we’ll likely hear the bank talk up the prospect of a rate hike in the second half of this year (perhaps even two, which would be very bullish USD). Combine this with the fact that the Swiss National Bank is on-guard against excessive Franc strength, and this could provide for continuation of the top-side move.

On a shorter-term basis, the channel that we discussed last week in USD/CHF remains alive and well. The support level we had mentioned just above .9750 offered yet another inflection before the top-side move had resumed. At this stage, traders can look for support in the .9850 region in the effort of continuation. For traders wanting to tread a bit more conservatively, deeper support could be sought out in the region around .9800, as this is the 76.4% retracement of the prior major move.

USD/CHF Technical Analysis: Swissy Sticking with the Channel

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

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

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AUD/USD Technical Analysis: Hanging Below a 5 Year Trend Line

Swing Trading, Forex Technical Analysis, Chart Pattern Set Ups, Breakout Trading

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Talking Points

-Near term and medium term patterns in AUD/USD are bearish against .7678

-Above .7678 creates higher highs and a break above a 2 year trend line

-Targets in a move lower include .74, .7250, and .70

The sprint higher on AUD/USD today gives it an impulsive look and may be the last gasp prior to a sell-off. The key level to the topside is .7678. A move above here would create a series of higher highs while pushing through a longer term trend line in place since 2011 (image 1). A move above the 78.6% retracement level near .7631 is an early warning signal that prices may push on above .7678 and into new recent highs.

AUD/USD Technical Analysis: Hanging Below a 5 Year Trend Line

Image 1 - Chart created using FXCM’s Trading Station

The shorter term and medium term outlook using Elliott Wave theory is for prices to fall from nearby levels while holding below .7678.

Previously, we wrote how AUD/USD was ripping into a reversal zone. A reversal zone it was, though the subsequent sell-off at 240 pips was much smaller than we were anticipating.

The price action since the July 27 low appears to be a zig zag. If this is the pattern, then a top may be looming nearby while price hold below .7678. This zig zag may put the final touches on green wave 2 which carves as a double three complex correction (see image 2 below).

AUD/USD Technical Analysis: Hanging Below a 5 Year Trend Line

Image 2 - Chart created using FXCM’s Trading Station

Assuming this is the pattern the market is carving, then it suggests a wave 3 lower. Wave 3’s tend to be the strongest and longest and would carry initial targets near .74 with secondary targets near .7250. There are even lower levels for longer term traders we outlined here.

Sentiment is turning negative for AUDUSD which hints that a couple more pokes higher may still be left in the pair. See if FXCM traders are buying or selling AUDUSD here.

Bottom line, the short term and medium term bias is bearish so long as prices remain below .7678. The bearish outlook targets .74, .7250, and .70. On the other hand, a successful move above .7678 would create a higher high while punching above a long term trend line.

Suggested Reading:

Ripping Into the Reversal Zone (AUDUSD)

Will the Range Bound Conditions Break? (EURUSD)

Dow Jones Industrial Average Yawns after FOMC (DJIA)

Are you familiar with one of the biggest mistakes traders make? Find out what it is and how to overcome it here.

Interested in a quarterly outlook for USD or other markets? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

To receive additional articles from Jeremy via email, join Jeremy’s distribution list.

Check out the latest standings for the FXCM trading contest HERE.




USD/CAD Stalls Before Getting Out of the Driveway

Swing Trading, Forex Technical Analysis, Chart Pattern Set Ups, Breakout Trading

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Talking Points

-USD/CAD breaks higher, but doesn’t follow through

-Tight confluence of resistance in USD/CAD near 1.3304-1.3381

-OBV is bearish, SSI is bullish; Follow GSI for clues if the price zone may hold or break

Have you ever had one of those cars that wasn’t reliable? You know, the one that when you put it into gear, it would frequently stall out on you. Well, USD/CAD reminds me of such a car.

USD/CAD broke higher on Monday, but has offered little by way of additional follow through. On Monday, we wrote how the Loonie has reached its highest level in 4 months. The breakout has been less than dramatic. Since Monday, USD/CAD has traded sideways in a very tight 95 pip range.

We identified in Monday’s report four different levels that may offer resistance in the coming days. Those levels still hold and are bound by 1.3304-1.3381. With significant amounts of resistance looming overhead, the inability to push further ahead suggests the path of least resistance may be lower. Volume, as measured through On Balance Volume (OBV) supports a weak outlook on price , too.

USD/CAD Stalls Before Getting Out of the Driveway

Chart created using FXCM’s Trading Station

On Balance Volume (OBV) has been showing signs of a sideways range. As price pushed to a new 4 month high on Monday July 25, OBV was still well below levels seen in May. This divergence doesn’t look good for bulls as it says the amount of volume on up candles has been weak.

From a sentiment perspective, there might be a hint of bullishness, though it is weak. Even though the number of short traders has increased to 5 months highs (see sub-chart below) the substantial amount of overhead resistance is going to make for a murky journey. As a result, being positioned long at current price levels isn’t appetizing as the risk to reward ratio is skewed heavily against us which is not a trait of successful traders.

Suggested Reading:

Learn how to use USD/CAD live trader positioning in your trading decision

USD/CAD Technical Analysis – Breakout but How Far?

USD/CAD Stalls Before Getting Out of the Driveway

Bottom line, it may be best to wait for USD/CAD to push into the 1.3304-1.3381 resistance zone before initiating trades. Since we have mixed signals via OBV and SSI, perhaps lean to the Grid Sight Index for assistance as to the near term direction.

Interested in a quarterly outlook for USD or other markets? Download our quarterly forecast here.

---Written by Jeremy Wagner, Head Trading Instructor, DailyFX EDU

Follow me on Twitter at @JWagnerFXTrader .

See Jeremy’s recent articles at his Bio Page.

To receive additional articles from Jeremy via email, join Jeremy’s distribution list.

Check out the latest standings for the FXCM trading contest HERE.




NZD/USD Technical Analysis: 0.7000 Could Be Key Going Forward

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

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Talking Points:

- NZD/USD having problem cracking resistance at 0.7120

- Further upside conviction might need to see a break above resistance at 0.7250

- 2.25% Official Cash Rate might be keeping the Kiwi bid, key intra-day levels here

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The NZD/USD is trading higher after the FOMC rate decision, but the pair seems to be having trouble breaking long term resistance at 0.7120 at the time of writing.

The pair has seen a bounce higher after finding support at a zone below the 0.7000 handle following sharp decline last week.

At this stage, the NZD/USD might need to see further strength to move above the 0.7120 resistance, which could indicate another attempt to make new highs. A break above may expose what could be a key resistance area below the 0.7250 level, which coincides with the 0.38 Fib of the downtrend starting from July 2014.

A hold below the 0.7120 level might imply that the latest push higher is corrective and could put the focus again on the 0.7000 figure for possible support. A move below the 0.70 figure will change the current market “structure” and might have eyes on 0.69 and 0.67 for potential support.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 46.4% of FXCM’s traders are long the NZD/USD at the time of writing. The SSI is mainly used as a contrarian indicator, implying a slight long bias.

You can find more info about the DailyFX SSI indicator here.

NZD/USD Daily Chart: July 28, 2016

NZD/USD Technical Analysis: 0.7000 Could Be Key Going Forward

--- 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




EUR/GBP Technical Analysis: Sideways Trading Post Brexit

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

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Talking Points:

- EUR/GBP trading sideways between well-defined technical levels

- Further upside conviction might need to see a break above resistance at 0.8500

- The 0.8250 level appears to be the initial focus for possible support

Find REAL TIME traders positioning with DailyFX’s SSI Indicator Here

The EUR/GBP is trading sideways between well-defined technical levels after the pair surged higher following the Brexit vote.

At the moment, the technical picture appears clear; further upside conviction may need to see a break above the 0.85 handle initially, which proved influential in the past, and also coincides with possible trend line resistance.

A break higher might expose the “post-Brexit” highs around the 0.86 figure before what appears to be a key area of resistance above the round 0.87 number.

A failure to move above the 0.85 handle could put the focus on the 0.8250 level for possible support, but longs may hold back from entering there without being able to achieve new highs.

If this scenario plays out, is seems likely that eyes will be on the zone below 0.81 to the 0.80 level, which also coincides with possible long term trend line support and the 0.38 Fib of the up move (as measured from the November 2015 lows), for possible reemergence of the uptrend.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 29.9% of FXCM’s traders are long the EUR/GBP at the time of writing. The SSI is mainly used as a contrarian indicator, implying strength ahead.

You can find more info about the DailyFX SSI indicator here.

EUR/GBP Daily Chart: July 28, 2016

EUR/GBP Technical Analysis: Sideways Trading Post Brexit

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

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




EUR/JPY Technical Analysis: 4-Hour Chart Showing Fresh Trend Potential

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Aggressive top-side reaction showing higher highs and lows on the 4-hour chart.
  • After recent events in Japanese elections, pressure may be removed from the long-side of the Yen, at least temporarily.
  • 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 aggressive down-trend showing in EUR/JPY with a caution towards chasing the move much lower without at least some evidence of resistance showing. That resistance never showed up, and over the weekend a significant win in Japanese elections gave Prime Minister Shinzo Abe a super-majority in the upper-house of parliament. As we discussed on Tuesday, this could be a game-changer, at least in the near-term for Japan and the Yen, as the threat of a massive increase in stimulus from the country with lessened political resistance could be enough to offset risk aversion flows.

Price action in the Yen has been extremely bearish this week on the heels of those election results, and given that we’ll likely see investors continuing to attempt to position-in ahead of any potential BoJ action, this move of Yen weakness could have near-term staying power.

On EUR/JPY, the level of 115.37 is especially interesting. This is the 61.8% retracement of the ‘Abe-nomics’ move in EUR/JPY, taking the low set in 2012 just before he recapture the PM post, to the highs in 2014. This price area had also offered swing-support in the post-Brexit referendum, we had discussed using this level as potential resistance a couple of weeks ago, but that never showed up. And when price action finally did cross above this line-in-the-sand, it ended up becoming support shortly thereafter.

Also of interest in this zone of potential support is a projected trend-line that can be found by connecting the low from the year 2000 to the low of March 12th, 2011 (shown in purple on the below chart).

Moving forward, traders can look for top-side entries by waiting on higher-lows to develop. Between 116.20-116.50 is an area nearby current price action in which traders with aggressive stances could investigate for bullish entries; and a bit below we have the zone between 115.00-115.50 straddling that Fibonacci level at 115.37. Should support develop in either of these regions, traders can look at top-side triggers with targets cast towards the psychological level at 117.50, the price action swing high at 118.00, and then the Fibonacci level at 119.90, which is just 10 pips shy of the 120-big figure while also being the 61.8% retracement of the ‘big picture’ move in the pair, taking the low from the year 2000 to the highs of 2014.

EUR/JPY Technical Analysis: 4-Hour Chart Showing Fresh Trend Potential

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: Slammed Down to Confluent Support Zone

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Aggressive down-side run to support after the Bank of Japan’s most recent rate decision.
  • While the BoJ did increase ETF purchases at last night’s decision, they did not launch the monetary ‘bazooka’ that many were looking for; but did keep the door open for a similar such announcement at their next meeting in September.
  • 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 attempting to claw-together an up-trend after two weeks of higher prices. And as the Yen was continuing to weaken on the expectation of additional monetary stimulus out of the Bank of Japan, the potential for a reversal of the Brexit-driven down-trend was alive and well. But at the time, price action was continuing to find resistance at a key Fibonacci level, and as we advised traders would likely want to wait for further confirmation of the up-trend before looking to trade the pair long.

Last night’s Bank of Japan meeting did not bring the monetary bazooka that many were hoping for: There were no announcements of helicopter money, and the bank merely increased their purchases of ETF’s. And while this is a form of stimulus for the Japanese economy, it fell far short of the expectations of the ‘big program’ that many market participants were hoping for. As this disappointment around BoJ permeated into markets, the Yen strengthened as stimulus bets priced-out of Yen-pairings.

The big question now is whether the Bank of Japan is going to trigger this ‘larger’ stimulus program that markets have been looking for at their September meeting. Given that resistance has shown on the Yen in many pairings shortly after last night’s decision (and given that the Yen is the counter-currency in most pairings, this would mean support in that individual market), it would appear that some market participants may be trying to use this move of strength to position-in to Yen pairings in anticipation of weakness ahead of September.

The current area of near-term support has quite a few levels of relevance: At 136.03 we have 61.8% of the post-Brexit move (a 38.2% retracement of that move), at 135.90 we have the 50% Fibonacci retracement of the July high/low, and at 135.48 we have the 76.4% retracement of the ‘Abe-nomics’ move, and then a bit lower at 135 we have a major psychological level in GBP/JPY.

Moving forward, traders looking to trigger short positions in GBP/JPY would likely want to see this zone with numerous support levels become breeched before looking to trigger positions. On the long side, should near-term price action take out the prior ‘lower-high’ on the hourly chart at 137.08, traders can look for top-side reversal plays under the premise that this confluent zone of support may have stemmed the declines, and that further anticipation of eventual monetary stimulus continues to drive flows of Yen-weakness.

GBP/JPY Technical Analysis: Slammed Down to Confluent Support Zone

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: 6.6500 Support Now in Focus

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

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Talking Points:

- USD/CNH held below short term support at 6.6860

-The failure to trade higher might put focus on possible support at 6.6500

- FOMC rate decision could prove volatile for the pair

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The US Dollar is trading lower versus the Chinese Yuan in offshore trade, as the 6.6860 level held as resistance.

As was mentioned in the prior report, the 6.6860 resistance level continued to hold with impressive accuracy, implying that technically short term focus might be put on the 6.6500 level for possible support.

A hold above 6.6500 appears crucial from a technical perspective in order to see that the bulls are still in control. A break below the level may imply that the 6.6 handle could be tested.

With that said, the FOMC rate decision today seems likely to increase volatility, which might see short term levels break.

A move above 6.6860 could have eyes at the 6.7 handle initially for possible resistance, followed by the January high around 6.7584.

USD/CNH Daily Chart: July 27, 2016

USD/CNH Technical Analysis: 6.6500 Support Now in Focus

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

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




CAC 40 Fails at Critical Resistance

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

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Talking Points

  • CAC 40 Fails at the 200 Day SMA
  • Current Daily Resistance is Found at 4,454.00
  • If you are looking for more trading ideas for equities markets, check out our Trading Guides

The CAC 40 has closed the week moderately higher, after being rejected yesterday from its 200 Day SMA (Simple Moving Average) at 4,454.00. Of the 40 listed stocks Karing shares have had the biggest gain on the session, closing up 6.19%. Going into next week’s trading, traders may again look for the Index to challenge resistance at the 200 period SMA. However if price fails to break out above 4,454.00, it opens up the Index to decline back towards the July 2016 swing low at 4,060.00.

CAC 40, Daily Chart

CAC 40 Fails at Critical Resistance

(Created using Marketscope 2.0 Charts)

Short term technical levels for the CAC 40 include over the R4 Camarilla pivot, at 4,482.13. A move above this value would be significant as price would have broken above the previously mentioned SMA. Support for the CAC 40 has also been established at 4,416.00. This arear is represented by the S4 pivot, and in the event that price breaks below this value next week it suggests that the Index is prepared to test new lower lows.

CAC 40, 30 Minute Chart

CAC 40 Fails at Critical Resistance

(Created using Marketscope 2.0 Charts)

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

Traders tracking sentiment should note that SSI for the CAC 40 (Ticker: FRA40) reads at -1.47. With 59% of positioning short, sentiment suggests that the CAC 40 may attempt to trade higher next week. In the event that prices breakout higher, SSI figures should continue to read negative and move to an extreme figure of -2.0 or greater. Alternatively, in the event of a bearish reversal traders should look for SSI to move towards a positive reading.

CAC 40 Fails at Critical Resistance

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WTI Crude Oil Price Forecast: 3-Month Lows As U.S. Supply Glud Renews Sub-$40 Fears

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

The price of WTI Crude Oil (CFD: USOil) traded at its lowest levels in three months this week as the Crude rally looks less sustainable than the equity rally that recently saw the SPX500 reach lifetime highs this month. A few weeks ago, we shared a new data point that helped forecast the price decline that has developed:

Recent reports show the short-term floating storage is sitting (pun intended) at its highest level since 2009 per the IEA July Oil Market Report. Bloomberg recently noted that ~9 million barrels of crude were stored off the coast of the North Sea in the UK, which was a significant jump of ~7 million barrels in May.

For what it’s worth, as I was flying into Houston Airport on July 22, I was amazed at the Oil Tanker’s sitting offshore. While I do not fly into Houston regularly, it does add to the report’s credibility, as it seemed a tanker could not turn around without running into other tankers in the Gulf of Mexico.

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

For this reason, we have encouraged you to keep an eye on increasing supply in H2 2016, and whether or not supply will be met with sufficient demand. As we head into the close of July, Crude Oil price is down ~20% from the June peak, and seasonal supply per the EIA report is at its highest in at least two decades.

That being said, we appear to be seeing a new wave of supply coming onto the market, and if demand cannot keep up (which the storage on Oil tankers argues it cannot), we could move lower. To explain how much lower, let’s move on to the charts.

Crude Oil Price Chart Shows Little Support & Strong Downward Momentum Is Building

WTI Crude Oil Price Forecast: 3-Month Lows As U.S. Supply Glud Renews Sub-$40 Fears

Few things are going right for Crude Oil Bulls when looking at the price chart. We’re seeing buyers fail to come in and support the price that nearly doubled from ~$26/bbl in February to ~$51/bbl in June. We’ve recently seen a breakdown through the 38.2% Fibonacci retracement level of the February-June range at $41.85/bbl, and a further breakdown is favored when looking at Ichimoku Cloud.

Ichimoku Cloud is a trend following indicator that allows you to see the “big-picture trend” on the chart. If price (shown via candles), and the momentum line (bright green on my chart) are below the cloud, we are in a bearish environment. Buying against the momentum and trend is not advised because a downtrend tends to gather steam much like a snowball rolling down a mountain.

For now, we can use the bottom of the cloud, which aligns with the 100-DMA at $44.63/bbl as clear resistance. Until price breaks above this level on a closing basis, higher prices should be viewed as more favorable levels to enter a short position as opposed to “buying low.”

Significant support aligns at the 61.8% Fibonacci Retracement zone of the February-June zone, which is also the late-March low ~$35.81/bbl. While fighting a trend is not encouraged, that is a level to see if buyers begin to show up due to bargain prices.

A failure for this level to hold will put the pit back in the stomach of Oil producers, as they will likely wonder if we are yet to see the low of this Millennium to date.

Bottom Line:

The pullback we have seen is not surprising, but unfortunately, the evidence is building that we could see downside acceleration. Furthermore, now that we have broken below the 100-DMA, a stronger break toward the next key support of 50% of the February-June range at $38.835/bbl could be underway.

For now, be on the watch for further US Dollar strength that would continue to pressure the price of Oil down through the 38.2%-61.8% retracement zone of the February-June rally.

Contrarian System Warns of Further Downside As of 7/28/16

WTI Crude Oil Price Forecast: 3-Month Lows As U.S. Supply Glud Renews Sub-$40 Fears

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

As of mid-day Thursday, The ratio of long to short positions in the USOil stands at 2.98, as 75% of traders are long. Long positions are 21.8% higher than yesterday and 244.2% above levels seen last week. Short positions are 1.5% lower than yesterday and 17.6% above levels seen last week. Open interest is 15.0% higher than yesterday and 58.6% above its monthly average.

We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USOil 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.

Key Levels Over the Next 48-hrs of Trading As of Monday, July 14, 2016

WTI Crude Oil Price Forecast: 3-Month Lows As U.S. Supply Glud Renews Sub-$40 Fears

T.Y.

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Gold Prices Trying to Carve Support, But Will FOMC Cooperate?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Intermediate-term trend still bullish, but near-term price action bearish.
  • Gold has continued to temper gains ahead of this week’s FOMC announcement, and if the Fed does take a hawkish stance with eyes towards a potential hike in September, the retracement in Gold prices could run deeper.
  • 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 Gold prices attempting to carve-out ‘higher-low’ support with the prospect of top-side continuation of the bullish trend. And in the article just before that, we had looked at just how overbought the recent up-trend in Gold prices had become, driven by a combination of fear-based risk aversion along with the expectation for even more monetary dovishness.

But as we approach another FOMC meeting later this week, it’s the questions revolving around monetary policy that may be giving continued pause to the up-trend in Gold prices. This is very similar to what happened in May, as the Fed talked up the prospect of a June rate hike and Gold prices plummeted from the $1,300 handle all the way down to $1,200. Of course, the Fed ended up relenting as U.S. data worsened; and this re-emergence of dovishness from the Fed had helped to catapult Gold prices higher again, just as we had seen in February and March of this year.

After a blowout NFP report earlier in the month and as U.S. stock prices sit at or near fresh all-time highs, the Fed has ample opportunity to talk up the prospect of rate hikes in the second half of this year; and if that takes place the expectation is that Gold will sell-off while the U.S. Dollar continues to firm. This is likely at least part of the reason for the near-term softness in Gold prices and a continued pause in the bullish-trend. The fact that Gold prices haven’t hit a new high since that most recent NFP report would confirm this thesis.

If the Fed does take on a hawkish stance towards hikes in the remainder of this year, with particular interest revolving around their next meeting in September, we’re likely going to see a deeper dive to a lower support level in Gold prices. The zone between $1,283.82-$1,301.61 could be especially interesting, as each price is a longer-term Fibonacci level. The price of $1,283.82 is 61.8% of the move from the 1999 low to the 2011 high (38.2% retracement of that move), while the price of $1,301.61 is 50% of the 2008 low to the 2011 high (the Financial Collapse Move). This is the same price zone that we had identified two weeks ago as our ‘S3’ zone of support, and should price action move down to this region, traders can begin looking for support in the effort of top-side continuation.

Gold Prices Trying to Carve Support, But Will FOMC Cooperate?

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

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

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Silver Prices: Looking to Short-term Parallels for Guidance

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

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What’s inside:

  • Silver touches off on resistance and pulls back
  • A set of short-term parallels offers traders a structure to operate off of
  • Expectations for extended moves remains low

In yesterday’s commentary, we looked at the strong move in silver prices above a short-term trend-line and touch of resistance around the 20.50 level. Silver found resistance at the first noted level and has since pulled back a bit, which leaves us with the question of whether it is simply a small pullback before seeking higher levels, or if it is the beginning of a move back down towards the 19.20 support level and the continuation of a broader daily range.

Since touching off on support at 19.20 on 7/20 there is a series of higher highs and higher lows developing, visible on intra-day time-frames, but it’s certainly not making for a very strong trend – not much is right now. Vol is low these days, and as such, looking for extended moves has been disappointing.

That aside, a decline to the lower parallel (~19.85/90) created during the past week could present another short-term dip-trip for a push back to the 20.50 level seen yesterday, or better. A break below the lower line would then strengthen the notion we will see a decline towards 19.20, and thus, at the least, a continuation of a broader daily range.

Silver Prices: Looking to Short-term Parallels for Guidance

We will continue to watch the positioning of large speculators in the futures market, as a decline from record long holdings along with a correction, whether it be in price or time, could help set the stage for another broader advance higher. For now, it would seem that until that happens, silver will have a difficult time pushing to and sustaining new heights.

In the immediate future the focus is on the before mentioned parallel for further guidance and from there we will take it one step at a time.

Follow trader positioning in real-time via the 'Speculative Sentiment Index'.

---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: Home On the Range

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

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What’s inside:

  • Same old range, different day
  • Volatility will pick up at some point, need to be patient
  • Short-term levels outlined (they haven’t changed)

Another day on the range. Yesterday, we had hoped the outcome from the BoJ would break the S&P 500 free by sparking global market volatility. Not the case, as neither was it on Wednesday with the outcome from the FOMC.

Where does this recent range stand historically? We have it calculated, by looking at the distance between the high and low of the past 10 days in the S&P 500 cash index, that the current range of only 0.91% is the smallest since the early 1960s.

So, don’t sweat it if you are finding the trading tough. Take a step back, if need be, volatility will return and the market will move once again. Keep your powder dry for when it does…

What will be the catalyst? Who knows, it could simply be price movement spurred by more buyers than sellers, or vice versa. Markets can move without a significant single event; people often forget that.

So it is, the upper and lower-bounds are the same again today – resistance is 2174/78, while support is 2160/55. But even when we do make a break for it be careful not to get caught into a trap. On this end, the preferred way to make a play at this time is to wait for a break and a retest of broken support/resistance or a counter-trend move, at the least, before entering.

Below is the same chart as yesterday, only a little more elongated...

S&P 500: Home On the Range

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---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.




DAX Short-term Look: On the Edge of a Wedge

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

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What’s inside:

  • Confluence of resistance looms
  • Rising wedge visible on short-term chart
  • BoJ disappoints, but fails to spark significant market volatility

Yesterday, we went over a confluence of resistance levels which lie in the 10300/400 vicinity, as trend-lines and horizontal price levels collide. But we also noted, we need to see the market reverse from these levels before we become interested from the short-side, preferably taking out the prior day low and snapping the short-term uptrend. Price levels only matter if the market responds to them, that has not been the case as the DAX has managed to rise through a couple of zones of resistance we had penciled in before.

DAX (Ger30) Daily

DAX Short-term Look: On the Edge of a Wedge

However, we could have something meaningful to sink our teeth into. Looking at the hourly chart, we can see price action is narrowing into a rising wedge. The bottom-side trend-line is the key to the pattern breaking, which the DAX is currently sitting just above. The resistance levels are there on the daily, now price action is aligning itself on the shorter-term time-frame. A break below the rising trend-line will also soon call for a break of the prior day low of 10265 (which has acted as both resistance and support in recent days).

The initial target if we get a trigger is support right around the 10100 mark; from there we would look to 10k and ~9900. The wedge could breakout to the upside, so it is important to wait for a confirmed break before looking to the shorts...

Hourly:

DAX Short-term Look: On the Edge of a Wedge

On another note: The Bank of Japan expanded its stimulus program in the early hours this morning, but did so in underwhelming fashion. The BoJ is doubling down on its ETF purchases, however, it left its policy rate unchanged at -0.1%. In total, the outcome is labeled, ‘disappointing’. But even so, markets aren’t responding very violently given all the hype and expectations going into the meeting. Central banks losing their impact…

Start improving your trading today with one of our many free trading guides designed to help traders of all experience levels. Also, check out, “Traits of Successful Traders” and find out what the #1 mistake trader make.

---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.




FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

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

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What’s inside:

  • Trading in the FTSE 100 remains choppy
  • Ascending wedge near triggering
  • FOMC later today, may have an impact on global stock markets

The FTSE 100 has made little head-way in the past two weeks after the monster rebound off the ‘Brexit’ day low. It appeared as though a pullback may develop following the reversal-day back on 7/14 at resistance created in August 2015, but so far following a one-day dip after the reversal event the FTSE has done little but chewed its way sideways.

Despite the FTSE struggling to trudge higher, there has been little reason to short the low volatility grind. It appears to be a combination of typical price action following extremely volatile swings, summer trading, and no significant catalyst to spur market participants.

The hourly chart shows the 100 working its ways towards breaking out of an ascending wedge. The depth of the triangle points to a measured move of ~130 points, which could take the FTSE up to around 6875, and if it were to trigger to the downside, ~6580. The ascending nature of the pattern within an uptrend suggests it should breakout to the upside, but a downside break is always possible, especially given resistance at hand. It is best to wait for these patterns to trigger before making a commitment.

FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

Resistance levels on a further climb are at last July and June swing highs of 6813 and 6874 (matching ascending wedge MM), respectively. Support comes in around 6610, then just beneath 6500 lies a one-year support zone of about 80 points or so which the market broke through on June 30 when Carney suggested the BoE would provide needed accommodations to the market.

FTSE 100 Technical Analysis: Ascending Wedge Nearly Complete

Later today the FOMC will release its decision on interest rates and monetary policy statement. There are no expectations of the Fed raising rates, so the market will be focused on language changes which may provide indications on the timing of another possible rate hike. Depending on how risk sentiment in the US plays out following the release, global equity markets could find themselves impacted in the next day of trading.

Watch trader positioning in real-time via the ‘Speculative Sentiment Index’.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




ASX 200 Technical Analysis: Index Trading at Resistance

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

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Talking Points:

- Index might be trading at resistance between 5,570-6,600

- Price might need a “higher low” above 5,380-5,400 or 5,500 to confirm bullish trend

- A hold above those levels appears crucial for continued bullish conviction

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The ASX 200 surge higher continues. The index has seen impressive conviction to the upside in the last couple of weeks after a break above a long term range resistance around 5,380-5,400.

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

After clearing the range top resistance, the ASX continues to print new 2016 highs, and upside conviction appears strong at the time of writing.

At the moment, the index is trading at what could be an area of resistance around 5,570-5,600, with the next possible resistance level sitting at the 5,700 level figure.

The index may need to see a correction lower to gain further momentum though, and find support above the 5,380-5,400 area or the 5,500 level to form a “higher low” in order to confirm that indeed we are probably seeing a reemergence of the long term up trend.

A failure to hold above 5,380 might be seen as a bearish signal and put the focus initially on the 5,300 level for potential support.

ASX 200 Daily Chart: July 28, 2016

ASX 200 Technical Analysis: Index Trading at Resistance

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

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




Nikkei 225 Technical Analysis: Pivoting Around 16,500 Again

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

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Talking Points:

- The Nikkei 225 stalls below the 17,000 handle

- Clear push away from 16,500 could indicate short term momentum

- Gains appearing to be corrective in the context of the near term downtrend, OBV divergence

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The Nikkei 225 is trading sideways, pivoting around the 16,500 level. The index initially broke above 16,500 but has since seen momentum stall, failing to reach the 17,000 handle.

OBV showed a short term divergence on the move higher, while volatility is seeing a significant shift lower (on ATR 14-day study). Taken together, this might indicate that the recovery is losing some momentum.

Indeed, price managed to carve out a “bearish engulfing” pattern just below the 17,000 figure and a trend line resistance. This seems to make the 16,500 level crucial once again, and a clear push from the level could be indicative of short term momentum.

A move lower could put the focus initially on the 16,000 area for possible support.

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.

A move below the 16,000 area could expose the 15,000 range lows once again.

If price manages to see a clear push above 16,500, this might put on the 17,000 handle for possible resistance, before the 2016 range highs below 18,000.

Nikkei 225 Daily Chart: July 28, 2016

Nikkei 225 Technical Analysis: Pivoting Around 16,500 Again

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

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