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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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



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

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

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Talking Points:

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

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

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

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

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

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

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

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

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

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

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

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

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



GBP/USD Technical Analysis: Higher-Lows in Post-Brexit Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Longer-term price action remains bearish; post-Brexit price action range-bound.
  • The post-Brexit Fibonacci retracement continues to show support/resistance inflections.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we looked at the British Pound as it attempted to build-in a bullish price action structure after dwindling near the post-Brexit lows for the better part of two months. And the logic behind the top-side move still exists, riding on the expectation that the ‘sharp repricing’ in the value of the British Pound from the Brexit referendum may lead-in to inflationary pressure in the United Kingdom. Should this inflationary pressure show up in imports for the import-heavy economy, the Bank of England’s hand may be forced away from future interest rate cuts for the fear of stoking even more inflation from an even weaker British Pound.

We haven’t seen the Bank of England capitulate on rate cuts just yet. At the BoE meeting in September, Mr. Carney, once again, took a dovish stance with markets warning that the Bank of England may be looking at more cuts down-the-road. But this isn’t what’s most interesting around this scenario; but rather the corresponding move in the Cable after those comments made their way into markets. These comments sent the Cable flying lower, again, similar to what happened after Mr. Carney spoke in June just days after the Brexit referendum, in August at the Bank of England’s rate decision, and again in September when the BoE launched the ‘bazooka’ of stimulus in response to Brexit. Each of these times that Mr. Carney has taken center stage the British Pound had weakened in value. The interesting part of this is that the weakness in the Cable appears to be waning with each attempt; producing a series of higher-lows on the daily chart.

Connecting the low in July to the low in August produces a trend-line that runs into current support levels (shown in Green below). Also of interest is the Fibonacci retracement of the post-Brexit move, taking the high on June 29th to the low on July 6th. For the past week we’ve seen numerous support inflections off of the 23.6% retracement of that move at 1.2965, and this is yet another indication of support building near these long-term lows in the British Pound.

So, traders would likely want to avoid getting caught in a long position when Mr. Carney speaks because, if recent history is any guide, he will talk the currency lower. But in his absence the Sterling has been free to creep-up; and longer-term this may be a more attractive trade idea as a) rates can’t go significantly lower for the BoE given that Mr. Carney has seemingly ruled out the possibility of negative rates and b) oncoming import inflation appears to be simply mathematical at this point, and this could continue to steer the rate conversation at the Bank of England.

GBP/USD Technical Analysis: Higher-Lows in Post-Brexit Range

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

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

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

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Talking Points:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

T.Y.

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USD/CHF Technical Analysis: Range within a Range, part 2

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Still range-bound, with no clear sign of when this may end.
  • The Swissy has seen a tighter range build over the past week, within the larger, longer-term range of the past six months.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we looked at a range-bound USD/CHF. Much of that is still the same: Swissy is still range-bound, prior support and resistance structure are still intact and there is little expectation for that range to break or this condition to change, at least in the near-term. And despite the lack of excitement, this isn’t necessarily a ‘bad’ thing as a consistent range can offer one of the more alluring aspects to traders in the fact that it’s simply consistent.

The difficult part about trading a range is the prevention of forced trades. With consistent support and resistance, traders can be lured into jumping-in more quickly on the prospect of that support or resistance holding-up. But this completely misses the benefit of the range, which would be buying while at or near a consistent zone of support and closing the position/getting short while near a consistent zone of resistance. Despite the pattern of prior consistency, traders still need to address risk-reward ratios because ranges don’t last forever; and when it does break, traders can’t afford to have the smaller profits of many trades wiped away by one really big, bad loser. This is the Number One Mistake that Forex Traders Make, and given the consistency and ‘moderated greed’ that can be brought upon by range-bound conditions, traders can often get lured into a false sense of confidence.

Traders want to approach the range just as if not more prudent than they would a trend: Risk-reward ratios still matter. The possible upside of the trade working out must offset the potential risk should it fail. The true benefit of the range is that setting these levels becomes fairly simple as you know where stops and targets should be placed.

In USD/CHF, we’ve seen a case of range-compression over the past two months of the six-month old range. The ‘bigger picture’ support zone can be seen in purple below, comprising the zone from the .9446 low to the fibonacci level of .9567. The most test of that zone was over a month ago, so in blue, we’ve added the shorter-term zone of support in the ‘sub range’ within the range, as we had discussed in our last article.

The resistance side of the zone is tighter given the double-top produced off the .9948 Fibonacci level, which is the 61.8% retracement of the 2011-2015 major move. The last test we saw of that level was the end of July, so just as we did with support we’ve outlined a tighter, more short-term level of resistance that can be used in the ‘sub range’ within the bigger, longer-term range.

USD/CHF Technical Analysis: Range within a Range, part 2

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Double Top in Play Once Again

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Australian Dollar returns to challenge familiar resistance near 0.77
  • Waiting for actionable signal, improved risk/reward to enter trade

The Australian Dollar has moved to challenge key double top resistance near the 0.77 figure against its US counterpart once again. Fundamental considerations hint the barrier may continue to hold as pivotal news-flow encourages selling, but confirmation is decidedly absent for now.

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

An actionable trade setup is absent at this point. On one hand, prices are too close to resistance to justify entering long from a risk/reward perspective. On the other, the absence of a clear-cut bearish reversal signal suggests it is premature to take up the short side. Opting for the sidelines seems most prudent.

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

AUD/USD Technical Analysis: Double Top in Play Once Again



USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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

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Talking Points:

Quick Fundamental Take:

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

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

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

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

Technical Focus:

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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

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

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

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

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

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

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

Key Levels as of Tuesday, September 13, 2016

USD/CAD Technical Analysis: Risk-Aversion Drops Loonie

T.Y.




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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

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



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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

Track short-term EUR/GBP trading patterns with the GSI indicator!

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



EUR/JPY Technical Analysis: Another Test of Confluent Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Long-term down-trend; near-term range-bound.
  • EUR/JPY saw a minimal movement off of support after our last article, only to return back to the same zone.
  • If you’re looking for trading ideas, check out our Trading Guides.

In our last article, we looked at EUR/JPY after the pair ran down to support after the September BoJ meeting. And as we wrote, this confluent zone of support had already seen multiple tests in the months leading up to that meeting, raising the possibility of a bigger-picture or longer-term reversal after the pair spent the better part of the previous 13-months in a vigorous downward-sloping channel (shown below).

EUR/JPY Technical Analysis: Another Test of Confluent Support

Chart prepared by James Stanley

It’s the price action after the Brexit referendum that should be really compelling to EUR/JPY traders. Drawing a Fibonacci retracement on the Brexit range (high/low of June 24th) brings on a series of levels that have seen a considerable number of support/resistance inflections. Of relevance to near-term price action is the 23.6% retracement of that move at 112.25, which is confluent with another, longer-term Fibonacci level at 112.02, which is the 23.6% retracement of the ‘Financial Collapse move’ in EUR/JPY, taking the 2008 high to the 2012 low. But perhaps more relevant is the fact that this support has held the lows in EUR/JPY since mid-July after numerous tests of this zone.

As we looked at in our last article, this continued support can open the door to top-side plays. The targets in our last article were at 114.30, and traders can also incorporate the potential resistance zone at 115.00-115.37. Should rising prices take out the 115.37 level of resistance, the legitimate possibility exists of an extension of the move towards deeper resistance at 117.50, 119 and then 119.90, just shy of the next ‘big’ psychological level at 120.00.

EUR/JPY Technical Analysis: Another Test of Confluent Support

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Three Strikes of Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Longer-term bearish, price action remaining near longer-term support in the 130.00-area.
  • GBP/JPY is testing a support level that’s previously led to big top-side moves in the pair in July and August.
  • If you’re looking for additional trade ideas, check out our Trading Guide.

In our last article, we looked at GBP/JPY while it tenuously traded around support at the 135-handle. As we noted, should support hold above 135, this could’ve opened the door for continued bullishness on the prospect of a continuation of higher-highs and lows; and with Central Bank meetings from both the U.K. and Japan on the docket in the coming weeks, the potential for motivation of this theme certainly existed.

But that didn’t happen. The Bank of England remained dovish, talking up the prospect of even more rate cuts down the road; and the Bank of Japan did not trigger the ‘bazooka’ of stimulus that could’ve brought upon Yen-weakness. The combination of what happened at these two Central Bank meetings brought GBP/JPY right back down to the well-tested zone of support in the 128.50-129.50-region. When this support zone came into play in July just after the Brexit referendum, price action bounced to the tune of 1,300 pips in the following week: When a subsequent test of this support happened in mid-August, price action bounced by almost 970 pips. Monday and Tuesday of this week saw additional tests of this support zone, and a trend-line drawn to connect the July-low to the August-low intersects directly with this two-day batch of support.

This can open the door for top-side plays in the pair, and traders can investigate stops below either the July swing low at 128.50 or the August swing-low at 129.00. On the top-side of the pair, traders would likely want to take notice of the potential resistance at 133.20, which was the Brexit swing-low, followed by the thick batch of potential resistance between 135.00-135.72.

GBP/JPY Technical Analysis: Three Strikes of Support

Chart prepared by James Stanley

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

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

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

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Talking Points:

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

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

- 6.7 breakout key for any real bullish conviction

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

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

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

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

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

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

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

USD/CNH Daily Chart: September 26, 2016

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

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

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

Follow him on Twitter at @OdedShimoni




CAC 40 Rejected at Daily Resistance

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

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Talking Points

  • CAC 40 Rejected at 4,500
  • Intraday CAC 40 Support Found at 4,452.56
  • What’s next for the equities market? Learn more with our Trading Guide

The CAC 40 is trading up this morning, advancing +0.72% so far in today’s session. This morning’s advance has been led by Technip, which is currently trading up +6.03%. The largest CAC 40 decline on the day stands with Publicis Groupe, which is trading down -.88%. Technically, the Index has again failed to breach daily resistance at 4,500. As prices turn lower, it opens up the Index to retest short-term values of intraday support.

CAC 40, Daily Chart

CAC 40 Rejected at Daily Resistance

(Created with TradingView Charts)

Intraday, the first value of support for the CAC 40 may be found near 4,452.56. If the Index drops below this value, it may suggest that today’s decline is part of a larger retracement. Bearish breakouts may be signaled under 4,433.12. A move through this point would suggest that the CAC 40 might move to the next daily values of support including 4,412.30 and 4,361.80. It should be noted that if price remain supported, that intraday bullish breakouts might begin above today’s R4 pivot at 4,510.89. In this scenario, traders may look for the CAC 40 to challenge new monthly highs above 4,530.00.

CAC 40, 15Min Chartt

CAC 40 Rejected at Daily Resistance

(Created using TradingView)

---Written by Walker England, Market Analyst

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Crude Oil Price Forecast: Oil Drops on Signs of Failed Accord

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

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Talking Points:

  • Crude Oil Technical Strategy: Short bias remains as falling resistance favors move to $43/bbl
  • Supply glut may get worse as IEA favors imbalance through late 2014
  • US Dollar continues sideways, which takes out a component of downward price pressure

The last week of Q3 has all focus on the OPEC and Russia meeting in Algiers. The Federal Reserve announcement did little for the US Dollar as many now see even the likelihood of one rate hike as a fading possibility. Now, Algiers may be a disappointment for Oil Bulls as the FOMC meeting on September 21 were to US Dollar Bulls as Iran has said they are not going to freeze output at the current level, and Saudi is not interested in freezing production alone.

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

While much focus is now on the outcome of the OPEC meeting in Algiers, and the following meeting in November where rumors will likely run rampant once again. However, on Tuesday, IEA came out with a warning that oversupply will exceed demand until late 2017. Traders will likely keep this warning in their back pocket and look for a possible failed-OPEC accord alongside DOE data on Wednesday to show a further build to increase further bearish bets on Oil.

Another development in institutional positioning has the aggressive bearish sentiment that has not been seen since September 2015. The bearish sentiment comes in the forms of Bearish Puts, which are purchased when traders want to sell higher than they believe the market will be in a set amount of time. Such bearish exposure could see the market test some key levels on the charts.

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

Crude Oil Price Forecast: Oil Drops on Signs of Failed Accord

The chart above shows competing technical stories. As explained earlier, the fundamental pressure appears to be for a push lower. Only a reversal of main themes such as a weak US Dollar, Oversupply, OPEC failed accord, followed by a price breakout above $50/bbl should turn trader’s attention toward the bullish mindset of Q2. The competition comes in the form of a potential bullish head and shoulders pattern that would activate an upside bias on a daily close above $50/bbl.

Currently, the price of Crude Oil is sitting in the middle of the August price range, which has engulfed September’s price action. Tuesday’s low was the 50% retracement of the range that spans from $49.10/bbl down to $39.22/bbl. The price support in focus now appears to be near the September low of $42.74/bbl, and if the price is unable to hold above that support, we will turn focus toward the daily price range of the August low from $40.84-$39.22/bbl. Such a breakdown would keep us patiently on the bearish side of the Oil market with a keen focus on fundamental stories.

Looking at the chart above, you can also see the 200-DMA also sits very close to the support levels mentioned above. Many eyes are on these levels from an institutional side to see if buyer’s begin to pour into Crude long positions with stops likely at the August low of $39.22/bbl.

Key Levels Over the Next 48-hrs of Trading As of Tuesday, September 27, 2016

Crude Oil Price Forecast: Oil Drops on Signs of Failed Accord

T.Y.




Gold Prices Pop after Fed, But Remain in Bearish Channel

Price Action, Swing & Short Term Trade Setups

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Talking Points:

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

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

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

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

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

Gold Prices Pop after Fed, But Remain in Bearish Channel

Chart prepared by James Stanley

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

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Silver Prices Looking to Hold Support, Monitoring Gold Closely

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

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What’s inside:

  • Oscillation continues, favoring very short-term trades
  • Silver trading near a key area which needs to hold for current view to remain fully in tact
  • Keeping a close eye on developments in gold

As the price of silver continues to oscillate back-and-forth between intersecting lines of support and resistance, trading opportunities remain left to only the very short-term minded. Yesterday, we highlighted a clean downward channel on the hourly which was poised to lead silver back towards support in the 18.90/19 vicinity.

In Tuesday’s trade we saw silver take a dive lower, falling into the noted support region. This area of expected demand comes by way of the lower trend-line of an ongoing wedge development above major long-term support (2013 – present) in the vicinity of 18 – 19.

If the expected path of further convergence before an upside breakout is to be paved, then the downside in silver from here should be limited. It could fall below the lower trend-line and still hold a bullish posturing, but we would need to adjust our current scenario. At the end of the day, as long silver holds above 18 and the rising trend-line off the December lows, the bias will stay in neutral to bullish territory.

Silver: Daily

Silver Prices Looking to Hold Support, Monitoring Gold Closely

Created using Tradingview

As we discussed not long ago, gold is still sporting a bull-flag structure beneath the 2011 to current downtrend line. It has thus far held the trend-line off the December lows, putting the metal in a position where it should soon make a break for it (one way or the other). At this time, the expected break is above the 2011 trend-line, but we will choose to wait for a confirmed break on a daily closing basis (weekly even better) before operating from the long-side. Silver will follow suit, but the path yet to be determined. In the event the December trend-line doesn’t hold and gold takes out 1300, silver prices will come under pressure along with gold. At which time we would need to consider bearish alternatives.

Gold: Daily

Silver Prices Looking to Hold Support, Monitoring Gold Closely

Created using Tradingview

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---Written by Paul Robinson, Market Analyst

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S&P 500/Nasdaq 100 Offer Several Short-term Reference Points

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

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What’s inside:

  • Lines/levels showing up in the S&P 500 & Nasdaq 100 worth noting
  • Offer guidance for short-term traders to operate off of
  • Bigger picture not presenting a lot of clarity at the moment, continuing to focus on short-term charts

On Tuesday, we looked at several angles of influence with regards to the short-term chart of the S&P 500. The number of lines to reference has been slightly reduced in the couple of days since, but there remains a couple of old and a couple of new ones added which are worth keeping an eye on for you short-term operators.

To being with, the S&P is pulling off a trend-line from the 9/8 peak along with a multi-day parallel; we will begin there as our guide for resistance in the short-run.

Going back to 9/15 we still have in place a solid parallel we were using as resistance earlier in the week, but now comes in as support on a break lower. Rising up from the south is the lower parallel of a short-term channel. Below there the lower parallel of the channel developing off the 9/12 low will come into play.

The top-side trend-line and lower parallel could funnel price action towards the apex of a triangle, which we would then have to wait for a break of either side before running with it.

SPX500: Hourly

S&P 500/Nasdaq 100 Offer Several Short-term Reference Points

Created in Tradingview

While we are at it, we will look at the Nasdaq 100, because it also has some interesting inflection points worth keeping on the charts. For starters, there is a top-side parallel which the tech-heavy index is failing to climb above. For the Nasdaq to tilt bullish it will need to clear this hurdle.

At the time of this writing the index is on the verge of breaking a short-term trend-line dating back to Tuesday. A bit further down is the trend-line rising up from the 9/12 low along with horizontal support in the 4850 vicinity.

A break below both t-lines and horizontal support will bring into focus the lower parallel running back to 9/12. It has numerous inflection points, making it a key angle to pay attention to; it also adds weight its upper parallel as resistance.

NDX: Hourly

S&P 500/Nasdaq 100 Offer Several Short-term Reference Points

Created in Tradingview

Traders can utilize the before mentioned markers as support and resistance for short-term positioning, and until we gain better clarity on the big picture, we will likely be best served keeping expectations of large moves muted in the meantime.

Learn more about charts and price action analysis in one of our free trading guides designed for traders of all experience levels.

---Written by Paul Robinson, Market Analyst

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DAX: Holds the Line, Boxing Itself In

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

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What’s inside:

  • The DAX holds key trend-line support, but…
  • Now close to facing off with an upper parallel, resulting in the market becoming ‘boxed in’
  • A couple of pointers worth considering

In Tuesday’s commentary we were discussing the then breaking trend-line off the June low and the confluence of support below by way of a pair of bottom-side trend-lines; one long-term another intermediate-term.

As it stood by day’s end, the confluence of support was never touched as neither did the DAX close swiftly below trend support. For starters, an important lesson here: To get confirmation on a break, when dealing with daily bars, we must wait for the bar to close above, or in this case, below support. This goes for any time-frame, breakouts or breakdowns can reverse intra-bar and thus provide no valid signal.

The reversal on Tuesday brings us to our current price action. There is a set of parallels extending back about a month, with the upper running down from 9/8 over the 9/22 peak. Still rising from the south is the trend-line from June we nearly broke the other day. This is leaving the DAX in a position of getting ‘boxed in’ from two differently angled trend-lines, or ‘wedging up’, or however you want to reference it. In any event, this could be a good thing should it further itself into the corner and then make a strong break for it.

Which way will it break, you ask? The trend still remains upward since June, although recent price action isn’t the most encouraging with a couple of lower highs and lower lows in there. It could be a consolidation for a move up or the trend-line may give way. So it’s a good question. Instead of predicting which way the market will break we will trade from a reactionary stance, which is where we usually start from in the first place. If the market does this, you do this; if the market does that, you do that. It might sound like an oversimplification of trading, but the point is that reacting over predicting is a good protocol to follow.

With a little more time, the DAX could position itself in the corner of the box/wedge. A breakout to the upside will bring the area around 10800 into focus, while a break lower brings an August trend-line into play and the 10260s held the other day; and with further weakness, the backside of the 2015 trend-line, lower month-long parallel, and August low at 10092.

DAX: Daily

DAX: Holds the Line, Boxing Itself In

Created in Tradingview

For now, the name of the game may be ping-pong as the market searches for direction.

Learn more about charts and price action analysis in one of our free trading guides designed for traders of all experience levels.

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinsonFX.




ASX 200 Technical Analysis: 5,500 in Focus For the Short Term

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

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Talking Points:

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

- Index blasted to the upside after forming a bullish reversal pattern at 5,200

- The 5,500 level seems to be in focus in the short term

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The ASX 200 rally continues after the index broke the 5,380 level, retraced to find support again and the index might now eye the 5,500 resistance.

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

The index blasted to the upside after forming a bullish “Morning Star” pattern around the 5,200 support.

The ASX broke higher and retraced to find support at 5,380 again for what now seems like continued upside momentum.

The hold above 5,380 might shift focus for potential initial resistance at 5,500 followed by the 5,570-5,600 zone.

If current conditions change and the index reverses course, eyes will likely be on 5,380 and a move below that level may be interpreted as a bearish development.

ASX 200 Daily Chart: September 29, 2016

ASX 200 Technical Analysis: 5,500 in Focus For the Short Term

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

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

Follow him on Twitter at @OdedShimoni




Nikkei 225 Technical Analysis: Trading Sideways Post BOJ

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

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Talking Points:

- Nikkei 225 continues to pivot around 16,500

- Sideways trading still the prevailing trend

- Index nudging lower after initial post BOJ spike

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

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

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

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

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

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

Nikkei 225 Daily Chart: September 26, 2016

Nikkei 225 Technical Analysis: Trading Sideways Post BOJ

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

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

Follow him on Twitter at @OdedShimoni