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EUR/USD Technical Analysis: A Top in Place Near 1.16?

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro recoils from resistance above 1.16, breaks six-day winning streak
  • Waiting for confirmation of Shooting Star candle to re-establish short

The Euro stalled after hitting an eight-month high above the 1.16 figure against the US Dollar, snapping a six-day winning streak. The appearance of a dramatic Shooting Star candlestick points to indecision and hints that a reversal downward may be in the cards ahead.

Near-term support is at 1.1461, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 23.6% level at 1.1367. Alternatively, a push above the 50% Fib at 1.1537 paves the way for another challenge of the 61.8% expansion at 1.1612.

A Shooting Star candlestick is not a sufficiently potent reversal signal to enter short without further confirmation. A follow-on decline will be sought to make for a more convincing setup before a short is triggered in line with long-term down trend resumption expectations.

Should you follow what FXCM traders are doing with the Euro? Find out here!

EUR/USD Technical Analysis: A Top in Place Near 1.16?



USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

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

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Talking Points:

  • USD/JPY Technical Strategy: Burden Of Proof Squarely On Bulls, Selling Rips
  • Other JPY Crosses Providing More Excitement Due To Lack of Dollar Demand
  • BoJ Failure Brings Sharpest Move Higher To The Delight of Hedge Funds

Unevenly Distributed Gains in JPY Weakness

Nothing was the most bullish thing the Bank of Japan could have done on Thursday, and they did exactly that. Last week, an aggressive move off key support on rumors that the BoJ would bring negative interest rate loans as the next component of Abenomics. When a new form of easing failed to materialize, JPY bears capitulated by exiting their position and pushing some JPY crosses lower by ~4-5% over the last five days as we’ve see in the United States & Australian Dollar.

The reason given for the BoJ to hold off on new forms of easing was to wait and see how the January 29 announcement was impacting markets. Given the rather dovish Federal Reserve rate announcement on Wednesday, the JPY jumped by the most since 2010. Additionally, the Bank of Japan also appears to no longer be interested in meeting market demands, which is usually more easing, and more interested in a wait-and-see approach that could lead to more JPY strength throughout the summer.

Happy Hedge Funds:

Recently, we noted that the Commitment of Traders Index released by the CFTC shows speculators in large institutions are heavily biased in the direction of lower USD via DXY and long JPY futures or bearish USD/JPY.

In both the US Dollar & JPY the COT Index, which is the difference between net speculative positioning and net commercial positioning measured is at its largest in over a year. The argument made by the CoT Index is that speculators for institutions are pushing the US Dollar lower & JPY higher or USD/JPY down.

Now The 108 Failed to Hold, We Could Be Heading Toward 106.30-105.18:

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

Key Technical Levels:

The chart above zones in on the chart we showed you on Wednesday’s post where we discussed the importances of the 55-DMA. Earlier this week, the 55-DMA, which is sitting around 111.80, acted as ideal resistance on the move from 107.93 to 111.87 before pushing aggressively lower to touch new 18-month lows.

Therefore, strong trend-defining resistance is very clear at the 55-DMA. Traders who understandably want more confirmation can wait for a break above the Ichimoku cloud to signal a trend change may be under way. Support becomes a bit more tricky when looking at 18-month lows, but we’re not without a few good targets.

First, the Bearish Head & Shoulder’s target for a full move, 100% of the neckline to pattern apex sits around 106.30. As of Friday morning, USD/JPY is sitting ~100 pips away from that target. Beyond the long-term Bearish Head & Shoulder’s target lies the October 15, 2014, low. This level is marked on the chart above and is at 105.18. A breakdown below this level, once thought impossible would turn focus to the big 100 figure and the Hedge Funds would be in a state of sheer jubilation.

USD/JPY Sentiment Should Be on Watch As Longs Back Off Fighting The Trend

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?

As of mid-day Friday, the ratio of long to short positions in the USDJPY stands at 2.78 as 74% of traders are long. Yesterday the ratio was 1.98; 66% of open positions were long. Long positions are 6.5% higher than yesterday and 31.8% above levels seen last week. Short positions are 10.0% higher than yesterday and 26.1% below levels seen last week. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are long gives a signal that the USDJPY may continue lower.

Shorter-Term USD/JPY Technical Levels

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

USD/JPY Technical Analysis: Head & Shoulder’s Target And Then What?



GBP/USD Technical Analysis: RSI Divergence on the 4-Hour

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at a potential bearish reversal pattern in GBP/USD after the pair had run into a stubborn Fibonacci resistance level. As we had written, there weren’t yet enough signs of a turn to trigger the bearish position; but there were enough warning signs to allow for a market closure of the previous bullish position.

Since then, the Cable has continued to run higher, breaking above the pivotal swing-high at 1.4668, and coming within 120 pips of the 2016 high in the pair (set on January 4th). The pair is overbought by many metrics, and 4-hour RSI has begun to show signs of divergence as higher-highs are printing on price action while lower-highs are showing on the indicator (shown below).

Again, this is a bearish signal potentially highlighting a nearby turn: RSI divergence is indicative of a waning trend. But at this point, price action does not agree as we’ve seen continued higher-highs and higher-lows. The level of interest for top-side re-entries is 1.4572, which is the 61.8% retracement of the 30-year move in GBP/USD, using the low of 1.0500 when George Soros ‘broke’ the Bank of England with the high set in 2008 just before the Financial Collapse.

Traders could look for top-side re-entries should price action move down to find support at this level. Or for those that wanted to look to get long at a slightly more conservative level could wait for support to show at the 1.4471 zone, which is the 23.6% retracement of the most recent major move. If prices put in a concerted break below this support (highlighted with a daily close below this level); then bearish positions may be shortly on the horizon as price action would be in the early stages of showing bearish formations.

GBP/USD Technical Analysis: RSI Divergence on the 4-Hour

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: Why You Should Watch This Opening Range

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

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Talking Points:

  • US Dollar Technical Strategy: Short Bias Favored Below 11,850
  • 21-DMA Continues To Act As Firm Resistance on Move Lower
  • Opening Range Breakout Would Offer Enticing Value Breakout/ Buy

After printing a 14-year high on January 29 when the Bank of Japan announced negative interest rates, the US Dollar Index has fallen by a little more than 5%. While Momentum can be a self-sustaining phenomenon, it's worth paying special attention to the US Dollar this Month. Specifically, the May Opening Range and keep on alert for a bullish breakout.

April shaped up to be a rough month for the US Dollar after following the lead from March. If you remember, last April, many were convinced the US Dollar had topped, but that sentiment only lasted until Mid-May where the US Dollar would then go on a 8 Month Run to top out again in January on a Negative Interest Rate Announcement by the Bank of Japan.

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

To some, the chart may appear to show the US Dollar may have topped. Unfortunately, we’re not sure if that’s the case. However, you will be able to note on the chart going back to Sprint 2003 that the US Dollar has recently turned lower off resistance and has now found support. Additionally, US Dollar typically from a seasonal point of view (a strategy that played well in April) outperforms in May.

We’ve Just Hit A Corrective Equality Point with the March 2015 Correction

A theme that we’ve continued to track, and that doesn’t appear to be letting up is the driving force for US Dollar bearishness with hedge funds and other institutional speculators. Such a development of an institutional bias to sell-USD shows that the path of least resistance continues to favor more downside. Looking at the recent Commitment of Traders report from the CFTC, the difference between the Commercial Hedgers and Institutional Speculators is at a 52-week extreme with hedgers long, and speculators short as speculators are the shortest they’ve been since Summer of 2014.

Additionally, one environment that has favored US Dollar strength has been volatile environments. Recent Macro Events have passed leaving little fear now and focus turning to the EU Referendum and the potential Brexit outcome as the next key event risk. The only problem for those wanting volatility (and wanting it now) is that the referendum vote is nearly 2-months away. One scenario to be on the watch for if May doesn’t bring out the USD Bulls is that we could be entering a grind lower in the US Dollar like we also saw in the low-volatility environment of 2014, which did ultimately lead to a breakout. However, the breakdown took place after many speculators left the Dollar position out of boredom only to be nearly forced back in due to the velocity of the move.

Shorter-Term US Dollar Chart Favors Focus on 21-DMA & 11,907

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

In the chart above, you’ll note that the top line of the short-term bearish (red) channel hasn’t been touched apart from the later February high where the channel was originated. The upper channel line aligns with the 21-DMA around 11,847. Earlier, we spoke about the significance of an opening range breakout for the month of May, a move above the 21-DMA would also be significant as the price of the US Dollar has failed to sustain itself above the 21-DMA since early March. The Monday morning low aligned nicely with the median line of the channel discussed earlier that has provided trend- support in the current move.

Below the current 2016 low on Monday of 11,716, traders can look to the May 15 low of 11,634. You’ll also see on the first chart that US Dollar is resting on the floor of a 13-year channel support line. Given the environment, we see now, a break below the channel support line and May 2015 low at 11,634 appears to be the higher probability view as opposed to Dollar buying beginning aggressively.

Shorter-Term US Dollar Technical Levels

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

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

US DOLLAR Technical Analysis: Why You Should Watch This Opening Range

Interested In our Analyst’s Longer-Term Dollar Outlook? Please sign up for our free dollar guide here.

T.Y.




USD/CHF Technical Analysis: Long-Legged Doji Off of Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

USD/CHF has provided an interesting display of price action over the past seven months. From mid-October of last year until the end of November, Swissy rallied all the way from .9475 up to a high of 1.0327. This was a strong, consistent burst higher that set a 5-year high in the pair.

But since that high was set in early December, it’s been a markedly different story for the Swissy. As the Federal Reserve backed away from the median expectation for a full four interest rate hikes in 2016, the US Dollar has gotten obliterated and this is quite evident in the technical formation on USD/CHF. The issue at current is one of entry protocol, as the most recent swing high took place at the .9800 vicinity, and given current price action, this would amount to an approximate ~230 pip risk outlay.

But perhaps more vexxing for the idea of continuation setups is the recent support hit that we’ve seen at the .9441 level, which is the 61.8% Fibonacci retracement of the ‘big picture’ move in the pair, taking the 2005 high to the 2011 low. Not only did we get a support hit, but the day that support came into play produced a long-legged Doji, which can often pop up around a significant market turn.

At this point, the potential reward down to support of .9441 (approximately 132 pips as of this writing), obviates the setup given the 230 pip risk level that might be required to trade the setup.

More interesting would be continued development of the bearish structure, which could come to fruition should a ‘lower-high’ print at the prevoius resistance area around .9660.

USD/CHF Technical Analysis: Long-Legged Doji Off of Support

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: Looking to Sell Above 0.76

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Pending short at 0.7603
  • Aussie Dollar breaks 2016 down trend, eyes support below 0.75 figure
  • Looking to enter short AUD/USD on a corrective bounce toward 0.76

The Australian Dollar may be resuming the long-term down trend against its US namesake after prices broke support capping losses for most of 2016. Prices turned lower as expected after putting in a bearish Evening Star candlestick pattern below the 0.79 figure.

Sellers now aim to challenge the 38.2% Fibonacci retracement at 0.7450, with a break below that on a daily closing basis opening the door for a test of the 50% level at 0.7331. Alternatively, a move back above trend line support-turned-resistance at 0.7563 paves the way for a challenge of a horizontal pivot barrier at 0.7680.

Prices are too close to support to justify entering short from a risk/reward perspective. Instead, an entry order will be established to sell AUD/USD at 0.7603. If triggered, the trade will initially target 0.7450 and carry a stop-loss activated on a daily close above 0.7680.

What do DailyFX analysts expect from AUD/USD in 2016? See our forecast here!

AUD/USD Technical Analysis: Looking to Sell Above 0.76



USD/CAD Technical Analysis: Re-Emergence of the Bulls?

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

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Talking Points:

What a difference a few days make! On Tuesday morning, the US Dollar weakness train was rolling along and USD/CAD printed a fresh 10-month low (1.2459). Nearly 30 hours later, USD/CAD is higher by 3.4% or ~425 pips. This significant move at the beginning of May may be significant given the seasonal significance of May for the US Dollar.

Widest Trade Balance on Record for Canada

Understandably, many traders looked to the price of WTI Crude Oil to see if that explained the CAD weakness. While Oil has weakened on the session on renewed risk-off sentiment and a much larger than anticipated inventory build potentially implying less demand, the cause was altogether different. On Wednesday morning, Canada posted its widest ever trade deficit (Exports – Imports = Trade Balance) at –C$3.41.

Before we dive into the technical picture on USD/CAD, a few points should be made. Namely, the strength of the Canadian Dollar since January 20 could be showing real signs of a competitive disadvantage in the global market. Much focus has been placed on renewed demand in Emerging Markets to help with demand for resources, but other items like autos declined significantly as well. C$ has strengthened by over 15% in a little more than 90 days.

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While a stronger Canadian Dollar is understandably a burden on exporters, traders will likely wait for the Friday Employment Report to throw in the towel on the USD/CAD short position. Another component that would likely shake traders out of bearish USD/CAD tree would be Poloz noting the market needs to be realigned, which presumes no accord was made by central banks to back off currency weakening monetary policy.

USD/CAD (H4) Chart Shows A Trend That Continues To Hold Well Within A Bearish Channel

USD/CAD Technical Analysis: Re-Emergence of the Bulls?

Key Support Levels from Here (Visual Map Below)

On the chart above, the reliable H4 Ichimoku cloud resistance has been broken and now the 34-DMA is under attack. The 425-pip move has likely taken short-term and trailing-stop short traders out of this move, which means there could be fuel to the ~13200 area.

Given the moon-shot nature of the move off Tuesday’s low of 1.2459, the main support between there and the ~425 pip move higher is today’s low of 1.2696. For now, those two support levels are worth watching and if neither is hit, we may have seen a sneaky low be put in for the CAD as the seasonably strong US Dollar returns to favor.

USD/CAD Bullish Wedge Is Breaking Out (H1 Chart)

USD/CAD Technical Analysis: Re-Emergence of the Bulls?

Regarding resistance, we recently broke above 1.2750, which was the top of the H4 Ichimoku Cloud and last week’s Pivot Point. As of Mid-Day Wednesday, the HoD is right at the 34-DMA, which has been solid resistance and currently sits at 1.2890. Beyond the 34-DMA lies the mid-April high of 1.2989, and the corrective top of a three-wave move that the wedge is drawn from that eventually led to an impulsive decline that we’re in right now, but may be exiting.

Canadian Dollar Rally Looks Steady per Sentiment

When looking at sentiment, crowd positioning has suddenly turned to long-term trend supporting. For those familiar with our model, this favors a larger move retracement may be under way. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are net-flat at a bull: bear of -1.01 as 50% of traders are long means that the long-held bearish USD/CAD signal may be fading. The Bear signal is being most challenged since late January, and as you can see in the charts below, the downside may favor a move higher.

Yesterday the ratio was 1.37; 58% of open positions were long. Long positions are 14.6% lower than yesterday and 32.5% below levels seen last week. Short positions are 18.5% higher than yesterday and 40.7% above levels seen last week.

USD/CAD Speculative Sentiment Index as of 5/4/2016

USD/CAD Technical Analysis: Re-Emergence of the Bulls?

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis support further warns of more CAD gains ahead.

Key Levels as of Wednesday, May 4, 2016

USD/CAD Technical Analysis: Re-Emergence of the Bulls?

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T.Y.




NZD/USD Technical Analysis: Support Below 0.68 in Focus

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar may be forming a double top below 0.71 vs. US counterpart
  • Looking for greater confirmation of reversal to re-enter short position

The New Zealand Dollar turned sharply lower after re-testing resistance below the 0.76 figure, putting in the largest daily decline in eight months. Positioning suggests that a bearish Double Top chart pattern may be emerging, pointing to deeper losses against the Kiwi’s US counterpart.

Near-term support is at 0.6784, the 38.2% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 50% level at 0.6701. Alternatively, a reversal above support-turned-resistance at 0.6924 paves the way for a challenge of the 0.7054-77 area (April 19 high, 38.2% Fib expansion).

Recent attempts to enter short NZD/USD in similar territory have met with limited success, with seesawing price action and lackluster follow-through ultimately producing flat results. With that in mind, a more convincing setup – perhaps with confirmation on a break of 0.6784 – will be sought to re-enter the trade.

What does our 2016 forecast envision for NZD/USD? Find out here!

NZD/USD Technical Analysis: Support Below 0.68 in Focus



EUR/GBP Technical Analysis: Eyeing Resistance Above 0.79

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro breaks monthly channel resistance, hints at move above 0.79 vs. Pound
  • Dominant long-term trend still points downward, painting gains as corrective

The Euro is attempting to rebuild upside momentum against the British Poundafter prices found support above the 0.77 figure. The pair has broken out of the falling channel established from swing highs set in early April, seemingly shifting the near-term bias back in favor of the upside.

A daily close above the 38.2% Fibonacci expansion at 0.7913 opens the door for a challenge of the 50% level at 0.7968. Alternatively, a reversal back below the 23.6% Fib at 0.7845 clears the way for a test of the 14.6% expansion at 0.7803.

Our entry order to sell EUR/GBP at 0.7800 was triggered but prices subsequently stopped out the position on a close above 0.7849. We will move to the sidelines from here, waiting for another opportunity to sell in line with the long-term down trend when the opportunity to do so presents itself.

What do DailyFX analysts expect from the Euro and Pound in 2016? Find out here!

EUR/GBP Technical Analysis: Eyeing Resistance Above 0.79



EUR/JPY Technical Analysis: 123.08 Fib Resistance In-Play

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the young but bullish structure that had begun to build in EUR/JPY; but as we advised, traders would likely wanted to approach with caution given the Bank of Japan meeting on the docket for later in the week. And that meeting did not disappoint. Nothing really happened; no new policies were unleashed and no new announcements were made, but that was somewhat of the issue. Markets were looking for some kind of extension or increase to Japanese QE and after the incredibly salient report had made the rounds a week earlier, it looked like something new would be announced.

But when no additional information was unveiled by the Bank of Japan at that April rate meeting, that bullish structure in EUR/JPY was smashed by a surging Yen.

Price action made some very interesting moves around this theme, and these levels can certainly become usable again. The low on Friday and again on Monday of this week was but a few pips below the previous swing low at 121.70. Sellers tried to take the pair lower yesterday but, again, support came into play to offset the selling pressure, and now EUR/JPY is catching resistance off of another familiar level at 123.08, which is the 38.2% Fibonacci retracement of the ‘secondary’ move in EUR/JPY, which takes the 2008 high to the 2012 low).

This could open the door for aggressive continuation setups with stops placed above today’s high of 123.50 (such as 123.65-123.70), and targets cast towards that previous zone of support below 122. Traders can also break up the exit by removing a portion of the position should 122 come-in, moving stops to break-even and looking for more profit on the remainder of the lot. Should Non-Farm payrolls bring on even more risk aversion, traders could cast deeper targets towards the 120 psychological zone with a scale-out approach.

EUR/JPY Technical Analysis: 123.08 Fib Resistance In-Play

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:160 Is the Line in the Sand

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY continues to run higher after hitting support off of the 27.2% extension of the prior major move.
  • 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 wrote about the Fibonacci extension on GBP/JPY at 151.61 that provided near-term support as the basis for a retracement in the longer-running down-trend. Since that article, the retracement hasn’t really calmed much, as price action has continually throttled up to higher-highs and higher-lows. This retracement extended on Friday, as rumors of a negative rate loans out of the Bank of Japan being issued to banks elicited further Yen weakness.

Price action for this week gapped higher, right into the 38.2% retracement of the prior major move; and this is the same Fibonacci retracement whose extension provided that near-term bounce that we discussed in our last article. This presents a quandary in the identification of the near-term trend. While this recent bout of strength has been notable, we’re still well below previously-established highs. This morning’s test of 160.04 offers a higher-low that could be used to denominate stance for the next week; and given that this is a major psychological level, this can be used to denote near-term biases.

For traders looking to get short, waiting for breaks of this support could allude to the potential for the return of the down-trend; while those looking to buy can use this as a basis level for stop placement.

The four-hour chart may provide usable structure for a week in which heavy volatility is expected on the back of an outsized slate of announcements. On the 4-hour chart below, we’re looking at near-term price action structure to illustrate how traders might be able to approach GBP/JPY moving forward.

GBP/JPY Technical Analysis:160 Is the Line in the Sand

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




USD/CNH Technical Analysis: Volatility Hits 8-Month Low

Fundamental analysis, economic and market themes

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Talking Points:

  • USD/CNH Technical Strategy: Flat
  • US Dollar treading water after hitting one-month high vs. Chinese Yuan
  • Ebbing momentum, absence of actionable trade setup calls for patience

The US Dollar is in digestion mode against the Chinese Yuan in offshore trade after prices advanced to the highest level in a month. Volatility continues to ebb, with the ATR measure of momentum dropping to the lowest level since August 2015 (on rolling 20-day studies).

From here, a daily close above the March 25 high at 6.5291 opens the door for a challenge of the 38.2% Fibonacci retracement at 6.5589. Alternatively, a move below resistance-turned-support at 6.4937 clears the way for a test of the 6.4529-4705 area (23.6% Fib expansion, rising trend line).

A clear-cut trade signal is unavailable at this point. Upside continuation has failed to materialize but an actionable bearish reversal setup is likewise absent. With that in mind, we will remain on the sidelines and wait for positioning to deliver something more compelling before committing to a directional bias.

How do Chinese assets fit into DailyFX analysts’ Q2 outlook? Find out here!

USD/CNH Technical Analysis: Volatility Hits 8-Month Low



CAC 40 Tests Support as European Equities Slide

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

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Talking Points

  • European Equities Decline, With the CAC 40 Trading Down -1.57%
  • Bearish Breakouts Begin Under Trendline Support
  • Sentiment Now Reads at an Extreme +2.58

CAC 40 Daily Chart

CAC 40 Tests Support as European Equities Slide

(Created using Marketscope 2.0 Charts)

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

European equities markets are trading lower this morning, with the CAC 40 trading down -1.57%. Of the 40 listed CAC components, only 2 are currently trading up on the day. Lafarge Holcim is leading today’s decline, and is now trading down -4.98% on the day. In the absence of any major events on today’s economic calendar, traders are looking to tomorrows Euro-Zone Retail Sales figures to gain further insight into the health of the European economy. Figures are set to be released at an estimated 2.6% (YoY) (Mar). If these expectations are missed, it could provide a catalyst for a continued market decline.

Technically, the CAC 40 is now nearing an ascending trendline, which is currently acting for support for the Index. This trendline has been drawn by connecting the February 11 daily low at 3890.50 with the April 7 daily low at 4,211.80. If prices break below support, it would be expected that the CAC 40 continues its downward trend by creating a series of lower lows. This includes price action moving through the previous two lows mentioned above. Alternatively, in the even that prices remain supported, prices may bounce up towards previous values of resistance. This includes Aprils standing high at 4,616.50.

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

Sentiment Data for the CAC 40 (Ticker: FRA40) remains extreme with SSI (speculative sentiment index) currently reading at +2.58. As prices have declined in 3 of the last 4 sessions sentiment totals have continued to increase. If SSI readings remain at positive extremes, it may suggest further declines in price for the CAC 40.

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WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

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

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Talking Points:

WTI Crude Oil broke above $45/bbl on a mixture of factors including a weak US Dollar, strong demand out of China, and a more balanced supply and demand picture than we’ve had in nearly two years. Now that we’ve crossed above the 200-DMA, which acted as such strong resistance since crossing below in early 2014, it appears there is little looking back. This change in market sentiment is significant because a move above $50 would likely start to see the low number of active rigs, a number that declined to balance the global supply glut, could start to rise again.

A Continual Change In Narrative Leaves Crude Bears In Doubt

A key factor in all the surge of Oil since mid-February has been the weak Dollar. While the US Dollar has been stubborn around the 11,800 level, a further push lower could take Oil closer and closer to the key $50 level.

Learn more about the breakdown of oil production – click here.

What few appreciate is how aggressively market dynamics can change in a quarter. While commodity bullishness, along with Emerging Markets was contentious at the end of Q4 and beginning of Q1, that sentiment is now ubiquitous.

As a telling sign of sentiment, Dennis Gartman said in January in his “Garman Letter” that Crude Oil wouldn’t trade back above $44/bb “in my lifetime,” though he did see it as oversold at the time, and boy was it ever. As we’ve since risen 73% off the lows, it is clear that a lot of narratives as to how 2016 would play out have been annihilated.

A Pull-Back Shouldn’t Concern Bulls. The H4 Ichimoku Cloud & 200DMA Will Be Firm Support

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

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The above chart is a medium-term price channel via Andrew’s Pitchfork tool with sliding parallels drawn with the slope of the median line off of key pivots. The lower handle is drawn off the February 11 low at 26.03. You’ll notice on the bottom-left of the chart; the sliding parallels have acted as key pivot support zones into Q2. Now that we have seen a break above the 200-DMA (currently near $40/bbl), our focus turns higher to the upper median line around $47.50.

Key Support Levels from Here (Visual Map Below)

The Support Zone in focus is the H4 Ichimoku Cloud, which aligns with the prior low near $45/bbl. Below here, there could be a quick drop to the 200-DMA, which would take a strong move lower down to ~$40/bbl. Given the significance of the Intermarket factors that have shifted since Oil broke above $40/ 200-DMA, only a move below there would change my bullish model.

Contrarian System Warns of Further Upside

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

In addition to the technical focus around Andrew’s Pitchfork, the sliding parallels, and the Intermarket relationship of US Dollar weakness, we should keep an eye on retail sentiment, which could be warning of more upside price action. Further upside is aligned with our Speculative Sentiment Index or SSI.

According to client positions at FXCM, the ratio of long to short positions in the US Oil stands at -1.70 as 37% of traders are long. Short positions are 9.1% higher than yesterday and 59.6% above levels seen last week. Open interest is 13.2% higher than yesterday and 30.2% above its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives a signal that the WTI Crude Oil may continue higher. If the trading crowd grows further net-short, we could be in the works of an upside extension taking us closer to $50/bbl.

Key Levels Over the Next 48-hrs As of Monday, April 27, 2016

WTI Crude Oil Price Forecast: China Optimism Pushes Oil Past $45/bbl

T.Y.

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Gold Prices: Too Hot to Handle, Too Shiny to Ignore

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article we looked for another top-side entry in the Gold market. As we had just printed an evening star formation on the daily chart while still remaining constrained within the prior area of congestion, it was likely wise to wait for support to become more confirmed before pressing another top-side entry. That support came in a bit deeper 24 hours later, and since then Gold has caught a major bid to break up to new highs; giving the appearance that the past 2.5 months of congestion may be giving way to a legitimate top-side breakout.

A large contributing factor to this recent run has been the aggressive moves of weakness in the US Dollar, and this has sent many major pairings flying higher (like GBP/USD, and even EUR/USD).

Now traders have the challenging prospect of looking for fresh top-side re-entries after Gold has staged yet another bullish breakout. And given the scope of extreme USD-weakness over the past week, and to a greater degree over the past three months, it would likely behoove the trader to wait for a more attractive entry while USD drops down to deeper and deeper support levels.

On the chart below, we look at three different support zones in Gold that could be helpful for plotting that re-entry. At $1,283.82, we have the 38.2% Fibonacci retracement of the ‘big picture’ move in Gold, and this is the level that had provided a clear swing high in March. A little deeper at $1,270, we have a very recent price action swing high that could become usable, and a little below that at $1,251.74 we have a well-tested level that was 23.6% of the prior major move.

Traders would want to wait for support to show at each of these intervals before triggering, and for those that want to avoid aggressive entries, the level at $1,270 would likely be optimal for that next long position given the more recent tests of resistance at this interval (swing high on 4/21/2016).

Targets for top-side entries can be cast towards prior levels of interest, with $1,283.82 becoming an active target for $1,270 entries or below; after which $1,301.61 becomes a secondary target, as this is the 50% Fibonacci retracement of the 2008-2011 move; followed by $1,307.49 (the 2015 high). If we eclipse that, we’d be looking at a 20-month high in the Gold market, at which point breakout trade management could be utilized on any remainder of the lot.

Gold Prices: Too Hot to Handle, Too Shiny to Ignore

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

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

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Silver Prices: Under Pressure Ahead of ADP and ISM Services

Global Macro and Momentum Trading

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Talking Points

  • Silver prices give back large parts of last week’s gains.
  • Short-term resistance is today’s high of $17.45 and the very short-term trend is bearish below this level.
  • A batch of US macroeconomic reports are on deck today and may have a big impact on silver prices

Silver prices were under pressure at the time of writing and had given back large parts of last week’s gains. If prices were to reach the $16.78 level then a complete reversal of last week’s gains would have occurred.

The losses to silver prices are on the heels of a stronger USD and the current decline is challenging the current uptrend of silver prices.

We note that the ability of prices to stabilize has been low. Price was, at the time of writing, trading at $17.20 with the next support level being the April 27 low of $17.03. Above the April 27 low of $17.03, the trend remains bullish as the April 27 low of $17.03 is a higher swing low in relation to the April 25 low of $16.78.

Short-term resistance is today’s high of $17.45 and this level is also the short-term trend defining level, as it is the most recent swing high of the short-term downtrend which started from the $18 level this Monday. The next resistance level beyond the $17.45 high is the May 3 high of $17.70 and is followed by this Monday’s high of $18.

A batch of U.S. macroeconomic reports are on deck today. One of session’s most important reports is the U.S. ADP Employment Change, which a Bloomberg News survey is projecting to print at 195k, a slightly lower amount compared with last month’s reading of 200k.

In relation to the importance and the ability to move the market, a key indicator is the ISM Non-Manufacturing Composite. It is key as it gives us a glimpse of the health of the U.S. service sector, a large part of which is attributable to U.S. first quarter GDP growth. A Bloomberg News economist poll projects a rise to 54.8 from 54.5.

Our Market forecasts for Q2 2016 are now live on the site. Download them for free.

Silver Price | CFD: XAG/USD

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

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

Contact and follow Alejandro on Twitter: @AlexFX00




SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • S&P 500 Technical Strategy: Long triggered with FIbonacci support at 2,065.45.
  • Another top-side, directional trend entry is available with current ‘higher-low’ support; but a Doji on the recently-finished monthly bar could highlight reversal potential for later in the week/month.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

In our last article, we looked at the S&P working on what could’ve been ‘higher-low’ support at a previously resistant area on the chart. As we had written, traders would likely want to approach trend-resumption entries with caution as we sat ahead of a large group of data for the remainder of the week. We had instead looked for a deeper retracement off of one of three potential support levels using prior price action structure.

The first of those levels came into play on Friday of last week when the S&P crossed below 2,065.45; and this was in the midst of some aggressive selling; it didn’t look like support was going to hold. But by the end of the trading session, pricse had moved back above 2,065, thereby denoting this as potential higher-low support. This could open the door for top-side re-entries using the Friday low for stop placement. But, one area of note that may become relevant later in the week, or perhaps deeper into May:

The Monthly SPX500 chart just posted a Doji formation, which will often show up near the top of a swing. April’s Doji also comes in at a lower-high from the previous swing-high, thereby further denoting reversal potential.

SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

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

This is still a very early observation as we’re in the first trading day after that monthly candle completed, but should price action begin to show lower-lows on the 4-hour chart, a reversal setup may be afoot. The levels of interest to denote those lower-lows would be the same support zones we’ve been investigating at 2,040 and again at 2,021.12.

For now, the daily chart is still showing up-trend, and traders can use the low from Friday to base a stop below 2,052 (the Friday low), with eyes on 2,100 for initial profit targets. This would set up a 1-to-1.5 risk-reward ratio, with secondary profit targets cast towards previous highs at 2,111, and then again at 2,133.

SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

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

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

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DAX 30 Continues Its Retreat

Global Macro and Momentum Trading

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Talking Points

  • The DAX 30 maintains a bearish bias, which has been in place since April 21.
  • Above the yesterday high of 10,156, the next resistance level is the April 28 high of 10,333, followed by the April 21 high of 10,448.
  • A short-term support level is the April 18 low of 9910, followed by the psychological level of 9750.
  • The Markit Eurozone Composite PMI remained unchanged at 53 and hints that growth for the second quarter has remained at a similar pace to the growth pace seen over the first few months of 2016.

At the time of writing, the DAX 30 (CFD: GER30) was resting above the April 18 low of 9910. However, the DAX 30 trading below the April 18 low would negate the bullish trend in place since the April 7 low of 9437, as price would not be creating higher lows on a breach to the April 18 low.

Below the April 18 low of 9910, the next potential support level is the psychological level of 9750, followed by the April 12 low of 9617.

The trend is bearish below yesterday’s high of 10,156 as it is the most recent swing high of the bearish trend, which has been in place since price hit a high of 10,448 on April 21.

Above yesterday’s high of 10,156, the next resistance level is the April 28 high of 10,333, followed by the April 21 high of 10,448.

The Markit Eurozone Composite PMI, an economy weighted combination of the Manufacturing, Construction and Services PMI, remained unchanged at 53 and thereby met the 53 expected in a Bloomberg poll. As the 53 reading is not too different to the average of the 53.2 in the first quarter of 2016, the Markit Eurozone Composite PMI is suggesting the Eurozone economy is growing at the same pace as the first quarter. Eurozone GDP increased by 0.6% QoQ in the first quarter.

This afternoon key U.S. data reports are on deck: the ADP Employment Change and April’s ISM Non-Manufacturing Composite. Please read today’s market update by Ilya Spivak, Currency Strategist, for more on today’s U.S. economic reports.

Our forecasts for Q2 2016 are now live on the site. Download them for free.

DAX 30 | CFD: GER30

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Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

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

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100 Approaches Critical Support

Global Macro and Momentum Trading

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Talking Points

  • The FTSE 100 remains bearish but price is now nearing a major support level, namely the April low of 6060.
  • The very short-term trend is bearish below yesterday’s high of 6283.
  • Markit/CIPS UK Construction PMI for April is on deck today and will be followed by key reports from the U.S., such as ADP Employment Change and the ISM Non-Manufacturing Index.

At the time of writing, the FTSE 100 (CFD: UK100) maintained its bearish bias which has been controlling price since April 20 when it reached a high of 6432.

The last short-term high of importance is yesterday’s high of 6283 and the trend is short-term bearish below this high given that it’s the most recent swing high in the downtrend since April 20.

According to classical technical analysis and for the bearish bias to abate, the sequence of lower swing highs and lower lows would need to end.

Short-term support levels are yesterday’s low of 6158, followed by the April 7 low of 6108 and the April monthly low of 6060.

We note that when price is nearing a major support level such as the April low of 6060, price tends to turn choppy. Between late February and early April, the 6060 level supported the FTSE 100. Below the 6060 level, the March 10 low of 6006 is the next resistance point and is followed by the February 24 low of 5841.

Resistance levels are yesterday’s high of 6283, the April 27 high of 6344 and the April high of 6432.

One of the macroeconomic reports, which may affect the FTSE 100 this morning is the Markit/CIPS UK Construction PMI for April, and as per a Bloomberg survey, the index is expected to decline to 54.0 from 54.2.

This afternoon key U.S. data reports are on deck: the ADP Employment Change and April’s ISM Non-Manufacturing Composite. Please read today’s market update by Ilya Spivak, Currency Strategist, for more on today’s U.S. economic reports.

Our Stock Market forecasts for Q2 2016 are now live on the site. Download them for free.

FTSE 100 | CFD: UK100

Please add a description for the image.

Created with Marketscope/Trading Station II; prepared by Alejandro Zambrano

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

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Technical Analysis: Eyeing a Break of the 9-Month Range


Talking Points:

- The ASX 200 tested a nine-month range top at 5,380

- Prices spiked higher following the RBA’s interest rate decision

- Long term up-trend may be resuming if a break-out finds follow through

The ASX 200 tested the 9-month range top at 5,380 following the RBA’s decision to cut interest rates, which saw a spike higher by the index. The price has been trading between the well-defined 5,380 resistance and the 4,750 support, which coincided with the 0.618 Fib level of the long term up trend from 2012.

A break above the range top at 5,380 might imply that the bulls have taken control, and that the long term up trend is resuming. However, follow through could prove limited if similar correlated “risk assets”, such as the S&P 500, do not find similar fortunes. An outcome in which the range top holds may initially put the focus on the psychological 5,000 level, which coincides with the 0.50 Fib, followed by the range bottom at 4,750.

With the ASX appearing to test sellers’ resolve at the 5,380 level, traders may look to take advantage of a breakout should an opportunity present itself. With that being said a failure to break above this level might imply a lack of bullish conviction, which may suggest a move lower is of higher likelihood.

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

ASX 200 Daily Chart: May 4, 2016

ASX 200 Technical Analysis: Eyeing a Break of the 9-Month Range

--- Written by Oded Shimoni, DailyFX Research

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




Nikkei 225 Technical Analysis: Stuck In a Well Defined Range


Talking Points:

- Nikkei 225 seems to be poised to test near term support at 15,000

- The index appears to have found some support below the 16,000 handle

- Gains may be corrective within context of the near term down trend

The Nikkei 225 is treading water after spiking down last week on the BoJ’s monetary policy announcement, with the index appearing to have found slight support below the 16,000 handle. The price is trading between the well-defined 18,000 resistance and the 15,000 support, with gains appearing to be corrective in the context of the near term down trend.

The Nikkei seems to be poised to test near term support at 15,000 after moving below interim support-turned resistance at the 16,500 level. A break below the 15,000 level may put the spotlight on the 50% Fib of the long term up trend from 2012 at 14,518. However, a move above 16,500 might expose the 18,000 resistance, with a break above that level signaling that the bulls may have taken control, perhaps implying that the long term uptrend is resuming.

With the Nikkei spiking down hard on the BOJ, it seems as though favorable setups may be lacking from a risk/reward perspective. However, a corrective move higher followed by a well-defined bearish technical setup may offer selling opportunities. With that being said, confirmation is absent for the time being.

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

Nikkei 225 Daily Chart: May 4, 2016

Nikkei 225 Technical Analysis: Stuck In a Well Defined Range

--- Written by Oded Shimoni, DailyFX Research

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