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EUR/USD Technical Analysis: Down Trend May Be Resuming

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1207
  • Euro breaks monthly uptrend, hints dominant down move is resuming
  • Short position triggered, targeting just below 1.11 figure vs. US Dollar

The Euro declined against the US Dollar as expected after putting in a bearish Harami candlestick pattern following a test of trend line support-turned-resistance. A break of support guiding prices higher since late July now hints the longer-term down trend is resuming.

From here, a break below the 38.2% Fibonacci expansion at 1.1097 opens the door for a test of the 50% level at 11014. Alternatively, a daily close above resistance in the 1.1200-15 area (23.6% Fib, trend line) sees the next upside barrier at 1.1263, the 14.6% expansion.

An intraday gap-filling bounce has offered acceptable risk/reward parameters and a short trade has been triggered at 1.1207, initially targeting 1.1097. A stop-loss will be activated on a daily close above 1.1263. Half of the position will be booked and the stop-loss trailed to breakeven when the first objective is met.

What do past EUR/USD price patterns hint about where prices are going? Find out here!

EUR/USD Technical Analysis: Down Trend May Be Resuming



USD/JPY Technical Analysis: Are The Bulls Ready To Rumble?

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

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Talking Points:

Access Our Free Q3 JPY Outlook As Pressures Mount on BoJ & the Federal Reserve Here

USD/JPY is closing at one-month highs ahead of Friday’s critical Non-Farm Payroll report. The significance of the employment report in the US is that Federal Reserve VP Stanley Fischer seemed to warn markets at Jackson Hole that a good employment report (consensus est. 180k) would open the door for two rate hikes in 2016 if the data continues to validate they’ve reached their goals.

Since Fischer’s comments, the US data has been coming in strong, while Japan’s has been weak enough to spark speculation about the BoJ accommodation, that USD/JPY is closing August at monthly highs and USD as a whole is near the top of the leader-board in G10FX. What is amazing about USD’s relative position is that last week before Jackson Hole, USD was the weakest G10 currency. What a difference a week makes. Especially when the VP of the Fed starts talking not just one, but maybe two hikes this year.

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USD/JPY Continues Below Heavy Resistance on Unrelenting JPY Strength

USD/JPY Technical Analysis: Are The Bulls Ready To Rumble?

Looking above, you can see what appears to be a very clear downtrend alongside a 200-WMA (currently at 107.40), Ichimoku Cloud, and Andrew’s Pitchfork (Red).

The impressive move higher is still taking place within a larger downtrend, which the various indicators on the chart above show you. Of the three indicators, Ichimoku Cloud would be one of the first to register a Bullish signal on a break and close above 105.20. The next breakout of a long-term indicator would be a weekly break and close above the 200-DMA (currently at 107.40), which you can see in the chart below has provided a good bias for longer-term trends.

Lastly, the Andrew’s Pitchfork (Red) would not concede that 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.

Should these three levels be broken in September, and the Speculative Sentiment Index flip negative (more on that below), we could be seeing the changing of the tide in FX as JPY becomes defensive on a large scale and USD returns to dominance as the result of a surprisingly hawkish Fed.

USD/JPY Technical Analysis: Are The Bulls Ready To Rumble?

The chart above shows the big picture for USD/JPY beginning with the descent from the Great Financial Crisis that eventually took USD/JPY down to 75.55. What’s important about the retracement from 125.85 toward 98.52 after the Brexit announcement is that we’ve stabilized well around the 50% retracement level of the 2011-2015 range, and we’ve also found support at the 2014 low before the last leg higher began. There are no guarantees in markets, but this looks to be a great place to find support before a solid attempt toward 110+. Of course, much of this is predicated on both central banks playing their role in a higher USD/JPY.

However, USD/JPY Sentiment Shows Traders Are Starting to Fight Upside Progress

USD/JPY Technical Analysis: Are The Bulls Ready To Rumble?

When looking at sentiment, the most pressing development is a rise in new short positions. As of mid-day Wednesday, the ratio of long to short positions in the USDJPY stands at 1.78, as 64% of traders are long. Yesterday the ratio was 1.96; 66% of open positions were long. Long positions are 0.7% lower than yesterday and 28.6% below levels seen last week. Short positions are 9.3% higher than yesterday and 74.1% above levels seen last week. Open interest is 2.7% higher than yesterday and 8.7% above its monthly average.

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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. The trading crowd has grown less net-long from yesterday and last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Shorter-Term USD/JPY Technical Levels: August 31, 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: Are The Bulls Ready To Rumble?

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GBP/USD Technical Analysis: Carney’s Lament

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Longer-term bearish, near-term price action trading in tighter range with recent compression of price action.
  • While many are still actively looking to sell on the brute uncertainty posed by the Brexit-referendum, the dramatic drop in Sterling prices is likely going to prelude an increase in inflationary pressures. This may force the BoE’s hand away from future rate cuts.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

In our last article, we looked at a recent uptick of bullish price action in GBP/USD; at least in-part driven by higher than expected inflation that had begun to show in the U.K. economy. And this made sense: We were all warned of such a situation by BOE Governor Mr. Mark Carney, who months ahead of the referendum noted that a decision to leave the European Union could entail a ‘sharp re-pricing’ in the value of the British Pound, and this could produce higher inflation; all the while coupled with rising unemployment and slowing growth: Pretty much a cornocoppia of pain for a Central Banker. At that point they have to decide whether they want to a) hike rates to stem inflationary pressure at the behest of employment and growth, or b) cut rates at the risk of running even higher levels of inflation which can, of course, begin to choke growth even further, spurn higher levels of unemployment, etc.

The irony of the situation is that, at least at this point, it appears that Mr. Carney’s responsive actions may be driving these risks more than the actual Brexit referendum itself. In the days following the Brexit referendum, Sterling price action was recovering and heading higher. That is, until Mr. Carney called an impromptu press conference to warn that rate cuts were coming. In the days following those warnings, the British Pound drove to even-lower 30-year lows to set price action support at a a level that has yet to be eclipsed. Since then, price action in GBP/USD has been winding deeper into a congestion pattern.

Even the ‘bazooka’ of stimulus launched by the Bank of England in early August failed to set a fresh low; and when price action fails to set a ‘lower-low’ on such an announcement that should elicit extreme bearishness, that’s a sign that a market may still be significantly oversold. And if we combine that with the fact that inflationary pressure is beginning to show, as led by import prices in response to the recent ‘sharp re-pricing’ in the British Pound, this could further the expectation for a bullish backdrop for the currency; as rising inflationary pressure could prevent the BOE from posing any near-term rate cuts.

On the chart below, we’re looking at post-Brexit price action in GBP/USD as prices continues to compress after the ‘post-Brexit’ low was set at 1.2788.

GBP/USD Technical Analysis: Carney’s Lament

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

For traders looking to establish bullish positions in the British Pound, there is but one near-term complication, and that’s rampant US Dollar strength since last Friday. The Dollar is running higher on more hawkish rate hike expectations from the Federal Reserve, but if recent history is any guide, this theme is unlikely to last.

Traders can follow price action in order to act on this theme. For GBP/USD, traders would likely want to wait for a top-side break of the wedge-like formation that’s been building, and this is the same ‘litmus’ level we looked at in our last article, around the prior price action swing at 1.3357. Should price action break above 1.3357, traders can then look to buy the ‘higher-low’ which may show in the zone around the price of 1.3250 (prior price action resistance as well as being a key psychological level).

GBP/USD Technical Analysis: Carney’s Lament

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: Fed Tempts Dollar Bulls To Bite

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

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Talking Points:

  • US Dollar Technical Strategy: USDOLLAR Fast Into Resistance
  • It’s a Mean Reverting World
  • Solid August ADP Reports Sets Stage For Dollar-Boosting NFP

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All eyes were on the US Dollar and Janet Yellen into Jackson Hole. Few were prepared for Stanley Fischer to steal the stage and warn markets about the possibility of two FOMC rate hikes if data held up into upcoming meetings. Since Jackson Hole, Home Prices data per Case-Shiller’s Index showed house values continued to rise, ADP private payrolls beat expectations, which paved the way for a solid NFP that Fischer also noted would be watched to see if the Fed is closer to reaching their full employment goal.

Other data points like consumer confidence increased in impressive fashion in August showing the consumer is likely to keep spending and keep the economic data humming along.

“The work of the central bank is never done. Moreover, I do not think you can say ‘one and done’ and that is it. We can choose the pace on the basis of data that are coming in.” That came from Stanley Fischer on the Fed’s possible policy path in an interview with Bloomberg. Now, the data seems to be so good that a 2016 hike is getting baked into the price, and if another hike becomes a topic of market talk, the US Dollar could start pushing into levels not seen since January.

The risk worth keeping an eye on is if the data continues to improve, but the Fed fails to act by lifting the rate. We have seen the Federal Reserve talk up potential rate hikes before only to point at data many didn’t consider because it did not directly affect the US Economy. That has caused the USD to fall in the past. However, if the Fed moves forward, there may be no turning back of USD strength into year-end.

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

D1 USDOLLAR Index Chart / Sharp Reversal From Nine-Week Lows

US DOLLAR Technical Analysis: Fed Tempts Dollar Bulls To Bite

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The move that emerged after Stanley Fischer told the market to be on the watch for two hikes if August NFP shows further progress toward goals of full employment (NFP est. 180k) have caused USD bears to run.

Now, traders are caught in a new world where discussions of Monetary Policy divergence could lead to a strong US Dollar against other currencies like the Canadian Dollar, Japanese Yen, and other EM currencies.

Either way, the US Dollar index is sitting in at the first key resistance level mentioned in recent posts at 12,000. A break above here, which is expected on anticipated rate hikes if NFP beats consensus on Friday would be 12,114.

US DOLLAR Technical Analysis: Fed Tempts Dollar Bulls To Bite

The rather busy chart above also shows that US dollar is pushing up against downward sloping resistance. If we’re able to break above this channel, we could be well on our way to a Dollar Breakout reminiscent of H2 2014 that wreaked havoc on Emerging Markets and shocked commodity markets due to the stronger US Dollar.

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Strong/Weak View of G8 FX for Wednesday, August 31, 2016: Dollar Surprise

In less than one week, the US Dollar has gone from the weakest currency in G8 to the second strongest currency in G8 behind the New Zealand Dollar. A robust NFP on Friday would likely thrust the Dollar into the top slot.

US DOLLAR Technical Analysis: Fed Tempts Dollar Bulls To Bite

Shorter-Term US Dollar Technical Levels for Wednesday, August 31, 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: Fed Tempts Dollar Bulls To Bite

T.Y.

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USD/CHF Technical Analysis: One’s Trend is Another’s Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • USD/CHF Technical Strategy: Longer-term range, near-term up-trend after Friday’s USD-reversal
  • Swissy has put-in extremely bullish price action as rate hike bets have continued to increase around the Federal Reserve.
  • SSI - If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of next month for certain account holders. Click here for full details.

In our last article, we looked at the recent up-tick in price action in the Swissy with the question of whether we were seeing a bear-flag formation or a legitimate bullish reversal of near-term price action. And last Friday gave us our answer after USD/CHF rallied by more than 160 pips in the five hours after Janet Yellen’s speech at the Jackson Hole Economic Symposium. Chair Yellen and Vice Chairman Stanley Fischer successfully prodded markets towards higher-rate expectations, and this drove the U.S. Dollar higher as rate hike bets for the United States began to increase after months of driving lower.

The Swissy has seen considerable rip since that Friday morning batch of speeches, and price action has only continued in a bullish manner to send USD/CHF to a key area of resistance at .9834. This level was the August ‘swing-high’ in the pair while also being the 23.6% Fibonacci retracement of the May high/low in the pair.

On the chart below, we look at this recent near-parabolic movement in the Swissy as U.S. rate expectations have hustled higher.

USD/CHF Technical Analysis: One’s Trend is Another’s Range

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

While this extremely strong move could be attractive for continuation potential, traders would likely want to scroll back on the chart to see the ‘bigger picture’ range with the twice-tested Fibonacci resistance level at .9948; which is the 61.8% retracement of the 2010 high to the 2011 low in the pair. Since falling into this range in March of this year, much of Swissy’s price action has been confined to this 450-pip range.

This is relevant for two reasons: A) This could cap top-end profit targets for bullish approaches at a meager 100-110 pips, which, while still ‘workable,’ could make for a difficult situation if chasing a near-parabolic move that’s more than 50 pips away from price action support. And B) should this recent bout of USD-strength reverse, this could make for an attractive short-side swing trade within the range if resistance at .9834 holds, enabling traders to lodge stops above .9948 whilst looking for profit targets in the .9550-.9600 vicinity.

So, while this near-term trend has been strong to the up-side, the longer-term range may present more potential to traders, particularly those looking to fade this recent bout of USD-strength.

USD/CHF Technical Analysis: One’s Trend is Another’s Range

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: Three-Month Uptrend Broken

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Pending Short at 0.7597
  • Aussie Dollar breaks three-month trend support vs. US counterpart
  • Short entry order set, looking for improved risk/reward parameters

The Australian Dollar has broken rising trend line support guiding prices higher since late May against its US namesake, hinting the long-term down trend is resuming. The pair marked a top with the formation of a bearish Evening Star candlestick pattern below the 0.78 figure and found fuel for a breakdown in hawkish comments from Fed Chair Janet Yellen.

Near-term support is at 0.7496, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a challenge of the 50% level at 0.7415. Alternatively, a reversal above the 0.7597-0.7647 area (23.6% Fib, June 24 high) paves the way for a retest of the August 11 high at 0.7760

Prices are too close to near-term support to justify entering short at market from a risk/reward perspective. With that in mind, a short entry order has been established to sell the pair at 0.7597. If triggered, the position will initially target 0.7496 and carry a stop-loss activate on a daily close above 0.7647.

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AUD/USD Technical Analysis: Three-Month Uptrend Broken



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

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

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Talking Points:

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

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

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

Quick Fundamental Take:

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

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

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

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

Technical Focus:

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

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

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

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

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

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

Bottom Line:

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

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

Canadian Dollar Has Regained Favorper Sentiment

USD/CAD Speculative Sentiment Index as of Thursday, August 25, 2016

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

Combining the technical picture above, with the sentiment picture, and the Intermarket analysis, there continues to be evidence for a possible breakdown if USD/CAD can break below 1.2762.

The ratio of long to short positions in the USDCAD stands at 1.48 as 60% of traders are long. Yesterday the ratio was 1.52; 60% of open positions were long. Long positions are 0.6% higher than yesterday and 3.0% below levels seen last week. Short positions are 3.6% higher than yesterday and 18.0% above levels seen last week. Open interest is 1.8% higher than yesterday and 10.9% above its monthly average.

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

Key Levels as of Thursday, August 25, 2016

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

T.Y.

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NZD/USD Technical Analysis: Six-Week Trend Line Broken

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Flat
  • Kiwi Dollar breaks near-term trend support, hinting at bearish reversal
  • Risk./reward considerations argue against triggering short trade for now

The New Zealand Dollar broke rising trend support set from late July, hinting a downward trend reversal against its US counterpart may be in progress. Follow-through has been limited however, with sellers unable to produce meaningful momentum thus far.

Near-term support is at 0.7214, the 23.6% Fibonacci retracement, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 0.7111. Alternatively, a recovery above trend line support-turned-resistance at 0.7278 paves the way for a challenge of 0.7325, the July 12 high.

Prices are too close to immediate support to justify entering short from a risk/reward perspective. With that in mind, opting to remain on the sidelines appears prudent for the time being until the pair offers an actionable opportunity to establish exposure.

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

NZD/USD Technical Analysis: Six-Week Trend Line Broken



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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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



EUR/JPY Technical Analysis: Sticking to the Range

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Longer-term down-trend still intact, near-term range developed over the past three weeks.
  • EUR/JPY is still near longer-term support values after the out-sized move lower post-Brexit.
  • If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator. If you’re looking at opening a trading account, FXCM has a contest at the beginning of each month for certain account holders. Click here for full details.

In our last article, we looked at the down-trend in EUR/JPY being at a ‘decision point’ after price action had posed a vigorous bounce off of the prior swing-low. As we noted, the fact that this swing-low came-in higher than the prior swing-low highlighted the down-trend in EUR/JPY may be nearing a reversal as sellers were unable to drive the pair lower. Since then, we’ve seen back-and-forth price action as EUR/JPY has built-in to a fairly consistent range through the month of August (shown below).

EUR/JPY Technical Analysis: Sticking to the Range

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

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

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

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

EUR/JPY Technical Analysis: Sticking to the Range

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

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

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GBP/JPY Technical Analysis: Bullish Channel Runs to Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Threatening to pose fresh up-trend after 500+ pip run in past two weeks.
  • We may be nearing a reversal of prior macro themes of Sterling weakness and Yen strength, and this could continue to prod price action higher should this come to fruition.
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article, we looked at GBP/JPY trying to dig-out support near the Brexit-lows. And while it may have taken a little over a week that support finally showed up at a very familiar level around the 129.25 area; still well-above the ‘post-Brexit lows’ in GBP/JPY around 128.59.

Since that higher-low showed up in mid-August GBP/JPY has been on a rip-roaring run; rallying by more than 650 pips whilst staying in a relatively clean price action channel (shown below).

GBP/JPY Technical Analysis: Bullish Channel Runs to Resistance

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

Driving this run is what could potentially be a fairly brisk reversal of the macro themes driving each sub-market of GBP & JPY. While the Yen was previously strong after the Bank of Japan underwhelmed at their most recent meeting, we’re now seeing Yen weakness in anticipation of more stimulus from the BoJ. And while the British Pound was previously weak on the back of expected rate cuts in response to Brexit, now we’re beginning to see inflationary pressure brought upon by the ‘sharp re-pricing’ of the British Pound, and this is posing a potential reversal of those rate-cut bets. All of this to say, an up-trend in GBP/JPY could run for a while longer should these themes come to fruition.

At issue with near-term structure is a confluent zone of resistance that’s currently capping price gains in GBP/JPY. The up-ward sloping channel has run into a confluent zone of resistance around 135.48. This should behoove patience for those looking at top-side plays; and with that approach, traders can look to buy ‘higher-low’ support; or, wait for resistance to break at which point they can then look to buy ‘support at old resistance’ in the effort of catching that higher-low.

GBP/JPY Technical Analysis: Bullish Channel Runs to Resistance

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

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

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USD/CNH Technical Analysis: 6.7000 The Hurdle After Swing Higher

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

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Talking Points:

- USD/CNH surged to the 6.7 handle after 6.6500 held on a retest

- Clear break and a hold above 6.7 might be required for further bullish conviction

- A short term hold above 6.6860 might be indicative of a tentative breakout attempt

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The US Dollar is nudging lower versus the Chinese Yuan in offshore trade, after the pair surged to the 6.7 resistance level following the Yellen speech this past Friday.

Indeed, after the index held the 6.6500 level on a retest, is seemed likely that focus will shift to 6.6860 followed shortly by the 6.7 figure.

At this stage, the pair is having difficulties cracking the level, and further upside conviction might require a clear break and a hold above, potentially exposing the January high at 6.7584.

A higher hold than 6.6500 might suggest further attempts at a break down the line. This seems likely to shift focus to two potential intermediate support levels: 6.6860 and 6.6750.

If the pair manages to hold above one of those levels, further breakout attempts appear likely.

With that said, stronger conviction to the downside may target the 6.6500 level again, followed by the July lows at 6.6224.

USD/CNH Daily Chart: August 29, 2016

USD/CNH Technical Analysis: 6.7000 The Hurdle After Swing Higher

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

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

Follow him on Twitter at @OdedShimoni




CAC 40 Set to Close Week in Range

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

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Talking Points

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

CAC 40, Daily Chart

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

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

CAC 40 Set to Close Week in Range

(Created using Marketscope 2.0 Charts)

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WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

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

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Talking Points:

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

Dollar demand has increased dramatically since Friday afternoon where Federal Reserve Vice President Stanley Fischer encouraged markets to be on the watch for the upcoming Non-Farm Payroll announcement on September 2 that could play a role in whether the Fed hikes soon. The price and price trends of Oil, which is priced in USD is inversely correlated to the USD so recent USD strength over the last 72 hours has put pressure on the energy market.

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

There are still a handful of encouraging developments in the Oil market that could accelerate the price appreciation of Crude should the Fed fail to hike, or the US Data take another turn lower, and the US Dollar weakness continues.

Wood Mackenzie recently informed markets that Oil discoveries are at their lowest since 1947 per conventional oil discovered. There is still solid production due to technologies like shale, but this could be setting the stage for a supply shortage in years to come, though we must be patience. As the old saying goes, nothing cures low prices like low prices and the lack of spending due to Oil’s collapse has set the stage for E&P companies only to stay with the winning areas like the Permian Basin in the United States.

Another development that has been overshadowed by a very strong US Dollar is that Iraq threw their support behind an OPEC freeze. Iran looks to be supportive of a freeze, but there is still doubt as to whether a unanimous agreement can come together.

H4 Crude Oil Price Chart Moving Lower In Price Channel, Awaiting Strength Later

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

The chart above shows the price action in US Oil over the summer. For now, the price looks to be ranging from support of ~$40/bbl and resistance of ~$50/bbl. The price also looks to be trading in a corrective price channel since peaking on August 21. A break above corrective resistance at $48.43 would be enough to encourage technically based traders to rejoin the Bull trend.

Last note, we discussed how on a longer-term / weekly chart, a framework for a Bullish Head & Shoulder Pattern has looked set. A legitimate breakout would be validated by a break of the price of Crude Oil above $51.64/bbl. If the price broke out and sustained above the highlighted range near ~$50/bbl, we would favor a move to $66.16, which would be 61.8% extension of the Head & Shoulder’s range and $75.60/bbl, a 100% extension, and traditional Head & Shoulder’s target.

For now, the stronger US Dollar will likely provide better prices to buy (read: likely heading lower) with a support zone in focus between $~46-$44/bbl. Only a move below there and a stronger US Dollar would put our medium term Bullishness on the shelf.

The key support that would deflate the confidence of the 20%+ August trend would be a break below the higher low of $41.08/bbl from August 11. A breakdown below there could be the first confident sign that price will continue to wallow lower in the falling channel drawn on the chart.

Bottom Line:

The US Dollar is not going to allow the next big move in the price of US Oil to be higher without a fight. The price of Oil is now trading at two-week lows after a week of sideways price action due to the uncertainty of the OPEC outcome and Dollar direction post-Jackson Hole.

Given that the majority of rhetoric at Jackson Hole was net USD Bullish, the Oil market will need to see increasing demand in real figures that was projected by the IEA if there are any hopes for a sustained move to and through $50/bbl.

Contrarian System Losing Favor of Upside Risk as of 8/30/16

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

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

As of mid-day Friday, The ratio of long to short positions in the USOil stands at -1.14, as 47% of traders are long. Yesterday the ratio was -1.32; 43% of open positions were long. Long positions are 14.6% higher than yesterday and 64.2% above levels seen last week. Short positions are 1.4% lower than yesterday and 4.1% below levels seen last week. Open interest is 5.5% higher than yesterday and 30.0% below its monthly average.

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

Key Levels Over the Next 48-hrs of Trading As of Tuesday, August 30, 2016

WTI Crude Oil Price Forecast: Two Week Lows On Dollar’s Strength

T.Y.

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Gold Prices Sink to Deeper Support, is More Pain to Follow?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • Gold Technical Strategy: Longer-term up-trend still alive, near-term bearish on Strong USD/higher U.S. rate expectations.
  • Gold prices are continuing to face pressure as rate hike bets further firm the Dollar.
  • 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 uptrend in Gold prices after having just moved down to support. But as we warned, with the Jackson Hole Economic Symposium later in the week and after numerous Fed members had already come-out to talk up higher rates, Gold prices could face further pressure as rate hike bets for the United States continued to increase.

And since Friday’s outlay of Federal Reserve dialog, USD strength has been all the vogue as markets have been pricing-in a higher probability of a rate hike from the Fed in the coming months. But this isn’t the first time that this has happened is it? Even this year, we’ve seen a very similar scenario play-out in April/May after the Federal Reserve a) posed a less dovish statement at their non-press conference rate decision and b) saw a continuation of hawkish dialog after the meeting as multilpe Fed members talked up higher rates. Gold prices have swung along with these rate expectations; with more than $100 coming off in the month, bouncing off of a key support level at $1,200 before ascending to fresh 2-year highs.

With USD-strength showing prospects of continuation, Gold prices may be in for a deeper retracement before bullish positions become attractive again. In our last article, we outlined three different support zones to watch for price action to move towards. These support levels integrate a Fibonacci retracement that can be found by charting the major move from the swing-low of $1,250.11 to the high of $1,375.04. The 50% retracement of this move at $1,312.57 had provided prior support in the month of July, and now price action is in the process of sliding below this level.

This highlights deeper support levels for potential top-side reentries should this current bout of USD-strength continue. At the level of $1,297.59 we have the 61.8% retracement of that same major move, and with the psychological level at $1,300, this could produce a ‘zone’ of support for traders to watch. And just below that, we have another confluent zone of support with two different Fibonacci levels around the ~$1,280 area.

Gold Prices Sink to Deeper Support, is More Pain to Follow?

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

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

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Silver Prices: Price Action Contracting, Follow the Break

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

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What’s inside:

  • Silver near-term trend remains pointed lower despite long-term support
  • Triangle developing within descending channel
  • Waiting for a break of the pattern before taking action

In yesterday’s commentary, we noted the conflict between long-term support at hand and the short-term trend which suggested a further drop in silver prices before possibly finding a bottom. Not a lot has changed since yesterday other than the potential for a triangle formation within the downward channel developing on the intra-day time-frame.

A break of a nicely developed triangle would lead to either further downside channel-building by finding support on the lower parallel or a capitulation-style move of the decline dating back to the very beginning of the month.

The height of the triangle formation suggests about a 60 cent move once it breaks. Should it break to the downside, a decline of that size will push silver to the May swing high at 17.99.

Keep in mind, while the trend is lower and suggestive of a continuation lower out of the triangle, these patterns can break in either direction; triangles are simply contractions in volatility indicative of pending expansion. On that note, it is important to wait for the pattern to develop and break, first, before taking an entry.

If the pattern breaks against the trend, then the area between 19 and 19.20 will quickly come into focus as resistance to contend with. This will make for a more difficult trade in the short-run, but be consistent with the current long-term support zone silver is presently in.

For now, we will remain patient in waiting for an outcome to the contraction in price before taking a trade.

Silver 2-hr/Daily

Silver Prices: Price Action Contracting, Follow the Break

Slow late summer trading conditions make for an excellent time to hone one’s skillsets. Check out one of our many free trading guides designed to help traders of all experience levels.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be reached via email at probinson@fxcm.com with any questions or comments.




S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

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

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What’s inside:

  • Yellen sparks volatility on Friday
  • Double-top leads to support break
  • Will use old support as new resistance, other levels outlined

On Friday, the S&P 500 experienced outsized volatility as a result of Yellen’s speech at the Jackson Hole Symposium. The nearly 30 handle range for the day was the largest since the second trading day of the month.

The net result wasn’t significant as the market closed only a few handles away from where it began the day, but the price action in between certainly wasn’t boring, as it gave day-traders a crack at a few good fade-trades.

It was a welcomed spat of volatility, but don’t be surprised if that is all it was for now. The unofficial end to the summer season comes after the Labor Day holiday (next Monday). Heading up to and even the week of, trading volumes and volatility often times remain light without any major catalysts.

Friday, the monthly jobs report for August will be released, presenting another possible pocket of volatility, but until we move on past the summer doldrums we remain content in keeping our trading size low and trade selectivity high.

The double-top formation we have been discussing in recent commentary further developed on a break below the 2168/72 area. As said last week, given the current choppy market conditions, the preferred scenario was to see the S&P drop below the neckline and then retest before looking for another drop lower.

Support was indeed broken on Friday (support now turns into resistance) and as of this morning the market is trading back in the thick of it. As long as there is no sustained trade above 2172, we will look for the market to struggle to gain further traction and favor sellers. On a move lower, support comes in at Friday’s low at 2159, then the 8/2 low of 2147.

If the S&P moves back above the 2168/2172 support zone, we may be in for more two-way sloppy trade.

S&P 500: Yellen Sparks Volatility, Market Starts Week at Pivotal Area

The summer lull presents a good time to sharpen your skills before markets pick back up again. Get started today by checking out one of our free trading guides.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




DAX: Slowly Turning Higher, Line in the Sand Drawn

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

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What’s inside:

  • The DAX is slowly turning up from support
  • Higher prices anticipated, but…
  • Choppy trading could be the biggest risk to this view right now, not sellers

The DAX continues to slowly turn higher after last Monday’s test of old resistance turned support. The confluence of previous peaks from April through June and trend-line are proving to be rather significant, leaving traders with a fairly clean line in the sand. Hold above the 8/22 low at 10386 and the bias is bullish, close below and a further retracement or worse becomes the risk.

Continued trade higher from the late June low will bring the 8/15 swing high into play, then a December swing high near 10900 and upper parallel of the trend-line running higher off the Feb lows (~11000).

DAX Daily

DAX: Slowly Turning Higher, Line in the Sand Drawn

The biggest risk in the very near-term appears not to be sellers stepping in and bullying the market lower, but rather a lack of good movement as we work our way through the remainder of the dog days of summer. With that in mind, there is a good chance trading will be choppy. Keeping trade size small and very selective is a prudent approach until market participants file back in from late summer vacation time.

Find out what characteristics separate successful traders from the rest in our free trading guide, "Traits of Successful Traders".

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

He can be reached via email at probinson@fxcm.com with any questions or comments.




FTSE 100: Pivots at Support, Working on Bull-flag Breakout

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

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What’s inside:

  • The FTSE 100 was closed yesterday in observance of public holiday
  • Index turning higher from confluence of support
  • Attempting to trade higher out of bull-flag formation

Yesterday, the FTSE 100 was closed in observance of the ‘Late Summer Bank Holiday’. Nothing was missed by the traders in London, as global markets were quiet and trading volumes low. To start off the day, the FTSE is relatively quiet, currently trading near the unchanged line.

The UK index (UK100) is in the process of turning higher from the confluence of support we noted on Friday; the lower parallel extending back to early July along with the late July peak. Friday’s low could turn out to be the low pivot of another lower high within the ongoing sequence of higher highs and higher lows.

Additionally, in the absence of sellers, a bull-flag has been forming as the market gradually falls back into the intersecting levels of support. Overall, this is construed bullish until support and the pattern are broken.

A push above the top-side trend-line of the bull-flag formation will help pave the way for a move back to the 8/15 high at 6956. However, with the dog days of summer upon us, conviction is low in the notion we will see a powerful move develop, in either direction, as many market participants remain away from their desk.

FTSE (UK100) Daily

FTSE 100: Pivots at Support, Working on Bull-flag Breakout

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX.

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




ASX 200 Technical Analysis: Index Trading At a Crucial Support Area

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

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Talking Points:

- Index trading at potential support after a push to the downside

- Key for current levels to hold if bullish control is to remain

- A break below 5,380-5,400 could be interpreted as a bearish sign

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The ASX 200 is trading lower for the sixth consecutive day, after the index failed to hold above a support area around 5,500.

The Index was trading sideways since the beginning of the month, between the 5,500 support and the 5,600 resistance area, which meant that a break below 5,500 could see participants focus on the 5,380-5,400 zone for potential support.

Indeed, the index seems to have found a slight pause to the decline around May swing highs at 5,431.

At this stage, keen buyers might attempt to re-enter the market, which means that reversal signs at this general area may still imply that the downside move was corrective.

A break and hold below 5,380 could be interpreted as a bearish sign with buyers failing to regain control.

It’s important to note that volatility is still printing its lowest levels since September 2014 (based on a 20-day ATR study).

ASX 200 Daily Chart: August 31, 2016

ASX 200 Technical Analysis: Index Trading At a Crucial Support Area

--- 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: Index Approaching Key Resistance

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

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Talking Points:

- 16,500 held as support with a bullish short term technical sign

- Index now trading near potential resistance after four days of gains

- A break above 17,000 could prove key going forward

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The Nikkei 225 is trading higher for the fourth consecutive day, alongside declining Yen prices, after the index formed a bullish “Hammer” formation on the 16,500 support.

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

The move to the upside has seen the index trade to a resistance area below 17,000; a confluence resistance zone with the 17,000 handle, 200-day SMA and the last swing highs.

At this stage, a break and a hold above 17,000 seems key for further upside gains, potentially exposing the longer term range top.

If the index reverses from this zone, focus might shift to 16,500 again for support, anda break lower could put the spotlight on the 16,000 level.

Volatility continues to become even more subdued, with 20-day ATR volatility measures now indicating the lowest levels since late 2014.

Nikkei 225 Daily Chart (With USD/JPY overlay): August 31, 2016

Nikkei 225 Technical Analysis: Index Approaching Key Resistance

--- 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