Support & Resistance

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EUR/USD Technical Analysis: Euro Rallies Most in 2 Weeks

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro recoils sharply higher after from monthly low vs. US Dollar
  • Clear-cut signs of topping sought to re-establish short position

The Euro bounced sharply higher after falling to the weakest level in a month, posting the biggest daily gain in two weeks against the US Dollar. Still, overall chart positioning continues to suggest the path of least resistance favors continuation of the long-term down trend.

From here, a daily close above support-turned-resistance at 1.0682 opens the door for a test of the 38.2% Fibonacci retracement at 1.0828. Alternatively, reversal back below support at 1.0518 paves the way for another test of the late-2016 bottom at 1.0366.

A short position activated at 1.0623 hit is first profit target and partial profit was booked. The second half of the trade was stopped out at breakeven. From here, the absence of a clear-cut bearish reversal signal argues against fading recent gains, at least for now.

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EUR/USD Technical Analysis: Euro Rallies Most in 2 Weeks

USD/JPY Technical Analysis: An Intermarket and Technical Powderkeg

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

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Talking Points:

USD/JPY should have everything going for it right now as the US Equity market continues to push higher, and the Federal Reserve looks awfully close if not already at its dual-mandate target of ~2% inflation and full employment. However, USD/JPY is struggling near 114 and has recently been offered as UST 10Yr yields look a bit shaky and Gold remains on a Bullish course along with other commodities.

As a trader who looks around for clues on themes to trade and sees what could be around the corner, it can be almost as valuable to find what the market is not doing (i.e. buying USD) as it is doing when a certain backdrop appears.

Looking around at the broad market landscape, there could be a technical and Intermarket powderkeg developing that is worth watching and if a proverbial spark is lit, it could lead to a large amount of JPY strength. For now, the weak and unwanted USD is unlikely to stand in its way. Per Bloomberg, Short exposure for the ETF tracking the S&P 500 has historically high assets with an aggressive rise in bearish bets despite the 10% run-up post-election. This rise in Bearish bets could show anticipation that we’re about to see a risk-off move that would likely align with further JPY strength.

I mentioned in yesterday’s DXY piece that Janet Yellen’s comments on her suspicions about the current administration being able to pass through all of the fiscal policy and the possible harm that proposed and passed immigration reform could do to destabilize the labor market may be to blame.

However you want to look at it, Traders seem suspect that even if the Fed follows through with their anticipated three hikes in 2017 that the USD is worth bidding up. One reason could be is that all the positive assumptions are priced into the USD at this point, and we’re unlikely to get a further USD boost from already known monetary policy divergence. If that’s the case, we could soon see the surprises leaning more to the upside for JPY and EUR should their Yield Curve begin to steepen due to inflation pressures showing up.

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The chart below shows what looked to be an honest breakout on the swing charts, and there is still no proof that we’re definitively heading lower. The short ETF exposure, continued strength in Gold and persistently weak USD do not help the upside argument, but they do not seal the downside argument either. You can see that the price and momentum component of Ichimoku (green line) has recently broken above the cloud. This could mean that a deep correction was in the works, but it could also mean that a reversal or breakout is forming, and we should be on the watch for both.

A break above Wednesday’s high at 114.92 will likely be the entry point for many Bulls to enter long in the belief we’re resuming the 5-year uptrend and the stop loss point for many Bears who feel the 2017 trend of USD weakness is set to continue. Either way, I do not see a clear picture on the charts alone, and the background information that is USD Bullish isn’t appearing to encourage the bidders to come out and buy.

The persistent USD weakness in 2017, and the inability of USD to go bid on such an encouraging backdrop of economic news releases have been favoring a breakdown, which would appear more likely on a daily close below the 61.8% retracement of the February range of 111.594-114.924 at 112.866. Additionally, a break and close below the drawn Andrew’s Pitchfork would encourage the argument that we have not been able to hold a Bullish structure and would also encourage the 2017 trend continuation lower. A hold of this level and a subsequent break above 114.924 could show that the aligning forces of JPY strength may remain on the sideline for now.

When considering the background and the Technical Picture, it may be helpful to know that given the positive US data, a downturn would likely continue to push USD/JPY much lower as many positively correlated markets to USD/JPY are considerably elevated and a breakdown in those correlated markets may align with aggressive downside in USD/JPY toward 110 or lower.

H4 USD/JPY Chart: USD/JPY Breaks Above Counter-Trend Bearish Channel & H4 Ichimoku Cloud

USD/JPY Technical Analysis: An Intermarket and Technical Powderkeg

Chart Created by Tyler Yell, CMT

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Shorter-Term USD/JPY Technical Levels: February 16, 2017

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: An Intermarket and Technical Powderkeg

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GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/USD Technical Strategy: Intermediate-term mixed; Near-term mixed.
  • The big driver for the top-side cable move will likely be inflationary pressure, moving the BoE away from dovishness and, perhaps even to a hawkish move in the not-too-distant future. This appears less-relevant, for now, after the most recent BoE Super Thursday.
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In our last article, we looked at the move-lower in the British Pound after the Bank of England’s Super Thursday batch of announcements. And while the BoE added a healthy increase to their growth forecasts, they coupled this with a cut to inflation forecasts; which removed some of the bullish motivation that was previously-showing in the pair.

At this point, price action on the daily chart of Cable is looking rather direction-less with little to work with while prices hover around the 1.2500-psychological level.

GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Chart prepared by James Stanley

The fact that the U.S. Dollar has been rather strong for much of February while Cable has been congested could denote the fact that the British Pound has exhibited at least some strength during the month. But this also highlights an issue with the bullish side of the pair at the moment, and that’s one of drivers, or perhaps more accurately, a lack thereof.

What makes the prospect of top-side in Cable really attractive is the idea of rising inflationary after the ‘sharp repricing’ in the British Pound around Brexit and the ensuing dovish-campaign from the Bank of England. While this is all very logical, and has even begun to show, the BoE has appeared unmoved by the threat of rising inflation; indicated most recently when the bank actually downgraded inflation forecasts for 2017 while dramatically increasing their expectations for GDP-growth. And this doesn’t even include the prospect of short-USD exposure that would come-along with long GBP/USD exposure; as Dollar strength has begun to show prominently again throughout February.

So, while this theme, or at least the potential for this theme remains very much alive (given the fact that we’ve seen continued support while USD has been ripping-higher), it does not appear to be a hot-button at the moment and traders would likely want to wait for price action to denote bullish continuation potential before looking to press long-exposure. For such an approach, a top-side break of 1.2580 could open the door for such a theme.

GBP/USD Technical Analysis: Holding Ground, but Drivers Lacking

Chart prepared by James Stanley

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

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USD/CHF Technical Analysis: Bullish Channel, Parity for Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the breakdown of the prior up-trend in USD/CHF, as the robust bullish move in the second half of Q4, 2016 was facing continued retracement throughout the month of January. But as we advised, the bearish move was beginning to look a bit stale and stretched; and RSI divergence had already begun to show.

Since that article, we’ve seen a relatively smooth bullish trend channel appear as buyers have been able to push prices-higher by ~265 pips off of the lows, highlighted on the hourly chart below:

USD/CHF Technical Analysis: Bullish Channel, Parity for Support

Chart prepared by James Stanley

The big point of contention in USD/CHF at the moment appears to rest with more broad-based U.S. Dollar themes. After the Greenback saw a near-historic run in the second half of Q4, 2016, the first month of 2017 saw an outsized retracement (which led to that stretched, bearish state we discussed in our last article). But with strength again showing in the Dollar in February, the prospect of bullish continuation can remain attractive in USD/CHF.

For top-side approaches, the level of parity is particularly interesting. This is a major psychological level that’s exhibited quite a bit of support and resistance action as USD/CHF has traded around this zone in the recent past. For those looking to gain bullish exposure, this can be a usable level in a couple of different ways. For more aggressive approaches, traders can look at lodging stops below this level with more near-term iterations of support, perhaps around the 1.0038 level. For those looking to exercise a bit more prudence or patience, waiting for support to show up around parity can open the door for top-side approaches with stops lodged below the .9900 zone of potential support.

USD/CHF Technical Analysis: Bullish Channel, Parity for Support

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Topping Below 0.78 Figure?

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Aussie Dollar breaks range top, rises to 3-month high vs. US counterpart
  • RSI divergence hints at downturn but actionable confirmation still absent

The Australian Dollarvaulted to a three-month high after a languishing in a choppy range the against its US counterpartfor nearly two weeks. Negative RSI divergence warns of ebbing upside momentum and hints a turn downward may be brewing ahead.

A daily close below the 14.6% Fibonacci expansion at 0.7685 opens the door for a retest of the February 7 low at 0.7606. Alternatively, a push above the 0.7733-60 area (23.6% Fib, double top) sees the next upside barrier at 0.7811, the 38.2% expansion.

RSI divergence is not sufficient as a standalone reversal signal and calls for confirmation with a more tangible sign of topping. With that in mind, monitoring from the sidelines rather than taking up a short position seems most prudent for the time being.

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AUD/USD Technical Analysis: Topping Below 0.78 Figure?

USD/CAD Technical Analysis: Resuming Test of Resistance

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

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Talking Points:

USD/CAD continues to trade in a falling channel amidst the swirling geopolitical risks surrounding the pair. On first glance, it appears that Canada could have a positive relationship under President Trump’s renegotiated trade plans, but firm details remain lacking. Either way, the Canadian Dollar trend, which is matched with the strong move higher in the commodity bloc brethren, Australian Dollar seem to be on a path of strength.

The commodities that back the Australian Dollar like precious metals and industrial metals like Iron Ore & Copper have been a bigger factor and contributor to the positive commodity story of 2017 than has the energy market that Canada relies upon. The large positive for the energy market has been the OPEC compliance as well as the stability in the price of Crude Oil above $50. Should the Oil market soon see a breakout, we could be on our way to a few weeks or months of defined Canadian Dollar strength in much the same way we’ve seen the Australian Dollar strengthen, which took over the top spot from the New Zealand dollar.

On Tuesday, Janet Yellen spoke to US Congress and did not mince words. The most memorable line was that it would be “unwise” for the Fed to wait too long before raising rates again. Upon this statement, we saw a strong move higher in the USD along with a move higher in US Treasury yields, which are positively correlated to the US Dollar. We will look to see if this move can gain traction, and if it can, it may put further pressure on the bearish structure of USD/CAD that we’ve been watching lately.

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The technical structure is quite clear in that we’re in a bearish channel as shown per the Andrew’s Pitchfork and H4 Ichimoku Cloud. There is a clear resistance that we’re watching with the recent lower high, an inability to break above this level would simply communicate that the USD per the DXY is in a period of consolidation and not so much on the way to a strong recovery.

There remains a focus on what could happen to the bond market in the US and the potential for US yields to move higher. However, we continue to see from many accounts of Treasury & Corporate Bond Auctions that demand for the bond market could keep a lid on US Yields, which have been positively correlated with the direction of the US Dollar. It remains important to remember Rule #1 in correlation analysis is the correlation does not mean causation.

The simplicity of the Technical framework, despite the advanced technical tools of Ichimoku & Andrew's pitchfork being applied, is that it helps us to see the road the USD/CAD is currently traveling down and when the path may change. The two black lines within the channel help to show that we are within a rather defined downtrend, and only a move to the upper red line would align with a break above the Ichimoku cloud on the H4 chart and bring about a strong possibility of a breakout.

A move to the lower red line of Andrew’sPitchfork would help indicate a strong continuation of the downtrend that looks to have begun in early 2017. I’ll continue to favor eventual downside despite the time being consumed in seeing a breakdown.

The market does not appear to show a breadth of volatility, which does not mean that a trend is above, but rather that the time it takes the trend to reach its destination is longer than at first anticipated. The line in the sand for the bearish technical picture where we would flip from a bearish bias to a neutral bias would be on a break above 1.3212, the February 7 high. Until then, I’ll favor further downside despite the time consumed to move lower in the pair.

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H4 USD/CAD Chart: Trading Well In a Falling Channel. Back To Channel Resistance

USD/CAD Technical Analysis: Resuming Test of Resistance

Chart Created by Tyler Yell, CMT

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Key Short-Term Levels as of Tuesday, February 14, 2017

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/CAD Technical Analysis: Resuming Test of Resistance

T.Y.


NZD/USD Technical Analysis: Downward Bias Favored

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Short at 0.7207
  • Kiwi Dollar rebounds after dropping to one-month low vs USD
  • Overall positioning continues to argue in favor of a downside bias

The New Zealand Dollar paused to digest losses after hitting a monthly low against its US counterpart but chart positioning continues to favor a bearish outlook. Prices topped as expected after retesting trend line support-turned-resistance set from January 2016.

Near-term support is at 0.7138, the 38.2% Fibonacci expansion, with daily close below that clearing a path to challenge the 50% level at 0.7064. Alternatively, a push back above the 0.7229-39 area (23.6% Fib, December 14 high) opens the door for a retest of the 0.7376-0.7403 zone (November 8, February 7 highs).

A short trade taken at 0.7205 hit its first objective and partial profit was booked. A subsequent rebound stopped out the second half of the position at breakeven. Risk/reward parameters look acceptable anew and a fresh short has been activated at 0.7207, targeting 0.7138. Half of exposure will be booked on hitting the first objective. A stop-loss will trigger on a daily close above 0.7239.

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NZD/USD Technical Analysis: Downward Bias Favored

EUR/GBP Technical Analysis: Aiming Below 0.84 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Short at 0.8462
  • Euro breaks range floor, drops to 6-week low vs. Pound
  • Sellers now aiming to test the water below 0.84 figure

The Euro managed to break below January’s swing bottom against the British Pound, hinting that sellers are preparing to test the water below the 0.84 figure. In broader terms, the breakdown suggests that the down trend initially launched in early October 2016 may be resuming after a two-week pause.

From here, a daily close below support in the 0.8334-70 area (September 6 low, 50% Fibonacci expansion) opens the door for a challenge of the 61.8% level at 0.8256. Alternatively, a reversal back above the 38.2% Fib at 0.8484 paves the way for a retest of the 0.8624-43 zone (23.6% expansion, February 6 high).

Risk/reward considerations appear acceptable and a short position has been activated at 0.8462, initially targeting 0.8370. A stop-loss will be activated on a daily close above 0.8506. Profit on half of the position will be taken and the stop moved to breakeven upon hitting the first objective.

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EUR/GBP Technical Analysis: Aiming Below 0.84 Figure

EUR/JPY Technical Analysis: Resisting at Old Support

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the continued range-bound price action in EUR/JPY with eyes on the vaulted psychological level at ¥120.00. But as we had written, until the longer-term zone of support between 118.50-119.00 was traded through, traders would likely want to avoid getting too bearish on the pair, with the potential for top-side range entries using that 120-level zone as support.

And after a quick breach of ¥120.00 last week, with one daily close below this zone, price action has run-higher, giving the appearance that the bullish side of the range may be trying to come back into the market.

But more recently, we’ve seen sellers showing quite a bit of response at the 121-handle; which was a prior support level. And this, coupled with the fact that we’ve had a recent lower-low, gives the appearance that this range may be nearing a down-side break. This should give pause to bullish approaches until more confirmation is had, perhaps using the confluent zone of potential resistance around 121.65 as an initiator for bullish-continuation.

On the bearish side of the pair, there could be an aggressive short-term setup to be worked with utilizing that zone of potential resistance. Stops above this level could account for ~70 pips of risk, and an initial target cast towards that zone of support around 120.20 could allow for ~80 pips of potential upside to the initial target.

EUR/JPY Technical Analysis: Resisting at Old Support

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Persistent Resistance

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Intermediate-term: Mixed, near-term bullish.
  • GBP/JPY is showing signs of congestion, which can be dangerous for such a pair as that congestion can lead to out-sized and, at times, chaotic moves.
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In our last article, we looked at the prior up-trend in GBP/JPY as price action exhibited signs of congestion by building into a longer-term symmetrical wedge pattern. But given the veracity of the prior up-trend, also combined with the fact that the bearish retracement in GBP/JPY caught support off of the 50% retracement of that prior bullish move, and the prospect for continued bullishness was very much alive.

Since then, we’ve seen a bit more congestion after a down-side break found support on a projected trend-line that had previously functioned as resistance. Buyers returned shortly thereafter, running prices higher by more than 400 pips since that support-check came in a little over a week ago.

GBP/JPY Technical Analysis: Persistent Resistance

Chart prepared by James Stanley

While GBP/JPY still carries potential for bullish-continuation, traders would likely want to await a bit of additional confirmation before looking to chase this theme-higher. For traders looking to add long exposure, awaiting a break of this zone of resistance between ¥142.45-¥142.88 could make the prospect of bullish continuation a bit more attractive. Should this take place, traders can then re-assign this zone of old resistance as support in the effort of top-side, bullish entries.

GBP/JPY Technical Analysis: Persistent Resistance

Chart prepared by James Stanley

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

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USD/CNH Technical Analysis: 6.8 in Sight Ahead of US 3Q GDP


Talking Points:

- Pair keeps pushing higher after breaking resistance at the January 7 top around 6.7584

- 6.8 handle now within touching distance as we approach US 3Q GDP numbers

- Pullback to support might initiate further buying

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The US Dollar keeps printing fresh record highs versus the Chinese Yuan in offshore trade, as the pair now sits within touching distance from what might prove to be an important resistance level at the 6.8 handle.

The pair surged higher after breaking resistance around the 6.7 handle followed by the 2016 January high around 6.7584.

Indeed, momentum still looks strong as we head into today’s key US 3Q GDP numbers, which could prove influential for the pair’s direction in the near term.

As it were, price is now sitting in close proximity to the 6.8 handle, and a break higher seems an important milestone for further gains.

If the pair reverses course, downside moves might still be interpreted as corrective as long as buyers can keep price above the 6.7 level.

The next major resistance levels seem to be the 6.8 handle, and 6.8500 while potential levels of support could be 6.7584 followed by the area below 6.7400 and the 6.7 handle.

USD/CNH Daily Chart: October 28, 2016

USD/CNH Technical Analysis: 6.8 in Sight Ahead of US 3Q GDP

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

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CAC 40 Turns From Yearly Highs

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

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Talking Points:

CAC 40 is trading down for Wednesdays session (-.42%), as European shares sell off ahead of the release of January’s ECB meeting minutes. Individual winners for the CAC 40 includes Cap Gemini (+2.66%) and Nokia (+0.96%). Losers include Schneider Electric (-4.41%) and Group Danone (-2.30%).

Technically the CAC 40 is turning lower after putting in a modestly higher high at 4,943.80 for the 2017 trading year. While the Index remains significantly above its 10 day EMA (Exponential moving average), todays rejection in price suggests that the CAC 40 may be putting in a technical double top. In the event of a market turn, traders should look for the Index to re-approach the displayed EMA found at 4,868.48 In the event that prices resume trending upward, traders should first look for prices to bounce near values of intraday support.

CAC 40, Daily Chart with Averages

CAC 40 Turns From Yearly Highs

(Created Using IG Charts)

Intraday market analysis has the CAC 40 trading below the first point of support found at 4,912.30. This move exposes a bearish breakout towards today’s S2 pivot at 4,887.00. A move below this value should be seen as significant as this would place the CAC 40 just above the previously mentioned 10 day EMA. In this scenario, traders may continue to look for prices to decline and challenge weekly lows near 4,834.30.

Alternatively, in the event that the CAC 40 finds support intraday, traders should first look for a move above today’s central pivot at 4,927.86. A move of this nature would put the CAC 40 back on track to test the standing 2017 high at 4,943.80. It should be noted here that the R1 pivot for the session is found at 4,953.27. If the Index reaches this point, it would suggest a resumption of bullish momentum in the short term and invalidate any developing topping pattern.

CAC 40, 30 Minute Chart with Intraday Pivots

CAC 40 Turns From Yearly Highs

(Created Using IG Charts

--- Written by Walker, Analyst for DailyFX.com

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Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

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Talking Points:

Crude Oil has been absent of any decent volatility, but that doesn’t stop the fact that the background picture developing could still be favoring a strong rise before the end of Q1 2017. We have had two back-to-back weeks of massive US Inventory builds out of Cushing OK, but the price of Crude Oil remains above our key support zone highlighted as a yellow rectangle on the chart below in the $50/52 price range.

The background behind what is happening in Crude is much more encouraging than what you see currently on the Crude Chart. The price of other industrial commodities like Copper and Iron Ore has led the view of the Reflation Trade, which shows that growth and possibly inflations expectations are on the rise, which could boost Oil.

The price of Copper recently broke above the early November high, when many Commodities, namely Gold turned tail and eventually dropped in H2 2016 by nearly 16%. The move higher in other commodities alongside the price stability in Crude Oil could be indicative that there is amarket belief that the cuts that OPEC is currently adhering to are doing long term good to the stability of the Oil market. While we do not forecast a $100/bl of oil, the technical picture and Intermarketanalysis do seem to show that a move to the lower $60/bbl range is believed to be very feasible.

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We still need to see a breakout above the current triangulation pattern or sideways consolidation that has been taking place since we rang in the New Year. The price level that we continue to watch is a corrective lower high, and likely a Triangle ‘B’ wave near $54.30. A break above this level would show that a strong price move could be underway as we’ve seen in other commodities and could be even more pronounced if the recent break higher in the USD on Janet Yellen comments fails to holdrecent support.

A break below the $50/52 zone would cause me to reconsider the Bullish view. However, consolidation continues to favor eventual continuation of a trend, which has been higher since the handle of the Pitchfork in August 2016.

When a market fails to drop in light of seemingly Bearish news like massive US inventories, it could be the fuel is spilled and the bullish move is just waiting for the right spark, which could cause the price to move higher with volatility not yet seen in 2017. That would be a common play out of a triangle pattern, which tends to drain the enthusiasm of the prior move by consuming time in the consolidation pattern before eventually advancing the trend.

Bottom line, while the price is wallowing in the low-volatility environment, keep alerts on a daily close above $54.30 or below $50/ bbl. Either break could be indicative of the next big move in Oil with a decent bit of long-waiting volatility to add.

D1 Crude Oil Price Chart: Crude Oil Volatility Is Subdued, Price Bounce From Support Favors Upside

Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

Chart Created by Tyler Yell, CMT Courtesy of TradingView

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Key Levels Over the Next 48-hrs of Trading as of Wednesday, February 15, 2017

Crude Oil Price Forecast: Technical Picture Favors The Patient Bulls

T.Y.

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Gold Prices Are Testing Support: Is Breakdown Imminent?

Price Action, Swing & Short Term Trade Setups

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In our last article, we looked at the continued run-higher in Gold prices that started around the Federal Reserve’s December rate hike and had run all the way-in to the beginning of February. And while this was a significant move that brought in more than $100 of gains to Gold prices over a month-and-a-half, this was still relatively minor in consideration of the previous bearish trend that began on the night of the elections and drove Gold prices lower by more than $210.

But since the beginning of February, strength in the U.S. Dollar has begun to show again, highlighted with yesterday’s Humphrey-Hawkins testimony from Fed Chair Janet Yellen, in which she commented that it’d be better to raise rates sooner rather than later. This helped to expedite some additional strength into the Greenback, and Gold prices have been tipping deeper into support as this strength has started to show more prominently.

At this stage, Gold prices are in an interesting zone of support from $1,215.17-$1,219.02, with $1,219.02 functioning as the 38.2% retracement of July-December bearish move. Also of interest for this zone is the two separate iterations of resistance that it offered to the top-side move in January, first on January 17th and then again on January 22/23. The 50% retracement of that same July-December move is at $1,248.83, and given the fact that bulls were unable to overtake this level, the long-term setup in Gold prices could still be classified as bearish, with January being but a retracement of the bearish trend.

Gold Prices Are Testing Support: Is Breakdown Imminent?

Chart prepared by James Stanley

For timing the bearish trend: Traders will likely want to await a break of this support zone to indicate that the bigger-picture bearish move may be on the way back. Given that this current zone of support functioned as resistance on two separate occasions, this could be a novel area for bulls to re-load; and while many currency pairs are driving down to fresh lows to account for this recent rush of Dollar strength, Gold prices are still catching support, and, at the very least this is deductively ‘not bearish’.

So, while a bigger-picture breakdown isn’t yet imminent in Gold prices, the prospect for continuation is there, particularly if the theme of U.S. Dollar strength continues in the coming weeks which will likely usher in a break of this support zone, at which point traders can look to sell ‘lower-high’ resistance in the vicinity of prior support.

Gold Prices Are Testing Support: Is Breakdown Imminent?

Chart prepared by James Stanley

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

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Silver Price: Steady Advance Keeps Bullish Outlook Intact

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

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What’s inside:

  • Silver continues to head higher from inverse H&S formation
  • Riding higher within parallels
  • 18.50-ish next area in focus with further strength

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The other day when we looked at silver it was trading right around the 200-day MA; a form of resistance we viewed as minor when considering the broader forces at work following the breakout from the two-month-long inverse head-and-shoulders pattern.

The US dollar is helping (now), but not sure how much it matters at the moment. Just a couple of days ago the two-week correlation between the dollar and silver stood at a positive 78%. Fancy that. The two can move together. This is why watching correlations out of the corner of your eye is a good thing, and not getting overly caught up in them; especially in the short-term.

Silver is riding higher along an upper parallel just above the 200-day. The upward sloping level of resistance shouldn’t be much of a factor if we are to see the eventual target at 19; this is not only the November peak, but also the measured move target based on the depth of the H&S formation. The concern is the area around 18.50, as we’ve discussed before, where lies the biggest threat to stopping the advance prior to reaching the target. The low from August and several daily closes in November have made 18.50-ish important.

Short-term, there is a parallel to the top-side line which is helping keep silver moving ‘neatly’ higher. A break below there and an undercut of the most recent swing low on 2/15 at 17.73 would bring the short-term picture into question. But overall, it would require an aggressive reversal lower to hit pause on the broader advance.

Silver: Daily

Silver Price: Steady Advance Keeps Bullish Outlook Intact

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---Written by Paul Robinson, Market Analyst

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Dollar Technical Analysis: YTD Highs In 2-Yr Yields Fail To Lift DXY

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Talking Points:

-Dollar Technical Strategy: rebound after six-weeks of new lows may be running out of steam

-Previous Post: Dollar Technical Analysis: You Should Watch This DXY Bounce

-Broader trend still higher, but doubts mount as bullish fundamentals don’t push price up

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

The US Dollar appeared to have everything going for it on Wednesday, but you would not know that by looking at the price. The Consumer Price Index surpassed economist’s expectations, which pushed higher the probability of the next rate hike in March to 42% as of Wednesday afternoon. Janet Yellen, in her testimony to Congress also continued her tone from Tuesday that appeared more hawkish than recent testimonies to Congress, but none of this was able to keep the DXY bid.

The trend in positive economic news developments in the UShasbeen visualized in the Citi Economic Surprise Index for the USD. Citi’s Surprise Index places a value on actual news releases relative to economists expectations, and the move higher from -20 in October to currently over +40. The rise in this index helps to visualize why the fall in Treasuries as investors and traders prepare for higher yields due to Federal Reserve action of raising interest rates. On Wednesday, the 2yr Treasury Yield traded at 2017 highs as the on the run issues were sold off. Since the election in November, there has been a strong positive correlation between the USD and the US 2YR Yield, but that may be breaking down.

It’s too early to tell, but it should be noted that it is possible the the USD has simply been unable to keep up with all the expectations placed on it following the election. Even Janet Yellen has voiced a concern or doubts about the ability of all the fiscal programs promised by President Trump to be enacted as well as voiced concern over proposed and some passed immigration policies could have on destabilizing the “full” employment market.

Despite this week's positive developments, the DXY failed to hold the bid that many likely anticipated. In our last technical note on the DXY, we noted that the recent bounce was important to watch, and the bounce itself should not be surprising. The bounce is important to watch because it happened at a confluence of support but should not have been surprising because after six straight weeks of new lows starting in late December, a bounce, even a tepid one is expected.

Looking at the chart below, the most important component is that the overall trend since mid-2016 is higher and the bias should overall be given to the Bullish view. In other words, the burden of proof still rests largely on the shoulder of the Bears despite the USD being the weakest G8 currency over recent weeks.

Regarding the potential for Bearish continuation of the 2017 trend, you should also note that we look to be making lower highs on the RSI(5) on the Daily Chart, which could show that we’re continuing to get less momentum behind the Bullish moves that could open up the view that we’re about to see a breakdown. If we break below the February low of 99.23, it’s fair to say that a larger breakdown is upon us.

What will likely be a painful new experience to many is that the breakdown (should it develop) could take place among a hawkish Fed or an environment of rising interest rates. The markets are a world built upon expectations, and it could be that the expectations became too much for the USD to live up to. We’ll have to wait for the next big move to build a firmer bias on this view.

For now, we’ll watch the three key zones of resistance. The main forms of resistance, for now, are the Fibonacci zone that comprises the 61.8-38.2% retracement of the 2017 range that occupies 102.07-100.99. We’re currently trading in that zone now, and a break above this zone could show that the broadertrend is soon to resume. A hold of resistance here along with the other forms of resistance, which are comprised of the Median Line of the rising pitchfork (LT Bullish) and the Daily Ichimoku Cloud followed by a break below the 99.23 February low would turn the focus definitively lower.

You may find it helpful to remember that the Median Dot Plot forecast at the December FOMC for the Fed to hike in 2017 was three hikes, anything that falls short of that and that sheds doubt on the potential inflation-inducing policies of President Trump could weight on the USD. In addition to the inability of the USD to support the momentum that it rode into 2017 on is the relative strength that is appearing from Europe & Japan.

There are major elections coming up in Europe that could have long-lasting political ramifications, but if the European yield curve continues to steepen as it has lately, there could be evidence that the future inflation in Europe that many thoughts had no chance of showing up is arriving.

These themes are not tradable yet, but should be watched as there are a multitude of ramifications here, least of which would be ECB tapering that could lift EUR. However distant, these possibility aligning with DXY price action should be watched.

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Dollar Technical Analysis: YTD Highs In 2-Yr Yields Fail To Lift DXY

Chart created by Tyler Yell, CMT

---

Shorter-Term DXY Technical Levels for Wednesday, February 15, 2017

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.

Dollar Technical Analysis: YTD Highs In 2-Yr Yields Fail To Lift DXY

T.Y.


S&P 500: ’Blow-off’ Phase in Progress

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

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What’s inside:

  • U.S. markets in ‘blow-off’ stage
  • No interest in getting blown away short, but buying here looks risky
  • Levels under consideration

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To start the week, the S&P 500 was testing the bottom-side of a trend-line running back to the Feb lows from last year; that line in a hurry become ‘right here’ to ‘down there’. The recent advance after a painful chop through much of December and January is looking a lot like a ‘blow-off’ top in progress. We’re not quite in a parabolic state, but it wouldn’t take much more of a rally to put it there. With that said, it’s hard to say when we will see a meaningful, trade-able top, but it’s possibly on its way to a theatre near you soon. The time-frame of a ‘blow-off’ isn’t isolated to one; there are short-term exhaustions, then macro. For now, we are mostly concerning ourselves with the short-term.

Being a ‘Tommy Top Picker’ isn’t fun and often times expensive, so we’ll wait for momentum to turn on the longs before digging in from the short-side. Buying at this juncture holds poor risk/reward, unless you are buying intra-day dips – which have been fruitful with their very shallow occurrences.

Looking upward, where could the market stall? Perhaps the under-side of the November trend-line around the 2060ish mark and climbing. But, again, these market melt-ups can be vicious, and until we see good price action indicating this move has run its full course we have no interest in being a hero here. On any decline from here we will look to the Feb ’16 trend-line as the first area of potential support, currently around 2328 and climbing.

S&P 500: Daily

S&P 500: ‘Blow-off’ Phase in Progress

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---Written by Paul Robinson, Market Analyst

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DAX Short-term Trading Outlook

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

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What’s inside:

  • DAX stalls, looks headed lower near-term on break of support
  • Decline still healthy unless we see aggressive downside price action, bias will change then
  • Technical levels outlined

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The title of Wednesday’s post was, “DAX Gearing Up for New Highs”. Not so fast. The market since that morning has been ‘soft-ish’, but nothing to get overly concerned with just yet. The short-term chart (hourly) suggests more downside could come if the market can’t soon bounce, but there is trend-line support not far below on the daily should sellers arrive.

A head-and-shoulder-ish pattern, or possibly a descending wedge could come into play real soon. The H&S formation has a weak right shoulder; the symmetry isn’t the best but still qualifies in our book as a valid formation. A clean break below 11725 exposes the downside regardless of what you want to call the configuration – H&S, wedge, or any other name you want to give it. We will look to the trend-line rising up from December and gap-fill from 2/13 at 11665 as the next levels of support on a break. However, if support holds and we see a pop higher, then bearish bets are off and we'll have to start looking upward.

An aggressive break lower and undercut of the trend-line extending back to early December would be of concern for wagers from the long-side looking out beyond the very short-term. For now, though, global risk appetite continues to remain buoyed, and until we see aggressive price action lower we will run with the notion of weakness being nothing more than a healthy pullback for what could later be the DAX gearing up for new highs.

DAX: Hourly

DAX Short-term Trading Outlook

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---Written by Paul Robinson, Market Analyst

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ASX 200 Technical Analysis: January Peak Back in View

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The ASX 200 loitered worryingly under January 9’s 19-month peak for nearly three weeks
  • Now the bulls have girded themselves for another crack at it, and they are getting close
  • What will happen if they get there will be key

For a while there Australia’s ASX 200 equity benchmark looked like an index in need of new direction.

Sure, it joined in the New Year optimists’ equity rally with a will. The ASX enjoyed a buying boost which took it up to 19-month highs on January 9. But that was more than 20 trading days ago. The index hasn’t slipped very far since, but it hadn’t shown much appetite to revisit those highs either.

Things changed five days back. Since then, Wall Street’s record-breaking vigor has helped the ASX chalk up five straight days of gains. That’s a line of green we haven’t seen for the Aussie index since its climb to that January peak of 5829.7.

Will it have the stomach to assault that peak again?

Well, it’s looking more and more like it. The bulls dealt with near-term technical resistance at 5739.80 on Monday. As long as the index can stay above there, then 5759.00 and 5796.60 will be the next hurdles to overcome. That second level would take it above January 9’s closing level, but still leave the index shy of the 5829.1 high traded on that day.

Can it get there? Well, this is likely to be a case of “one resistance at a time,” but the moving averages look supportive. At present 200-day moving average is some way below the 100-day (see chart below). These signals are not infallible, but a higher shorter term average is usually a bullish indicator.

Getting back to the peak: ASX 200

ASX 200 Technical Analysis: January Peak Back in View

Chart Compiled Using TradingView

Technically speaking, a return to January 9’s peak probably looks more likely than not. However, what the ASX does if and when it gets there will be fascinating. A meaningful push higher will probably embolden the bulls, but another failure at that top will only see it become a more formidable barrier.

OK, so it’s your favorite currency, but is it anyone else’s? Check out the DailyFX sentiment page to find out.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The Nikkei has risen nicely since September, but seems to have hit an impasse
  • The 19600 level seems beyond it; the bulls have failed there four times
  • However, there may yet be reason for hope

Like many of its global peers, Japan’s Nikkei 225 equity benchmark has been rising quite consistently since September 2016. However, it appears to have hit something of a barrier.

For the last four weeks, the index has failed repeatedly to get above the 19600 level for any length of time, despite repeated assaults on that summit. For times the bulls have tried, and four times they have failed.

Is this barrier becoming significant, or will it too fall in time?

Well, a look at the moving averages for the index might well suggest the latter. The shorter-term, 100-day average has been above the 200-day since they crossed over back in mid-December. That sort of cross is held to be a bullish signal, and so it proved. The Nikkei is not around 19,300. Back then it was at 18416 or so.

As you can see from the chart below the two moving averages continue to diverge, which suggests that the index could still have more upside to give. It has already given plenty since that bullish crossover but the two have diverged more sharply since, which might give the bulls reason to hope.

The Nikkei may need to overcome resistance at the 19584 level to convince investors that it has what it takes for another leg higher. Above that, the next level to conjure with will be resistance at 20,012. The Nikkei hasn’t been that high since last November.

That sort of level would also offer investors the considerable psychological support of seeing the index back above 20,000. However recent history suggests that it doesn’t stay up there for long.

Still sending bullish signals. Nikkei moving averages.

Nikkei 225 Technical Analysis: Bullish Hopes Battered But Alive

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX


FTSE 100 Tech Update: ST Trend Weakening, but Still Intact (For Now)

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

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What’s inside:

  • FTSE continues to move higher out of inverse head-and-shoulders
  • Watching trend sequence for signs of fracturing
  • Hourly chart in view

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We continue to run with the inverse head-and-shoulders pattern the FTSE 100 broke free from last week, with the target remaining set at the January high of 7354. Bringing the hourly chart into perspective, a series of higher highs and higher lows is underway, but could come under fire with a drop below the low on Tuesday. This would bring the short-term trend sequence into question, and trade back down to the neckline of the H&S formation could be in order. At that juncture, while the pattern would still be in play, it would become a point where the market needs to hold or else a more aggressive decline might be get underway. There is additional support at the trend-line running up from the head of the pattern. It would require a break of both the neckline and trend-line for real concern from the long-side to set in.

But as long as we don’t see a lower low and a break of noted support levels, we continue to favor more upside within a developing upward channel. It might not be pretty, which is why (in consistent fashion) the preferred approach is to buy on dips as long as the trend sequence maintains its integrity. Chasing momentum in equity indices is often a losing endeavor, unless it’s U.S. indices recently which have gone on a rampage in recent sessions. But typically; pullbacks for buys, bounces for shorts tend to offer up the best risk/reward scenarios.

FTSE: Hourly

FTSE 100 Tech Update: ST Trend Weakening, but Still Intact (For Now)

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.