Support & Resistance

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EUR/USD Technical Analysis: Short Trade Hits First Target

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Short at 1.1390
  • Euro attempts recovery after finding support above 1.12 figure
  • Partial profit taken on short trade after prices hit first objective

The Euro is attempting to claw its way higher after finding support above the 1.12 figure having hit a one-month low against the US Dollar. Thus far, gains appear to be corrective in the context of a larger down move that brought prices through support guiding the move higher since mid-March.

Near-term support is at 1.1215, the April 25 low, with a break below that on a daily closing basis exposing the 38.2% Fibonacci retracement at 1.1103. Alternatively, a reversal above rising trend line support-turned-resistance at 1.1286 sees the next upside barrier at 1.1353, the 14.6% Fib expansion.

We entered short EUR/USD at 1.1390. Prices have now met our initial objective at 1.1241 and we have taken profit on half of the position. The remainder of the trade will remain open to capture any further weakness. The stop-loss has been adjusted to the breakeven level.

What do FXCM traders’ bets on the Euro say about where it’s going? Find out here!

EUR/USD Technical Analysis: Short Trade Hits First Target



USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

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

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Talking Points:

  • USD/JPY Technical Strategy: Watching To See Further Resistance Breaks
  • Other JPY Crosses Providing More Excitement Due To Lack of Dollar Demand
  • Markets Look For Confirmation on Negative Loans to Banks at Upcoming BoJ

Unevenly Distributed Gains in JPY Weakness

USD/JPY Bulls may be feeling pip-envy, and that’s understandable. Since Bloomberg reported a source that the BoJ was considering providing Negative Interest Rate Loans to Banks to spur lending on April 21, the JPY has nearly weakened across the board.

GBP/JPY & CAD/JPY have risen since the announcement by 3.31% & & 2.5% respectively. However, the USD has only risen 1.68%, and a few commodity crosses have not held the gains at all against the JPY. Therefore, if you want to play JPY weakness, US Dollar may not be the preferred way to do so unless the Federal Reserve unexpectedly takes a hawkish tone.

Central Bank Game Theory

While many eyes on whether or not the Bank of Japan will announce new stimulus or not, which would expectedly drop the JPY further, USD/JPY Bulls could continue to feel pip-envy from other JPY bears if the Federal Reserve doesn’t play ball. In other words, If the Federal Reserve stays the course from the March meeting with a neutral stance while watching negative developments, the downtrend in the US Dollar may be reinforced.

The ideal scenario for a buyer of USD/JPY would be for the Fed to signal an increase is likely at an upcoming meeting while encouraged by global developments in the commodities market. If this bullish rhetoric favoring policy normalization was to be produced alongside new stimulus from the BoJ, the next great Bull Run might be just getting started. For that, let’s look at the charts.

Strong Move Off LT Channel & Previously Mentioned Support:

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

Key Technical Levels:

The chart above goes back to the 2011 low and has Andrew’s Pitchfork drawn of 3-key pivots in 2012. As you can see, the price has gone from extreme optimism in May 2013 & December 2014 to now traveling to an extension of the bullish channel. After looking for 3-waves down from the 2015 high, we recently bounced off of the 161.8% extension of A multiple times at ~108. This level aligns with the 100% lower pitchfork extension that caught the recent low.

From a technical perspective, If this plays out as expected, it would either favor immense US Dollar strength or in my preferred view, a new wave of extreme JPY weakness few are expecting. The appropriate filter for this view to engage would be a break above the daily Ichimoku Cloud, which aligns with the congestion of late Q1 price resistance near 114.

Price Action of Recent Decline:

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

Shorter-Term, my attention is drawn to 55-DMA (Orange Line) near 111.90. A break above 111.90 would open up the labeled ‘4’ near 114, which has been firm resistance. Further, you can see that 38.2% of the bearish impulse move caught the dead-ball high of proposed wave ‘4.’ Therefore, that could add to the significance of a break above this level, and at least, could open up 117.50 if not a much higher move back into the 120s.

Such a Move Could Have Significant Implications For Risk

The implications if this plays out as expected with JPY weakness would likely be a major move higher continuing in risk-assets. The clearest plays in this view alongside JPY weakness would be developed market equities much higher such as the GER30, SPX500, & JPN225. Currently, that view is most likely supported by the further improvements in China.

If we fail to break above the resistance levels mentioned, it could indicate that USD/JPY had a sugar high reaction, just like it did on January 29 (labeled ‘2’ on the chart above), and we could soon test and break the recent low around 107.90. This would be an about-face of what I mentioned, and could indicate much more aggressive JPY strength that the BoJ would not likely be prepared to accept.

A failure to push higher and a turnaround below 107.90 may also align with delayed BoJ easing. The support behind BOJ delaying easing is to wait for more of an impact from negative rates, which one would expect to lead to JPY strength across the board. Recently, we heard from Ex-board member Nakahara, a close economic adviser to PM Shinzo Abe, who said the Bank of Japan should not add stimulus now, but rather they should take more time to gauge the impact of negative rate strategy they implemented on January 29. Another argument states that if an accord was reached by Central Banks not to engage in currency weakening that the BOJ may wait to add stimulus until after the G-7 summit, which will be hosted by Abe in May.

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

USD/JPY Technical Analysis: Signs of Hope for JPY Bears?

As of mid-day Friday, the ratio of long to short positions in the USDJPY stands at 1.80, as 64% of traders are long. Yesterday the ratio was 1.98; 66% of open positions were long. Long positions have scaled back week over week by 7.0%. Another sentiment index, the Commitment of Traders Index released by the CFTC shows speculators by large institutions would likely fight this move. In both the US Dollar & JPY the COT Index, which is the difference between net speculative positioning and net commercial positioning measured is at its largest in over a year. The argument made by the CoT Index is that speculators for institutions are pushing the US Dollar lower & JPY higher or USD/JPY down.




GBP/USD Technical Analysis: Pound Pops into Confluent Zone; Reversal Afoot?

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article, we looked at the coagulated price action that was being seen in GBP/USD. As we had alluded to, when those situations arise there are really only two options, and they are somewhat related: Either a) walk away or b) outline a conditional setup and wait for price to meet your parameters.

We looked at a conditional setup derived from Fibonacci, and the top-side setup was triggered in the days following that most recent article; looking for support at the 1.4152 level.

The primary point of resistance was at 1.4251, and that level has been soundly broken with very little signs of selling as prices were rising. Price action has ascended through the next batch of resistance at 1.4349-1.4375, and is now trying to find support in this key area on the chart.

This could have the hallmarks of a new trend, with new support being established at old resistance; but rather than push the top-side move, I’m going to close the remainder of the position at market, as we may be seeing a short-side reversal setup beginning to show.

Five of the past seven four-hour candles are showing wicks at 1.4400, a clear sign of selling off of this resistance level; and the daily chart is working on a non-completed spinning top formation. A spinning top or Doji after a big move is indicative of a potential reversal, so this is somewhat trying to prelude a bearish harami setup.

Now, with that being said, there aren’t yet enough clear signs of reversal to trigger the short just yet; merely enough to obviate the preexisting long position. To plot for a short position, traders can watch the current batch of confluent support between 1.4349-1.4371, which includes three different Fibonacci levels over various time frames, as well as a projected trend-line. Should this batch of support yield, traders can then begin looking for resistance to develop in this area before triggering the short position.

Targets for prospective short positions could be set to prior support values at 1.4304, 1.4251, and then again off of 1.4152.

GBP/USD Technical Analysis: Pound Pops into Confluent Zone; Reversal Afoot?

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: Score One For Seasonality

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

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Talking Points:

  • US Dollar Technical Strategy: Short Bias Favored Below 11,895
  • 21-DMA Continues To Act As Firm Resistance on Move Lower
  • Macro Environment Shifting To a Dollar Negative Narrative

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

The question for all traders is, what’s next? While some would like to think that a May Rally, May is a seasonally bullish month for the Dollar for what it’s worth, there are a few reasons this may not come to pass.

First, Central Bank rhetoric has fundamentally changed in the last year, and really in the last two months. Specifically, we’ve seen the Federal Reserve become relatively dovish to where they’ve stood in the past whereas other central banks like the European Central Bank, Bank of Japan, and recently the Reserve Bank of New Zealand have stood pat on monetary policy. The non-US Central Banks have favored waiting to engage in more stimulus, which was currency strengthening because of what was priced in while the Fed is slowly convincing the market that their four rate hike prediction via the dot plot at the December meeting may only come half-true at best. This new narrative has led to multiple re-adjustments as to the appropriate narrative to trade in the markets.

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

US DOLLAR Technical Analysis: Score One For Seasonality

Lastly, it’s important to note that a driving force for the US Dollar had been hedge funds and other institutional speculators. This source of support has all but dried up. Looking at the recent Commitment of Traders report from the CFTC, the difference between the Commercial Hedgers and Institutional Speculators is at a 52-week extreme with hedgers long, and speculators short as speculators are the shortest they’ve been since Summer of 2014.

Additionally, one environment that has favored US Dollar strength has been volatile environments. Recent Macro Events have passed with eyes now focusing on Brexit as the next key event risk, which is nearly 2-months away. Ironically, to the note above, we could be entering a grind lower in the US Dollar like we also saw in the low-volatility environment of 2014.

Therefore, the Fed and the large traders in the market do not appear to support a higher US Dollar. At least, for now.

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

US DOLLAR Technical Analysis: Score One For Seasonality

In the chart above, you’ll note that the top line of the channel hasn’t been touched apart from the later February high where the channel was originated. The upper channel line aligns with the April 27, 2016, high around 11,907, which is also the FOMC high and should be respected as resistance. The Thursday morning low aligned perfectly with the 2016 low at 11,784, which will be the key support in focus.

Beyond these recent extremes of 11,907 and 11,784 traders can look to two key pivots. On the top side, the recent aggressive move lower was seen at 12,030. A break above 11,907 followed by 12,030 could well signal that a significant correction or a resurgence of Dollar Bullishness, which would align with the May Seasonality patterns.

Below the current 2016 low of 11,784, traders can look to the June 18 low of 11,732 followed by the May 15 low of 11,634. You’ll also see on the first chart that US Dollar is resting on the floor of a 1-year channel. Given the environment we see now, a break below appears to be the higher probability view as opposed to Dollar buying beginning aggressively.

Shorter-Term US Dollar Technical Levels

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

US DOLLAR Technical Analysis: Score One For Seasonality

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T.Y.




USD/CHF Technical Analysis: Double-Doji Sets Up Short-Side Swing

Price Action, Swing & Short Term Trade Setups

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Talking Points:

Over the past two articles we’ve been plotting a re-entry into USD/CHF. Two articles ago we outlined the zone of potential resistance from .9660-.9700 that may be interesting for fresh short positions. And in our most recent article, we tapped the breaks as the price action that got us into that resistance zone was exuberantly strong, printing a Marubozu candlestick that traders should be cautious towards fading.

But as we outlined, should price action have stalled in this vicinity over the next couple of days, the short entry could become attractive given the realization of resistance in this price zone. That’s precisely what we had over the past two days of price action with Dojis printing on the daily chart, and this opens the door for short-side swing positions lower.

Traders looking to get short USD/CHF can look to post stops above the batch of resistance between .9660 and .9700, with targets set towards previous support levels of .9550 (38.2% Fibonacci retracement of the most recent major move, shown in maroon below), .9500 (major psychological level) which is confluent with the 27.2% extension of the prior major move, followed by .9441 (shown in blue below, 61.8% of the ‘big picture’ move, taking the 2005 high to the 2011 low), and then .9398 (shown in orange below, 50% of the secondary move, taking the 2010 high to the 2011 low).

USD/CHF Technical Analysis: Double-Doji Sets Up Short-Side Swing

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: Monthly Trend Support at Risk

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Flat
  • Australian Dollar drops to monthly trend support after soft 1Q CPI data
  • Waiting for improved risk/reward to sell in line with long-term trend

The Australian Dollar turned lower against its US counterpart as expected after putting in a bearish Evening Star candlestick pattern. Prices are now challenging support capping the downside since early March. The move lower followed a disappointing set of first-quarter CPI figures.

Near-term trend line support is at 0.7549, with a break below that on a daily closing basis opening the door for a test of the 38.2% Fibonacci retracement at 0.7450. Alternatively, a reversal back above the 14.6% level at 0.7688 paves the way for a challenge of the 38.2% Fib expansion at 0.7834.

Risk/reward considerations argue against taking a short position in line with our 2016 fundamental forecastas prices sit squarely at support. We will remain on the sidelines for now, waiting for an actionable opportunity to sell AUD/USD to present itself.

Are you making this common mistake trading AUD/USD? Find out here!

AUD/USD Technical Analysis: Monthly Trend Support at Risk



USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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

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Talking Points:

What a difference a few months make! As we head into the close of the April, though we still have FOMC coming up, the Canadian Dollar is the strongest G10 currency of the year. So far, the CAD has bested the US Dollar by nearly 10%. For the month, the Canadian Dollar is up nearly 4% against the US Dollar, which is second to the British Pound, which is the second-best performing currency in the G10 for April.

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On Tuesday morning, we heard from Bank of Canada Governor, Stephen Poloz, who sounded understandably confident. Now, if you look at short-term interest rates markets in Canada, they are now pricing in rate hikes. While a lot was out of the hands of the Bank of Canada, they appeared to have played the commodity carnage the most effectively of major central banks.

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

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

Key Support Levels from Here (Visual Map Below)

On the chart above, the four-hour Ichimoku cloud allows you to see resistance that has not been worth fighting aggressively. The term “sell the rip”, does a fine job of encapsulating the environment we’re in where strength has been short-term and simply provides more attractive levels to sell as opposed to signs of a reversal. The Canadian Dollar is the clear strongest currency in G10FX, so it makes sense that not fighting this trend is the wise play.

Regarding resistance, we recently pivoted from 1.2750, which is the top of the H4 Ichimoku Cloud and the Weekly Pivot Point. Above 1.2750, should we get a break above there, the next level of focus will be at the 34-DMA. The 34-DMA has been solid resistance and currently sits 1.2970, which was the –mid-April high, and the corrective top of a three-wave move that eventually led to an impulsive decline that we’re in right now.

Given the strength of the trend, recognizing support seems like more of a formality. This is because most firm levels of support have been aggressively broken. The next levels of support I’m watching are the June 01 high at 1.2561 and the June 18 low and 50% retracement of the 2012-2016 range of 1.2160/26. In 64 days, marking the 2016 high of January 20, USD/CAD has reversed 2,060 pips so saying something needs to slow down or reverse course is too subjective for my taste. Furthermore, a break below the two support levels would turn attention to the May low of 1.19186.

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

Canadian Dollar Rally Looks Steady per Sentiment

When looking at sentiment, crowd positioning has continued to fight the trend aggressively providing a favor for more downside. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are net-long at a bull: bear of 2.06 as 67% of traders are long means that a bearish USD/CAD signal remains at play. This signal has been working itself out since late January, and as you can see in the charts above, the fervor of the fight is growing. Now that the price has broken back below the 1.2600 level, we’ll continue to favor trend continuation toward the Weekly S1 Pivot at 1.2508. A break below these new key support metrics and a move further into positive territory on the SSI would favor further downside towards downside targets mentioned above.

USD/CAD Speculative Sentiment Index as of 4/27/2016

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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

Key Levels As Of Tuesday, April 27, 2016

USD/CAD Technical Analysis: Will Yellen Stop or Strengthen CAD’s Run?

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T.Y.




NZD/USD Technical Analysis: Short Position Re-established

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Short at 0.6895
  • Kiwi Dollar attempts recovery after finding support at monthly low vs. USD
  • Short trade re-established as bearish setup stays intact despite stop-loss hit

The New Zealand Dollar attempted to recover after finding interim support at a weekly low above the 0.68 figure against its US counterpart. Prices turned lower as expected after the appearance of a bearish Dark Cloud Cover candlestick pattern and broke monthly trend support, hinting recent gains are corrective.

Near-term support is at 0.6835, the April 22 low, with a break below that on a daily closing basis opening the door for a test of the 38.2% Fibonacci retracement at 0.6784. Alternatively, a reversal above the 14.6% Fib expansion at 0.6938 paves the way for a challenge of the 23.6% threshold at 0.7002.

Our NZD/USD short position from 0.6863 was narrowly stopped out on a daily close above 0.6887. However, the underlying setup has not been invalidated. With that in mind, we will re-enter the position and adjust the initial objective to 0.6835 as well as set a stop-loss to trigger on a close above 0.6924.

What do FXCM traders’ NZD/USD bets imply about the price trend? Find out here!

NZD/USD Technical Analysis: Short Position Re-established



EUR/GBP Technical Analysis: Looking to Sell at 0.78 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Pending short at 0.7800
  • Euro accelerates lower, issuing the largest decline in six months vs. Pound
  • Short entry order at 0.78 established for improved risk/reward parameters

The Euro accelerated lower against the British Pound, putting in the largest daily loss in six months and exposing the 0.77 figure. Prices established a top with the formation of a Bearish Engulfing candlestick pattern as expected, with subsequent losses hinting the long-term down trend may be resuming.

Near-term support is in the 0.7683-0.7703 area, marked by a horizontal pivot and the 38.2% Fibonacci retracement. A break below this barrier on a daily closing basis exposes the 50% level at 0.7549. Alternatively, a reversal above the 23.6% Fib at 0.7849 paves the way for a test of the 14.6% retracement at 0.7951.

Prices are too close to support to justify entering short at current levels in line with our 2016 fundamental outlook. With that in mind, we will set an entry order to sell EUR/GBP at 0.7800. If triggered, the trade will initially target 0.7703and carry a stop-loss activated on a daily close above 0.7849.

Are FXCM traders long or short the Euro and the British Pound? Find out here!

EUR/GBP Technical Analysis: Looking to Sell at 0.78 Figure



EUR/JPY Technical Analysis: Bullish Structure Continues

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • EUR/JPY Technical Strategy: Flat.
  • EUR/JPY continues to run higher with a recent higher-low point of support established at ~125.00
  • 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 the continued retracement in EUR/JPY as yet another downward sloping trend-line faced a test from bullish price action. Since that article was published, EUR/JPY has continued its bullish run, showing additional iterations of higher-highs and higher-lows. With a widely anticipated Bank of Japan meeting set for later in the week, traders will want to be cautious chasing any short-term trends; but given recent support and resistance structure, traders may be able to line up setups on both sides of EUR/JPY.

The near-term move in EUR/JPY has been markedly bullish as seen on the 4-hour chart below. This morning saw confirmation of the most recent higher low, which took place at an interesting level of 125, which is a major psychological level while also being the 50% retracement of the most recent major move. This price had also functioned as prior resistance, so we have an example of old resistance becoming new support, and that can further solidify the bull thesis with near-term price action in EUR/JPY.

Traders looking to act on the near-term structure of EUR/JPY could look at long positions with stops below the recent batch of higher-lows (denoted with a blue box on the below chart), and targets set to 125.50 (recent price action swing high), 126.67 (76.4% of the most recent major move), and then 127.50 (major psychological level).

On the short side, traders would likely want to wait for this recent batch of support at 125 to be violated before embarking on a bearish thesis. This could, at the very least, indicate that bears may be able to continue pushing prices lower. At that point, traders looking to get short could look for resistance on the hourly or 4-hour chart; but until 125 yields, be careful of pushing the short-side of EUR/JPY.

EUR/JPY Technical Analysis: Bullish Structure Continues

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

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

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

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • GBP/JPY Technical Strategy: Flat.
  • GBP/JPY continues to run higher after hitting support off of the 27.2% extension of the prior major move.
  • If you’re looking for additional trade ideas, check out our Trading Guideand if you’re looking for shorter-term ideas, check out our SSI indicator.

In our last article we wrote about the Fibonacci extension on GBP/JPY at 151.61 that provided near-term support as the basis for a retracement in the longer-running down-trend. Since that article, the retracement hasn’t really calmed much, as price action has continually throttled up to higher-highs and higher-lows. This retracement extended on Friday, as rumors of a negative rate loans out of the Bank of Japan being issued to banks elicited further Yen weakness.

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

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

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

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

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




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

Fundamental analysis, economic and market themes

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Talking Points:

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

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

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

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

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

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



CAC 40 Channels Ahead of FOMC

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

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Talking Points

  • The CAC 40 Consolidates Ahead of Today’s FOMC Rate Decision
  • Daily Channel Resistance is Found Near 4,660
  • Sentiment is Negative with SSI reading at -1.28

CAC 40 Daily Chart

CAC 40 Channels Ahead of FOMC

(Created using Marketscope 2.0 Charts)

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The CAC 40 is little changed this morning, trading up .19%, as international markets await todays FOMC rate decision. Expectations are for the FOMC to hold key rates at .50%. Any deviation from this policy could have a systemic effect on markets as central banks are now seen as coordinating their policy decisions. Regardless of the outcome of today’s FOMC event, traders should expect increased volatility from markets around this high importance release.

Technically, the CAC 40 has been trading in a descending price channel going back to the August 2015 high at 5,218. Prices have been retracing slowly back towards channel resistance for the last two months, after putting in a new swing low at 3,890. Now as prices close in on this long-term resistance near4,660, prices are again consolidating.

CAC 40 4Hour Chart

CAC 40 Channels Ahead of FOMC

(Created using Marketscope 2.0 Charts)

In the graph below, we can see this consolidating with a short-term price channel developing on the 4Hour chart. If prices breakout above the displayed line of declining resistance, I would then look for prices to challenge the longer term resistance line near 4,660. Alternatively, if prices break lower, it opens prices to retest our previous swing low. In this scenario, traders should first look for prices to challenge the previous swing low at 4,424, followed by a move to a new monthly low beneath 4,211.

Find out the latest positioning totals with DailyFX’s sentiment page

As of this morning SSI (speculative sentiment index) for the CAC 40 (Ticker: FRA40) stands at -1.28 with 56% of positions net short. When taken as a contrarian signal this small negative value has a slight bullish bias. If prices break higher, outside of the depicted price channel, it would be expected to see sentiment figures turn lower. Conversely, if prices channel lower, traders should watch for SSI totals to flip to a positive reading.

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

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

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Talking Points:

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

A Continual Change In Narrative Leaves Crude Bears In Doubt

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

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

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

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

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

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

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

Key Support Levels from Here (Visual Map Below)

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

Contrarian System Warns of Further Upside

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

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

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

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

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

T.Y.

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Gold Prices: Evening Star Urges Caution to Bulls

Price Action, Swing & Short Term Trade Setups

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Talking Points:

In our last article we looked at another long entry in Gold as the recent bull flag was seeing more aggressive top-side tests. The big question that we asked was rather this recent bout of digestion after a strong top-side move may be nearing an end; and given the breakout, it would appear that to be the case. But even with the prospect of another leg of bullishness, entry is of the upmost importance as we’ve traveled far away from the support that was being used to substantiate the stop on the previous setup. That level is at $1,200.41, and this is the 61.8% retracement of the ‘big picture’ move in Gold (shown in black on the chart below).

After a new short-term high was set yesterday at $1,262.60, we’ve seen some pullback in the move; and that pullback went even deeper today. This gives us an evening star setup on the Daily chart should today’s candle close near current levels, and given that this is a bearish-reversal formation, this could be just enough to caution bulls from jumping the gun on the long setup to, instead, wait for a cleaner entry.

For those that do want to push the top-side of the move, there are motives for support at current levels. $1,240.78 is the 61.8% retracement of the most recent move, and there is also a mid-line of a recently developed up-ward sloping channel (shown on the chart below in blue). Today’s price action appears to have given some bounce to this area of the chart, but it would still be too early to consider this support as being confirmed. Traders that do want to act on this setup would likely want to keep stops tight in the event of a deeper retracement. For those that are already long, this could be an opportune time to adjust stops to break-even on the remainder of the position.

Moving forward, confirmation of support in the $1,240 area could open the door for additional top-side entries, as could a higher-high/higher-low setup off of $1,251.74.

Gold Prices: Evening Star Urges Caution to Bulls

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

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

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Silver Prices Rise on a Soft Dollar, GDP on Deck

Global Macro and Momentum Trading

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Talking Points

  • Silver traded higher today as the USD was on the back foot.
  • The FOMC rate decision and the Bank of Japan rate meeting sent the USD lower and silver prices higher.
  • U.S. 1Q GDP and Jobless Claims on deck.

Precious metals traded higher today as the USD was on the back foot following the FOMC rate decision and the Bank of Japan rate meeting.

Technically, the trend of silver prices was bullish above the April 25 low of $16.82, as the April 25 low was higher than the preceding swing low of $16.13 (formed on April 18). The first support level is yesterday’s low of $17.09. Below the April 25 low of $16.82, the psychological level of $16.50 could turn into support.

The fall in USD explains why silver prices are higher. On the day and at the time of writing, the Buck was lower against all of its G10 peers. The Japanese Yen was the biggest winner, up by 3.14% on the day and followed by the Kiwi dollar (up by 1.68%).

The trigger behind the rise of the Yen was inaction by the Bank of Japan. Bloomberg News reported that a small majority of economists expected some type of action at the BoJ rate meeting. Instead (and to the surprise of the markets) as seen in the decline of USDJPY, the central bank left their monetary policy unchanged. The Kiwi Dollar (the second best performer of the day) rose as the RBNZ also left its rates unchanged.

At yesterday’s FOMC rate decision the Fed removed the reference to global risks in its policy statement. They also left the door open for a June rate hike. This sent the USD and U.S. 2-year-swap higher, however, after just a few minutes both the Dollar and the interest rates had returned to their initial levels. Please read FOMC Holds Rates at April Meeting, Focus Moves to June” for more on the Fed.

As the U.S. trading session starts, focus shifts to U.S. GDP and Jobless claims. A Bloomberg Survey expects the first quarter GDP to rise by 0.7% annualized QoQ and for Jobless Claims to rise from 247K to 259K. Read more about it here: EUR/USD to Eye Topside Targets on Disappointing 1Q U.S. GDP Report.

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

Silver Price | CFD: XAG/USD

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




SPX500 Technical Analysis: Higher-Low Ahead of US Earnings

Price Action, Swing & Short Term Trade Setups

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Talking Points:

  • S&P 500 Technical Strategy: Limited out of previous setup; currently flat.
  • A heavy week of data may bring in a deeper retracement that could potentially be used for top-side reentries.
  • 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 another trend-side entry in the S&P, using recent support structure to plot potential re-entries. The support structure looked at in our last article utlized the move seen last year, taking the top at 2,137.10 to the ‘Chinese Black Monday’ low on August 24th. And while a lower-low was printed in January and again in February, that Fibonacci retracement has continued to offer usable levels for traders, most recently offering a top-side re-entry off of the 76.4% retracement at 2,065.45.

As of right now, price actionappears to be carving out a higher-low point of support at the same level that set the high on 12/29-12/30 of 2015; just before price action began the deluge to kick off a whole new stream of worries in the new year. This is a pivotal level at 2,082.10, and over the past week we’ve seen price action find resistance, break above, and now set support at this level; giving the appearance of yet another higher-low.

But before chasing the up-trend, traders would likely want to peruse the economic calendar to see the headline risk for the week ahead: One-third of the S&P 500 is reporting earnings this week, with a heavy emphasis on tech companies, which can often have a leading quality for shares as technology investments usually go hand in hand with bullish economic forecasts. If tech earnings disappoint, if guidance is downgraded and, in-turn, if shares move lower in response to this batch of earnings reports, traders may be able to look for a deeper retracement within the pre-defined Fibonacci structure, looking for support at 2,065.45, or 2,021.12 (the 38.2% retracement of that prior major move).

The likely determinant as to whether this uptrend remains or whether it takes a down-side turn will be FOMC on Wednesday. Should the Fed successfully do what they’ve been doing, provide support to markets by offering dovish implications around down-graded forecasts, the up-trend in the S&P could certainly continue, with eyes on prior resistance points of 2,111.37 (near-term swing high), 2,116.40 (prior swing-high), 2,125 (minor psychological level) and then the all-time high of 2,137.10.

SPX500 Technical Analysis: Higher-Low Ahead of US Earnings

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

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

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DAX 30 Under Pressure On BoJ Inactivity

Global Macro and Momentum Trading

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Talking Points

  • The DAX 30 (CFD: GER30) maintained a short-term bearish bias at the time of writing. The monthly trend is also under pressure.
  • The decline to the DAX is on the heels of BoJ surprising the markets by not expanding their monetary stimulus.
  • As the U.S. trading session starts focus shifts to U.S. GDP and Jobless claims.

The DAX 30 (CFD: GER30) maintained a bearish bias at the time of writing. The trend was short-term bearish as yesterday’s high of 10,346 is lower than last week’s high of 10,488. We have been highlighting this trend over the last few days.

The April 14 high of 10,110 is now in play as a potential support level and is the same level which held as resistance for most of March. Below the April 14 high the psychological level of 10,000 will come in focus. Resistance levels are yesterday’s high of 10,346, followed by the April 22 closing level of 10,409.

We note that the longer-term trend is now under pressure as the price has now lost 61.8% of its gains from last week’s low of 9906. Last week’s low of 9906 is crucial for the bullish trend in place since price bottomed out on April 7, as it is the last swing low on the daily chart. Below it, the next major support level is the April 7 low of 9437.

The decline to the DAX is on the heels of BoJ surprising the markets by not expanding their monetary stimulus, the Japanese Yen and stock markets declined as a result of the meeting outcome.

The German Unemployment Rate remained unchanged at 6.2% and therefore matched economists’ expectations. The DAX 30 rose slightly on the news, but five minutes after the release it resumed its tumble. German CPI will follow in the afternoon. A Bloomberg News survey projects the inflation rate to rise by 0.1% YoY, which would be a step back from the 0.3% rise in March. The report is important as it influences the monetary policy of the ECB, which in turns affects economic growth in the Eurozone and Germany. As the U.S. trading session starts, focus shifts to U.S. GDP and Jobless claims.

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

DAX 30 | CFD: GER30

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




FTSE 100 Revisits Its Weekly Low

Global Macro and Momentum Trading

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Talking Points

  • FTSE 100 slid on what to appears to be an adjustment to overnight declines in Asian stock markets.
  • BoJ inaction generates stock market turmoil.
  • FTSE 100: Over the last 24 hours, this week’s low of 6248 has been supporting price, while the 6343 level capped the price (yesterday’s high).

At the time of writing, the FTSE 100 (CFD: UK100) was lower by 1% on the day. The price slide appears to be an adjustment to overnight declines in Asian stock markets. The Nikkei 225 was down by 3.61% when trading closed for the day in Japan, a decline, which was generated by the outcome of the BoJ Rate Meeting Decision.

The Japanese Central Bank opted to leave its policy rate at -0.1% and did not extend its stimulus package to include negative rate bank loans. Bloomberg news reports that a slight majority of economists surveyed had projected some sort of change to the BoJ monetary policy. The Financials sectors in Japan was the most badly hurt, down by 5.79% on the day.

Technically, FTSE 100 (CFD: UK100) has been trading lower since mid-last week when the price reached a high of 6432. Over the last 24 hours, this week’s low of 6248 has been supporting price, while the 6343 level capped price (yesterday’s high).

Below this week’s low of 6248, the next support level is the April 11 low of 6162 and followed by the April 7 low of 6104. Resistance levels are yesterday’s high of 6343 and last week’s high of 6432.

No U.K. market moving events are on deck today.

Today, the German Preliminary Consumer Price Index report is published. A Bloomberg News survey projects the inflation rate to rise by 0.1% YoY, which would be a step back from the 0.3% rise in March. The report is important as its influences the monetary policy of the ECB, which in turns affects economic growth in the Eurozone. In the afternoon, focus shifts to U.S. GDP and Jobless claims. See our economic calendar.

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

FTSE 100 | CFD: UK100

Please add a description for the image.

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

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

Contact and follow Alejandro on Twitter: @AlexFX00




ASX 200 Sustains Advance above 3-Month High


Talking Points:

  • Strategy: Be mindful of a retracement below the 3-month high
  • Upward momentum showed sign of exhaustion
  • The index remained range-bound with the upper bound being 50% Fibonacci

The ASX 200 successfully broke above a 3-month high and resistance level at 5227. However, the upward momentum showed sign of exhaustion, as we predicted in the previous article. Downside risk may develop if momentum signals continue to wane into next week.

Investors may take caution with their stop loss and target levels, in case the ASX retraces below 5227 level once more. Upside potential remains limited, with a firm resistance and 50% Fibonacci at 5391.5. The index remains largely range-bound.

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ASX 200 Sustains Advance above 3-Month High

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Strategist for DailyFX.com

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Nikkei 225 Retraces below 50% Fibonacci


Talking Points:

  • Strategy: Prepare for further declines under 50% Fibonacci
  • Upward momentum has waned
  • Support levels are 17,141 then 16,461.5, and resistance level is 61.8% Fibonacci at 18045.8

Nikkei 225 returned to the area below 50% Fibonacci at 17,438.5 on the second day of declines. A waning momentum indicates that further fall may be possible. A downward reversal would face a firm support level at 16461.5 which held throug March.

Investors with long position may consider to revise their strategy if the index extends lower and away from 50% Fibonacci, especially if it falls below the 17141 mark which capped the index for two weeks during late March. On the other hand, any rebound from here may face firm resistance around 61.8% Fibonacci at 18045.8.

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Nikkei 225 Retraces below 50% Fibonacci

Daily Chart - Created Using FXCM Marketscope

--- Written by Nathalie Huynh, Strategist for DailyFX.com

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Contact and follow Nathalie on Twitter: @nathuynh