Support & Resistance

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EUR/USD Technical Analysis: Move Back Below 1.18 Hinted Ahead

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/USD Technical Strategy: Flat
  • Euro may be resuming down trend started in September vs. US Dollar
  • Short position activated, initially looking for a move below the 1.18 figure

The Euro broke support guiding prices higher over the past month, hinting the down trend started against the US Dollar in September may be resuming. The single currency succumbed to broad-based selling pressure amid disappointment in the unraveling of an almost-there Brexit accord.

From here, a daily close below the 38.2% Fibonacci expansion at 1.1756 opens the door for a challenge of the 50% level at 1.1692. Alternatively, a move back above the 23.6% Fib at 1.1834 paves the way for a retest of trend line support-turned-resistance, now at 1.1890.

A shallow break of chart support offered compelling risk/reward parameters to enter short and the trade has been triggered at 1.1824, initially targeting 1.1756. A stop-loss will be activated on a daily close above 1.1858. Half of profit will be booked and stop moved to breakeven when (and if) the first objective is met.

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EUR/USD Technical Analysis: Move Back Below 1.18 Hinted Ahead


USD/JPY Rate Forecast: NFP Recovery Shows Strong Uptrend Intact

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

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USD/JPY Rate Forecast Talking Points:

  • USD/JPY Price Forecast: buyers likely to continue pushing price higher above 111/110.7
  • US Dollar Index chart shows most consecutive daily gains of 2017 supported by seasonal factors
  • USD/JPY Rate Insight from IG UK: sharp drop in retail long positions favors upside continuing

The US economy continues to roll on as evidenced by November Nonfarm Payroll data released on Friday, which continued to give traders reason to buy the US Dollar. The US Dollar is working on its best week of 2017 when looking at consecutive daily gains that align with seasonal factors that tend to see the US Dollar strengthen at year-end.

US Dollar Strengthens On Strong Headline

The USD/JPY price initially dropped in the hour following the release of the November US employment data, but was then bid for the rest of the day and ended the week higher by nearly 1%. Traders looking to other JPY pairs also saw weakness as EUR/JPY, NZDJPY, and AUD/JPY also ended the trading week near the high of the weekly range.

Typically, wide-spread JPY weakness is seen when there is wide-spread Bullish risk-sentiment, and the massive stock of Japanese investor capital is sold to buy foreign assets with improving yield prospects. In such a scenario, traders tend to look for the strongest relative currency to buy against the JPY, and in the last few weeks, the US Dollar is making its case. FX traders started the week positive on the British Pound Sterling (GBP) but cooled off optimism after reports that Brexit negotiations were making progress as uncertainty remained that will slow down eager GBP buyers.

Another sign of USD strength continuing is seen in funding markets, known as basis swaps. A dollar premium in USD/JPY 3-week basis swaps per Bloomberg data shows dips in USD are likely to be limited and gains could continue.

Optimism in Japan As Deflation View Fades

A key development over the recent week has been signed for optimism in Japan’s economy. However, traders should not expect the Bank of Japan to use this as a reason to slow down their asset purchases and reduce monetary easing yet. Traders questioned whether such growth would lead to a BoJ exit that would strengthen the JPY, but so far traders do not seem concerned.

A key pattern of central bankers is to let the economy seemingly ‘over-heat’ before discussing monetary policy tightening little alone reducing accommodation. A large question mark remains China, whose growth heavily effects Japan (and everyone else), but as inflation prospects in Japan rise and global growth look synchronous, we could soon see a period of impressive Japanese economic strength with an accommodating Bank of Japan that helps lift JPY crosses higher.

USD/JPY Rate Forecast

The market forces heading into year-end are favoring the USD/JPY rate to test chart resistance at 114. The price remains below the highest level in six-months of 114.73, but a hold above the December 6 low of 112 with rising yields from the UST 2Year would anticipate further strength. USD/JPY trading at the highest level in nearly a month on Friday have traders anticipating a test of key resistance.

Should the price break the 114.73 level on a closing basis, which is possible with the Federal Reserve set to raise rates next week, fighting the uptrend would be ill-advised. On the other hand, if the Federal Reserve sends a dovish warning, which is unexpected given the trend of strong US economic data, traders should watch the 112 level as support. A break below 112 on a closing basis could well lead to a retest of the 6-month range support near 108. Until 112 breaks, the uptrend remains favored.

Unlock our Q4 forecast to learn what will drive trends for the Japanese Yen and the US Dollar by year-end!

USD/JPY Rate Forecast: NFP Recovery Shows Strong Uptrend Intact

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

USD/JPY Insight from IG Client Positioning

USD/JPY Rate Insight from IG UK: sharp drop in retail long positions favors upside continuing.

The sharp drop in long retail positions, coupled with the rise in short-positions provides a contrarian bias to favor further gains.

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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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GBP/USD Technical Analysis: Plotting Around the Pull Back

Price action and Macro.

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Talking Points:

- The British Pound is pulling back after the recent bullish breakout.

- Retail traders remain slightly net-short, with 1.08 traders short for every one long, as of this writing.

- Want to see how GBP and USD are holding up to the DailyFX Forecasts? Click here for full access.

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In our last article, we looked at what had been a messy prior month in the British Pound as GBP/USD attempted to find a direction. Coming into September, Sterling was strong as Mark Carney had warned that rate hikes may be on the horizon in order to temper the aggressive inflation that’s started to show in the U.K. This led to a bullish spike that eventually created a fresh one-year high in the pair at 1.3658. But, in the wake of that bullish breakout, Mark Carney started to pump on the brakes, warning that rate hikes would be gradual and slow, as the BoE continued to expect Brexit to be a hindrance for the British economy.

This brought price action down to a key support level at 1.3478, which is the 50% retracement of the ‘Brexit move’ in GBP/USD. We discussed this level in mid-September, and support held there for a little over a week before bears finally began to take-over again. That pull back lasted all the way until 1.3026, at which point the messy range began to build, shown below in grey; and this held for almost two full months, including through the BoE rate hike in early-November.

GBP/USD Four-Hour: Range-Bound with Resistance at 1.3320, 38.2% retracement

GBP/USD Technical Analysis: Plotting Around the Pull Back

Chart prepared by James Stanley

The instigator of this recent breakout appears to be progress in Brexit discussions between the U.K. and EU. This began to show about two weeks ago, and prices finally were able to break above the 1.3320 Fibonacci level that had twice reversed bullish advances (highlighted in red above). Strength continued to drive the pair-higher, and we eventually re-eclipsed that Fibonacci level at 1.3478; but just as we saw in September, bulls were unable to hold the move and a deeper retracement has developed.

At this point, the 2017 trend in GBP/USD remains bullish, and the near-term trend on the hourly has bullish connotations, as well. The current challenge would be finding an adequate level of support in the shorter-term move in order to position in to the longer-term theme. One price of relevance that may be soon be in the cards is that prior area of resistance at 1.3320. This is the 38.2% retracement of the bullish theme from August-September, and we’ve seen quite a few relevant inflections around this level. Support showing at this price opens the door for bullish plays; and the 50% retracement of that same move at 1.3216 can be attractive for stop placement on bullish positions. This would also enable an approximate 1-to-1.5 risk-reward ratio by taking profits at that prior point of support around 1.3478; and if a 1.3500 break or a test of the prior high at 1.3658 is in the cards, that risk-reward ratio could become considerably more attractive.

GBP/USD Four-Hour: Support Potential at Prior Resistance for Bullish Continuation

GBP/USD Technical Analysis: Plotting Around the Pull Back

Chart prepared by James Stanley

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

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USD/CHF Technical Analysis: Fibonacci Resistance at Four-Month Highs

Price action and Macro.

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Talking Points:

- USD/CHF has broken above a key level of resistance around .9770 as the pair trades at four-month highs.

- USD-strength has been a resilient theme thus far in Q4, and if this is something that continues, the topside of USD/CHF can remain as attractive in the near-term.

- Want to see the DailyFX Q4 Forecast on USD? Click here for full access.

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Swissy is trading higher on the day after breaking out to fresh four-month highs last week. In our last article, we looked at the level of .9770 showing back-up as resistance after sellers came-in at .9837. The level of .9770 is the 38.2% Fibonacci retracement of the December 2016- September 2017 major move. Perhaps more importantly than any theoretical prognostications is the fact that this level functioned as resistance on multiple occasions over the past four months, rebuking upward advances in both June and August.

USD/CHF Daily: Fresh Four-Month Highs After Fibonacci Resistance at .9770 Gives Way

USD/CHF Technical Analysis: Fibonacci Resistance at Four-Month Highs

Chart prepared by James Stanley

Prices have rallied up to find resistance at another retracement from that same study, with the 50% level at .9880 currently helping to set near-term highs. This denotes the prospect of further bullish continuation, and a top-side breech of that level opens the door for bullish strategies targeting a re-test of parity (which, perhaps coincidentally, is 11 pips away from the 61.8% retracement of this same study).

USD/CHF Four-Hour: Fibonacci Resistance at .9880 After Double-Top Breakout

USD/CHF Technical Analysis: Fibonacci Resistance at Four-Month Highs

Chart prepared by James Stanley

This can open the door to a couple of different plays in the pair. With prices finding resistance on the under-side of a 50% Fibonacci retracement, buyers will likely want to try to avoid chasing the move for fear of getting caught on a top. Rather, traders can look for support to show-up at that area of prior resistance, around .9770, in the effort of trading bullish continuation.

Alternatively, if a higher-low support test does not show up, traders can look for the next area of resistance to come in around the parity figure. This is a huge psychological level on the pair, and it’s very close to the 61.8% retracement of the same move that’s helping to set current resistance. A visit towards parity opens the door for higher-low support to show around current resistance, and this can be attractive in the aim of trading bullish continuation in USD/CHF.

USD/CHF Four-Hour: A Large Zone of Resistance Looms Above (around parity)

USD/CHF Technical Analysis: Fibonacci Resistance at Four-Month Highs

Chart prepared by James Stanley

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

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AUD/USD Technical Analysis: Aiming to Probe Below 0.75 Figure

Fundamental analysis, economic and market themes

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Talking Points:

  • AUD/USD Technical Strategy: Short at 0.7611
  • Aussie Dollar sinks to 6-month low after rejection at former support line
  • Prices poised to test below 0.75 figure after breaking Fibonacci barrier

The Australian Dollar has dropped to the lowest level in six months against its US counterpart, with a break of chart support hinting at a move below 0.75 ahead. The currency turned lower as expected following a retest of a rising trend line that was guiding the rally from December 2016 until a breakdown in November.

A break below the 23.6% Fibonacci expansion at 0.7514 has exposed the 38.2% level at 0.7428. Breaking the latter level opens the door for a test of the 50% Fib at 0.7358. Alternatively, a move back above former support at 0.7532 clears the way for another challenge of resistance at 0.7625.

The short AUD/USD trade triggered at 0.7611 hit its initial target and profit has been booked on half of the position. Remaining exposure will remain in play to capture any follow-on weakness. The stop-loss has been railed to the breakeven level.

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AUD/USD Technical Analysis: Aiming to Probe Below 0.75 Figure

Canadian Dollar Rate Forecast: Falling With Commodity Currencies

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

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Canadian Dollar Talking Points:

  • USD/CAD Price Forecast: upside favored toward 1.3000 above 1.2666
  • Bank of Canada caution causes Loonie losses to pile up across the board
  • Canadian Dollar falls over 1% vs. GBP, NOK, & USD after BoC announcement
  • Sentiment Highlight: net-bearish bias in retail positioning provides ST bullish outlook

The Canadian Dollar rate has fallen across the board after a cautious Bank of Canada aligned with multiple factors that could put further pressure on the CAD. Despite sharp gains last Friday in CAD due to impressive employment gains, the Canadian Dollar rate fell below 1.28 to the USD.

Canadian Dollar Losses Extend On Compounding Factors

Key drivers of Canadian Dollar weakness in global markets a day after the Bank of Canada left rates unchanged were commodities selling off led by metals like Gold and Copper and the spread between US Treasury 2 year yields and CA 2 year yields widened showing the market believes tightening in the coming years will favor the Federal Reserve. While small on absolute terms, the U.S.-Canada 2-year sovereign rate spread widened to32bps vs. 26bpsbefore Wednesday’s BOC rate decision showing a market forces favor USD for now.

Another persistent concern among Canadian Dollar rate traders are deteriorating NAFTA negotiations, which prompted Prime Minister Trudeau to suggest a Canada-U.S trade deal remains possible if NAFTA fails.

Unlock our Q4 forecast to learn what will drive trends for the US Dollar through year-end!

Canadian Dollar Forex Forecast

When analyzing the USD/CAD price chart, traders can see an erosion of sellers below 1.2650 where the price has found support since November. A short-term bullish target would be 1.2927, the 50% retracement of the 2017 range of 1.3793-1.20613. A break above 1.2927 would favor a move above the 200-DMA (1.2956) toward 1.3130, which is the 61.8% retracement of the previously mentioned range.

Only a breakdown below 1.2650 on a closing basis for USD/CAD would adjust the bullish forecast.

USD/CAD Chart: Multiple Fundamental Factors Weaken CAD and push USD/CAD Higher

Canadian Dollar Forex Forecast, Rate Market Support at 1.2666.

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

Valuable Insight from IG Client Positioning for USD/CAD

Valuable Insight from IG Client Positioning for USD/CAD

Retail trader data shows 45.1% of traders are net-long with the ratio of traders short to long at 1.22 to 1. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise.

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Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

To attend Tyler's webinars where he covers influential stories driving marketrs, go here: Webinar Calendar

Contact and discuss markets with Tyler on Twitter: @ForexYell


NZD/USD Technical Analysis: Dominant Trend Still Points Lower

Fundamental analysis, economic and market themes

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Talking Points:

  • NZD/USD Technical Strategy: Pending short at 0.6895
  • Kiwi Dollar down trend has slowed but the dominant still bias favors losses
  • Upswing sought for improved risk/reward parameters to enter short position

The dominant New Zealand Dollar trend continues to favor the downside against its US counterpart despite an apparent deceleration in the pace of decline. The steeper down move from the late September swing high seems to have ended but a shallower series of lower highs and lows remains in play.

From here, a daily close below the November 17 low at 0.6781 exposes range floor support at 0.6752, followed by the 38.2% Fibonacci expansion at 0.6697. Alternatively, a push above 0.6935 (23.6% Fib retracement, channel top) exposes the 0.7030-54 area (38.2% retracement, October 9 low, former trend line support).

Risk/reward considerations argue against taking a short trade at current levels. With that in mind, a short entry order has been established to sell NZD/USD at 0.6895. If triggered, the trade will initially target 0.6793 and carry a stop-loss activated on a daily close above 0.6946.

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NZD/USD Technical Analysis: Dominant Trend Still Points Lower

EUR/GBP Technical Analysis: Looking for Opportunities to Sell

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro bias still bearish amid consolidation below 0.89 figure vs. British Pound
  • Choppy price action, adverse risk/reward setup argue against taking trade for now

The Euro has settled into a narrow consolidation range below the 0.89 figure against the British Pound but overall positioning seems to favor the downside. A break of rising trend line support set from early November suggests bears have the initiative, with the resumption of the drop from August highs potentially at hand.

From here, a daily close below the 38.2% Fibonacci expansionat 0.8796 sees the next significant downside barrier in 0.8728-46 area (September 27 low, 50% level). Alternatively, a reversal back above the 23.6% Fib at 0.8879 opens the door for a retest of trend line support-turned-resistance, now at 0.8912.

The pair is too close to immediate support to justify entering short from a risk/reward perspective. Furthermore, price action within the larger range established in mid-October has been rather choppy, making a clear-cut technical setup difficult to nail down. Opting to wait for greater clarity seems prudent.

Not sure where to start on your EUR/GBP trading strategy? Check out our beginners’ guide!

EUR/GBP Technical Analysis: Looking for Opportunities to Sell

EUR/GBP Technical Analysis: Looking for Opportunities to Sell

Fundamental analysis, economic and market themes

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Talking Points:

  • EUR/GBP Technical Strategy: Flat
  • Euro bias still bearish amid consolidation below 0.89 figure vs. British Pound
  • Choppy price action, adverse risk/reward setup argue against taking trade for now

The Euro has settled into a narrow consolidation range below the 0.89 figure against the British Pound but overall positioning seems to favor the downside. A break of rising trend line support set from early November suggests bears have the initiative, with the resumption of the drop from August highs potentially at hand.

From here, a daily close below the 38.2% Fibonacci expansionat 0.8796 sees the next significant downside barrier in 0.8728-46 area (September 27 low, 50% level). Alternatively, a reversal back above the 23.6% Fib at 0.8879 opens the door for a retest of trend line support-turned-resistance, now at 0.8912.

The pair is too close to immediate support to justify entering short from a risk/reward perspective. Furthermore, price action within the larger range established in mid-October has been rather choppy, making a clear-cut technical setup difficult to nail down. Opting to wait for greater clarity seems prudent.

Not sure where to start on your EUR/GBP trading strategy? Check out our beginners’ guide!

EUR/GBP Technical Analysis: Looking for Opportunities to Sell

EUR/JPY Technical Analysis: Prices Plummet to Support as the Range Remains

Price action and Macro.

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Talking Points:

- EUR/JPY has continued within the range that started in mid-September; and this has even lasted through the ECB’s extension of QE into 2018.

- Since another test of resistance last week, prices have started to pull back in an aggressively bearish fashion. Bulls will likely want to avoid trying to catch this falling knife, instead electing to allow the setup to clean-up a bit before investigating top-side setups.

- Want to see how EUR and JPY are holding up to the DailyFX Forecasts? Click here for full access.

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In our last article, we looked at the continuation of the range in EUR/JPY after support had started to bend earlier in November. The bending around support happened after a fairly bearish driver had availed itself when the ECB elected to extend QE well into 2018. The fact that a deeper sell-off did not show here is just testament to how weak the Japanese Yen was/has been; along with the fact that markets are continuing to harbor the assumption that the ECB will, eventually, have to move away from uber-dovish policy relatively stable global growth continues to show.

Much of this recent range has been governed between two key Fibonacci levels. At resistance: We have the 61.8% retracement of the 2014-2016 major move. And at support, we have a zone starting with the 50% retracement of the 2008-2012 move, along with a group of swing highs that showed-up in August of this year before the range started.

EUR/JPY Four-Hour: Range-Bound since Mid-September

EUR/JPY Technical Analysis: Prices Plummet to Support as the Range Remains

Chart prepared by James Stanley

Just last week brought another resistance test around 134.41; but as we’ve seen twice before, bulls have had a tendency to lose motivation around that level. Prices have since started a rather aggressive sell-off, and traders would likely want to wait for support to re-enter the zone before plotting bullish continuation. At this point, buying EUR/JPY after such a rigid and consistent sell-off over the past few trading days would be akin to trying to catch a falling knife. Maybe it works, but is the risk really worth the possible reward?

To establish long positions, traders are likely going to want to wait for some element of bullish price action to begin showing on lower time-frames, such as the hourly chart. This can be done in a few different ways, but most operable given the consistency with which this pullback has shown could be awaiting the break of this aggressively-sloped bearish channel, at which point long positions can become favored again under the presumption of bullish potential. The key for such an approach would be watching for this to take place above the prior swing-low within support at 131.70. If we do see a top-side break of this bearish channel after early-indications of a higher-low, the door is opened for bullish exposure. If we don’t get this before taking out that prior low, we’ll discuss another way of moving forward below the following image:

EUR/JPY Hourly: Aggressive Bearish Channel Fast Approaching Longer-Term Support Zone

EUR/JPY Technical Analysis: Prices Plummet to Support as the Range Remains

Chart prepared by James Stanley

If we don’t get that higher low:

If we don’t see this string of weakness break before taking out the 131.70 level, traders are likely going to want to revert to the longer-term setup or, to put it another way, look to trade the horizontal range rather than plotting trends inside of the range. This would be standard range-trading logic, looking for some evidence of support (reaction/elongated wick highlighting reaction) within the zone to open the door for long positions. Traders can then look to the mid-line of the range for stop management, or perhaps even an initial scale out of the position; awaiting for prices to re-test resistance at 134.41.

EUR/JPY Technical Analysis: Prices Plummet to Support as the Range Remains

Chart prepared by James Stanley

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

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GBP/JPY Technical Analysis: Double-Bottom, Meet Double-Top

Price action and Macro.

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Talking Points:

- GBP/JPY surged after bouncing from a recent double-bottom formation; but just a week later, resistance came-in at the September swing-high leading to a double-top formation.

- The double-bottom is a cleaner formation, and this echoes the general bias of strength that’s been seen in the pair this year. We look at a couple of different ways of approaching bullish exposure in GBP/JPY.

- Want to see how GBP and JPY are holding up to the DailyFX Forecasts? Click here for full access.

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In our last article, we looked at GBP/JPY breaking above an area of prior resistance that showed around a key Fibonacci level. The price in question is 148.29, and this is the 61.8% retracement of June to December, 2016 major move in the pair. Perhaps most importantly, this price had helped to set resistance for almost ten full months in GBP/JPY. Prices turned-around here in mid-December, and again in May as GBP/JPY put in a peculiar period of price action. This pair is often trending or moving in somewhat of a directional manner: But it’s also notorious for being wild and chaotic. The fact that the first nine months of this year were so seemingly quiet in the pair is something that deserves attention, as we may be on the cusp of some brutal movement, in one direction or the other.

We have yet to see GBP/JPY embark on a directional movement since that initial September breakout. Price action has been bound between support of 146.94 and resistance of 152.86 for more than two-and-a-half months. This has created a pattern on either side of the move: A double-bottom is showing at support while a slightly less-intriguing (explained below) double-top remains at resistance:

GBP/JPY Daily: Range Bound since Mid-September – Double-Bottom Formation

GBP/JPY Technical Analysis: Double-Bottom, Meet Double-Top

Chart prepared by James Stanley

The reason that the double-bottom here would be a bit more intriguing than the double-top is the accompanying price action. While both the double-bottom and top share similar levels of reversal in their respective formations, the double-bottom had consistent build of price action both higher-and-lower as each leg of the formation was setting. The tops, meanwhile, came-in rather violently, with quick reversal reactions at each. Many chartists will consider the high around 152.00 between those two points of support as the ‘peak’ of the double bottom formation; and the double-top simply has nothing comparable. And while this wouldn’t necessarily preclude these levels as usable, it does denote a general overall bullish bias that remains in GBP/JPY after this year’s move-higher.

What this means: Traders will likely want to be careful with short-side exposure with the current back-drop. If we do get a breach of support at the double-bottom, the door can be opened for bearish breakouts. But until then, the short-side of GBP/JPY should be approached with caution.

The long-side, however, could be a bit more interesting. One way of moving forward can simply be waiting for support to test around that same area of the prior double bottom. Stops can be set below the low and if buyers do return to push prices back towards resistance, a fairly attractive risk-reward ratio could be seen. The down-side to this approach is that we’re currently more than 300 pips away from that support level; so this is a bit divorced from our current context.

One possibility would be to look for support to build around the psychological level of 150.00. This would still be fairly early as price action posed a fairly aggressive reversal shortly after the open of this week’s trading, and we just began to re-engage this level earlier this morning. So, we can’t quite call this near-term support yet and there’s a chance that this potential setup flakes out before it becomes usable. But – if this does confirm, the door can be opened to aggressive bullish stances in GBP/JPY, targeting the prior swing-high around ¥151.75 before an eventual return towards resistance of ¥152.50.

GBP/JPY Four-Hour: Near-Term Support Potential

GBP/JPY Technical Analysis: Double-Bottom, Meet Double-Top

Chart prepared by James Stanley

Trading Support in GBP/JPY

To confirm support, traders can wait for prices to start moving higher; indicating that the near-term sell-off may be done. We’ve seen a bit of cessation at the lows, but we have yet to see bulls starting to take over, as the hourly still shows a ‘lower-high’ around 150.40. The simple act of price action taking out this level can denote that support may be stable enough to act upon, enabling stops below the ‘peak low’ of this recent bearish run. This shorter-term approach with tighter stops can afford the possibility of more near-by profit targets, such as prior areas of relevance around 151.15, 151.75, or 152.50.

If higher-low support doesn’t hold, if a near-term higher-high does not print – this aggressive approach would be invalidated and, instead, focus should be paid towards the longer-term setup.

GBP/JPY Hourly: Early Signs of Support ~ ¥150.00

GBP/JPY Technical Analysis: Double-Bottom, Meet Double-Top

Chart prepared by James Stanley

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

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USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Price action and Macro.

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Talking Points:

- USD/CHF resisted off of a key area again this morning. Should USD-strength continue, a bullish move over this resistance level can open the door to breakout strategies in Swissy.

- While USD weakness continued well into this month, USD/CHF has been range-bound since July, deductively highlighting a relatively weak Swiss Franc that could become attractive for continuation should USD-strength continue to show.

- Want to see how USD has held up to the DailyFX Forecasts? Click here for full access.

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The U.S. Dollar has had a rather rough 2017. In a down-trend that’s seen as much as -12.3% of the U.S. Dollar’s value erased, even while the Fed talks up additional rate hikes, few currencies have been able to keep pace with the Greenback’s declines. After coming into the year trading above the 1.0300 level, USD/CHF has seen as much as 925 pips taken-out as the pair has driven-lower.

But after running into support in mid-July around the .9433 level (the 2016 low), the declines have slowed as USD/CHF has built into a rather volatile range-bound pattern. Resistance has begun to build around the .9773 level, and we’ve seen multiple iterations of resistance show-up here; each rebuking USD/CHF’s upward advance.

USD/CHF Daily: Range-Bound Since Re-Test of 2016 Low

USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Chart prepared by James Stanley

At this point, a top-side break of that well-worn resistance level could open the door to an attractive bullish breakout setup. Just above this area of resistance is another level of interest at .9813, as this is a prior swing-low point of support that also showed as a quick swing-high before the pair initially sank below .9770. This can be used in a couple of different ways. For traders looking at the more aggressive route of taking on bullish exposure on a break of .9775 (a few pips beyond the exact point of resistance), the level at .9813 can be utilized as an initial target and an opportunity to move the initial stop up to breakeven. Or, for those who want to approach USD/CHF a bit more conservatively, the .9813 level can be used to trigger the bullish breakout, with .9772 becoming an area to look to for stop placement in the effort of containing risk in the event that the breakout doesn’t continue-higher.

On the chart below, we’ve added five potential resistance levels above the .9813 inflection point, each of which has been derived from a prior price action swing and/or group of swings. Each of these can be used as potential targets should the bullish breakout continue if/when resistance is taken out.

USD/CHF Four-Hour: Potential Top-Side Resistance Levels Applied

USD/CHF Technical Analysis: Three Month Highs to Set Bullish Breakout

Chart prepared by James Stanley

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

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CAC 40 Double Tops at Channel Line

Swing trading, chart patterns, breakouts, and Elliott wave

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Talking Points

  • CAC 40 carves a double top pattern
  • Elliott Wave pattern could not push beyond the mid-line of the Elliott Wave channel
  • Bears are activated on a move below channel support near 5200

The Elliott Wave pattern on CAC 40 is intriguing. CAC 40 appears to have finished the five wave impulse move at the Elliott Wave channel mid-line. This implies a weak market and is a bearish pattern.

This pattern suggests that a longer term correction is underway. The first battle of support emerges near 5,200 where the blue Elliott Wave support channel emerges as well as the bottom of the Ichimoku cloud.

Interested in learning more about Elliott Wave and Ichimoku? Grab the beginner and advanced Elliott Wave guide as well as the Ichimoku guide.

CAC 40 Elliott Wave and Ichimoku Pattern

CAC 40 Double Tops at Channel Line

Created using IG Charts

Any near term bulls would need to show themselves in CAC 40 near 5,200. If this level breaks, then the door is opened up to 4,900-5,000. We have two different levels appearing there.

First, the previous wave ‘iv’ extreme is near 5,000. Previous fourth waves tend to act like a magnet in corrective moves.

Secondly, the 38% retracement of the June 2016 (Brexit) low to the November 1, 2017 highs appears near 4,921.

Therefore, if 5,200 breaks, traders can look for further weakness down towards the 4,900-5,000 price zone.

Lower potential exists, but we will need to see the structure of how the correction develops to weigh the odds further.

Why do traders lose money? Find out in our Traits of Successful Traders Research.

---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave analyst with a Master’s designation. This report is intended to help break down the patterns according to Elliott Wave theory.

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Other Elliott Wave forecasts by Jeremy:

GBP/USD Hanging Over the Edge of a Cliff

AUDUSD technical forecast hints at the market searching for a bottom.

Short term EURUSD Pattern Hints at Bounce to 1.17.

USD/CAD dives 200 pips, will it continue?

Gold price forecast points towards lower levels.

Crude oil prices reach highest level since July 2015.

NZDUSD Elliott Wave Analysis: Temporary Relief Rallies

USD/JPY : A Bird in the Hand is Better Than Two in the Bush


Crude Oil Price Forecast: Producer Hedging May Limit Aggressive Upside

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

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Talking Points:

  • WTI Crude Oil Technical Strategy: Buying Dips Above $54.85/bbl
  • Producer hedging likely acting as current detractor from post-OPEC extension gains
  • Sentiment Highlight: the ratio of traders short to long at 1.48 to 1, favoring upside

The price of crude oil continues to be lower than the pre-OPEC decision high of $59.08. However, there are emerging signs that reason for optimism remains for the Bulls.

First, reports from OPEC showed that their crude production dipped in November to the lowest level in sixmonths. Developments like this have some investment banks like Goldman Sachs stating the front-month premiums on so-called commodity spreads could continue to signal a likely rise in prices.

An additional signal outside of what you see on the charts that gains may persist is that the while the price has moved sideways around $57 per barrel, likely producer hedging has picked up mightily. As you can imagine, the rationale for producer hedging is that by buying ‘puts,’ sellers can lock in a currently attractive price on oil produced. Producers appear to have been doing this along the rise seen in H2 2017 because the optionality to sell oil at increasing prices can be offloaded if the prices continue to rise and repurchased. Such moves not only ensure the health of their balance sheets, but also that supply will remain steady.

The way hedging is anticipated by producers is through an increase in short positions by swap dealers, which the CFTC data shows. An increase of put positions tends to put selling pressure on the market, which as you can see on the chart, has merely slowed the advance to a sideways move before what could be a nice continuation into the New Year.

The technical picture shows a chart that was once overheating is now catching its breath. There remains little argument for an outright short crude oil position as OPEC production continues to decline and the price trend remains higher.

The price of WTI Crude oil is expected to attract buyers above the dynamic trendline from Ichimoku of $56.47-54.89 (mid-Nov. low) on dips. Initial resistance was expected at the 1.618% Fibonacci extension at 59.08, and that is where price recently paused. A resumption higher above $59.08 would target a move to $62.

Unlock our Q4 forecast to learn what will drive trends for the Euro and the US Dollar through year-end!

WTI Crude Oil is currently trading above the 5-, 8-, and 13-DMAs last week and settled above the 200-WMA for the last two weeks for the first time since mid-2014. Currently, only a break below $56.47-54.89 would open broader concerns of a short-term top, but above this level, buying dips remains the preference.

Chart Watch: Dynamic Support At 56.47 (26-Period Midpoint) Supporting Price Advances

Crude Oil Price Forecast: Producer Hedging May Limit Aggressive Upside

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

WTI Crude Oil Insight from IG Client Positioning: ratio of traders short to long at 1.11:1

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

Crude Oil Price Forecast: Producer Hedging May Limit Aggressive Upside

Oil - US Crude: Retail trader data shows 47.5% of traders are net-long with the ratio of traders short to long at 1.11 to 1. In fact, traders have remained net-short since Oct 25 when Oil - US Crude traded near 5205.9; price has moved 11.2% higher since then. The number of traders net-long is 5.9% higher than yesterday and 14.0% higher from last week, while the number of traders net-short is 1.7% lower than yesterday and 15.7% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse lower despite the fact traders remain net-short (emphasis added.)

---

Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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Gold Prices Continue Sideways Price Action

Price action and Macro.

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Talking Points:

- Gold prices put in another resistance test last week, but bulls were unable to break above $1,300.

- Retail traders are aggressively long Gold with IG Client Sentiment currently showing +4.04-to-1. Given retail traders’ traditional contrarian nature, this is a bearish indication.

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In our last article, we looked at Gold prices in the midst of sideways price action that had lasted for most of the previous month. And while I’d love to be able to regale you with stories of breakaway trends and momentum trades surging in either direction - that simply has not been the case: The range in Gold prices continues as we tread into the final month of 2017.

Coming into the year, Gold prices were dropping like a rock. This was on the back of the surge being seen in the U.S. Dollar as the ‘Trump Trade’ got further priced-through capital markets. But as that Dollar strength viciously turned into aggressive weakness in the first quarter of the year, Gold prices began to lift-higher. This lasted all the way into June, where a double top around the $1,296 level finally initiated some element of resistance. This is a level that remains resistant, as we saw just last week when price action tried to break through on Monday, Tuesday and Wednesday; only to fail as sellers pushed back down towards the confluent support zone that we’ve been following.

Gold Daily: Resistance Holds, Prices Re-Approach Confluent Support as Mean Reversion Continues

Gold Prices Daily

Chart prepared by James Stanley

In July, Gold strength began to show again, and for almost two full months bulls were in control. This lasted all the way until we ran-up to a fresh one-year high at $1,357.50 in September. After prices pulled back a portion of that move, support started to show around the 61.8% retracement with resistance continuing around the 38.2% level. This gives us near-by levels to work with in looking for the mean-reversion in Gold to finally give way. Support structure can be looked at from the October low up to the November low; a range comprising the levels of $1,260 to $1,265. On the resistance side of the coin, traders can follow the $1,296 double top up to the $1,306 October swing-high.

Once either of these sides give way, traders can begin plotting longer-term directional approaches in Gold. Until then, be cautious around getting caught in between the cracks of support and resistance on near-term Gold charts.

Gold Daily: Near-Term Range Break to Open Door to Longer-Term Directional Approaches

Gold Daily

Chart prepared by James Stanley

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

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Silver Price Woes Deepen as Gold Sellers Finally Wake Up

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

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What’s inside:

  • Silver continues to break support level after support level following pattern, trend-line break
  • Gold just getting started as the December trend-line finally gives way, 200-day MA under siege
  • Levels and lines outlined to watch as recent developments progress
  • Plus, a bonus chart – Platinum

See what’s driving Gold & Silver into year-end in the DailyFX Trading Forecasts.

Silver has been getting rocked for over a week now following the breakdown out of a symmetrical triangle and decline below the July trend-line. There were minor levels of support we were been watching, but buyers were scarce as price has moved from one level to the next. A move into the mid-15s or worse (July low – 15.19, 2003-current trend-line) could soon develop on a clean break of 16, and with gold looking to have started a new leg lower this becomes an increasingly likely outcome. There may be a bounce or two along the way, but barring an extremely sharp turnaround, those should be short-lived. Resistance first clocks in at the October low of 16.34.

Silver: Daily

Silver Price Woes Deepen as Gold Sellers Finally Wake Up

Gold stubbornly held in for a while, but finally succumbed to selling pressure yesterday and as a result it broke the one-year trend-line. Yesterday’s hit also took it outside of a nearly matured wedge. The pattern wasn’t as ‘pretty’ as the one formed by silver, but nevertheless the entanglement that gold has been caught in looks headed for the rear-view mirror. Once firmly below 1261 there isn’t a lot to the left on the chart in the form of support. Minor support around 1251, but after that you have to start looking towards the 1220/05 region to find more meaningful levels. The trend-line from February and then there is the July low. To turn the picture around, we need to see a firm recapturing of the December trend-line, and really things don’t shape up for longs until solid clearance back above 1300.

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Gold: Daily

Silver Price Woes Deepen as Gold Sellers Finally Wake Up

Bonus Chart: Platinum

Platinum is currently breaking an important trend-line extending higher from the January 2016 low, and on that it threatens to take out levels extending back to December of last year. A break of those levels and things could get ugly fast, with nothing in sight until the 2008 trend-line and Jan ’16 low at 811.

Platinum: Daily

Silver Price Woes Deepen as Gold Sellers Finally Wake Up

---Written by Paul Robinson, Market Analyst

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US Dollar Index Attempts to Breakout As Next Big Move Could Guide ’18

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

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Talking Points:

  • US Dollar Index Technical Strategy: Failure to break above 94.20 in Dec. would be worrisome
  • 2018 could continue to see a focus on growth and MonPol normalization outside of US
  • Sentiment Highlight: EUR/USD bearish bias from retail weakens, DXY may see strength

Given the horrible performance of the Dollar Index in 2017 relative to expectations going into the year, it’s fair to ask the following. Can the dollar index hold above 90, a level not traded at since 2014 as the ‘shock & awe’ of monetary policy normalization gets outsourced to other central banks.

A tailwind for the USD in 2014 has become a headwind in 2017 and possibly beyond. The initial boost was the emergence of widespread economic growth. The green shoots caused the Federal Reserve to hint at normalization that began with the rate hike of 2015 and the simple forecasting of normalizing caused the USD to gain ~20% in July 2014 through January 2017. However, the growth has spread (as central bankers hoped it would), and now the central banks that are hinting at possible normalization are the ECB and BoJ, which in turn, may see their respective currencies see the same type of outperformance in 2018 that the DXY did in 2014-Jan 2017. The ECB has already seen the EUR (57.6% of the Dollar Index Weighting) rise 10.6% this year and further gains would likely weigh down on the Dollar Index, which has fallen by 9.5% YTD.

US Dollar Index Attempts to Breakout As Next Big Move Could Guide ‘18

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

The charts can be a helpful guide, but the fundamental backdrop suggests that global growth is helping other currencies much more than the US Dollar despite a hawkish Federal Reserve, which has already been priced into the market. Another argument for the lack of US Dollar upside is seen in the flattening US yield curve between the US Treasury 2 and ten-year security. The flattening yields show a tightening Federal Reserve on the front end as investors are unwilling to sell off the longer-dateddebt for fear that growth and inflation measures will soon fade.

When looking at the chart below, the key zone worth watching is the 200-DMA on the four-hour chart (93.95 and a level that had our previous attention, 94.20. A daily price break and close above that level would indicate short-term strength if nothing else as it would break the series of lowerlows and lower highs were seen since October. A break above this zone would likely be triggered by JPY weakness as risk-sentiment remains positive and the GBP outlook remains uncertain with unfolding Brexit negotiations with a current focus around the Irish border to be discussed on December 14.

The counter view would be a break below the November low near 92.50. A break and close below would likely set the stage for a negative start to 2018, and what could altogether be another poor year if the yield curve continues to flatten and global growth that the Fed has already recognized and implemented into monetary policy plans forces other Central Banks to pull away from their QE regimes.

Unlock our Q4 forecast to learn what will drive trends for the US Dollar through year-end!

US Dollar Index Attempts to Breakout As Next Big Move Could Guide ‘18

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

Insight from IG Client Positioning: Pickup in long positioning favors resistance on price advance

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

EUR/USD sentiment is analyzed for insight since EUR/USD makes up 57.6% of DXY.

US Dollar Index Attempts to Breakout As Next Big Move Could Guide ‘18

EURUSD: Retail trader data shows 38.4% of traders are net-long with the ratio of traders short to long at 1.61 to 1. The number of traders net-long is 30.0% higher than yesterday and 12.2% higher from last week, while the number of traders net-short is 4.3% higher than yesterday and 15.0% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse lower despite the fact traders remain net-short (emphasis added.)

---

Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

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Contact and discuss markets with Tyler on Twitter: @ForexYell


S&P 500 at Risk of Further Downside in Days Ahead

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

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What’s inside:

  • S&P 500 sprint to new record highs found resistance at upper parallel from 2016
  • Monday’s ‘gap-n-trap’ off resistance after volatile session shifts focus lower
  • Looking for a pullback to continue in this sequence towards 2600

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The recent sprint to new record highs in the S&P 500 brought it to a top-side trend-line starting back at the peak in April 2016 which crosses over the March high and over the point where the market stalled late last week into Monday. The gap and intra-day reversal (aka ‘gap-n-trap’) to start the week gave indication that the ‘blow-off’ period we were discussing last week had likely, at the least, come to a pause, if not signaling an outright decline to take place next.

Market participants have been conditioned over time to ‘buy-the-dip’, every little dip. So far, that has been the right play, and indeed with seasonality favorable we could see the dip bought again. But the optimal spot may not come until we see overbought conditions alleviated a bit more, either through time, price, or both. Even if the S&P 500 were to rise back up towards Monday’s high, the trend-line which put the stop on it this week could do-so once again.

Barring a complete resurgence to new highs and strong close above the upper trend-line, a drop down into a sizable area of support may be just around the corner. There is confluence between varying angles of support surrounding 2600 (+/- 5 points). The slope from June (which has several points of influence), the August trend-line, and swing-high created in November all run together in the same general vicinity.

S&P 500: Daily

S&P 500 at Risk of Further Downside in Days Ahead

This was brought up last week, but it’s worth mentioning again. The area we are at now is quite important from a long-term standpoint. There is an upper parallel starting all the way back in 2009 that may have a material influence on the market as the calendar flips to 2018. We may be nearing the end of a ‘wave-5’ high. For more on this, check out this piece.

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S&P 500: Weekly

S&P 500 at Risk of Further Downside in Days Ahead

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---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinonFX.


DAX Technical Analysis: Waiting for a Range Breakout, Levels to Know

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

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What’s inside:

  • DAX remains stuck in volatile range after false breakdown on Friday
  • Closing print required above or below range resistance or support
  • Taking a reactionary approach and waiting for a confirmed breakout

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On Friday, the DAX put in a closing print below support in the 12900s, but it came with a caveat. The drop happened into the close of the session on political headlines in the U.S., which sunk European markets without them having a chance to recover with U.S. markets. Which they did. As a result, yesterday’s gap higher reflected a readjustment for the ‘dip-and-rip’ which took place during afterhours.

Nevertheless, the DAX is sitting with a weak technical backdrop as it continues to lack any power to the upside despite testing a fairly substantial area of support. The area around the bottom of the 2+ week range continues to hold, but for how much longer will that be the case?

Another strong closing print towards last week’s low or below it is seen as a reason for the market to find additional sellers, with the next level of support arriving at the July swing-high at 12676. This appears only minor in significance, with the next real area of interest clocking in closer to 12500 where the June 2016 trend-line and 200-day MA are quickly rising to a point of confluence.

A close above 13209 remains viewed as needed if the DAX is to get into gear and trade back towards the previous record high. We may see some more chopping around before a resolution of the range, and on that we’ll wait patiently until further clarity presents itself. It could be today, it could be a week or longer.

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DAX: Daily

Dax daily chart

---Written by Paul Robinson, Market Analyst

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ASX 200 Technical Analysis: Evolving Pennant Trumps Double-Top

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • Last week the ASX 200 stood at a crossroads
  • A bearish double top formation was possible, but so was a much more bullish pennant
  • Now it looks as though the latter prospect dominates

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When I last looked at the ASX 200’s charts a week ago they seemed to offer two possible futures.

The trouble was that they were mutually exclusive. One prospect was that of a classic, bearish double top. In that scenario the index would have peaked again at the highs of early November but failed to push on, presaging a broader, deeper fall. That might have put the entire climb up from October’s lows into sinister focus.

Now it’s still a little too early to rule out that possibility entirely but, a week later, it does look far less likely. The index did make a second top on November 28 but, had the formation held, then it seems most unlikely that the subsequent falls would have run into support as soon as they did.

ASX 200 Technical Analysis: Evolving Pennant Trumps Double-Top

So, if we write off the double top, what does that leave us with. Well, for the bulls it’s quite good news. For the other possibly scenario I wrote about last week was a pennant formation. And that seems to have been confirmed in spades.

As you can see the ASX bounced at the pennant’s uptrend base on December 5, only to peak out at its downtrend top on December 8.

ASX 200 Technical Analysis: Evolving Pennant Trumps Double-Top

In short this pennant has plenty of confirmation and is usually seen as a ‘continuation pattern.’ What that means is that, once the pattern plays out, the market should continue to behave as it did before the pattern started. In this case of course that would mean that it starts to climb again. Of course, it could be some time before it does so. As you can see from the chart this formation could be with us until the early days of 2018.

But it certainly bears watching. Assuming it holds then support should come in around 5945, with subsequent resistance in the 6008 area. If we see another trough and peak around either of those levels, then it will be a very strong sign that this constructive pennant is holding and that the bulls can hope for good things.

A word of caution is order though. Pennant or no pennant the ASX has not looked particularly comfortable above the 6,000 mark for quite a long time. Forays there have been brief going all the way back to 2008. It will take a lot to overcome this ‘muscle memory’ even if the index’s climb resumes.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


Nikkei 225 Technical Analysis: Near-Term Uptrend Under Threat

Financial markets, economics, journalism and fundamental analysis.

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Talking Points:

  • The Nikkei is bearing up quite nicely, not too far from its highs for this year
  • But, that said, the index isn’t in any obvious hurry to break new ground to the upside
  • Indeed a near-term uptrend channel is now under some threat

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The Nikkei 225 daily candlestick charts present the technical analyst with a clear difficulty at present – that of finding a meaningful set of near-term trend lines.

Last Wednesday’s intraday low and November 9’s intraday high both skew the picture perhaps unacceptably if they are included. In any case they both look quite spurious even if the latter level does represent this year’s high point so far for the Tokyo equity benchmark.

However an arguably more meaningful uptrend channel can be drawn if we ignore both and instead focus on the climb in place since October 19- itself a portion of the overall rise from the lows of late August.

Nikkei 225 Technical Analysis: Near-Term Uptrend Under Threat

And what we see here is a little disquieting, at least for those with bullish hearts. For while the Nikkei might looks comfortable enough at a relatively elevated level, this chart suggests that its uptrend is waning. This need not be definitive of course. The possible pennant formation I talked about last week has played itself out and, while there’s little sign of a push higher yet, the index is at least holding on.

The index is currently just below the first 23.6% Fibonacci retracement of its climb from September 10’s lows. That comes in at 22501, just a whisker from current levels. Should that give way conclusively on a daily or weekly close basis then keep an eye on that uptrend channel.

If that goes too then focus will be on the next retracement level, that at 38.2% of the previous gain. It currently kicks in at 21887.6 and that level doesn’t appear to have a lot of chart validation as likely support.

Nikkei 225 Technical Analysis: Near-Term Uptrend Under Threat

That said the index may be hovering as it is for reasons more fundamental than technical. A crucial US labour-market report looms this week and behind it, next week, approaches the final Federal Reserve monetary conclave of 2017.

The US central bank is thought all-but certain to raise interest rates then, but that potential has been extremely well flagged and must be pretty well priced in to all markets now, including the Nikkei. The Fed’s prognosis for 2018 will matter far more, three rate hikes currently penciled in.

These fundamentals are likely to run all markets until the Fed’s mind is known.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX


FTSE – A Lot of Resistance, Some Support, a Pound of Impact

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

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What’s inside:

  • FTSE dropped hard into support and held, but…
  • Has numerous points of resistance and poor trend structure
  • Brexit talks and potential Pound volatility further muddy the waters

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A week ago, when we were discussing the FTSE it was noted that the volatile price action around resistance gave shorts the upper-hand. But this would likely only be the case for a little while as big support arrived not far below in the 7315/290 vicinity, of which the zone was only breached by a couple of points before turning around this week. It was thoroughly tested twice, once on Friday and again yesterday. Solid support, but…

Overall, the trend since the high a month-ago remains postured bearishly with a series of lower-lows and lower-highs in place, however; there is enough solid footing for the market to hold onto that it now leaves shorts with limited ‘open space’ to operate without running the risk of another bounce. It’s a tricky spot at the moment, but it looks likely there will still be pressure on the footsie for now, and as such, rallies are likely to face sellers.

Resistance arrives from around 7370 up to 7400-ish. This area consists of the bottoms created during the swing-low in November, underside of the recently broken December 2016 trend-line, 200-day MA, and trend-line off the record high. Indeed, a lot of resistance to contend with. Support clocks in right around 7290, and below there the trend-line extending from April beneath the September low, roughly 7255.

Muddying the waters further are Brexit talks through Friday, when the UK is to give a recommendation to the EU council. Pound volatility is set to impact UK stocks, especially the currency-sensitive FTSE 100 with its largely multi-national make-up (FTSE/GBPUSD 1-mo correlation = -63%). For now, we’ll take a neutral stance and come back when the picture presents a better-looking scenario.

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FTSE: Daily

FTSE Daily chart

---Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at @PaulRobinsonFX