Archive February 2019

Chinese Yuan Takes Spotlight – Investors Buy as China Borrowing Jumps


DailyFX Podcast Talking Points:

  • A patient Federal Reserve (per Fed Funds Futures) could lead to eager to buy investors
  • Is the Yuan a proxy for a rush back into global assets that have recently been oversold?
  • Key metals like Iron Ore see a premium paid on upside options likely signaling upside
  • Prefer to listen to market views? Check out Trading Global Markets Decoded, the DailyFX Podcast

Is the SPX in a bear market rally with 2,800 being resistance or are things fundamentally different enough to encourage investors to keep buying in views of a brighter future in the near term? That is the question the DailyFX’s Sr. Analyst; Tyler Yell looks to answer in this week’s show with a handful of supporting points that are worth your consideration.

A key bear market is also underway in a market that gets too little attention. Volatility, whether you look at bonds, equities, or FX has plummeted in early 2019 that may also favor further upside albeit at a slower pace than that.

Stock, Fixed Income, & Currency Volatility YTD Factored by 100

Volatility,VIX

Data source: Bloomberg

What’s Going On?

The S&P 500 continues to rally up with the help of the Fed as chairman Jerome Powell provides a positive economic outlook while communicating patience is the play in 2019.

Commodity,SPX,Fed

Data source: Bloomberg

What Does This Mean?

As we see in the graph above, the bond market has been performing in the opposite direction as the equity market, which tends to be normal. In times of uncertainty and fear, the volatility index moves in the same direction as the bond market.

When looking at the 2008 crisis, the bond market outperformed the equity market, and the VIX index was at its highest. Investors tend to tilt towards less volatile investments such as government bonds in times of uncertainty and given the potential deal between China and the U.S, the Fed’s positive outlook and increase in market confidence; it would be no surprise if the equity market continues upwards in the short-term.

Record-Breaking New Lending MoM in China Propels CSI 300 Higher

New Lending China

Data Source: Bloomberg

What’s Going On?

In 2018, China witnessed one of its slowest growth as a result of the trade war. The government had set in place some stimulus programs to lessen the effect, and it seems to now be kicking in. It has been reported that new yuan loans have hit a record this month of 3.23 trillion yuan making their monthly assets equivalent to that of all the global banks combined.

What Does This Mean?

As small and medium companies take advantage of the liquidity injected by the government, we may see China’s economy pick up especially with the potential truce between U.S and China. Although this may seem positive, the country needs to be cautious and ensure that there aren’t too many funds circulating since not only can it increase inflation, it will further increase their debt-to-GDP ratio, which is already too high.

Iron Ore Options Continue to Seek Upside Protection

Iron Ore and commodity

Source: Bloomberg

What’s Going On?

Iron ore premiums increase on call options as prices may continue to increase.

What Does This Mean?

With the closing of Vale’s mine and iron ore production declining in China, this shift in supply may push markets to drive prices higher since the demand would likely be higher than the supply. This looks to have resulted in a higher call option premium shown in blue on the chart above.

WANT MORE?

Sr. Analyst, Tyler Yell, CMT covers these topics and more in the DailyFX podcast; Trading Global Markets Decoded that you can access here.

— Written by Nancy Pakbaz, CFA

Follow Nancy on Twitter @NancyPakbazFX





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Gold Price Technical Outlook: XAU/USD Correction Underway


Gold prices reversed off trend resistance this week with the move risking further losses heading into the March open. These are the updated targets and invalidation levels that matter on the XAU/USD charts into the close of the week. Review this week’s Strategy Webinar for a complete review of this setup and more.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold Daily Price Chart (XAU/USD)

Gold Price Chart - XAU/USD Daily

Technical Outlook: In my last Gold Technical Outlook we noted that price had reversed off channel resistance on building momentum divergence with the immediate threat lower while below 1341. The decline has now broken below monthly-open support at 1321 and keeps the focus on a larger correction in price with broader bullish invalidation steady at the 1302 confluence support zone.

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Gold 120min Price Chart (XAU/USD)

Gold Price Chart - XAU/USD 120min

Notes: A closer look at price action shows gold trading within the confines of a near-term descending channel formation extending off the weekly highs with price now approaching targeted support at the 38.2% retracement at 1311. Look for a reaction there with a break lower targeting the 100% ext at 1307 and key support at 1302/03 – an area of interest for possible exhaustion / long-entries IF reached. Initial resistance stands at 1321 backed by the weekly open at 1327 with broader bearish invalidation at the weekly opening-range high at 1332.

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Bottom line: The immediate focus remains lower while within this formation but we’re looking for a reaction on move towards near-term channel support for guidance. From a trading standpoint, I’ll favor fading weakness targeting 1311 & 1307. Ultimately a larger setback here may offer more favorable long-entries from lower levels next month.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment

Please add a description for the image.

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.34 (70.1% of traders are long) – bearishreading
  • Long positions are1.0% lower than yesterday and 13.4% higher from last week
  • Short positions are 3.0% lower than yesterday and 12.7% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Spot Gold-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

Active Trade Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

https://www.dailyfx.com/gold-price/how-to-trade-gold.html?ref-author=Boutros





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Dow Jones Will Look to Inflation Data, Fed Expectations on Friday


Stock Market Talking Points:

  • The Dow Jones will look to Friday’s core PCE data and unemployment figures
  • Financials will be an important sector to watch in Friday’s trading as inflation expectations shift and bank stocks react accordingly
  • As for trading opportunities, the US Dollar may absorb the bigger impact given the nature of the data

See how IG clients are positioned on the Dow Jones, Crude oil and the US Dollar with our free IG Client Sentiment Data.

Friday’s US equity session may be guided by the financial sector as investors get a taste of inflation – and in turn an adjustment to rate forecasts – through the release of core PCE data. Since the equity tumble in October and December, bank stocks have lagged the broader S&P 500 as the market adapted to rate hike expectations. In turn, the lower rate expectations effectively reduced the profit potential for banks as interest rates look to remain low for longer.

Dow Jones Price Chart: Daily Time Frame (January 2017 – February 2019) (Chart 1)

dow jones and xlf etf price chart

Dow Jones price chart overlaid with ratio of S&P 500 to XLF ETF in red. Fed funds futures in blue.

It is no surprise then that the XLF ETF, a SPDR fund that provides exposure to the US financial sector, has trailed the broader S&P 500 since late December as reflected in the ratio of SPX to XLF. The depths of December coincide with a shift in Fed Chairman Powell’s tone that subsequently saw rate hike expectations plummet. Reinforcing this under-performance, the XLF ETF notched considerable outflows around the time of the dovish shift.

XLF ETF Outflows and Price Overlaid with S&P 500 (Chart 2)

XLF ETF price chart and fund flows

Since October 1st, the XLF ETF has recorded nearly $5.6 billion in outflows. December alone notched roughly $3.1 billion in outflows. Apart from a huge inflow on January 2nd, the fund has come under immense selling pressure as the outlook for the financial sector shifted on the Fed’s new tone. While some of the selling is attributable to broader equity pressure, it is important to note the sustained outflows even as the broader equity market rebounded in January and February. Those months saw another $1.5 billion exit XLF.

That said, US economic data has been relatively strong in recent weeks. US fourth quarter GDP surprised analysts and regional data along with sentiment indicators have rebounded considerably from January. Should Friday’s core PCE data deliver a similar surprise, financials will be the sector to watch as investors gauge the data’s impact on monetary policy and the knock-on effect it could have for individual bank stocks.

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Together, the financial sector could work to buoy or pressure the Dow Jones. Similarly, the inflationary takeaways from the data could impact the Dollar to a greater extent than the Dow. Given the nature of Friday’s data and the potential for a market reaction, the US Dollar may be a more appropriate vehicle to source volatility in tomorrow’s session.

US Dollar Price Chart (DXY): 1-Hour Time Frame (January 28 – February 28) (Chart 3)

dollar price chart february

The Dollar has been pressured the last two weeks, retreating from 97.37 to lows around 95.80 on Thursday. Poor PCE data could spur a continuation of the recent downtrend, while a surprise to the topside could propel the Greenback to test the resistance from the recent decline highlighted in the chart above. Check out a deeper analysis of the US Dollar for different perspectives on opportunities through Friday’s session.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: EURUSD Continues Towards Range Resistance; GBPUSD Breakout Stalls

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.





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Sentiment Suggests Price May Soon Reverse


EURUSD

52% OF TRADERS ARE NET-LONG

EURUSD: Retail trader data shows 52.0% of traders are net-long with the ratio of traders long to short at 1.09 to 1. The number of traders net-long is 8.2% lower than yesterday and 21.3% lower from last week, while the number of traders net-short is 1.5% lower than yesterday and 22.9% higher from last week.

For more in-depth analysis, check out the Q1 2019 Forecast for the Euro

EURUSD SENTIMENT SUGGESTS A MIXED BIAS

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

Having trouble developing your strategy? Here’s the #1 mistake that traders make.

— Written by Nancy Pakbaz, CFA, DailyFX Research

Follow Nancy on Twitter @NancyPakbazFX





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NZD/USD Technical Price Outlook: Kiwi Consolidation Narrows


The New Zealand Dollar broke below the weekly opening-range low after turning from range resistance yesterday and remains at risk for further losses against the US Dollar heading into the March open. These are the updated targets and invalidation levels that matter on the NZD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

New to Forex Trading? Get started with this Free Beginners Guide

NZD/USD Daily Price Chart

NZD/USD Price Chart - New Zealand Dollar vs US Dollar Daily

Technical Outlook: In my latest NZD/USD Weekly Technical Outlook we noted that Kiwi had, “carved out an even clearer range between 6707-6941 and the focus heading into the close of the month is on a break of this range.” Price posted a reversal candle off the yearly high-day close at 6890 yesterday with momentum failing ahead of the 60-threshold (typically bearish).

Daily support is eyed at the confluence of the 100 & 200-day moving averages at 6750/56 backed by the 61.8% retracement of the yearly range / 2018 trendline support at ~6722 (area of interest for possible exhaustion / long entries IF reached). A close below 6700 would validate a break of the 2019 consolidation range with such a scenario exposing 6633. Key resistance / broader bearish invalidation steady at 6922/31.

Learn how to Trade with Confidence in our Free Trading Guide

NZD/USD 120min Price Chart

NZD/USD Price Chart - New Zealand Dollar vs US Dollar 120min

Notes: A closer look at price action shows Kiwi turning rom the median-line of an ascending pitchfork formation extending off the yearly lows with an embedded descending formation keeping the focus lower while below 6861. Initial resistance stands at 6813 with near-term confluence support yeed at 6785/90– a break below this level is needed to keep the short-bias viable targeting subsequent objectives at 6750/56 and 6722.

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Bottom line:NZD/USD has turned from range resistance with the decline now targeting near-term confluence support. From a trading standpoint, we’re looking for a reaction on move lower towards the lower parallel with a break below needed to keep immediate focus lower. I’ll favor fading strength while below 6843 targeting a downside break – ultimately, be on the lookout for exhaustion on a move towards 6700 IF reached.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

NZD/USD Trader Sentiment

NZD/USD Trader Sentiment

  • A summary of IG Client Sentiment shows traders are net-long NZD/USD – the ratio stands at +1.12 (52.9% of traders are long) – neutral reading
  • Long positions are6.9% lower than yesterday and 2.2% higher from last week
  • Short positions are 11.6% lower than yesterday and 13.2% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZD/USD prices may continue to fall. Yet traders are more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed NZD/USD trading bias from a sentiment standpoint.

See how shifts in NZD/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant NZD/USD Data Releases

NZD/USD - New Zealand / US Economic Data Releases

Economic Calendarlatest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Active Trade Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

https://www.dailyfx.com/free_guide-tg.html?ref-author=Boutroshttps://www.dailyfx.com/free_guide-tg.html?ref-author=Boutros





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Bullish Momentum Unravels Following US GDP Report


Gold Talking Points

The price for gold slips to a fresh weekly-low ($1317) as the U.S. Gross Domestic Product (GDP) report shakes up the outlook for monetary policy, and the failed attempt to test the 2018-high ($1366) may generate a larger correction in the precious metal as the bullish momentum starts to unravel.

Image of daily change for major currencies

Gold Price Forecast: Bullish Momentum Unravels Following US GDP Report

Image of daily change for gold prices

Gold is back under pressure as fresh updates to the U.S. GDP report show the growth rate expanding 2.6% in the fourth-quarter of 2018 versus projections for a 2.2% print, and the developments may sway the outlook for monetary policy as the core Personal Consumption Expenditure (PCE), the Federal Reserve’s preferred gauge for inflation, unexpectedly climbs to 1.7% from 1.6% per annum during the three-months through September.

The positive development may encourage Fed officials to squeeze in a rate-hike later this year as cycle as the central bank pledges to be ‘data dependent,’ but the ongoing shift in trade policy may encourage a growing number of Fed officials to adjust the Summary of Economic Projections (SEP) at the next meeting in March as U.S. Trade Representative Robert Lighthizer warns that ‘much still needs to be done before an agreement can be reached’ with China.

Image of fed balance sheet

In turn, the Federal Open Market Committee (FOMC) may continue to change its tune over the coming months amid the ‘crosscurrents’ clouding the economic outlook, and the stronger-than-expected GDP print may do little to revive the hawkish forward-guidance for monetary policy as Chairman Jerome Powellwarns of ‘muted’ inflation. In fact, it seems as though the FOMC is preparing to taper the $50B/month in quantitative tightening (QT) as Chairman Powell states that ‘the Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff, and the change in the monetary policy outlook may continue to heighten the appeal of gold as the central bank appears to abandoning the hiking-cycle.

With that said, the broader outlook for bullion remains constructive, but the precious metal may stage a larger pullback over the coming days as the bull-flag appears to have run its course. At the same time, recent developments in the Relative Strength Index (RSI) suggest the bullish momentum will continue unravel as it falls back from overbought territory and snaps the upward trend from late-last year. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Gold Daily Chart

Image of gold daily chart

  • Lack of momentum to test the 2018-high ($1366) may spark a larger correction in gold, with the recent development raising the risk for a further decline as the price for bullion initiates a series of lower highs & lows.
  • In turn, a close below the $1315 (23.6% retracement) to $1316 (38.2% expansion) region brings the former-resistance zone around $1298 (23.6% retracement) to $1302 (50% retracement) on the radar, with the next region of interest coming in around $1279 (38.2% retracement) to $1288 (23.6% expansion).

For more in-depth analysis, check out the 1Q 2019 Forecast for Gold

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other markets the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.



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Further GBPUSD Gains Likely Limited Near-Term


GBP price analysis and outlook:

  • GBPUSD has been rising within an upward-sloping channel on the charts.
  • However, a pause now seems likely before its climb resumes.

GBPUSD advance running out of steam

The GBPUSD price has been strengthening for nearly two weeks now as fears that the UK will leave the EU without a Brexit deal have receded. However, a pause is now possible before the rally extends higher. As the hourly chart below shows, the pair is already finding it hard to make a significant break above the 1.33 level.

GBPUSD Price Chart, Hourly Timeframe (February 15-28, 2019)

Latest GBPUSD price chart.

Chart by IG (You can click on it for a larger image)

Moreover, the trendline joining the recent higher highs is now around 1.3385 and the price will have to break through it before reaching the next important psychological level of 1.34. In addition, the daily chart shows the pair stalled just above the 1.34 level on several successive days back in June 2018, adding to the resistance there.

On the other hand, the downside is now well protected, with a raft of moving averages sitting below the current price. Note too that the RSI on the chart above is no longer at the 70 level signifying the pair has been overbought and that there is still a bullish signal from the retail trader sentiment data.

Resources to help you trade the forex markets:

Whether you are a new or an experienced trader, at DailyFX we have many resources to help you:

— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex





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US Dollar Gains on GDP Data, GBPUSD Losses May be Fleeting


GBPUSD Price and US Q4 GDP:

  • US Q4 2018 GDP beats expectations but Q1 2019 growth likely to slow.
  • Sterling consolidation ahead of renewed upside move.

Q1 2019 GBP and USD Forecasts and Top Trading Opportunities

GBPUSD is backing off in early NY turnover after US Q4 GDP beat market expectations – 2.6% vs 2.2% – giving the greenback a small bid. The US data showed that business investment and private consumption remained firm with a sharp rise in intellectual property rights (13.1%) helping to fuel the uplift. However recent poor US hard data, including December’s shockingly weak retail sales, point to a slowing US economy and today’s print may be the best for some quarters, signaling a softer greenback in the weeks ahead.

On the left-hand side of GBPUSD, Sterling continues to push higher as No Deal Brexit concerns dissipate. No firm developments have yet been decided or at least disclosed, reigning in the British Pound, but further upside looks the path of least resistance. Today’s short-term setback in the pair could continue back down to a cluster of supports between 1.3220 (January 25 high) and 1.3177 (38.2% Fibonacci retracement) but further losses from here will likely need a negative Brexit headline to give the move momentum. The recent move above the September 20 high around 1.3300 needs to be closed above to add confirmation to further upside moves. The RSI indicator is in overbought territory, after the recent rally from the February 14 low around 1.2770 and should be respected.

Further GBPUSD Gains Likely Limited Near-Term.

GBPUSD Daily Price Chart (February 2018 – February 28, 2019)

US Dollar Gains on GDP Data, GBPUSD Losses May be Fleeting

Retail traders are 45.3% net-long GBPUSD according to the latest IC Client Sentiment Data, a bullish contrarian indicator. Recent changes in daily and weekly sentiment however give us a mixed trading bias for GBPUSD.Weekly short-positions are 35.7% higher than last week, as retail seemingly sell into the recent rally.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.





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EURUSD Continues Towards Range Resistance; GBPUSD Breakout Stalls


EURUSD, GBPUSD, US Dollar Talking Points:

The US Dollar continues to retreat with sellers showing-up again around this morning’s European open. This has helped USD to craft a fresh three-week-low, dropping below the 96.00 area that had helped to provide support yesterday. In a corresponding move, EURUSD tested above the 1.1400-handle, threatening to fill-in the longer-term range formation that’s held in the pair over the past three months.

The outsized bullish breakout in the British Pound has run into resistance as GBPUSD has held the highs at the 1.3350 area. USDCHF is breaking down this morning, making a run towards the .9902 level of prior support; and USDJPY remains near highs despite the USD bearish push this morning, keeping that pair as an attractive option for strategies based upon USD-strength.

– DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

The US Dollar is posing a bounce from a fresh low this morning, as sellers showed-up during the Euro session and have continued to push the US currency lower. DXY set a fresh three-week-lows after dropping below the 96.00 level yesterday, and this has helped EURUSD to post a topside test above the 1.1400 handle.

In the US Dollar, the area of interest for bears would likely remain around that 96.00 zone of prior support, which could open the door for bearish continuation strategies. Secondary resistance could be followed from the previous support zone, running around the 96.27-96.30 area, taken from the 50% marker of the prior bullish move.

US Dollar Two-Hour Price Chart

us dollar usd two hour price chart

Chart prepared by James Stanley

EURUSD Shies Away from Wedge Resistance; Tip-Toes Up to Longer-Term Range Resistance

The longer-term range formation in EURUSD is continuing to hold as buyers have been able to finally pose a push above the 1.1400-handle. The longer-term range has shown resistance in a zone that runs from 1.1448-1.1500, and the big question at this point is whether Euro bulls have the enthusiasm to drive that high.

EURUSD Daily Price Chart

eurusd eur/usd daily price chart

Chart prepared by James Stanley

On a shorter-term basis, prices are testing the resistance side of a rising wedge formation; and as I discussed yesterday, the bullish move in EURUSD over the past two weeks has priced-through in an almost begrudging manner, as buyers have continually slowed the approach upon re-tests of prior highs while remaining fairly active around support (which is what led into the formation of the rising wedge, in the first place).

EURUSD Two-Hour Price Chart

eurusd eur/usd two hour price chart

Chart prepared by James Stanley

USDCHF Drops From Parity, Makes Run Towards .9902

Going along with that Euro strength this morning has been a bearish push in USDCHF, with Franc bulls pushing the pair below the parity level that had previously held the lows in the pair. I had looked at this market as part of this week’s FX Setups as an option for working with USD-weakness, and this is part of a longer-term scenario that saw a key resistance level come into play a couple of weeks ago.

Next areas for support potential on the pair are the .9902 area, which had helped to hold the late-January swing-low. After that, .9850 is of interest, followed by the zone that runs from .9750-.9767.

USDCHF Four-Hour Price Chart

usdchf usd/chf four hour price chart

Chart prepared by James Stanley

GBPUSD Breakout Pauses

Yesterday saw a strong topside move in the British Pound as the diminishing prospect of Hard-Brexit created a sharp bullish move in the currency. GBPUSD perched to as high as 1.3350, at which point prices began to digest that prior topside move. The big question now is which push is next? Will buyers be able to pose another topside breakout beyond the 1.3350 level? Or, will a pullback be in order before that bullish drive might have the backdrop for continuation. I had looked into each of these scenarios in yesterday’s technical article on the pair entitled, GBPUSD: Cable Rally Goes Overbought on Run to Seven-Month Highs.

GBPUSD Hourly Price Chart

gbpusd gbp/usd hourly price chart

Chart prepared by James Stanley

USDJPY Holds Near Highs as Yen-Weakness Remains

Despite the fact that the US Dollar remains on its backfoot, USDJPY continues to hold near recent highs. Even with the Greenback driving lower throughout this week, USDJPY has retained its prior bullish structure, posing a revisit to earlier February support before pushing back-up to the 111.00 level. This can help to keep the pair as an attractive option for USD-strength strategies; but USDJPY may need a deeper retracement to clear out some stops before the longer-term bullish move might be ready for continuation. I had looked at two manners of approach around the pair in this week’s FX Setups. The first of those was to look for topside breakouts upon prints of fresh highs. And while the fresh high showed up on Monday, continuation did not follow as prices pushed back to that 110.30 support. The second manner of approach remains as an option, with a pullback to find support at a zone of prior resistance. This would be the same resistance zone that helped to hold the highs as part of the ascending triangle in the pair earlier this month, which had led into that breakout up to the 111.00 level.

USDJPY Four-Hour Price Chart

usdjpy usd/jpy four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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EURUSD Short-term Chart Wedging Towards a Resolution


Struggling right now? It happens to the best. Check out these four core ideas to help boost your Confidence as a Trader.

EURUSD 4-hr rising wedge set to lead to price movement

Euro volatility has been low of late to say the least, with ranges of varying time-frames rivaling those back in 2014 when volatility was at a historical extreme. While these conditions could persist for some while longer, there will be short-term pockets of opportunity.

The rising wedge on the 4-hr chart suggests we are on the verge of movement. It has a corrective look to it given the context of a generally weak trend. However, this doesn’t mean EURUSD won’t break higher out of the pattern, which is why we need to wait.

There are three ways I see this possibly playing out. The simplest scenario is for a break of the lower trend-line making up the wedge and then a clean dive towards the 11200-mark or worse could be on its way. However, at the time of this writing (still a couple of hours until the 2pm GMT 4-hr candle closes) the second, but slightly more complicated scenario, is looking increasingly likely.

It involves a breakout to the upside into trend-line resistance from last month (again if the 4-hr candle closes outside the pattern), followed by a failure back through the bottom-side trend-line of the rising wedge formation. This would be a ‘head-fake’ trade, where the market gets sucked in long then having the rug yanked out from underneath.

The third scenario is that we see a top-side break and run through trend-line resistance. This is viewed as the most difficult of the three scenarios to execute as it would require buying a currency that has not been kind to traders taking a.) breakout-style trades and b.) bullish set-ups.

We are very near finding out which one of these will play out, and at the very least an uptick in volatility looks to be around the bend. While one of the above scenarios might not turn out to be appealing, higher volatility could at least bring with it a currently unforeseen opportunity in the near future.

Check out the longer-term EURUSD forecast in the DailyFX Euro Forecast.

EURUSD 4-hr Chart (Wedge break scenarios)

EURUSD 4-hr chart, wedge break scenarios

***Updates will be provided on these ideas and others in the trading/technical outlook webinars held on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

—Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX





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