Oil Prices Slide – IMF Fires Warning Shot for US & China Consumers


Oil Price Talking Points

Oil fails to retain the upward trend from earlier this year as it snaps the monthly opening range, and the weakening outlook for global growth may continue to drag on the price of crude amid the ongoing trade dispute between the U.S. and China, the two largest consumers of oil.

Image of daily change for major financial markets

Oil Prices Slide – IMF Fires Warning Shot for US & China Consumers

Image of daily change for oil prices

Oil prices remain under pressure following the warning shots from the Organisation for Economic Co-operation and Development (OECD), and it remains to be seen if the Organization of the Petroleum Exporting Countries (OPEC) will respond to the weakening outlook for global growth as the U.S. and China struggle to reach a trade deal.

Image of IMF forecast

The ongoing shift in U.S. trade policy may become a growing concern as the International Monetary Fund (IMF) insists that ‘consumers in the US and China are unequivocally the losers from trade tensions,’ and the group goes onto say that ‘failure to resolve trade differences and further escalation in other areas, such as the auto industry, which would cover several countries, could further dent business and financial market sentiment, negatively impact emerging market bond spreads and currencies, and slow investment and trade.

With that said, OPEC and its allies may come under pressure to boost production at the next meeting on June 25 as the rise in tariffs are expect to curb the purchasing power for U.S. and Chinese households, but the ongoing alliance may keep oil prices afloat in 2019 as the producers pledge to keep ‘inventories under control.’

Nevertheless, the recent price action in crude raises the risk for a larger correction as the price of oil snaps the monthly opening range, with the downside targets now on the radar as crude prices fail to preserve the upward trend from earlier this year.

Crude Oil Daily Chart

Image of oil daily chart

  • Keep in mind, a ‘golden cross’ formation appears to have taken shape as the 50-Day SMA ($61.10) crosses above the 200-Day SMA ($60.39), but the difference in slope undermines the potential for a bullish signal.
  • Crude has taken out the monthly opening range following the failed attempt to break/close above the $62.70 (61.8% retracement) to $63.70 (38.2% retracement) region, with a move below $57.40 (61.8% retracement) opening up the Fibonacci overlap around 54.90 (61.8% expansion) to $55.60 (61.8% retracement).
  • Will keep a close eye on the Relative Strength Index (RSI) as it quickly approaches oversold territory, with a break below 30 raising the risk for a further decline in the price of oil as the bearish momentum gathers pace.

For more in-depth analysis, check out the 2Q 2019 Forecast for Oil

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 Strategist

Follow me on Twitter at @DavidJSong.



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Bearish Momentum Continues as Brexit Turmoil Weighs


GBP/JPY Price Outlook, Charts and Analysis

  • Markets are pricing in UK PM Theresa May’s exit from 10 Downing Street.
  • GBP/JPY is currently trading at its lowest level in more than four months.

Download the Q2 GBP and JPY forecasts and discover what is likely to move the price through mid-year!

Find out more about GBP and JPY data releases for this week from the DailyFX Economic Calendar

Just getting started? See our Beginners’ Guide for FX traders

GBP/JPY – Sellers Remain in Charge

On May 6, GBP/JPY opened with a downside breakaway gap starting a fresh movement lower. On May 13 the price opened with a measuring gap to the downside showing more weakness and pushing lower to carve a lower low on May 17 at 139.55.

On May 21 GBP/JPY rallied towards 141.74. However, the pair pulled back in the same day and closed below 140.50 reflecting buyer hesitation. Alongside this development, the relative strength indicator (RSI) failed to break above (30) and continued moving within the oversold territory, emphasizing the strength of the bearish momentum.

Today the GBP/JPY hit the levels we mentioned in last week article. Read More: Further Bearish Momentum Hints at 139.00

GBP/JPY DAILY PRICE CHART (FeB 2019 – MAY 23, 2019)

GBP/JPY price Daily Chart 23-05-19

Looking at the GBP/JPY daily chart shows the price testing the low end of the current trading range (139.00 – 140.50). If the pair close today below 139.00 the price may edge lower to test 137.95. Weekly support level at 138.46 is worth monitoring. A close below 137.95 will take GBP/JPY to a lower territory hinting towards 137.35. Weekly support at 137.66 needs to be kept in focus.

Any close above 139.00 could push the price towards the high end of the trading range mentioned above. Daily resistance levels at 140.02 and 140.22 must be watched closely. If the price closes above 140.50 this will move it to the higher trading range (140.50 – 141.90) GBP/JPY could push to test the high end however. The resistance zone at 140.90 – 141.10 and daily resistance at 141.56 need to be monitored along the way.

Having trouble with your trading strategy? Here’s the #1 Mistake That Traders Make

GBP/JPY Two-HOUR PRICE CHART (MAY 9 – 23, 2019)

GBP/JPY price 2H Chart 23-05-19

A closer look at the GBP/JPY two-hour chart, we notice the pair closed and traded below the downtrend line originated from May 14 high at 142.15. If the price remaines below 139.15 and breaks below today’s lowest price at 138.88, a bearish sentiment would suggest the price falls towards the weekly support mentioned above. Potential rebound level could be at 138.63, see the chart.

Yesterday, GBP/JPY created a high at 140.02. If the price breaks above this threshold it could rally towards the next high at 140.70. Resistance levels mentioned above need to be considered.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi



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Bearish Outlook Ahead of CPI Data, Trade Wars


TALKING POINTS – TRADE WAR, IBGE INFLATION IPCA-15, BRL, IBOVESPA

  • Fading optimism over US-China trade resolution nauseating markets
  • Brazil inflation data may skew inflationary risks and monetary policy
  • Pension reform progress remains a headline risk to economy outlook

See our free guide to learn how to use economic news in your trading strategy!

The Brazilian Real may find itself under pressure after local inflation data is published. Month-on-month price growth is expected at 0.41 percent, slightly lower than the previous report at 0.72 percent. The Brazilian economy at this time is in a fragile state by virtue of the uncertainty caused by the US-China trade war and local structural reforms. The latter is arguably one of the biggest drivers of price action in Brazilian markets.

Earlier this month, the Brazilian central bank announced that it was going to hold the benchmark Selic rate at 6.50 percent – as expected. Policymakers noted that while local economic activity was weaker, inflationary risks remain broadly “symmetrical”. This has allowed monetary authorities the luxury of holding rates while local pension reforms talks continue, though external headwinds and local CPI may derail their neutrality.

Additional risks to inflationary pressure include the current state of Brazil-China relations. Yesterday marked the first day of investment negotiations between Brazilian Vice President Hamilton Mourao and high-level Chinese officials. If the negotiations between the two emerging market giants go well, it could boost sentiment in the Brazilian economy and provide a tailwind for inflation.

However, whatever deal is achieved between China and Brazil will likely be offset by souring relations between Beijing and Washington. Both sides appear to be digging their heels in with US President Donald Trump now adding additional measures involving Chinese tech-leviathan Huawei. Finding a resolution now against what is an already-unhospitable backdrop will likely only continue to sour global sentiment.

BRL PRICE CHART ANALYSIS

The Brazilian Real has been rapidly falling against the US Dollar, with USD/BRL recently puncturing the 4.000 landmark. The last time the pair reached this level was back in October of 2018. The pair appear to be hovering just above what may be a new psychological floor. The long wicks on both sides of the short-bodied daily candles indicates indecision.

USDBRL reaching October 2018-highs… But for how long?

Chart Showing USDBRL

It appears that only a favorable – or unfavorable – fundamental development in either the pension reforms or US-China trade relations will be a key force in determining the pair’s bearish or bullish trajectory. Looking ahead, monitoring these crucial factors will be essential to maintaining a well-informed trading strategy. To learn more about Brazilian assets, you may follow me on Twitter @ZabelinDimitri.

FX TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter





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USDJPY Faces Chart Support as S&P 500 Sinks on Trade Wars, US PMI


Asia Pacific Market Open Talking Points

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We’d love to have you along.

Japanese Yen and Swiss Franc Gain As Stocks Tumble

The anti-risk Japanese Yen and Swiss Franc outperformed against their major counterparts on Thursday, gaining at the expense of equities across the globe. The deterioration in risk appetite could be traced to US-China trade war fears and dismal economic data from the world’s-largest economy. In Europe, the Euro Stoxx 50 inched closer to trend-line support as the S&P 500 ended the day about 1.2 percent lower.

In the US, we witnessed the softest pace of expansion in the manufacturing sector since 2009. Things didn’t do that much better when looking at Markit Services PMI which clocked in at 50.9 versus 53.5 expected, the softest outcome since at least February 2016. US front-end government bond yields tumbled as Fed rate cut bets increased and the US Dollar weakened.

Japanese Yen Technical Analysis

Taking these developments into account, USD/JPY tumbled about 0.65% in its worst day in over two months after retesting the falling channel from December pointed out in the second quarter Japanese Yen forecast. This leaves the Yen facing the rising support line from June 2016 again but before getting there, it must pass through the May 13 low at 109.02.

USD/JPY Daily Chart

USDJPY Faces Chart Support as S&P 500 Sinks on Trade Wars, US PMI

Chart Created in TradingView

Canadian Dollar Tumbles With Crude Oil Prices Again

Meanwhile, crude oil prices tumbled over 5% in the worst day this year thus far, focusing on the bearish fundamentals of market sentiment as anticipated in this week’s forecast. Unsurprisingly, this extended declines in the oil-sensitive Canadian Dollar in what was a similar performance from yesterday. The British Pound kept falling on Brexit uncertainty with UK Prime Minister Theresa May closer to stepping down.

S&P 500 and Nikkei 225 Futures and Crude Oil

USDJPY Faces Chart Support as S&P 500 Sinks on Trade Wars, US PMI

Chart Created in TradingView

Friday’s Asia Pacific Trading Session

The pro-risk New Zealand Dollar looks to be keeping a close eye on general sentiment as it brushed aside local trade data. The similarly-behaving Australian Dollar also falls into this category. S&P 500 futures are now pointing cautiously higher, perhaps bolstered by commentary from US President Donald Trump who earlier said that there is a “good possibility of a China trade deal”.

However, in the medium-term, it will likely take less rhetoric and more progress in negotiations to cause a turnaround in financial markets. Over the past 24 hours, we have seen major Chinese newspapers (People’s Daily) criticize US efforts to blacklist local companies which puts trade talks in an awkward spot. The Yen may thus look past Japanese CPI data and focus on vulnerabilities in equities.

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter





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JPY Crosses Crater Amid Collapsing Market Sentiment


JAPANESE YEN – TALKING POINTS

Risk assets are under immense pressure so far during Thursday trading session as market participants grow increasingly skeptical over global growth prospects. The latest anti-risk move has sent forex traders reeling to unwind Japanese Yen-backed carry trades while equities around the world spiral lower alongside an oil price plunge.

Carnage came to risk assets amid dismal economic data out of Europe and the US which coupled with fears over the impact of an ongoing trade war uncertainty. The dramatic jolt of pessimism is clearly illustrated through the JPY currency crosses with USDJPY, EURJPY, AUDJPY, GBPJPY and CADJPY all taking a nosedive.

USDJPY PRICE CHART VS EURJPY, AUDJPY, GBPJPY & CADJPY: 5-MINUTE TIME FRAME (MAY 23, 2019 INTRADAY)

USDJPY, AUDJPY, EURJPY, GBPJPY, CADJPY Price Chart

The Canadian Dollar is the worst performing major currency against the Japanese Yen with a 1.0 percent plunge as the loonie downside finds amplification through collapsing oil prices on the back of slowing global growth. The Pound Sterling has also come under a considerable amount of pressure as the Brexit latest weighs negatively on GBP, lending weight to the GBPJPY’s 0.7 percent drop.

As for the greenback, a bleak US PMI report released earlier exacerbated USD weakness against the Yen to the tune of a 0.7 percent slide while the Euro edged down 0.5 percent perhaps owing to EU Parliamentary elections uncertainty. Meanwhile, the Aussie continues to drift lower helped along by rising RBA rate cut bets and trade war risk sinking AUDJPY 0.5 percent as well.

JAPANESE YEN CURRENCY INDEX: DAILY TIME FRAME (DECEMBER 06, 2018 TO MAY 23, 2019)

Yen Currency Index Price Chart

On balance, the Yen is on track to post its biggest daily gain since the January flash crash measured by the Japanese Yen Currency Index (JXY). The Yen rally could lose steam over the short-term, however, as spot FX rates approach technical levels that have potential to provide support for JPY counterparts. That said, if the recent flareup in risk trends intensifies, Japanese Yen bulls could remain in charge of forex price action.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter





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What if Mexico, Canada Join the US in the Trade War with China?


Trade War Talking Points:

  • After the US lifted metal tariffs on Mexico and Canada, some market participants have suggested the USMCA could form a united front against China in the ongoing trade war
  • Amid the conflict, Mexico has enjoyed a surge in exports to the United States as manufacturers look for workarounds
  • Read why 7.00 is the Spot to Watch in USDCNH in the US-China Trade War

What if Mexico and Canada Join the United States in the Trade War with China?

Progress in the US-China trade war has ground to a halt according to officials from both sides, which has rattled investor sentiment. As each party searches for leverage, some market participants have suggested a united USMCA could band together in an effort to alter uncompetitive Chinese trade practices. While Mexico and Canada carry significantly less sway with the Asian nation than the US, their trade balances are anything but negligible.

What if Mexico, Canada Join the US in the Trade War with China?

Data Source: Bloomberg

Over the last 10 years, Canada and Mexico have accounted, on average, for 2.43% and 2.96% of China’s total exports. During this time, Canada has seen its share of Chinese exports shrink – from 2.6% in 2009 to 2.3% in 2018. On the other hand, Mexico has seen its trade with China climb from 2.43% in 2009 to 3.36% in 2018, as the economic ties between the two countries grow. Together, the three North American nations account for more than 25% of China’s total exports. Conversely, the reliance of USMCA members on Chinese demand is quite limited.

What if Mexico, Canada Join the US in the Trade War with China?

Data Source: Bloomberg

North American demand for Chinese goods has fluctuated over the last decade, reaching a low of 8.62% in 2011 and a high of 10.83% in 2015. More recently, demand has been trending lower and the total percentage of Chinese imports from USMCA nations slipped to 9.31% in 2018.

View A Brief History of Trade Wars for background on economic conflicts like the US-China Trade War.

Therefore, the trade relationship between USMCA and China leaves the latter with few retaliatory options. The nation has already had to explore unconventional methods in its economic bout with the United States, so an engagement with a trading bloc that accounts for 26% of trade inflows but only 9% of outflows could weigh significantly on Chinese trade and the economy by extension. But what are the chances the North American nations band together?

Currently, the chances are low. The USMCA agreement will first have to be passed by US lawmakers – which is anything but certain. This assumes the removal of metal tariffs was the final barrier for agreement from Mexico and Canada. Beyond that, the United States will have to convince its partners to engage in economic conflict with the world’s second largest economy – a tall task. However, there is some precedent for cooperation.

Canada and Huawei

On December 1, Huawei CFO Meng Wanzhou was detained in Canada at the behest of the United States. The detention amounted to another front in the US-China trade war – and dragged Canada into the conflict. Since the detention in late 2018, tensions between Canada and China have been strained as two Canadian nationals faced arrest in China alongside a block on imports of canola seeds from two of Canada’s biggest exporters.

Early this May, President Trump and Canadian Prime Minister Justin Trudeau talked over the phone to discuss trade. The two reportedly discussed steel and aluminum tariffs, which have since been removed – paving the road to recovery between the two partners. With these developments, Canadian action against China now seems plausible, with multiple reasons for Canada to join forces with the US.

Mexico Has Everything to Gain

While Canada has an axe to grind, Mexico could look to make hay while the sun shines. As increased levies make Chinese exports less attractive to US consumers and less profitable for exporters, corporations will search for alternatives. Last week, Walmart announced it will begin analyzing options to shift its supply chain out of China to avoid price increases and others are likely to follow. While many companies will look to shift production elsewhere in Asia, some have chosen to move closer to home.

What if Mexico, Canada Join the US in the Trade War with China?

Data Source: United States Census Bureau

Already, companies have begun to open up shop in Mexico – with Hasbro and GoPro as two of the more notable examples. The shifting tides have had an immediate impact on recent trade data. Consequently, Mexico is now the United States’ top trading partner in goods according to US Census Bureau data. Further, US imports of Mexican goods rose 10% in 2018 – the most since 2011.

That said, the country’s best course of action may be to stay off the radar and hope the trend continues. In the year-to-date, USDMXN has slipped -3.3% and the Peso could etch greater gains should exports to the United States continue to climb.

While the likelihood that either Mexico or Canada directly engage in the trade war is minor, its impacts can be observed in shifting trade balances and fluctuating currency rates. But, with the Chinese economy hinged to exports, the addition of two import-heavy belligerents could prove an insurmountable obstacle for Xi Jinping and the People’s Bank of China – were it to occur.

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

Contact and follow Peter on Twitter @PeterHanksFX

Read more: TSLA, Uber Stock Troubles Could Signal Shifting Tech Sentiment

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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US Dollar Price Action Setups in EUR/USD, USD/CAD and AUD/USD


US Dollar Price Action Talking Points

  • The US Dollar has had a wild ride today, first rallying up to a fresh two-year-high before a set of poor PMI’s brought in the sellers. At this point, the US Dollar has erased the entirety of this week’s gains and is currently showing a bearish engulfing candlestick on the daily chart.
  • This weekend brings considerable gap-risk in the Euro as European Parliamentary elections go through Sunday.
  • DailyFX Forecasts are published on a variety of currencies such as Gold, the US Dollar or the Euro and 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.

US Dollar False Break – Bearish Engulfing

It’s been a wild day in the US Dollar, as the currency started the US session with a push up to a fresh two-year-high. But, that theme of strength did not last for long, as a poor PMI report released at 9:45 AM brought out the bears and, at this point, sellers remain in-control of near-term price action. On the Daily chart, the US Dollar is now working on a bearish engulfing pattern after a failed breakout at the two-year-high, and this can bring interest to short-side themes in the US Dollar.

US Dollar Daily Price Chart

us dollar daily price chart

Chart prepared by James Stanley

Stocks Rocked as Risk Aversion Creeps Back In

Going along with USD-volatility has been a volatile backdrop in global risk markets, perhaps best illustrated in US stocks that have put in a very bearish day of price action so far. While there are a number of bearish factors in the backdrop, the item that really stands out here is FOMC policy stance. The S&P 500 began to reverse earlier this month on the heels of the FOMC rate decision as the bank wasn’t quite as dovish as what market participants had been expecting. That weakness lasted through the first half of May as 50% of the March-April rally was taken-out. But, once support at 97.04 played in, prices rallied and continued to do so into this week. But yesterday’s FOMC minutes echoed that earlier-month lack of dovishness at the Fed, and similar to S&P price action on May 1, prices have been selling-off in the aftermath.

At this point, the S&P 500 is testing an interesting level of support around the 2810 level on the chart. A hold here keeps the door open for bullish reversals but, should this area give way, focus can quickly move back to the short-side of the theme.

S&P 500 Four-Hour Price Chart

spx500 four hour price chart

Chart prepared by James Stanley

EUR/USD False Breakout, Buyers Push Rally Back into Prior Support

It’s been a rough day for EUR/USD bears as prices did technically put in a fresh multi-year low. But, there wasn’t much run-lower and prices quickly reversed back into a key area on the chart. European Parliamentary elections going into this weekend could keep the pair on the move, and the Euro carries significant risk for gaps as those elections run through Sunday. If you’re looking for a primer on this theme, our own Dmitri Zabelin has produced an excellent write-up on the matter entitled, EURUSD at Risk on 2019 European Parliamentary Elections.

EUR/USD Four-Hour Price Chart

eur/usd four hour price chart

Chart prepared by James Stanley

GBP/USD: Mayhem, Beware of Bear Traps

Prices in GBP/USD have continued to sell-off into today as a series of risk factors remain around the UK. At this point, no one really knows how Brexit is going to shape up and it looks as though we’re not even sure who will be leading the UK through this theme in the coming months. Nonetheless, an oversold GBP/USD has caught a bid to go along with the US Dollar’s pullback and, at this point, lower-high resistance is showing around prior support. This may be a bear trap scenario, and traders looking to on-load short-side Sterling exposure may want to wait for a deeper retracement before plotting strategy-lower.

GBP/USD Eight-Hour Price Chart

gbpusd gbp/usd price chart

Chart prepared by James Stanley

USD/CAD: Vigorous Bounce Inside of the Range

I had looked at this one earlier this morning as USD/CAD was hard-charging towards the 1.3500 resistance that’s held the highs over the past month. The notable item here was the support reaction yesterday, when USD/CAD tipped-below the 1.3361 Fibonacci level on the chart. At this point, range strategies remain a workable theme and, as discussed earlier today, there is scope for bullish strategies should the backdrop line up for such.

USD/CAD Four-Hour Price Chart

usd/cad price chart

Chart prepared by James Stanley

USD/JPY Highlights Risk Aversion

Going along with the theme of increasing risk aversion, Yen-strength has remained around the US Dollar even as DXY was pushing up to fresh two-year highs today. At this point, price action in the pair is at a tough spot on the chart, having traded through the psychological 110.00 level. This will likely need a bit of fill-in before either bearish or bullish scenarios can become attractive again. Perhaps the closest next theme of interest is a pullback to resistance in the prior support zone that runs from 109.67-110.00.

USD/JPY Four-Hour Price Chart

usdjpy price chart

Chart prepared by James Stanley

AUD/USD Recovery?

It’s been a brutal two-week stretch for AUD/USD. The pair broke below the .7000 handle and did not stop. Prices finally found a semblance of support around the 76.4 and 78.6% retracements of the 2019 major move. I had looked into this scenario on Monday and, at this point, the lows have held and the door may soon be opening to bullish strategies in the pair.

AUD/USD Hourly Price Chart

audusd hourly price chart

Chart prepared by James Stanley

NZD/USD Attempting to Hold the Lows

Similar theme in NZD/USD as looked at above in AUD/USD. The big area of interest here is the .6500 handle, and a hold of short-term higher-low support can soon re-open the door to bullish strategies in the pair; particularly for those looking to work with short-side USD scenarios on the basis of the bearish engulfing candlestick on today’s price action.

NZD/USD Hourly Price Chart

nzd/usd hourly price chart

Chart prepared by James Stanley

Gold Rallies Up to Key Fib – Now What

Risk aversion is running, the Dollar is dropping and Gold is rallying. Bulls have come back into the yellow metal and resistance has showed at a key area on the chart of 1286.38, which is the 61.8% retracement of the 2013-2015 major move. At this point, support around prior resistance could open the door for bullish trend scenarios. The area looked at in the webinar spans from the approximate 1277.50 up to the 1280.50 area of prior support.

Gold Price Two-Hour Chart

gold price chart

Chart prepared by James Stanley

Oil Crushed – Fib in Play – Reversal Potential

It can be very difficult to get bullish on a market like Crude Oil that’s just been shell-shocked to a fresh three-month-low. But – selling at this point could be a challenge given the size of the move thus far and the proximity to recent swing-highs. On the long-side, however, support has come-in at a key Fibonacci level that had previously helped to hold resistance. The price of 57.47 is the 38.2% retracement of the 2016-2018 major move and since breaking-above in March, price action has yet to test this level for support.

Crude Oil Eight-Hour Price Chart

us oil price chart

Chart prepared by James Stanley

Dow Drop Closes In on Four-Month Lows at Key Fib

Stocks have been on offer over the past two days, getting some additional short-side run after yesterday’s FOMC minutes release. At this point, price action is fast approaching a key area on the chart at 25,266, which is the 14.4% retracement of the 2015-2018 major move. This same price helped to hold the lows in March and again in early-May. A hold of higher-lows around that level keeps the door open for reversal strategies: A break-below, however, opens the door for short-side breakouts targeting the 25k psychological level.

Dow Jones Four-Hour Price Chart

dow jones price chart

Chart prepared by James Stanley

DAX Tests Confluent Support: Can Bulls Hold the Line?

Similar backdrop here as DAX weakness has shown prominently so far today. Prices are at a key area of confluence on the chart. A hold keeps the door open for bullish reversals: A break-below opens the door for bearish breakouts.

DAX Daily Price Chart

Dax Daily 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 have a section for each major currency, and we also offer a plethora of resources on Gold or 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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Near-term Trade Setups in USD/CAD and AUD/USD


Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

USD/CAD 240min Price Chart

USD/CAD Price Chart - US Dollar vs Canadian Dollar 240min - Loonie

In this week’s Canadian Dollar Price Outlook we noted that, “From a trading standpoint, the near-term risk is weighted to the downside after Friday’s reversal but initial monthly-open support rests just lower at 1.3388.” A brief stint below this level yesterday registered a low at 1.3357 (just pips from the 1.3354 confluence support zone) before reversing sharply higher with USD/CAD breaking above the 61.8% retracement / weekly opening-range high today at 1.3454/56.

Look for support ahead of the 1.3435/37 confluence zone IF price is heading higher on this stretch with near-term topside objectives at the May high at 1.3514 and 1.3537– a breach / close there would be needed to validate a breakout of the monthly range. A break of the lows would expose the 78.6% retracement at 1.3309.

New to Forex? Get started with our Beginners Trading Guide!

USD/CAD Trader Sentiment

USD/CAD Trader Sentiment - Loonie Positioning - US Dollar vs Canadian Dollar Price Chart

  • A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.67 (37.4% of traders are long) – bullish reading
  • Long positions are 29.5% lower than yesterday and 2.9% higher from last week
  • Short positions are 14.4% higher than yesterday and 11.2% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USDCAD-bullish contrarian trading bias from a sentiment standpoint.

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

AUD/USD 120min Price Chart

AUD/USD Price Chart -

In my most recent Australian Dollar Price Outlook we noted that Aussie had, “filled the Sunday gap with the weekly opening-range set just above the yearly low at 6866.” The range remains intact heading into the close of the close on Thursday with price now poised to mark an outside-day reversal off the lows is Aussie closes at these levels.

Weekly open resistance stands at 6911 backed closely by the upper parallel of the pitchfork we’ve been tracking since the monthly high- ultimately a topside breach / close above 6934 is needed to suggest a larger recovery is underway. A break lower would still risk a drop towards 6854 and 6828– looking for a bigger reaction off one of those levels IF reached. Review my latest AUD/USD Weekly Price Outlook for a look at the longer-term technical trade levels.

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

-Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex





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S&P 500, Dow Jones, Nasdaq 100 Price Outlook


S&P 500, Dow Jones, Nasdaq 100 Price Outlook:

  • The S&P 500 plunged to Fibonacci support at 2,815 at Thursday’s open
  • The blue-chip Dow Jones Industrial Average looks to test an area of support from 25,350 to 25,435
  • Retail traders are overwhelmingly short the S&P 500, find out how to use IG Client Sentiment Data with one of our Live Sentiment Data Walkthroughs

S&P 500, Dow Jones, Nasdaq 100 Price Outlook

The three major US stock indices gapped lower at the open to start Thursday trading, a familiar sight as of late. Financial news media and analysts were quick to blame continued trade war fears for the rout, as the two sides cite stalled negotiations. Weak manufacturing and services data likely sparked additional concern. But unlike other recent equity turmoil, Thursday’s move was accompanied by a surge in risk-off assets, from the US Dollar to Gold. As the weekend approaches, here are the price levels to watch for each major equity index.

S&P 500 Price Outlook

After falling out of a rising wedge, the S&P 500 is testing a critical support trendline marked by the lows from March and May. Three Fib levels are also present in the area, offering significant support in the 2,811 to 2,815 range. Should the Index break beneath 2,811, traders can look for subsequent support at the psychological 2,800 level. An effort below 2,800 would mark the lowest level for the Index since late March. Should that occur, look for minor support around 2,785 – the lows from late March.

S&P 500 Price Chart: 1 – Hour Time Frame (April 15 – May 23) (Chart 1)

S&P 500 price chart technical levels

To the topside, the 50% Fib level at 2,838 and the lower bound of the rising wedge will pose resistance. Given the number of technical levels near the current trading price, the Index may trade indecisively as bulls and bears attempt to gauge the others commitment.

Dow Jones Price Outlook

Similarly, the Dow Jones Industrial Average fell out of its own wedge. After gapping lower, the Average quickly slipped to support from 25,350 to 25,435 which marks the lows from late-March and has provided buoyancy in May. A drive lower would open the door for the Index to test March’s low at 25,202.

Dow Jones Price Chart: 1 – Hour Time Frame (April 15 – May 23) (Chart 2)

Dow jones price chart technical levels

On a rebound to the topside, the Average must first retake 25,520 – a level which has given pause to rebounds in the past. Secondarily, the Index will face a confluence of resistance in the 25,770 to 25,825 area. For both the Dow Jones and the S&P 500, a daily close above Thursday lows and the support which they rest at is critical for the prospect of a bullish recovery effort. Follow @PeterHanksFX on Twitter for technical updates on each of the major indices.

Nasdaq Price Outlook

The more-volatile Nasdaq 100 suffered the largest loss in Thursday trading, off more than -2% from Wednesday’s close. It is no surprise then that the tech-heavy Nasdaq is also trading near May’s lows after breaking beneath two Fib levels at 7,290 and probing 7,281 – the swing low from May 13. Should 7,281 be taken out, the Nasdaq will look to March’s lows at 7,253 to pause a continued run lower.

Nasdaq Price Chart: 1 – Hour Time Frame (April 17 – May 23) (Chart 3)

Nasdaq 100 price chart technical levels

In the event a recovery effort is mounted, the Nasdaq will have to break through the lows from May 15 and 20 – around 7,360. After that, bears would look to offer selling pressure from the two Fib levels at 7,374 and 7,383.

Amid considerable selling pressure, retail traders are confident that US stocks will continue to fall – adding to their short positions. This confidence is observable with IG Client Sentiment data. For a primer on retail sentiment as an indicator, and why this may mean stocks will rise, sign up for a walkthrough webinar.

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

Contact and follow Peter on Twitter @PeterHanksFX

Read more: Will the Stock Market Crash in 2019?

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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US PMI Figures Miss, Pushing Treasury Yields To 2019 Lows


Markit PMI Talking Points:

  • The U.S. Markit composite PMI reading came in at 50.9, marking continued weakness in the US services and manufacturing sectors
  • US Treasury yields continue to fall as Investors look for safety among concerning economic data and trade tensions
  • The weak trend continues in services and manufacturing, falling from a high point last summer

Markit Economics released their May Purchasing Managers Index readings Thursday for the service and manufacturing sectors. The weak data put pressure on a rising US Dollar, pushing the dollar from its daily high of 98.365 to 98.125 at the time of this article’s writing.

DXY

US Treasuries yields also fell on the release of the data, as investors sought out the safety of US debt as the economy continues to show signs of stress. Consequently, the 10-year yield hit a year-to-date low of 2.3203. The move in US Treasury yields shows a contrasting appetite for US debt compared to last year. Economic data points have continued to come in mixed during 2019, with these economic fissures starting to spark investor concern.

TNX

The Flash US Composite PMI index signaled the weakest expansion in business activity since May 2016. Interestingly, in the face of continuing trade tensions with China, input prices eased in May for a third consecutive month. However, survey participants were less optimistic about output over the next 12 months with many respondents noting trade tensions as a factor for their weak views of future output.

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

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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