Technical Analysis

Forex trading crowds have sold into Dollar strength versus the Japanese Yen and other counterparts – this could be the start of a US Dollar turnaround.

Weekly Summary of Forex Trader Sentiment and Changes in Positioning



Our Speculative Sentiment Index measures what proportion of retail traders are long and short on key currency pairs. Our sentiment-based trading strategies most often go against the crowd—if everyone’s buying, we prefer to sell and vice versa.

As things stand, most traders are buying into dollar weakness against the Euro—leaving us in favor of EURUSD gains. Elsewhere however, more traders have sold into USD strength. We see this as early sign of short-term turnarounds in the GBPUSD, Gold prices, and other key prices.






--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com




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US Dollar Technical Analysis– Prices overturned a bullish Morning Star candlestick pattern identified yesterday, recoiling from falling trend line resistance set from the July 8 swing high to challenge support at 10739, the 50% Fibonacci retracement. A break beneath this boundary exposes the 61.8% level at 10675. Trend line resistance is now at 10793, with added reinforcement from the 38.2% Fib at 10803.

Confirm your chart-based trade setups with the Technical Analyzer.



--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com



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This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

Weekly Price & Time:
EUR/USD WEEKLY:

• EUR/USD overcame the 4th square root progression of the month-to-date low near 1.3200 this week to trade to its highest level in over a month
• Our medium-term trend bias remains lower, however, while below the 1.3415 2Q13 high
• The 5th square root progression of the year-to-date high at 1.3130 is key support and weakness below this level is required to signal a broader downside resumption in the pair
• Medium-term cycle studies point to the end of next week and the start of the week of August 5th as a potentially important inflection point where the downtrend could attempt to resume
• The 1.3415 2Q13 high is very significant from a Gann perspective and only a weekly close over this level alters the broader negative picture in place since June

Weekly Strategy: We like selling the Euro next week against 1.3415.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	1.3020	*1.3130	1.3265	1.3315	*1.3415

USD/JPY WEEKLY:

• USD/JPY has moved steadily lower since failing at the start of the month near the 78.6% retracement of the May to June decline in the 101.60 area
• While above the 2Q13 low near .9375 our longer-term trend bias will remain higher in the exchange rate
• The 101.60 level is now a clear pivot and traction above this level is required to signal a resumption of the broader uptrend
• Medium-term cycle analysis points to the middle of next week as being significant and a possible point from where the the longer-term trend will try to reassert its influence
• Weakness below .9375 on a weekly closing basis is needed to alter the broader positive technical picture and turn us negative on the rate

Strategy: We like tactical USD/JPY longs going into the turn window next week.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*0.9375	0.9760	98.10	0.9960	*101.60

GBP/USD WEEKLY:

• GBP/USD has traded steadily higher since finding support in late July at the 12th square root progression of the year-to-date high in the 1.4810 area
• However, while below the 2Q13 high at 1.5750 our longer-term trend bias will remain lower in Cable
• Fibonacci polarity at 1.5170 is a medium-term downside pivot, but weakness below 1.4810 is really required to confirm a resumption of the broader downtrend
• Medium-term cycle studies point to the middle of next week and a possible cycle turn window where the longer-term downtrend could attempt to reassert
• Only aggressive strength over 1.5750 would alter the negative technical structure and turn us positive on the Pound

Strategy: We like tactical short positions in Cable heading into the cycle turn window this week.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.4810	1.5170	1.5385	1.5575	*1.5750

GOLD WEEKLY:

• XAU/USD traded to its highest level in over a month this week before finding strong resistance just below the 1348 161.8% projection of the late June/early July recovery
• While below the early June high near 1423 our longer-term trend bias will remain lower in the metal
• The 2nd square root progression of this week’s high near 1272 looks like a key downside pivot with weakness required to signal a resumption of the broader decline
• Medium-term cycle studies are now negative on the metal following the failure at Fibonacci symmetry during this week’s medium-term cycle turn window
• Strength over 1348 is needed to alter the negative cyclical picture and turn us positive on the metal

Strategy: We like tactical short positions in the metal while under 1348.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1250	*1272	1318	*1348	1372

--- Written by Kristian Kerr, Senior Markets Strategist for DailyFX.com



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USDJPY traded into the bottom of 3 week consolidation this week. Volatility is increasing but remains relatively low. Strength from the current level would present an opportunity to participate on the short side for a larger decline.

Pair	atr(5)%	atr(20)%	atr(5)pips	atr(20)pips
USDZAR	1.49	1.55	1442	1500
AUDUSD	1.28	1.42	118	131
NZDUSD	1.29	1.39	104	112
USDNOK	1.04	1.35	614	796
USDSEK	1.04	1.28	675	833
USDMXN	0.91	1.22	1147	1533
USDJPY	1.22	1.17	121	116
USDCHF	0.82	1.00	76	93
GBPUSD	0.71	0.89	110	137
EURUSD	0.65	0.84	87	111
USDCAD	0.55	0.69	57	71

The table displays ATR over 5 and 20 day periods in % and pips. One way to easily identify a market increasing in volatility is 5 day ATR > 20 day ATR. USDJPY is increasing in volatility.

USDJPY
4Hour



FOREXAnalysis: The USDJPY traded into the bottom of 3 week consolidation this week. Volatility is increasing but remains relatively low. Strength from the current level would present an opportunity to participate on the short side for a larger decline. Thursday’s late day spike low is resistance along with Friday’s post Tokyo consolidation at 98.80/90. Also, watch the underside of the broken channel (in red) for resistance.

FOREX Trading Strategy: Looking for a high into 98.80/90. 97.50 and 96.40 are estimated supports with 95.40 as ultimately the strongest support and a final target.

GBPJPY
Daily



FOREXAnalysis: Additional GBPJPY charts. GBPJPY traded into big resistance this week from highs throughout April, May and June. Most don’t pay attention to close levels but closes of important market days (or weeks, months, hours, etc.) often serve as useful pivots…sometimes with an uncanny degree of accuracy. The 5/23 close at 154.03 marked the exact high for the latest advance (7/24 high was 154.03).

At one degree higher, the GBPJPY high in May was registered 3 pips above the breakdown week from August 2009 (weekly close in August 2009 at 156.76 and May 2013 high at 156.80).

FOREX Trading Strategy: I’ve been focusing on the GBPJPY trade in the Daily Technicals Yen section since Wednesday but for those not yet involved in the trade, strength above 152.00 would now present an opportunity to participate on the short side. 152.15 and 152.67 in particular form a zone of resistance. Shorts are valid below 154.10. Support to exit half of the trade is 149.90.

GBPUSD
Daily



FOREXAnalysis: The GBPUSD Bigger picture GBPUSD bearish logic goes something like this; a 4 year triangle was broken to the downside in February. The market found bottom in March and rallied in 3 waves, eventually failing at the February breakdown level. The rally from July’s low has retraced 61.8% of the decline from the June high and 38.2% of the decline for the year. Don’t forget, the high for the year was made on the first trading day of the year (significant when one considers the distribution of highs and lows within a calendar year). Ultimately, the long term triangle break portends a return to 1.3500.

FOREX Trading Strategy: We still don’t have a tradeable high in order to trade with a reasonable stop but price is in the right area to top and event risk is heavy next week.

Nikkei 225 and S&P 500
Daily



FOREXAnalysis: Continue to monitor to the S&P and Nikkei. Last week we focused on the fact that “the new S&P high is not confirmed by Nikkei action. Support becoming resistance and vice versa holds true for trendlines as well. Both markets have traded to the underside of former support lines. It is reasonable to expect resistance here. Market leaders are also flashing warning signs.” Don’t be surprised to see another push to satisfy the market’s obsession for round figures. 1700 is just around the corner but make no mistake, any such push would probably be on fumes and signal a top.

FOREX Trading Strategy: Looking to play a stock market reversal through USDMXN and USDZAR (see below).

USDMXN
Daily



FOREXAnalysis: “5/22 is an important day. That is the Nikkei top and it was the S&P top. It was also a large volume day across many markets, including USDMXN. The close of that day is estimated support at 12.42.” If the S&P pushes to a final high, USDMXN might try for 12.42 but the rally from the 7/18 low is in 5 waves, which suggests that the market has turned.
FOREX Trading Strategy: Looking for a pullback to get long. 12.49 is estimated support.

USDZAR
Daily


FOREXAnalysis: USDZAR has pulled back slowly over the last 6 weeks to test a former upward sloping resistance line. A large range key reversal unfolded on Wednesday after price dipped just under the line. The market response is promising. The daily RSI dip below 40 is characteristic of a market attempting to bottom within a larger bull trend.
FOREX Trading Strategy: Quite possible that a low is in place. An intraday plot of the rally from the low shows a sharp advance with a potentially completed flat correction from the 7/24 high. Look for a pullback and for price to hold the low before making commitments.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com


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THE TAKEAWAY: The US Dollar broke below chart support, hinting at continued weakness ahead after prices hit a one-month low last week. The S&P 500 remains stuck near 1700.

US DOLLAR TECHNICAL ANALYSIS – Prices broke support at 10739, the 50% Fibonacci retracement, exposing the 61.8% level at 10675. A further push below that targets the 76.4% level at 10596. The 10739 has been recast as near-term resistance, a barrier reinforced by a falling trend line set from the July 8 swing high (now at 10778).



The Dow Jones FXCM US Dollar Index and the Mirror Trader USD basket are not the same product.
S&P 500 TECHNICAL ANALYSIS – Prices pulled back from the 1700 figure to retest resistance-turned-support at 1687.40, the May 22 swing high.A reversal back below this barrier exposes the 76.4% Fibonacci expansion at 1675.10. Alternatively, a push above 1700 aims for the 100% level at 1710.90.



GOLD TECHNICAL ANALYSIS – Prices put in a Bearish Engulfing candlestick pattern below resistance at the top of a rising channel set from late June, hinting a move lower is ahead. Channel bottom support is now at 1305.84, with a break beneath that initially targeting the 23.6% Fibonacci expansion at 1273.98. Channel resistance is now at 1372.71.



CRUDE OIL TECHNICAL ANALYSIS– Prices turned lower as expected. Sellers have now overcome support is at 105.06, the 23.6% Fibonacci retracement, exposing the 38.2% level at 102.70. A further push beneath that aims for the 50% Fib at 100.79. The 105.06 level has been recast as near-term resistance, with a reversal back above that eyeing the July 19 high at 108.89.



--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com


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This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved.

Foreign Exchange Price & Time at a Glance:

EUR/USD:

• EUR/USD overcame the 4th square root progression of the year-to-date high in the 1.3240 area to trade to its highest level in over a month
• While above the 2x1 Gann angle line of the year’s low in the 1.3160 area our near-term trend bias will remain higher
• A confluence of various Gann levels in the 1.3300 area makes this a critical resistance and a close above is needed to prolong the advance
• Cycles point to the latter half of the week as a key cycle turn window
• The 4th square root progression of the year’s low is immediate support, but only weakness below 1.3160 turns us negative on the single currency

Strategy: Like holding long positions for a few more days while 1.3160 holds.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	*1.3160	1.3200	1.3275	*1.3300	1.3360

GBP/USD:

• GBP/USD has moved steadily higher over the past few weeks since finding support at the 12th square root progression of the year’s high in the 1.4810 area
• While over 1.5250 our near-term trend bias will remain higher in Cable
• A convergence of Gann and Fibonacci levels between 1.5420 and 1.5440 is key resistance and a close above this zone is needed to trigger a further advance
• Cycles studies point to the latter part of the week as being an important inflection point for the Pound
• Weakness below 1.5250 is required to undermine the immediate positive tone and turn us negative on the pair

Strategy: Like holding reduced long positions in Cable for the next few days as long as support at 1.5250 remains intact.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.5250	1.5325	1.5380	*1.5440	1.5500

XAU/USD:

• XAU/USD traded to its highest level in over a month last week before finding resistance at the 161.8% projection of the late June advance in the 1348 area
• Our near-term trend bias has to remain higher while above 1310, but failure at key symmetry during last week’s cyclical window increases the potential for a more important top
• Traction over 1348 is required to alleviate this concern and set up a more important move higher in the metal
• A minor cycle turn window is seen around the middle of the week
• A close under 1310 would be further evidence of a more important peak and turn us negative

Strategy: Like being square here for a few days. Will look to position accordingly on a break through 1348 or 1310.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	*1283	*1310	1334	*1348	1371

Focus Chart of the Day: USD/CAD



USD/CAD historically has been one of the harder cyclical pictures for us to decipher (likely a result of the compressed volatility in the rate). However, over the past few months the picture has seemingly become clearer as the pair has respected a few key cycle turn windows and is trading in a more rhythmic fashion. An analysis of the medium-term cycles suggests the next few days have the potential to spark a turn in the pair and we expect the USD will try to resume its broader uptrend during this timeframe. The 78.6% retracement of the June to July advance near 1.0235 and the 4th square root progression of the year-to-date high around 1.0195 are natural levels from where this reversal could develop. Weakness below the latter support past Thursday, however, would undermine the burgeoning positive cyclicality.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

US Dollar Technical Analysis– Prices are retesting broken support-turned-resistance at 10739, the 50% Fibonacci retracement, to challenge a falling trend line set from the July 8 swing high (now at 10762). A break above the latter barrier exposes the 38.2% level at 10803. Near-term support remains at 10675, the 61.8% Fib.



--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com


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4Hour


FOREXAnalysis: The GBPUSD “rally has reached the 61.8% retracement of the decline from the June high (1.5392) and the 38.2% of the decline from the beginning of the year (1.5408). The rally from the July low consists of exactly 2 equal legs right now.” The trade below last week’s low increases confidence that a high is in place. Interestingly, current pattern is nearly identical to the pattern that preceded the June FOMC meeting.

FOREX Trading Strategy: Wrote on 7/25 that “the rally in late US trading on ‘news’ is consistent with capitulation as well but there is no need to try and pick the exact high.” As it turned out, that was the exact high and we can now sell against that level. Due to upcoming news releases and likely volatile conditions, I plan on entering the market in halves with stops at 2 levels. Short entries at 1.5265 and 1.5305. Stops at 1.5360 and 1.5440. Target half at 1.5030.

LEVELS: 1.5100 1.5153 1.5200 1.5280 1.5308 1.5353



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EUR/USD Technical Analysis – Prices took out resistance at 1.3260 marked by the 76.4% Fibonacci retracement. The bulls now aim to challenge a falling trend line set from February at 1.3330, followed by the June 18 swing high at 1.3416. The 1.3259 mark has been recast as near-term support, with a reversal beneath that initially targeting the 61.8% Fib at 1.3162.




--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com



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Daily


Commodity Analysis: No change – Gold’s rally reversed gains after running into former lows and channel resistance. Gold’s advance is better than silver’s, which remains extremely depressed. Daily RSI on the metal has recovered to 60, a common area for the indicator to stop in a bear market.”
Commodity Trading Strategy: The response at channel support makes me wary of being short. Moving to flat.
LEVELS: 1267 1282 1306 1332 1350 1395



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