Technical Analysis

EUR/USD is challenging a key support level at month-end while Gold pauses after reaching its highest level since mid-May. USD/JPY remains in consolidation mode.

Weekly Price & Time Analysis: EUR/USD

• EUR/USD failed last week to close above the 1.3415 2Q13 high on a weekly basis
• While below this level our broader trend bias will remain lower
• The 2nd square root progression of the year-to-date high at 1.3220 is key support and a weekly close below this level is needed to signal a downside trend resumption
• A long-term cycle turn window is in effect for a few days
• A weekly close over 1.3415 will confirm a trend reversal and open the way for a much more important move higher in the weeks ahead

Tactical EUR/USD Strategy: Still short against a weekly close over 1.3415.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	1.3110	*1.3220	1.3220	1.3335	*1.3415

Weekly Price & Time Analysis: USD/JPY

• USD/JPY has been unable to gain any real traction over the 5th square root progression of this year’s high in the 98.60 area
• While over the 2Q13 low near .9375 our longer-term trend bias will remain higher in the rate
• A close over 98.60 and then 99.65 on a weekly basis is needed to confirm that an upside resumption of the broader trend is indeed underway
• The next few days are a turn window in the rate
• The 97.50 retracement confluence remains intermediate support, but only aggressive weakness below the 2Q13 low on a multi-day closing basis would turn the broader outlook negative

Tactical USD/JPY Strategy: Tactical longs favored against .9375.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*93.75	97.60	98.55	*98.60	99.55

Weekly Price & Time Analysis: Gold

• XAU/USD traded to its highest level since mid-May before finding resistance on a closing basis at the 7th square root progression of the year-to-date low at 1419
• While abvoe the 3rd square root progression of the year-to-date low in the 1280 area our broader trend bias is positive on the metal
• A weekly close over 1419 and then the 100% projection of the July advance at 1441 is needed to trigger the next leg higher in the metal
• A medium-term turn window was seen around the middle of the week
• The 4th square root progression of the year’s low near 1350 is important support, but only aggressive weakness below 1280 would turn the broader technical outlook negative

Tactical Gold Strategy: We like tactical long positions in Gold while above 1280.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	*1280	1350	1401	1419	*1441

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


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3 month triangles in USDJPY and EURJPY may give way to breakouts although the proximity to the apex in both warns of false moves. A rare monthly key reversal unfolded in the S&P 500 and USDZAR volatility remains favorable for active traders.

USD/JPY and Nikkei 225
Daily




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- USDJPY trade since 5/22 may take the form of a triangle, a common continuation pattern.
- The apex of the triangle (black lines drawn off of highs/lows and red lines drawn off of closes) occurs 9/26, 91 trading days from the 5/22 top. Today was the 72nd day of consolidation, which is more than 75% of the distance from the top to the apex. The risk of a false breakout increases after the 75% point however (Edwards and Magee, Technical Analysis of Stock Trends).
- At turns, the Nikkei 225 (NK) and USDJPY have diverged (failed to confirm price extremes). Both topped on 5/22. At the June low, the USDJPY low wasn’t confirmed by a new NK low. At the July high, the NK high wasn’t confirmed by a new USDJPY high. At the August low, the NK low wasn’t confirmed by a new USDJPY low.
-The Nikkei decline from the July high may take the form of a wedge (in Elliott, this would be A-B-C with wave C as a diagonal). Such patterns often give way to sharp reversals.
Strategy – Monitor for swing trade breakout above 99. Also, support before the August low is 97.60 and 96.70.

EUR/JPY
Daily




- EURJPY trade since 5/22 may also take the form of a triangle, a common continuation pattern. The risk of a false breakout due to the proximity of the apex applies to EURJPY in the same manner as USDJPY.
-Triangle support crosses 129 early next week. The close of the August low day (8/12) is 128.87 and is also possible support.
-The decline from 132.42 (8/23 high) would divide into Fibonacci proportion at 128.84.
Strategy – Monitor for a breakout / monitor for support just below 129 for long entry. Beware a false break, especially if lower. 127.50 (close of the large range day on 6/13) is possible support below the August low of 127.96.

S&P 500 2009-Present
Daily



- The S&P 500 traded to the trendline that extends off of the November 2012 and June 2013 lows. Price has touched the line 2 of the last 4 days.
-8/27 NYSE TRIN at the close was 2.66 (previous instances going back to the 2009 low indicated in red-the chart below plots instances from 2005 to 2009). Extremely high TRIN readings can indicate panic lows or the beginning of larger declines; thus the current juncture is CRITICAL.
-Failure to hold and 1600 (April high at 1597 and 6/6 low at 1598) will be seen in short order.
-Monthly JS Spike (2 charts down…key reversal with range >= 12 month ATR). In the last decade, bearish spikes have led to at least several months of consolidation. The most recent instance was July 2007. That high was revisited in October 2007 before the crisis.
Strategy – Dangerous level to operate. Panic lows, if even as just part of a larger topping process, could come near 1590-1600. If September starts off higher, then will look for a lower high.

S&P 500 2005-2009
Daily



S&P 500
Monthly



USD/ZAR
Weekly




- USDZAR traded to its highest level since March 2009 this week before closing near the low for the week.
- JS Spikes (see below chart) formed on 8/22 and 8/28. I classify these as key reversals from at least a 20 day price extreme (in this case it was a 4+ year price extreme) with a range at least as great as the 20 day ATR. Previous instances are circled on the chart.

Strategy – Looking for a high next week. 10.31-10.33 is the estimated resistance zone. First big support is probably 10.10. Must keep an open mind here with respect to larger bull trend and be ready to cover and go long on approach into confluence of trendline support (see below).

USD/ZAR
Daily




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



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S&P 500 rebounds off an important support level, but still at risk of forming a broader top. EUR/USD breaks below 1.3220 while GBP/USD holds above a key Gann line.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

• EUR/USD broke under the 38% retracement of the July to August advance on Tuesday to trade to its lowest level since late July
• The move under the 1.3220 2nd square root progression of the year-to-date high has turned out near-term trend bias to negative
• We would like to see a non-holiday daily close below 1.3220 to further confirm this shift in trend or a clear breach of the 1x2 Gann angle line of the July low at 1.3170
• A minor cycle turn window is seen during the second half of the week
• A move back over 1.3315 is needed to turn the technical outlook back to positive

EUR/USD Strategy: Looking to get short.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	*1.3130	1.3170	1.3175	1.3240	*1.3315

Price & Time Analysis: GBP/USD

• GBP/USD rebounded last week off the 1x1 Gann angle line of the year’s high in the 1.5485 area
• While over this level our near-term trend bias will remain higher in Cable
• The 61.8% retracement of the late August decline at 1.5605 now needs to be overcome to further confirm a resumption of the broader uptrend
• A minor turn window is seen around the second half of the week
• A close under the 1x1 Gann agle line of the year’s high now at 1.5465 would turn the outlook to negative on Sterling

GBP/USD Strategy: Like the long side whilst over 1.5465.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.5465	1.5535	1.5575	*1.5605	1.5655

Price & Time Analysis: USD/CAD

• USD/CAD has entered into a sideways to higher range against the 1x2 Gann angle line of the 2012 closing low in the 1.0555 area
• While over the 50% retracement of the July range at 1.0425 our near-term trend bias will remain higher in Funds
• The 1.0555 area remains a minor pivot with strength above required to expose more important resistance near 1.0600
• A medium-term turn window is in effect over the next day or so
• Intermediate-term support is seen around 1.0470, but only a close under 1.0425 will undermine the positive technical structure

USD/CAD Strategy: Like the long side while above 1.0425.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/CAD	*1.0425	1.0470	1.0535	1.0555	*1.0610

Focus Chart of the Day: S&P 500



The S&P 500 reversed off the 1627 2nd square root progression of the all-time high last week. The reversal came during a medium-term cycle turn window. Following this occurrence strength should be expected for at least a few days, but we remain unconvinced that this latest turn higher is a resumption of the broader uptrend. The 1710 early August high was quite significant from a longer-term cyclical perspective and in our view while it remains intact there is significant risk for a more important correction in the weeks ahead. Conceivably the index could trade to as high as 1678 or even 1692 in the next few days. However, a failure to overcome these levels by early next week will greatly increase the risk that a broader top is developing. 1627 remains critical support with weakness below this level on a closing basis the likely lynchpin to further material weakness.

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


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Talking Points

• Prices rose as expected after forming a Bullish Engulfing pattern at support near 0.89
• We continue to hold a long positionas the focus turns to trend line resistance at 0.9094
• Break above 0.9094 targets the 0.9256-95 area (range top, 23.6% Fib retracement)

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




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

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• USD/CHF rebounds off key Gann level
• Cycles favor a further rebound in the S&P 500
• USD/JPY testing a major upside pivot

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: USD/CHF

• USD/CHF has rebounded further off the 7th square root progression of the year-the year-to-date high in the .9145 area
• Subsequent strength through the 2nd square root progression of the August low at .9335 has shifted our near-term trend bias to positive
• Immediate focus is on the 38% retracement of the July to August decline at .9375 with strength above needed to expose Gann points at .9405 and .9440
• A couple of minor turn windows are seen over the next few days, but a more important window is eyed around the middle of next week
• A confluence of Gann support levels near .9260 needs to be breached to undermine the burgeoning positive structure in the rate

USD/CHF Strategy: Like the long side while over .9260.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/CHF	*0.9260	0.9305	0.9365	0.9375	*0.9405

Price & Time Analysis: NZD/USD

• NZD/USD traded to its lowest level since early July last week before rebounding sharply over the past few days
• Strength over .7860 has turned the near-term trend bias to positive
• A convergence of Gann and Fibonacci levels near.7940 suggests that this area is the next pivot of interest with a close above needed set up a further advance
• A minor turn window is seen around the latter part of the week
• The .7860 area is now support, but only weakness below the August low near .7720 will turn us negative on the Bird

NZD/USD Strategy: Small longs favored while over .7720.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
NZD/USD	*0.7720	0.7860	0.7885	*0.7940	0.7990

Price & Time Analysis: S&P 500



S&P 500 found support last week at the 2nd square root progression of the all time high in 1627 area

• While below the 78.6% retracement of the August range at 1692 our trend bias will remain negative
• The 1627 level remains a major downside pivot with weakness below needed to trigger material weakness
• The short-term cyclical picture favors strength for at least a few days
• Only a close over 1692 would improve the negative technical outlook

S&P 500 Strategy: Like the short side while below 1692. May look to add into the expected strength over the next few days.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
S&P 500	1616	*1627	1640	1658	*1692

Focus Chart of the Day: USD/JPY



Key resistance for us in USD/JPY has been 99.45/65 as this area includes the 1x1 Gann angle line of the and the 4th square root progression of the year’s high (if we include the 61.8% retracement of the May to June decline we could say this resistance zone extends all the way to 99.95). While the exchange rate managed to trade above this zone on an intraday basis yesterday it wasn’t able to finish the day above these levels leaving us with lingering doubts about the latest move higher. For us, a close over this zone is really needed to signal an end to the consolidation period of the past few months and confirm a resumption of the broader uptrend. Failure to get over this zone on a closing basis by the end of the week would warn that the consolidation phase is not yet finished.

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


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EUR/USD Wave Pattern Possibility into ECB
4Hour



-EURUSD recovered Wednesday to close at 1.3206, right at the 8/15 low of 1.3205.
-3 waves down from the August high are visible, thus the current rally may compose a corrective 4th wave. Former pivot highs at 1.3226, 1.3234 and 1.3254 are levels to look for a top.
-The next downside level of interest is the 7/11 close at 1.3094.
Trading Strategy: Shorting between 1.3230 and 1.3250 with a 1.3310 stop. Target half at 1.3100.
LEVELS: 1.3020 1.30941.3162 | 1.3226 1.3254 1.3297


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GBPUSD – Forex retail crowds have sold aggressively into recent GBPUSD gains, and the sudden shift in sentiment gives us pause in our calls for British Pound weakness.

Trade Implications – GBPUSD: Our sentiment-based trading strategies have recently gone long the GBP as crowds go in the opposite direction—an important shift from just seven days ago. Indeed, our SSI data shows that total retail short positions jumped 20 percent week-over-week, and current sentiment readings favor a test of key GBP resistance through near-term trading.

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

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4Hour



-On 8/30, NZDUSD closed beneath the line that extends off of lows from June and August before reversing on Monday. The false break signaled an important low just as the false break higher on 8/19 signaled an important top.
-The larger trend is down as per the 3 wave advance from the June low.
-Exceeding .7920 would make 5 waves from .7719 and possibly complete a flat correction from the 8/23 low at .7761. Resistance is estimated at .7933, .7970, and .7994.

Trading Strategy: Watching AUDUSD to exceed its August high while NZDUSD fails to exceed its August high to trigger the next
big sell signal.
LEVELS: .7792 .7839 .7869 | .7933 .7970 .7994



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• Tactical decline in EUR/USD beginning to take shape
• USD/JPY fails at projection level
• Gold outlook remain positive

Weekly Foreign Exchange Price & Time at a Glance:

Weekly Price & Time Analysis: EUR/USD

• EUR/USD came under further downside pressure this week to trade to its lowest level since mid-July
• While below the 1.3415 2Q13 high our broader trend bias will remain lower in the single currency
• A weekly close below the 2nd square root progression of the August high at 1.3220 will be further evidence that a more important decline is unfolding
• The second half of next week is a medium-term cycle turn window in the rate
• A move through the 1.3320 61.8% retracement of the late August – September decline would relieve the immediate downside pressure, but only a weekly close over 1.3415 turns us positive

Weekly EUR/USD Strategy: Still short against a weekly close over 1.3415

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	1.3020	*1.3100	1.3170	1.3315	*1.3415

Weekly Price & Time Analysis: USD/JPY

• USD/JPY touched the 100% projection of the initial August advance on Friday before coming under aggressive downside pressure
• While above the 2Q13 low near .9375 our longer-term trend bias will remain higher in the exchange rate
• The projection level at 100.15 and the 78.6% retracement of the July – August decline at 100.30 are now important pivots with a weekly close above required to signal the start of a new leg higher
• The next medium-term cycle turn window is seen in about a week
• A cluster of Gann supports near 98.60, 97.60 and 96.70 are important, but only weakness below .9375 will turn the broader outlook to negative in USD/JPY

Weekly USD/JPY Strategy: Tactical longs favored against .9375

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	97.60	98.60	1.5605	*100.30	100.70

Weekly Price & Time Analysis: GOLD

• XAU/USD came under further downside pressure this week following last week’s failure at the 7th square roo progression of the year-to-date low in the 1418 area
• While over the 3rd square root progression of the year’s low at 1280 our broader trend bias will remain higher in the metal
• A move through 1418 and the 100% projection of the July advance near 1440 is needed to set off the next important move higher in the metal
• The middle of the month looks like a cycle turn window
• The 1350 area is important support, but only a weekly close below 1280 would turn us longer-term negative on Gold

Weekly XAU/USD Strategy: Like tactical long positions in Gold while above 1280.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	*1280	1350	1387	1418	*1440

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

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An eventful week in Japanese markets should get more interesting in the coming weeks. USDJPY strength is suspect as long as the Nikkei 225 is capped by its May-July trendline. USDZAR completed a near term topping pattern on Friday and objectives are defined.

USD/JPY and Nikkei 225
Daily



- USDJPY trade since 5/22 may take the form of a triangle, a common continuation pattern. The Nikkei may also be forming a triangle. The USDJPY triangle break was NOT confirmed by the Nikkei break.
- The apex of the triangle (black lines drawn off of highs/lows and red lines drawn off of closes) occurs 9/26, 91 trading days from the 5/22 top. Today was the 72nd day of consolidation, which is more than 75% of the distance from the top to the apex. The risk of a false breakout increases after the 75% point however (Edwards and Magee, Technical Analysis of Stock Trends).
- At turns, the Nikkei 225 (NK) and USDJPY have diverged (failed to confirm price extremes). Both topped on 5/22. At the June low, the USDJPY low wasn’t confirmed by a new NK low. At the July high, the NK high wasn’t confirmed by a new USDJPY high. At the August low, the NK low wasn’t confirmed by a new USDJPY low.
-Friday’s USDJPY slide found low at the topside of former trendline resistance. Daily structure is considered healthy as long as daily close is above 98.80 (prior closing peak).
Strategy – Recovery off of post NFP low in USDJPY is promising. Looking for support on Monday…watch 98.90. Below 98.20 would negate bullish swing potential and shift focus towards 96.70/90.

EUR/JPY
Daily




- EURJPY trade since 5/22 may also take the form of a triangle, a common continuation pattern. The risk of a false breakout due to the proximity of the apex applies to EURJPY in the same manner as USDJPY.
-Triangle support crosses 129.30 next week. The close of the August low day (8/12) is 128.87 is also possible support.

Strategy – Monitor for a breakout / monitor for support from 128.90-129.30. Beware a false break, especially if lower. 127.50 (close of the large range day on 6/13) is possible support below the August low of 127.96.

ZAR/JPY
Weekly




-ZARJPY has made important lows at this time of year in recent years. The 2011 low occurred in September. The 2012 low occurred in October. In other words, frequency of lows is roughly 1 year.
-Price is testing the line that extends off of the May and July highs as well as the series of highs from 8/9-8/15.
-Weekly RSI(13) has crossed above 40. A bullish momentum profile is one in which RSI exceeds 70 at price highs and holds above 30 at price lows.
-‘Launch points’ for extended rallies have occurred as double bottoms of sorts in recent years. In 2011, lows were made in September and November. In 2012, lows were made in June and October. This year, lows have been made in June and August (remains to be seen if the August low holds…but off to a good start).
-Getting ahead of ourselves here…but price could be forming a massive inverse head and shoulders pattern (upward sloping as well).

Strategy – Need to see how market handles current resistance before doing anything but you’ll want to keep this one on the watch list.

USD/ZAR
Weekly




- USDZAR traded to its highest level since March 2009 last week before closing near the low for the week.
-Currently testing steep trendline support (in red), a break shifts focus to the former resistance line turned support (in blue).
- Friday’s breakdown completed a head and shoulders top (with a weak right shoulder). Objectives are 9.83 and 9.80 (see below chart).
-Resistance is 10.07-10.10.
Strategy – Looking for a sale in 10.07-10.10 region next week. I would also look to nibble on the long side into 9.75-9.83.

USD/ZAR
4Hour




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


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