Technical Analysis

Talking Points

• US Dollar May Be Set to Resume Uptrend After Pullback
• S&P 500 Attempting to Carve Out Base at Key Support
• Gold Prices Poised to Overtake $1400/oz Figure Again

US DOLLAR TECHNICAL ANALYSIS – Prices appeared to have overturned a two-month down trend last week with a break above channel top resistanceset from July’s swing high. Initial resistance was met at 10798, the 23.6% Fibonacci expansion, with a pullback from this barrier now producing a retest of the channel top (10711). A push below that exposes the August 12 low at 10652. Alternatively, a reversal back above resistance aims for the 38.2% Fib at 10888




S&P 500 TECHNICAL ANALYSIS – An attempt to build meaningfully higher from a support region bracketed by a pair of trend lines set from the November 2012 continues. Near-term resistance is at 1658.30, the 38.2% Fibonacci retracement, with a break above that targeting the 50% level at 1668.10. Initial trend line support is now at 1653.80, followed by the outer barrier at 1637.70.




GOLD TECHNICAL ANALYSIS – The formation of a Bullish Engulfing candlestick pattern above support marked by the bottom of a rising channel set from late June hints at gains ahead. Initial resistance is at 1396.41, the 23.6% Fibonacci expansion, with a break above that exposing the 38.2% level at 1419.89. Channel support is now at 1363.03.




CRUDE OIL TECHNICAL ANALYSIS– Prices are testing resistance in the 109.66-110.32 area, marked by the February 2012 closing high and the 50% Fibonacci expansion. A break above that exposes the 61.8% level at 112.23. Near-term support is at 108.40, the 38.2% Fib, followed by the 23.6% expansion at 106.04.




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

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Talking Points
- Syrian tensions remain between Russia and US, but no strike for now.
- Australian Dollar jumps on election outcome; could be short-lived.
- US Dollar trades broadly lower after August NFPs disappoint.

INTRADAY PERFORMANCE UPDATE: 09:50 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.12% (-0.20%prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

The Dow Jones FXCM Dollar Index is trading back near its post-NFPs release low from Friday as risk-appetite has firmed across the globe – at least in FX markets. Overnight, 2Q’13 GDP figures showed that the Japanese economy grew by +3.8% annualized, a slight tick down from the +4.1% figure in the 1Q’13 but well-above the prior 2Q’13 estimate of +2.6%.

While the stronger growth figures have stoked a turnaround in the Japanese Yen from its overnight lows – stronger growth reduces the need for more easing from the Bank of Japan – the funding and safe haven currency remains a bottom performer after news broke over the weekend that Tokyo would host the 2020 Olympics. Mainly, this has to do with the Yen’s inverse relationship with the Nikkei 225, which closed up by +2.48% on Monday.

Also out of the Eastern Hemisphere this weekend was news that Tony Abbott of the Liberal Party (right-leaning) ousted Kevin Rudd of the Labor Party (left-leaning) as Prime Minister of Australia. The Australian Dollar has emerged as a top performer in the wake of the results as Mr. Abbott promised to revitalize the country’s mining sector, and generally boost what has been a sagging economy over the past two years.
Mr. Abbott’s desires for economic grandeur may be misguided. Indeed, with the recent slowdown in China and emerging market turmoil, there is mounting evidence that the global commodity supercycle may be cooling; neither Mr. Abbott nor Mr. Rudd could do anything about that. Even if carbon taxes and mining taxes are dismissed, the core issue remains: weak revenue streams as demand for base metals erodes – Australia’s top export being iron ore.

Accordingly, what this means is that we should expect new policies to struggle; and the Reserve Bank of Australia will likely need to keep its policy looser than previously anticipated as the Australian government undergoes its own version of fiscal consolidation. Incoming data remains important; but we wouldn’t be surprised if the RBA front-runs any fiscal drag with at least one more 25-bps rate cut in 2013.

AUDJPY 5-minute Chart: September 9, 2013 Intraday




ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION

See the


--- Written by Christopher Vecchio, Currency Analyst

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Talking Points

• US Dollar Threatens to Undo Last Week’s Upside Break
• S&P 500 Finally Finds Fuel to Drive Rebound at Support
• Gold Rebound Signaled by Bullish Candlestick Pattern

US DOLLAR TECHNICAL ANALYSIS – Prices appeared to have overturned a two-month down trend last week with a break above channel top resistanceset from July’s swing high. Initial resistance was met at 10798, the 23.6% Fibonacci expansion, with a pullback from this barrier now producing a retest of the channel top (10705). A push below that exposes the August 12 low at 10652. Alternatively, a reversal back above resistance aims for the 38.2% Fib at 10888.




S&P 500 TECHNICAL ANALYSIS – Prices vaulted higher from support in a region bracketed by a pair of trend lines set from the November 2012, taking out the 23.6% Fibonacci expansion at 1662.10. Buyers now aim to challenge the 38.2% level at 1684.10. The 1662.10 level has been recast as support, with a move below that eyeing trend line barriers at 1655.50 and 1639.30.



GOLD TECHNICAL ANALYSIS – The formation of a Bullish Engulfing candlestick pattern above support marked by the bottom of a rising channel set from late June hints at gains ahead. Initial resistance is at 1396.41, the 23.6% Fibonacci expansion, with a break above that exposing the 38.2% level at 1419.89. Channel support is now at 1366.95.



CRUDE OIL TECHNICAL ANALYSIS– Prices put in a bearish Dark Cloud Cover candlestick pattern at resistance in the 109.66-110.32 area, marked by the February 2012 closing high and the 50% Fibonacci expansion, hinting a move lower is ahead. Near-term support is at 108.40, the 38.2% Fib, followed by the 23.6% expansion at 106.04.Alternatively, a reversal above resistance exposes the 61.8% level at 112.23.



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

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Talking Points

• US Dollar Upswing Unravels, 2-Month Down Trend Resumes
• S&P 500 Hits 4-Week High as 1700 Figure Returns to Focus
• Gold Prices Recoil from $1400/oz, Challenge Trend Support

US DOLLAR TECHNICAL ANALYSIS – A break below a counter trend line support underpinning the upswing over the past month suggests the downtrend initiated at the July swing high as resumed. Sellers now aim to challenge the 38.2% Fibonacci expansion at 10673, with a break below that targeting the 50% level at 10631. Near-term resistance is at 10726, the 23.6% Fib.




S&P 500 TECHNICAL ANALYSIS – Prices vaulted higher from support in a region bracketed by a pair of trend lines set from the November 2012, taking out the 23.6% Fibonacci expansion at 1662.10 to challenge the 38.2% level at 1684.10. A break above this barrier aims for the 1700.00 figure and the 50% Fib 1701.80. The 1662.10 level has been recast as support.




GOLD TECHNICAL ANALYSIS – Prices pulled back to support marked by the bottom of a rising channel set from the late-June swing bottom and a horizontal pivot barrier at 1347.52. A break below that broadly aims for the 1300/oz figure. Near-term resistance is at 1415.33, the 38.2% Fibonacci retracement.




CRUDE OIL TECHNICAL ANALYSIS– Prices declined as expected after putting in a bearish Dark Cloud Cover candlestick pattern at resistance in the 109.66-110.32 area, marked by the February 2012 closing high and the 50% Fibonacci expansion. Near-term support is at 106.04, the 23.6% Fib, followed by a rising trend line at 104.20.Initial resistance is at 108.40, the 38.2% level.




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

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• USD/JPY stalling at Gann resistance
• XAU/USD at an important near-term pivot
• GBP/USD trades to 7-month highs

Foreign Exchange Price & Time at a Glance:
Price & Time Analysis: USD/JPY

• USD/JPY traded to its highest level since mid-July on Wednesday before encountering resistance just below the 5th square root progression of the August low at 100.70
• Our near-term trend bias will remain higher in the rate while above a slew of Fibonacci and Gann support levels in the 98.40 area
• The 100.70 level is now a clear near-term upside pivot with traction above needed to expose more serious resistance at 101.25
• A minor cycle turn window is in effect over the next couple of days
• Some Gann levels near 99.40 should provide interim support, but only weakness below 98.40 would turn us negative on USD/JPY

USD/JPY Strategy: Like the long side while over 98.40

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*98.40	99.40	100.35	*100.70	*101.25

Price & Time Analysis: GBP/USD

• GBP/USD broke above the 2Q13 high on Wednesday to trade to its highest level in over 7 months
• Out near-term trend bias is higher in Cable while above the 1x3 Gann angle line of the year-to-date low in the 1.5600 area
• A convergence of the 4th square root progression of the year’s high and the 1x4 Gann angle line of the year’s low in the 1.5830 area needs to be overcome soon to set up further gains
• A minor cycle turn window is seen around the end of the week
• Weakness below 1.5600 on a closing basis is required to undermine the immediate positive tone in Sterling

GBP/USD Strategy: Like the long side while over 1.5600

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.5600	1.5650	1.5765	*1.5830	1.5895

Price & Time Analysis: USD/CAD

• USD/CAD repeated failures at the 1x2 Gann angle line of the 2012 low has led to significant weakness over the past week or so
• Weakness below 1.0430 has turned our near-term trend bias negative in Funds
• Critical support is seen at the 2x1 Gann angle line of the 2012 closing low near 1.0325 with weakness below on a closing basis needed to trigger a more serious decline
• A minor cycle turn window is seen today and at the end of the week
• The 50% retracement of the July range at 1.0430 is important near-term resistance and only strength above this level would turn us positive on USD/CAD

USD/CAD Strategy: Like selling USD/CAD on strength.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/CAD	1.0265	*1.0325	1.0335	1.0400	*1.0430

Focus Chart of the Day: GOLD



XAU/USD has come under steady pressure since failing late last month at the 7th square root progression of the year-to-date low at 1418. So far the price action in the metal looks only corrective, but a big test to this view will come around 1357 and 1350. The former is the 2nd square root progression of the August high while the latter is the 5th square root progression of the year’s low. If the metal is set to undergo a more immediate resumption of its most recent advance then this is the zone from where it should probably occur (could maybe go as low as the 38% retracement of the June-August advance around 1337). Too much weakness below 1337 and the prospects for a much more messy drawn out corrective process will greatly increase in our view. Only weakness below 1270 turns the technical picture negative, however.

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

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Talking Points

• US Dollar Support Break Hints at Further Weakness Ahead
• S&P 500 Clears the Way for a Push Above the 1700 Figure
• Gold Prices Challenge Two-Month Rising Trend Threshold

US DOLLAR TECHNICAL ANALYSIS – A break below a counter trend line support underpinning the upswing over the past month suggests the downtrend initiated at the July swing high as resumed. Sellers now aim to challenge the 50% Fibonacci expansion at 10631, with a break below that targeting the 61.8% level at 10588. Near-term resistance is at 10673, the 38.2% Fib.



The Dow Jones FXCM US Dollar Index and the Mirror Trader USD basket are not the same product.
S&P 500 TECHNICAL ANALYSIS – Prices vaulted higher from support in a region bracketed by a pair of trend lines set from the November 2012. The bulls have now cleared the 38.2% Fibonacci expansion at 1684.10, exposing the 50% level at 1701.90. A further break above this barrier aims for the August 2 high at 1709.60 and the 61.8 Fib 1719.60. The 1684.10 level has been recast as support.



GOLD TECHNICAL ANALYSIS – Prices pulled back to support marked by the bottom of a rising channel set from the late-June swing bottom and a horizontal pivot barrier at 1347.52. A break below that broadly aims for the 1300/oz figure. Near-term resistance is at 1415.33, the 38.2% Fibonacci retracement.


CRUDE OIL TECHNICAL ANALYSIS– Prices declined as expected after putting in a bearish Dark Cloud Cover candlestick pattern at resistance in the 109.66-110.32 area, marked by the February 2012 closing high and the 50% Fibonacci expansion. Near-term support is at 106.04, the 23.6% Fib, followed by a rising trend line at 104.20.Initial resistance is at 108.40, the 38.2% level.



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

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Japanese Yen – Retail forex traders are their most heavily long the Japanese Yen versus the British Pound (short GBPJPY) since 2011, and very heavily one-sided sentiment leaves us in favor of further Yen weakness across the board.
Trade Implications – GBPJPY: Our sentiment-based trading strategies have done well selling into Yen weakness versus the British Pound and the Australian Dollar (long GBPJPY and AUDJPY). Said systems may continue to build on recent outperformance, but it will be important to watch the next Yen moves.


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Talking Points

• US Dollar Finds Interim Support at Augusts’ Swing Low
• S&P 500 Rally Pauses But Positioning Still Favors Gains
• Gold Snaps Trend Support, Aims Below $1300/oz Mark

US DOLLAR TECHNICAL ANALYSIS – Prices found interim support in the 10646-57 area, marked by the August 16 low and the 61.8% Fibonacci expansion. Near-term resistance is at 10687, the 50% level, with a break above that targeting the 38.2% Fib at 10716. Alternatively, a move below support exposes the 76.4% expansion at 10620.




S&P 500 TECHNICAL ANALYSIS – Prices vaulted higher from support in a region bracketed by a pair of trend lines set from the November 2012. The bulls have now cleared the 38.2% Fibonacci expansion at 1684.10, exposing the 50% level at 1701.90. A further break above this barrier aims for the August 2 high at 1709.60 and the 61.8 Fib 1719.60. The 1684.10 level has been recast as support.




GOLD TECHNICAL ANALYSIS – Prices broke below the bottom of a rising channel set from late-June and cleared the 1343.73-47.52 region marked by a horizontal pivot as well as the 14.6% Fibonacci expansion. Sellers now aim to challenge the 23.6% level at 1288.32. Alternatively, a reversal back above 1347.52 opens the door for a retest of the channel bottom, now at 1363.72.




CRUDE OIL TECHNICAL ANALYSIS– Prices declined as expected after putting in a bearish Dark Cloud Cover candlestick pattern. Near-term support is now at 105.93, the 23.6% Fibonacci retracement, with a break below that targeting the bottom of a rising channel set from early July (now at 104.28). Channel resistance is at 110.64.




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


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2013 began with strong trending moves in the Japanese currency and stock market. The USDJPY, Nikkei 225, and ZARJPY have broken through May-July trendlines. The seeds may be sown for these markets to end the year as they began…in strong trends.

USD/JPY
Daily





-USDJPY low for the month at 98.27 is still the first trading day of the month. In bull trends, early month lows and late month highs are common.
-Last Friday’s (9/6) USDJPY slide found low at the topside of former trendline resistance. Daily structure is considered healthy as long as the daily close is above 98.80 (prior closing peak).
-A small range key reversal on Wednesday is still in place but the dip found support near last Friday’s close and from former resistance at 99.14 (8/23 high).
-Daily RSI has exceeded 60 twice in the last 2 weeks but failed to stay above the barrier. This is a concern for bulls.

Strategy – Looking for a low at more or less current level. Watch 98.80-99.15 (20 day average and line that extends off of 9/6 and 9/12 lows).

Nikkei 225
Daily





-The Nikkei 225 broke through the line that extends off of the May and July highs on Monday (9/9). The break increases confidence in the USDJPY break one week earlier (on 9/2).
-The decline from the July high to the August low is in 3 waves (corrective), implying that 14963 will be broken before 13160 is broken. Wave C took the form of a diagonal and has been completely retraced.
-The rally from 13160 unfolded in 5 waves (impulsive). Impulsive channeling suggests that the presented account is the correct count (impulsive channel – connect waves 2 and 4, then extend a parallel line to the top of wave 3. That line often estimates the end of wave 5).
-The pullback from 14578 stopped 10 points shy of the former 4th wave area (14158-13675) on Thursday. 5 wave rallies are followed by 3 wave declines that often end near the previous 4th wave extreme (circled), which is also the 61.8% retracement in this instance. That level is support if reached but I’m not dismissing gains from the current level as real markets rarely follow textbook scripts and the near term momentum profile has changed. Since the 13160 low, price tops have occurred when RSI (4 hour) is above 70 and price lows when RSI is near 50. This is an example of a bullish momentum profile (see the left side of the chart as well).

Nikkei 225
4Hour




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 has broken 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 (the higher the RSI figure at the low, the stronger the market).
-‘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 – Watching for support from the top side of the broken trendline near 9.84.

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

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Talking Points
- Larry Summers, the hawkish Fed candidate, is out of the running.
- Janet Yellen, Vice Chairman of the Fed and the dovish candidate, appears to be the new favorite.
- High yielding FX take advantage of US Dollar weakness.

INTRADAY PERFORMANCE UPDATE: 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.56% (-1.34%prior 5-days)

ASIA/EUROPE FOREX NEWS WRAP

The Dow Jones FXCM Dollar Index opened the week lower to its lowest prices since June 19, the day that the Federal Reserve officially pivoted its monetary policy towards potentially reducing QE3 later in the year. However, the US Dollar’s weakness has not been stoked by speculation surrounding this week’s FOMC meeting.

Instead, investors have turned their eye further down the Fed’s calendar to January, when current Chairman Ben Bernanke’s term is set to expire. While he has not officially announced his retirement, it is widely expected that he will leave his post in four months.

Over the past few weeks, market participants have seemingly narrowed the possible Bernanke replacements down to two candidates: Janet Yellen and Larry Summers. The former is the current Vice Chairman of the Board of Governors of the Federal Reserve; the latter served as the head of the US National Economic Council from January 2009 to November 2010.

While both candidates are highly respected within economics, there has been a growing belief that if Larry Summers, reportedly President Obama’s preferred choice, were to take over the Fed, monetary policy would tighten given Mr. Summers’ belief that fiscal stimulus (government spending) is more effective than the Fed’s recent non-standard monetary stimulus (QE).

Furthermore, market participants consider Ms. Yellen to be more dovish than Chairman Bernanke; and so the aggregate impact of Mr. Summers announcing that he would withdraw his name from consideration has the markets pricing out a hawkish chairman and pricing in a dovish chairwoman in the very near-term.

The news is unlikely to impact the US Dollar for long this week (it will matter more in the future). Instead, there are a plethora of items to watch for as we wait for the Fed’s policy meeting on Wednesday.

EURUSD 5-minute Chart: September 16, 2013 Intraday



Taking a look at European credit, lower yields in the core and mixed yields in the periphery have likely weighed on the Euro on Monday. The Italian 2-year note yield has decreased to 2.027% (-2.6-bps) while the Spanish 2-year note yield has increased to 1.717% (+0.5-bps). Similarly, the Italian 10-year note yield has decreased to 4.526% (-4.8-bps) while the Spanish 10-year note yield has decreased to 4.455% (-3.0-bps); lower yields imply higher prices.

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION




--- Written by Christopher Vecchio, Currency Analyst

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