Technical Analysis

Talking Points

• Prices are testing falling trend line resistance-turned-support at 131.86
• Break downward aims for rising channel support at 130.52
• Near-term resistance is in the 133.81-89 (channel top, May 22 high)

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

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Talking Points:
- Highest Euro-Zone Zew Survey: Expectations since September 2009.
- Highest German ZEW Survey: Expectations since December 2009.
- BoE’s forward guidance may be working as CPI steps down.

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 US Dollar is broadly lower following a weak start to the trading week yesterday, but price action has started to shift from favoring the New Zealand Dollar over its Australian counterpart and the Euro over the British Pound. As the trading day has marched forward, there’s been an increased interest surrounding the Euro as regional bond yields have crept higher.

Typically when European bond yields have moved up (particularly in Italy and Spain), the Euro has suffered. Today, however, yields are not increasing because investors are selling on fear; rather, improving economic growth prospects have reduced the demand for fixed income and boosted demand for riskier assets like stocks (the German DAX is holding near its all-time high set yesterday at 8626.11).

Indeed, signs of a stronger Euro-Zone are emerging, with the ZEW Surveys surging to their best outputs in four years. Here are the figures stoking Euro strength:
-Euro-Zone ZEW Survey: Expectations (SEP): 58.6 from 44.0
- German ZEW Survey: Current Situation (SEP): 30.6 versus 20.0 expected, from 18.3
- German ZEW Survey: Expectations (SEP): 49.6 versus 45.0 expected, from 42.0

Meanwhile, the British Pound is seeing a bout of weakness following the soft CPI report. The report underscores shifting consumer expectations as the Bank of England attempts to keep interest rates pointed lower. Accordingly, if data today proliferates and becomes a trend, there is scope for a short-term, fundamentally based reversal in the EURGBP.

EURUSD 5-minute Chart: September 17, 2013 Intraday



Taking a look at European credit, higher yields across the region (especially in the core) on the back of improving economic data have lifted the Euro. The Italian 2-year note yield has decreased to 1.916% (-4.2-bps) while the Spanish 2-year note yield has increased to 1.689% (+0.5-bps). Similarly, the Italian 10-year note yield has decreased to 4.434% (-1.5-bps) while the Spanish 10-year note yield has increased to 4.407% (+0.2-bps); lower yields imply higher prices.

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION




--- Written by Christopher Vecchio, Currency Analyst

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Weekly




-GBPUSD traded to its highest level since January 18thon Monday. Price tagged the underside of the line that extends off of the 2010 and 2012 lows before pulling back.


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Talking Points:

- Bank of England Minutes spur next leg higher for British Pound.
- US Dollar most unchanged but losing ground ahead of FOMC.
- Fed’s meeting today accompanied by updated economic forecasts and press conference.

INTRADAY PERFORMANCE UPDATE: 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.15% (-0.58%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP

The Dow Jones FXCM Dollar Index remains near its monthly lows as investors have scaled back expectations of a full-fledged QE3 taper by the Federal Reserve at its policy meeting today, as incoming US economic data has been disappointing the past several weeks.
Specifically, there are signs that the labor market is stumbling, while recent softer inflation data has stoked concerns about broader economic weakness. Accordingly, the most recent forecasts from Bloomberg News suggest that only a mere $5B will be tapered today, with MBS purchases on hold at $40B/month and US Treasuries purchases scaled down to $40B/month (from $45B/month).
While this forecast is influenced by the distribution of economists’ estimates – most see no change in QE3 or a $10B cut in US Treasuries purchases – it’s evident that market participants see only a small taper happening; “taper-lite” as it’s been dubbed.

Considering that US yields continue to hover near their highest levels in two years (pre-US ‘AAA’ downgrade), a significant pullback in yields amid a “taper-lite” scenario exposes the US Dollar to further weakness, particularly against the day’s top performers, the British Pound and the Japanese Yen.

A dovish Fed/most negative US Dollar outcome would have the following characteristics:
- a small reduction of QE3, no more than $15B, all from US Treasuries, leaving MBS purchases unchanged;
- a promise not to begin a linear, successive pace of tapering – ‘dependent on incoming data’ – to avoid 1994-esque bond market sentiment from setting in;
- a downgrade of the Fed’s 2013 and 2014 growth, inflation, and labor forecasts in light of recent data;
- and a shift in the Fed’s forward guidance thresholds (previously set as: greater than +2.5% yearly inflation; or Unemployment Rate sub-6.5%).

Today’s Fed meeting will shift the tectonic plates of financial markets, no doubt. Chief Currency Strategist John Kicklighter will be expanding on this analysis and reviewing the possible outcomes in a special webinar for the Fed rate decision in DailyFX Plus, starting at 13:45 EDT/17:45 GMT.
GBPUSD 5-minute Chart: September 18, 2013 Intraday



Taking a look at European credit, “risk on” conditions reminiscent of the peak of the Euro-Zone crisis in 2011 have emerged. At that time, the Euro strengthened when peripheral yields fell (Italy, Spain) and core yields rallied (Germany, Holland). Such is the case today; although with the FOMC rate decision later today, price action has been understandably subdued. Accordingly, should a dovish FOMC emerge, intraday European credit suggests that the Euro is positioned to rally against the US Dollar.
The Italian 2-year note yield has decreased to 1.871% (-3.1-bps) while the Spanish 2-year note yield has decreased to 1.630% (-2.2-bps). Similarly, the Italian 10-year note yield has decreased to 4.360% (-3.7-bps) while the Spanish 10-year note yield has decreased to 4.375% (-1.7-bps); lower yields imply higher prices.

ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION




--- Written by Christopher Vecchio, Currency Analyst

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-USDJPY breakout pending?
-USDMXN and USDZAR sitting on big support levels

USDJPY
Daily




The USDJPY trended higher until May. Since the 5/22 top, a triangle may have unfolded and may be complete after the 9/2 break above the May-July trendline. It’s possible that the breakout fails but operate on what has happened…to this point, that is a breakout.
It’s worth noting that the 21 day (1 month) and 126 day (6 month) averages are aligned in a bullish manner again. The proximity of the averages to each other and price indicate a compressed range that typifies conditions prior to a breakout.

USDJPY
8Hour




I am long USDJPY against the month to date low (98.20). Options volatility implies roughly a 1.4% move from current price. 1.4% on each side of 99 = 97.63 and 100.39. A trendline confluence lines up with the 8/30 low at 97.90 so I’ll look for support at 97.60/90 is taken out longs.

100.39 is just shy of last week’s high of 100.60. If the reaction is positive, then resist the temptation to chase into the top of the range. Rather, take some off of the table.

USDMXN
Daily




USDMXN is really darn close to trendline support and has already responded to the 7/31 high as support. Yesterday’s inside day at support is a setup that I look for too.
I’m looking higher towards 13.15 but am not yet positioned. A push into 13.04/05 and pullback would probably present a long opportunity.

USDZAR
Daily




USDZAR met a head and shoulders target on Monday as well as a long term trendline (former resistance line turned support in July-see next chart). The inside day at support setup is evident.
I’m looking higher towards 10.15 but am not yet positioned. A push into 9.90 and subsequent pullback would probably present a long opportunity. A new low could also test the 126 day (6 month) average, which has been support for over a year.

USDZAR
Daily




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

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Talking Points

• Prices are bounding from trend line support set from mid-June (97.81)
• Near-term resistance is at 98.89 (23.6% Fib); break above that targets 99.59 (38.2% Fib)
• Turn below support aims for a trend line set from late February (now at 96.03)

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

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Weekly




-GBPUSD made an inside day at resistance following the largest one day advance since 7/1/10. After such an extended move, an inside day serves as a turn warning.
-The line that extends off of the 2009 and 2010 lows serves as an impediment to gains but the next possible resistance is the line that extends off of the 2011 and 2013 highs at about 1.6225 and the January 2nd close (high of the year…first trading day of the year) of 1.6252.
-21 day RSI is at 75. This is the highest reading since early June 2009.
Trading Strategy: Flat right now but monitoring for more evidence of a top (intraday pattern).
LEVELS: 1.5775 1.5885 1.5970 | 1.6100 1.6180 1.6252

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Talking Points

• Prices declined as expected after showing a bearish Dark Cloud Cover candle pattern
• Support is now at 0.9081 (61.8% Fib); push beneath that exposes 0.8993 (76.4% Fib)
• Resistance is in the 0.9152-71 area (trend line, 50% Fib); break higher eyes 0.9224 (38.2% Fib)

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

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Talking Points

• EUR/USD trend bias turns positive
• USD/JPY entering into important cycle window
• Gold rebounds from key support zone

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

• EUR/USD finally managed to overcome the 2Q13 high at 1.3415 on a multi-day closing basis
• This shifts our broader trend bias in the Euro to positive
• The 7th square root progression of the year’s low at 1.3545 is an important upside pivot with traction above needed to accelerate the advance towards important upside attractions at 1.3600 and 1.3665
• A cycle turn window is seen around the first week of October
• The 2x1 Gann angle line of the year’s low at 1.3370 is important support, but weakness below the September low near 1.3100 is required to shift the broader bias to negative

Weekly EUR/USD Strategy: Looking to initiate tactical long positions in the Euro.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	*1.3100	1.3370	1.3525	*1.3545	1.3600

Weekly Price & Time Analysis: USD/JPY

• USD/JPY remains in consolidation mode below key Gann resistance levels at 99.65 and 100.65
• While above the 1x1 Gann angle line of the February low in the 97.65 area our broader trend bias will remain higher
• The 99.65 and 100.65 levels remain pivotal for the exchange rate with traction above the latter required to signal a broader upside resumption
• A fibonacci time cycle turn window is in effect over the next few days
• Only weakness on a multi-day closing basis below 97.60 would turn the broader technical outlook to negative in USD/JPY

Weekly USD/JPY Strategy: Tactical longs favored 97.60

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*97.60	98.60	99.35	99.65	*100.65

Weekly Price & Time Analysis: GOLD

Charts

• XAU/USD touched its lowest level in over a month this week before finding support at the 1x2 Gann angle line of the year’s low in the 1294 area
• While over this 1294 support level our broader trend bias will remain higher in the metal
• The 61.8% retracement of the May to June decline at 1370 is now a key upside pivot with traction above neede to signal a broader upside resumption
• A cycle turn window is in effect over the enxt few days
• Weaknes below 1294 on a closing basis would turn the broader technical outlook very negative

Weekly XAU/USD Strategy: Like tactical long positions in Gold while above 1294.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1273	*1294	1334	*1370	1419

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

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Talking Points

• US Dollar at Risk of Renewed Selling After Brief Correction Higher
• S&P 500 Falters as Expected, Meets Support Layer Below 1700 Mark
• Gold Corrects Higher from Interim Support Above $1300/oz Figure

US DOLLAR TECHNICAL ANALYSIS – Prices put in a Bearish Engulfing candlestick pattern below rising trend line support-turned-resistance set from early April (now at 10587), hinting a move lower is ahead. Near-term support is at 10469, the June 13 low, with a push beneath that exposing the March 25 bottom at 10413. Alternatively, a reversal above the trend line targets the August 16 low at 10646.



S&P 500 TECHNICAL ANALYSIS – Prices are pulling back as expected, completing a bearish Evening Star candlestick pattern and breaking below the 23.6% Fibonacci expansionat 1708.70. Sellers are now testing the 38.2% level at 1693.00, with a push beneath that exposing the 50% Fib at 1680.30. The 1708.70 mark has been recast as near-term resistance.




GOLD TECHNICAL ANALYSIS – Prices found interim support at 1320.86, the 38.2% Fibonacci expansion, edging higher to set their sights on resistance in the 1341.60-47.52 area. This is defined by a horizontal pivot and the 23.6% Fib. A break above the outer threshold of this region targets rising channel support-turned-resistance at 1393.15. Alternatively, a reversal through support eyes the 50% expansion at 1304.10.



CRUDE OIL TECHNICAL ANALYSIS– Prices broke support at the bottom of a rising channel set from early July and an upward-sloping trend line established from mid-April. Sellers are now testing the 38.2% Fibonacci retracement at 102.05, with a break below that eyeing the 50% mark at 98.91.Channel support-turned-resistance is now at 105.15.



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

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