Technical Analysis

• Long term stock market channels and US Treasury Bond pattern
• New Zealand Dollar crosses may reverse
• USDMXN responds to support

30 Yr. US Treasury Bond Future Continuous Contract (Dec)
Daily


-The 30 Yr. US Treasury Bond future traded above the 7/22 high today and into the day of the July high.
-Price is at resistance but so is the specter of a head and shoulders bottom. Friday’s weak US session urges caution but 131 20/32 (Wednesday low) is the pivot. A push through 135 14/32 would open up a run towards measured levels of 139 14/32 and 140 20/32. These levels coincide with important highs in June.
-Bigger picture, price has responded to the October low and the mentioned measured levels are in line with major support/resistance levels (see below chart).
30 Yr. US Treasury Bond Future Continuous Contract (Dec)

Weekly



Nasdaq Composite and S&P 500 Index

Weekly




-The Nasdaq and S&P 500 are pushing into channel resistance that originates at the 2009 lows.
-The dashed lines are trendlines that connect the origin of a move and first meaningful reaction (defined as more than 6 months of weakness) within that move. The lines identified the final highs in 2007 although the S&P 500 did ‘ride’ the line higher for some time. The steep slopes of the current lines denote a manic market environment. A final ‘blowoff’ into these lines is possible.
-The Nasdaq composite would consist of 2 equal legs from the 2009 low at 3921. The S&P 500 would consist of 2 equal legs at 1179 (the first legs end at the May 2011 highs).
Trading Strategy: A possible outcome from a bond market breakout (not yet confirmed) and US equity indices at major resistance is a reversal from capital appreciation to capital preservation.

EUR/NZD
Daily




-EURNZD decline from the March 2011 high is an ending diagonal. Reversals from these patterns often return to the pattern’s origin (1.9564).
-Price has returned to the 200 day average. Highs from October 2012 and February 2013 are support here as well.
-Divergence with NZDJPY supports a turn at the current juncture. This fractal may help us navigate market swings moving forward as well.
Trading Strategy: I am long now with a stop at 1.6000. Catching a turn often requires several attempts and if this market heads lower then watch for support at the 5/29 low of 1.5873. As always, I’ll track developments in real time through Twitter @ JamieSaettele.

NZD/JPY
Daily




-NZDJPY has responded to the line that extends off of the April and September highs. A key reversal formed on Thursday and an inside day on Friday.
-Gaps can only occur in the FX market over the weekend. When gaps occur, pay attention. The close before the gap serves as a reference point. That level is possible resistance when approached from below and possible support when approached from above. Look to April for an example. The 4/12 gap served as resistance for weeks. The 9/20 close is serving as resistance right now.

Trading Strategy: Flat at the moment…will visit this early next week.

USD/MXN
Daily



-“USDMXN has been trading in a broad range since the June high. The pattern may take the form of a 3 point ascending triangle. Such patterns have the ability to produce intense bullish market moves.”
-Dashed trendlines are drawn off of the closes. Solid lines are drawn off of the high/low. USDMXN has rebounded from the trendline that extends off of the closes.
Trading Strategy: Near term resistance extends to about 12.93. A push through on an impulsive rally would suggest that a low is in place. Until then, keep 12.70 in mind as possible support for a turn.
--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

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Talking Points

• Prices are testing resistance at 1.3679 (38.2% Fib expansion)
• Negative RSI divergence warns a move lower may be ahead
• Initial support at 1.3600 (23.6% Fib); below that eyes 1.3472 (Oct 16 low)

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

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Talking Points:

• Outstanding UK Economic Data
• Divergent BoE/BoC Monetary Policies
• Bullish Technical Case for GBP/CAD

GBPCAD can be a challenging pair to trade, but its current set-up is extremely attractive to longer-term macro traders. The Bank of England (BoE) is toeing the line between neutral and hawkish monetary policy, and the vast majority of recent UK data has been outstanding, with the clear bright spot being the latest UK labor market numbers.

UK jobless claims recently posted their strongest reading in a dozen years, and have now declined for 12 consecutive months and beaten expectations for six straight months. UK unemployment data is especially significant due to the impact on the UK’s quantitative easing (QE) program.

The Bank of Canada (BoC), on the other hand, remains firmly in the neutral policy camp, and the most recent employment report from Canada suggests the Bank will remain there for some time.

While the Canadian unemployment rate surprisingly fell below 7.0%, it did so despite a weaker participation rate as more and more unemployed leave the labor force. This is usually a sign of frustration with the labor market and is not good news for Canada. Add to that weaker PMI figures and worse-than-expected building permits for this month and we get a picture of a stagnant Canadian economy.

Such a disparity between the nations’ economies and central bank policies means that we will be seeing interest rate expectations favor the British pound (GBP) over the Canadian dollar (CAD) going forward.

Bullish Technical Case for GBP/CAD

From a technical context, GBPCAD has been consolidating sideways since August 2010 after a significant decline. That consolidation came to an end earlier this fall, when the pair broke higher on GBP strength and CAD neutrality, and that trend looks likely to continue in the medium to long term.

Guest Commentary: GBP/CAD Upward Momentum to Continue



The major support level for GBPCAD is now 1.6250, while the move looks to target at least 1.92 over the coming months. This is an attractive set-up for long-term traders looking to limit their exposure to the US dollar (USD).

By Liam McMahon, currency strategist, GlobalFxClub.com

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Talking Points

• Prices are testing resistance at 1.3679 (38.2% Fib); a break targets 1.3710 (Feb high)
• Negative RSI divergence warns a move lower may be ahead
• Initial support at 1.3638 (Feb 1 close); below that eyes 1.3600 (23.6% Fib)

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

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Weekly



-The channel that originates from the July low crosses the July 2011 low this week (1.3837). The 61.8% of the decline from the 2011 high is 1.3833 and the measured move from the just broken 1.3645-1.3461 range is 1.3829 (1.3645 + 1.3645-1.3461).
-The line that extends off of the 2008 and 2011 highs is at 1.3970 this week.
-Estimated support is 1.3725/50 (post NFP spike high and 15 minute close).

Trading Strategy: Staying long EURNZD and moving the stop up to 1.6050.
LEVELS: 1.3672 1.37031.3750 | 1.3830 1.3900 1.3970



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Talking Points

• Prices are testing resistance at 1.6235, the 23.6% Fibonacci expansion
• A break higher targets 1.6446 (38.2% Fib expansion)
• Near-term support is at 1.60, 1.5918 (23.6% Fib retracement)

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

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Talking Points

• US Dollar Eyeing 16-Month Support After April Bottom Break
• S&P 500 Technical Positioning Hints a Pullback May Be Ahead
• Gold Prices Finding Interim Resistance Below $1350/oz Level

US DOLLAR TECHNICAL ANALYSIS – Prices broke below the 10391-424 area, the April swing bottom, to expose resistance-turned-support marked by the June 1 2012 swing high (10323). Alternatively, a reversal back above 10424 eyes the June 2013 bottom at 10469.





S&P 500 TECHNICAL ANALYSIS – Prices recovered as expected after showing a Spinning Top candlestick at support marked by a rising trend line set from late February. Buyers are now testing resistance at 1754.40, the 100% Fibonacci expansion, with a Harami candlestick pattern warning a pullback may be ahead. Near-term support is at 1729.00, the 76.4% Fib.Alternatively, a push above resistance aims for the 123.6% level at 1779.80.





GOLD TECHNICAL ANALYSIS – Prices broke higher as expected after putting in a bullish Morning Star candlestick pattern. Resistance is now at 1342.57, the 50% Fibonacci retracement, with a break above that targeting the 61.8% level at 1364.06. Near-term support is at 1321.09, the 38.2% Fib. A reversal back beneath that eyes the 23.6% Fib at 1294.51.




CRUDE OIL TECHNICAL ANALYSIS– Prices continued to move lower as expected, taking out support at the 38.2% Fibonacci retracement (98.86) to expose the bottom of a channel set from late August (now at 96.82). A break below that aims for the 50% Fib at 94.73. Alternatively, a reversal back above 98.86 eyes the September 14 2012 swing top at 100.40.





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

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Talking Points:

• Weekly Divergence on EUR/JPY Chart
• False Breakout on the Daily Chart
• 2 Ways to Trade EUR/JPY on the Hourly

A simple glance would convince most that EURJPY is in a weekly uptrend, as shown below. However, there are signs of progressive slowing on this chart, as evidenced by the higher highs in price and the lower highs in the corresponding stochastic.
In particular, the persistent nature of this divergence—which has already occurred twice and is primed to happen again—suggests that EURJPY could be ready to begin a consolidation in the next few weeks.

Guest Commentary: EUR/JPY Weekly Uptrend in Jeopardy



It would be ideal if price could bulldoze right through the short-term rising trend line and drop straight to longer-term support, but even a small move could provide interesting opportunities for intraday traders.

The daily chart is also encouraging. There has been a pop up above resistance from the previous high, followed by a quick thrust lower. This is enforced by the bearish engulfing candlestick pattern.

As the false breakout pattern is one of the go-to set-ups for professional traders, this certainly presents an opportunity go to short at least to the short-term rising trend line.

Guest Commentary: False Breakout on EUR/JPY Daily Chart



Nonetheless, given the countertrend nature of this set-up, a shorter time frame is preferred to account for the fact that the move may well be short-lived.

Guest Commentary: Trade Scenarios on EUR/JPY Hourly Chart



There are two possible ways to trade this situation:

• Breakout: The easiest would be the breakout short after the pullback on the hourly chart. Price is currently in a consolidation pullback pattern, as marked with the short support line on the hourly. A break lower would indicate momentum resumption to the downside. To be conservative, a Fibonacci expansion calculation has been made, identifying the support zone as being between 132.45 and 133.20. Due to the choppy nature of breakouts, it would be advisable to use a filter to confirm the downward move before entering, such as a close below Bollinger bands on standard settings on the hourly chart. This set-up would give at least 1:1 risk/reward ratio to the top of the supportive region, and potentially much better if price went to the rising trend line. Traders would be well-advised to trade with caution when prices approach the support zone, and to abort the trade should any adverse price action (such as bullish candlestick patterns) occur.
• Deep Pullback. Those who prefer the notion of better reward for risk can trade the deep pullback, as shown by the alternative arrow on the chart. Resistance from the daily chart, together with some room for error, provides a zone of price potentially turning at 134-59-134.92. This requires a higher level of skill to trade, but it can be traded using the 15-minute chart and classical reversal patterns such as head and shoulders, 1-2-3 tops, lower highs and lower lows, and divergence. The exact entry will depend on each trader's preferred trading style.

It is worth re-highlighting the fact that this is a countertrend trade, and although the set-up is solid, trade management can prove crucial to whether or not this turns out profitably. This is certainly not one of those “set-and-forget” trades!
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com


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Talking Points

• US Dollar Finds Interim Chart Support After Clearing April Bottom
• S&P 500 Technical Setup Continues to Warn of a Pullback Ahead
• Gold Expected to Continue Higher After Clearing Fib Resistance

US DOLLAR TECHNICAL ANALYSIS – Prices broke support in the 10416-24 area, marked by April’s shelf support and the 38.2% Fibonacci expansion, to expose the 50% level at 10374. A further push beneath that eyes the 10323-31 region, defined by the June 1 2012 swing high and the 61.8% Fib. Alternatively, a reversal back above 10424 targets the 23.6% expansion at 10468.




S&P 500 TECHNICAL ANALYSIS – Prices recovered as expected after showing a Spinning Top candlestick at support marked by a rising trend line set from late February. Buyers are now testing resistance at 1754.40, the 100% Fibonacci expansion, with a Harami candlestick pattern warning a pullback may be ahead. Near-term support is at 1729.00, the 76.4% Fib.Alternatively, a push above resistance aims for the 123.6% level at 1779.80.




GOLD TECHNICAL ANALYSIS – Prices broke higher as expected after putting in a bullish Morning Star candlestick pattern. Resistance is now at 1634.06, the 61.8% Fibonacci retracement, with a break above that targeting the 76.4% level at 1390.64. Near-term support is at 1342.57, the 50% Fib. A reversal back beneath that eyes the 38.2% Fib at 1321.09.



CRUDE OIL TECHNICAL ANALYSIS– Prices continued to move lower as expected, taking out support at the 38.2% Fibonacci retracement (98.86) to expose the bottom of a channel set from late August (now at 96.57). A break below that aims for the 50% Fib at 94.73. A Doji candlestick warns of indecision however and hints a bounce may be ahead, with a reversal back above 98.86 eying the September 14 2012 swing top at 100.40.




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

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Talking Points

• Euro closing in on major resistance zone
• USD/JPY nearing a range break

Weekly Foreign Exchange Price & Time at a Glance:

Weekly Price & Time Analysis: EUR/USD

• EUR/USD traded to its highest level since November of 2011 this week
• The broader trend bias is higher in the Euro while above important Gann support at 1.3540
• The 61.8% retracement of the 2011 to 2012 at 1.3830 is an important resistance as is the top of the 1-year standard deviation channel at 1.3880
• The middle of November and the first half of December look significant for the Euro from a longer-term cyclical perspective
• Weakness below 1.3540 would turn the broader outlook 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	*1.3540	1.3655	1.3795	*1.3830	*1.3880

Weekly Price & Time Analysis: USD/JPY

• USD/JPY continues to trade near the middle of a multi-month contracting range
• While below 98.60 on a weekly close basis our broader trend bias remains lower
• The 7th square root progression of the year’s high at 96.60 remains a critical support level with weakness below needed to trigger a more impulsive decline
• A fibonaci time relationship suggests the next few days could see a break of the multi-month range
• A move back through 98.60 is needed to signal that a more important move higher is unfolding

Weekly USD/JPY Strategy: Square here, but will sell a break of 96.60.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	95.60	*96.60	97.35	97.55	*98.60

Weekly Price & Time Analysis: GOLD

• XAU/USD has moved steadily higher from last week’s cycle turn window
• A weekly close over 1322 will turn us positive on the metal
• Gann resistance at 1375 is the next major hurdle on the upside with a move above needed to prolong the move higher
• A cycle turn window is seen around the first half of next month
• A move under the 1x1 Gann angle line of the year’s closing low now at 1270 would suggest a more important decline is unfolding

Weekly XAU/USD Strategy: Square here, but looking to initiatiate tactical gold longs on weakness.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	*1270	1317	1345	1357	*1375

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

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