This is a discussion on Technical Analysis within the Forex Trading forums, part of the Trading Forum category; Talking Points Prices are testing the 1.6406-38 area (trend line from Jul’13, 38.2% Fib exp.) A Shooting Star candle hints ...
Talking Points
- Prices are testing the 1.6406-38 area (trend line from Jul’13, 38.2% Fib exp.)
- A Shooting Star candle hints at weakness; initial channel top support is at 1.6214
- Breaking above 1.6438 initially targets 1.6577 (50% Fib expansion)
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Talking Points:
- US Dollar Locked in Familiar Range Before NFP Data
- S&P 500 Continues to Sink Having Topped as Expected
- Gold Technical Positioning Hints at a Rebound Ahead
US DOLLAR TECHNICAL ANALYSIS – Prices continue to consolidate below resistance in the 10641-53 area marked by the November 12 high and the 23.6% Fibonacci expansion. Near-term support is at 10595, the 23.6% Fib retracement, with a break below that exposing the 38.2% level at 10549. Alternatively, a reversal above resistance initially aims for the 38.2% expansion at 10839.
S&P 500 TECHNICAL ANALYSIS – Prices broke lower as expected, completing a Rising Wedge chart formation. A break below the 14.6% Fibonacci retracement at 1788.80 has exposed the 23.6% level at 1773.90. Pushing further below this barrier targets the 38.2% Fib at 1749.60. Alternatively, a reversal back above 1788.80 eyes the November 29 high at 1813.10.
GOLD TECHNICAL ANALYSIS – Prices put in a bullish Morning Star candlestick pattern, hinting a move higher is ahead. Positive RSI divergence reinforces the case for an upside scenario. Resistance is in the 1237.57-51.54 area, marked by the 23.6% Fibonacci retracement and the October 15 low. A break above that initially targets the 38.2% level at 1268.98. Near-term support is at 1211.67, the December 4 low.
CRUDE OIL TECHNICAL ANALYSIS– Prices continued higher as expected after breaking resistance at the top of a falling channel set from late August. A Shooting Star candle below resistance at 98.02, the 23.6% Fibonacci expansion, now warns of a pullback. Near-term support is at 95.36, with a break below that targeting channel top resistance-turned-support at 92.52. Alternatively, a push through resistance aims for the 38.2% Fib at 101.90.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Talking Points
- EUR/USD takes out important Fibonacci resistance
- USD/JPY pulls back from multi-month highs
- Gold at important cycle points
Weekly Foreign Exchange Price & Time at a Glance:
Weekly Price & Time Analysis: EUR/USD
- EUR/USD extended the advance from the 50% retracement of the July to October advance to trade to its highest level in over a month on Friday
- Our broader bias is positive on the Euro and will remain so while above 1.3540
- The 78.6% retracement of the October/November decline at 1.3715 is the next important upside pivot with traction above exposing the year’s high
- A medium-term cycle turn window ends early next week with the next window of significance coming near the end of the month
- A move under the 7th square root relationship of the year’s low at 1.3540 would turn us negative on the Euro
Weekly EUR/USD Strategy: Square here, but may look to buy on weakness if current turn window fails to trigger a reversal.
Instrument Support 2 Support 1 Spot Resistance 1 Resistance 2 EUR/USD *1.3540 1.3595 1.3680 1.3715 1.3770
Weekly Price & Time Analysis: USD/JPY
- USD/JPY traded to its highest level since May earlier this week before encountering Gann resistance near 103.50
- Our broader trend bias is positive in the exchange rate while above the 2nd square root relationship of the years’ high at 101.70
- A move through 103.50/70 is needed to signal that another leg higher is underway
- A medium-term cycle turn window is seen over the latter half of next week
- Only a move below101.70 would shift our broader-term trend bias to negative
Weekly USD/JPY Strategy: Like being long against 101.70.
Instrument Support 2 Support 1 Spot Resistance 1 Resistance 2 USD/JPY *101.70 102.00 102.75 103.05 *103.70
Weekly Price & Time Analysis: GOLD
- XAU/USD traded this week to its lowest level since late June before finding support at the 1st square root relationship of the year’s low
- Our broader trend bias is negative in the metal while below last week’s high at 1258
- A daily close under 1219 signals a resumption of the broader decline
- A Fibonacci time relationship related to the August high and June lowcould influence over the next few days
- A daily close back over 1258 would turn us positive on the metal.
Weekly XAU/USD Strategy: Like being square here into this turn window. A close over 1258 would get us long.
Instrument Support 2 Support 1 Spot Resistance 1 Resistance 2 XAU/USD 1180 *1219 1233 *1258 1282
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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- USDJPY ‘3 point triangle’ setup is possible
- AUDUSD may test .9167-.9203 before backing off
- USDCAD and USDNOK breakouts to end the year?
USD/JPY
Hourly
-The USDJPY decline from 103.37 is corrective and most of the drop has already been retraced.
-One of my favorite ‘trend extension’ setups is the construction of a 3 point triangle (contracting boundaries but with just 3 legs). A drop from before the high that finds support before 101.61 could satisfy requirements.
-A bullish objective of 105.12 is derived by calculating the measured move from the 103.37-101.61 dip. A close from Oct 2008 remains uncovered at 105.30.
Trading Strategy: Looking to re-enter longs (trailed out at 102.20 this week). 101.80-102.20 is estimated support.
AUD/USD
4Hour
-AUDUSD formed an outside day reversal on Friday.
-The drop to a new low appears to have completed 5 waves down from the 12/2 high. A complete retracement of that decline would return price to the ‘former 4th wave’ at .9167. In general, .9167-.9203 is resistance.
-A re-test of the breakdown level from the head and shoulders top at .9267 is possible as well.
Trading Strategy: Larger trend is still down but I am flat at the moment after being trailed out of a month long short position at .9080. Short term support is estimated at .9065. .9200 may be the level to think about turning bearish again.
USD/NOK
Weekly
-USDNOK broke above a 3 year trendline in June. The topside of that line was tested as support in September (the test was on the ‘no-taper’ spike).
-Recently broken resistance at 6.0730 (10/10 high) served as support throughout Nov.
-This is the 3rd week this year that price is attempting a break above the 2012 high. Measured moves on a break above 6.2643 are 6.7963 and 6.9115. The 2010 high is at 6.7273. 6.10 is estimated support within the range.
Trading Strategy: I am long with a 6.10 stop.
USD/CAD
Weekly
-USDCAD traded above 1.0700 this week for the first time since May 2010 (after the ‘flash crash’).
-The line that extends off of the 10/22 and 11/18 lows may come into play as support. That line is at 1.0530 on Monday and about 1.0560 next Friday. Recently broken highs of 1.0608 and 1.0567 are also of note.
-Measured objectives from recently broken ranges are 1.1035 and 1.1681. These levels are roughly in line with the July 2009 and Aug 2009 highs at 1.1723 and 1.1125. The May 2010 high at 1.0854 is of note.
Trading Strategy: A substantial bull move may be underway. 1.0567-1.0608 is support. I am looking for a low in that zone.
USD/MXN
Daily
-Tis a tale of trendlines in USDMXN. On Tuesday, price traded into and reversed from the resistance line that originates from the 2012 high. On Friday, the rate traded into a well-defined support line that originates from the Jul low.
Trading Strategy: Just know that the market is coiled for a large move. Price needs to stabilize before entertaining longs.
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Talking Points
- Prices broke resistance at 140.50 (23.6% Fib exp.), exposing 141.78 (38.2% Fib exp.)
- A further push upward aims for 142.82 (50% Fib expansion)
- Turning back below 140.50 exposes 140.00, 138.42 (December 4 low)
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Talking Points
- A bullish Morning Star candle pattern hints a move higher is ahead
- Breaking above resistance at 0.9170 (23.6% Fib ret.) targets 0.9282 (38.2% Fib ret.)
- Near-term support is at 0.8988, the December 6 swing low
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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-Retail FX traders are their most net-short EURUSD on record
-Our retail forex sentiment-based Momentum2 system strategy is long from $1.3649
- A contrarian view of crowd sentiment favors further gains
Retail forex traders have literally never been more net-short the Euro versus the US Dollar, and a contrarian view of crowd sentiment leaves us steadily in favor of further EURUSD gains. But what are the risks?
Forex Trading Crowds at their Most Net-Short Euro on Record
Our proprietary retail sentiment data shows that there are nearly 5 open orders short for every one that is long (a Speculative Sentiment Index ratio of -4.8). We saw a very similar sentiment extreme through late October when the Euro traded towards multi-year highs of $1.3830.
Yet this time around we’re seeing a slightly different dynamic: total long positions are actually at their lowest levels in nearly three years. Why does that matter? Put simply, there’s less aggressive selling this time around and more passive profit-taking. It suggests that the EURUSD could head higher as very few believe it can hit further highs. What are the technical risks?
Euro Trading Near Critical Technical Resistance at Fibonacci Levels and Mutli-Year Highs
One critical risk to the Euro rally is simple: the pair is coming up on significant technical resistance. The $1.3840 level represents the 61.8% Fibonacci retracement of the $1.4940-$1.2060 decline and likewise coincides with the multi-year peak.
Resistance doesn’t always hold, and it’s certainly possible that the pair presses to fresh highs. Yet technical risks are clear, and we would trade cautiously here given the risk of failure at key levels.
We noted yesterday one other factor that may be helping the Euro at these levels: forex seasonal trends tend to produce EURUSD gains into the end of the year.
The difficulty in using seasonality in trading is clear: how do you time and manage a position when all you know is that the Euro tends to rally in a given period? It’s more important to line up any such studies with other trade techniques to make it useful.
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Talking Points
- Prices put in a Bearish Engulfing candlestick pattern, hinting at a move lower ahead
- Initial support is at 0.8316 (23.6% Fib exp.); below that targets 0.8267 (38.2% Fib)
- Near-term resistance is at 0.8395, the December 9 swing high
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Talking Points:
- Confluence of "Hidden" EUR/GBP Resistance
- Potential A-B-C Pullback Developing
- The Ideal Time Frame for Taking This Trade
The daily chart for EURGBP shows the pair in a choppy downtrend. Given these conditions, applying the usual strategy of selling rallies in a downtrend would be advisable, except that in this case, there are two hidden levels of resistance that are likely to go unnoticed by most traders.
Guest Commentary: 2 “Hidden” EUR/GBP Resistance Levels
Most traders would wait for the top of the downward wedge to be tested before initiating a short, but the presence of this interesting confluence of resistance offers an alternative entry. It may well be only temporary resistance, but even a small bounce on the daily chart will result in a reasonable trade on the lower time frames.
The four-hour chart below provides more insight into how this situation can best be traded. At this time frame, a five-wave Elliott count appears to be in progress as price rises towards resistance.
Guest Commentary: Potential “A-B-C” Pullback in EUR/GBP
Three iron-clad Elliott Wave rules have been honored thus far. Those rules are:
- Wave 2 does not go below wave 1;
- Wave 3 is not the shortest of waves 1, 3, and 5; and…
- Wave 4 should not overlap wave 1
The adherence to these critical rules suggests that price is in a wave 5 move up to resistance. For traders, this indicates:
- It may be possible to sell the top of wave 5, should it enter into the hidden area of resistance;
- The resulting move should be significant, but it is less likely to reverse the whole upward move
Wave counts can easily go awry, however. Thus, the best response in this situation would be to focus on getting in at the top of wave 5 with as little risk as possible, and then manage the trade accordingly.
Whether or not the a-b-c wave scenario illustrated above manifests itself is unclear, and as always, that’s for the market to decide. What is clear, however, is that the hourly time frame will provide the best trigger, allowing traders to realize the most favorable risk/reward profile for this trade.
Guest Commentary: Key Resistance Zone for EUR/GBP Shorts
The key zone of resistance is a little more ambiguous than usual, but erring on the side of caution, it can be estimated as 0.8434-0.8468. The disadvantage of this particular estimation is that wave 5 may not get there before giving a significant turn. If that happens, this trade will be null and void, even if price eventually does rise to this level.
However, given the hidden nature of the resistance levels used, a more conservative estimation has been made to account for the potential of mild overshooting.
Viable triggers will consist of the usual suspects: pin bars, bearish engulfing patterns, and bearish reversal divergence on the hourly chart. This trade, like many we target, should be given two or three tries, depending on the personal rules of the trader.
It is also worth pointing out that there will be a level of support to contend with on the way down, and if price fails to break that level conclusively, then it will be a sign to scale out and move stops, effectively reducing the overall risk on this trade.
By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com
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