Technical Analysis

Talking Points

• A pullback from resistance at 0.9170 (23.6% Fib ret.) eyes 0.8984 (23.6% Fib exp)
• Support is reinforced by the Dec 6 low at 0.8988; below that eyes 0.8872 (38.2% ret.)
• Reversing above 0.9170 aims for 0.9282 (38.2% Fib expansion)

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

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Talking Points

• Prices broke support at 0.8985 (23.6% Fib exp.), exposing 0.8872 (38.2% Fib exp.)
• Positive RSI divergence warns of ebbing selling pressure, warning of a reversal
• Turning back above 0.8985 initially aims for 0.9166 (December 10 high)

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

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• USDJPY endures 3rd December reversal day; GBPJPY short setup
• EURNZD and GBPNZD nearing support levels
• USDMXN responds to support; trade is open

USD/JPY
Daily



-USDJPY traded to a new high for the year on Friday but reversed sharply. The high is not accompanied by a high in the Nikkei, which does the raise the possibility of a deeper drop. 3 daily reversal bars since 12/3 (2 are outside days) is also cause for concern.
-Still, the ‘trend extension’ setups described last week is valid as long as price is above 102.14. Weakness below there would open up the possibility of a deeper drop. 100.60-101.13 would be on the radar as possible support.
-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 for support in the 102.65/95 region for longs against 102.10.

GBP/JPY
4Hour



-I concern myself with trade setups and risk, not predicting what will happen next. As such, the GBPJPY may be setting up for a short.
-Price has broken through the trendline that extends off of the 11/19 and 12/5 lows. The line crosses through the 12/11 and 12/12 bars as well. From here, a ‘drift’ into the underside of the line early next week may present an opportunity to go short. 168.80 is estimated resistance.
Trading Strategy: Possible top so monitor for failure near 169 for a possible short. If this trade is taken, then plan on exiting a portion at 166.40.

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


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Talking Points

• Important cycle turn window seen around the end of the year in EUR/USD
• USD/JPY comes off multi-year high
• GBP/USD nearing key support level

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

• USD/JPY moved above 104.00 last week to trade at its highest level since 2008
• Our near-term trend bias is positive on the rate while above 101.65
• Interim resistance is seen around 104.00 ahead of the next key attraction near the 104.55 100% extension of the September/October decline
• A medium-term cycle turn window late last week could see the rate come under some pressure if 104.00 cannot be overcome soon
• Only a daily close below 101.65 would turn us negative on USD/JPY

USD/JPY Strategy: Favor the long side while over 101.65

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*101.65	102.10	103.05	104.00	*104.55

Price & Time Analysis: GBP/USD

• GBP/USD traded last week to its highest level since 2011 before reversing
• Our near-term trend bias remains higher in Cable while over the 1.6210 2nd square root relationship of the year’s high
• The 1.6460 area is interim resistance ahead of a key Fibonacci/Gann convergence at 1.6500
• A minor cycle turn window is seen around the middle of the week
• A daily close under 1.6210 would turn us negative on the Pound

GBP/USD Strategy: Favor the long side while over 1.6210

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
GBP/USD	*1.6210	1.6250	1.6340	1.6380	*1.6460

Focus Chart of the Day: EUR/USD



Looking at exchange rates this morning it seems little has changed in the week I have been absent. Perhaps the most notable price action from a cyclical perspective has been in EUR/USD as the rate blew through an important cycle turn window around the start of the month. In many ways this strength in the single currency is not all that surprising as December has a seasonal tendency to be one of the stronger months in the rate. That said, January has a tendency to be one of the worse. With important longer-term Pi and Fibonacci cyclical relationships converging in about two weeks and sentiment approaching contrarian extremes (DSI at 85% bulls as of Friday) I believe the Euro is setting up for an important top of sorts around the end of the year. Given the proximity of the October higher, it is likely to materialize from above 1.3830 with 1.3880 and 1.3990 the next key resistance zones of note.


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


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Talking Points

• A Harami candle pattern with negative RSI divergence hint at a turn lower ahead
• Breaking support at 141.12 (14.6% Fib ret.) initially exposes 140.07 (23.6% Fib)
• Near-term resistance is at 142.81, the December 13 swing high

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


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Talking Points

• Euro stuck below key resistance
• AUD/USD closing in on the lows of the year
• Gold forming a base

Price & Time Analysis: EUR/USD

• EUR/USD traded to its highest level since late October last week before reversing over the past few days
• Our near-term trend bias is positive on the Euro while over 1.3595
• The 61.8% retracement of the 2011 to 2012 decline at 1.3830 remains a major upside barrier and traction above is needed to trigger a more important move higher
• Several Pi and Fibonacci cyclical relationships converge at the end of the month
• Only a daily close below 1.3595 would turn us negative on the Euro

EUR/USD Strategy: Favor the long side while over 1.3595.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	*1.3600	1.3715	1.3745	1.3800	*1.3830

Price & Time Analysis: AUD/USD

Charts

• AUDUSD has come under steady pressure since failing last week at a key Gann convergence near .9160
• Our near-term trend bias remains lower in the Aussie while below the 2nd square root relationship of the year’s low at .9035
• Immediate downside attention is on the 1st square root relationship of the year’s low at .8910 with weakness below likely exposing the intraday extremes of the year
• A cycle turn window is seen around the end of the year
• Only a daily close back over .9035 would turn us positive on the Aussie

AUD/USD Strategy: Favor the short side while under .9035.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
AUD/USD	0.8845	*0.8910	0.8915	0.8960	*0.9035

Focus Chart of the Day: GOLD



Before we left on holiday we wrote about the potential for a low in Gold during the first week in December. Despite numerous intraday probes below, the low close in the metal for the month remains the idealized turn window date of December 2nd. While the strength in Gold exhibited since then has admittedly been rather pathetic there is still a very real possibility in our view that this is all part of a basing process. Last week’s high of 1267.75 is an important near-term pivot with traction above needed to confirm that a more important low is indeed in place. On the other hand, weakness below 1211 on an intraday basis or a close below 1219 would negate the potential for a more important cyclical low.


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Daily

Chart


-GBPUSD is showing signs of failing after breaking above multi-month consolidation (1.6259). Possible trendline support is near 1.6150 on Wednesday.
-Consider a multi-week topping process a possibility as long as price is below 1.6415.
Trading Strategy: Not much to do for me here but keep an eye on GBPNZD.
LEVELS: 1.6132 1.6197 1.6240 | 1.6330 1.6415 1.6443

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


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Talking Points
- AUD/USD prone to a reversal
- USD/JPY in consolidation mode
- Gold nearing important inflection point


Price & Time Analysis: USD/JPY

• USD/JPY remains in consolidation mode below the year-to-date high at 103.91
• Our near-term trend bias is positive on the exchange rate while above the 2nd square root relationship of the year’s high at 101.85
• The 103.90 area is interim resistance ahead of the 100% extension of September/October decline at 104.55
• A medium-term cycle turn window is seen around the latter part of next week
• Only a daily close below 101.85 would turn us negative on USD/JPY

USD/JPY Strategy: Favor the long side while over 101.85.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	*101.85	102.50	102.95	103.90	*104.55

Price & Time Analysis: GOLD

• XAU/USD has traded in a sideways to higher range since finding support near the 1st square root relationship of the year’s low earlier in the month
• Our near-term trend bias remains lower in the metal while below last week’s high near 1268
• The low close of the month at 1219 is an important pivot with weakness below on a closing basis needed to singal a downside resumption
• A medium-term cycle turn window is seen around the latter part of next week
• Traction over 1268 is needed to turn us positive on Gold

XAU/USD Strategy: Favor the short side while under 1268.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1200	*1219	1232	1248	*1268

Focus Chart of the Day: AUD/USD


AUD/USD recorded a new low close for the year on Tuesday (by 1/10th of a pip on the FXCM platform). The decline to this point has been impressive with the exchange rate losing more than 8 big figures since its failure at the 200-day moving average back in October. However, the decline is now more than 40 trading days old. One of our favorite trend cycle lengths is around 45 days as this marks a Gann Commodity “Death cycle” where short-term reversals are more frequent. Interestingly this day count will roughly coincide with the Winter Solstice (in the Northern Hemisphere) this weekend which is another potentially important inflection point in Gann theory. It is also worth pointing out that the last few weeks of December are one of the stronger periods of the year for the exchange rate on a seasonal basis. Factors certainly seem to be aligning for at least a short-term reversal in the Aussie over the next week. Tempting as it might be to try to catch the bottom tick, we prefer to wait for strength that confirms our notion before positioning. Any continued weakness into the latter part of next week will negate the potential positive cyclicality.

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

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Talking Points:

• Classic USD/SGD Elliott Wave Patterns
• A Key Correlation That Validates the Long Side
• Step-by-Step Trade Parameters

Heading into today’s key Federal Open Market Committee (FOMC) decision, we were prepared with USDJPY short orders, as described in this previous article. Interestingly enough, on a spike higher this morning, we missed our initial fill by just a fraction of a pip, but we will nonetheless leave the orders in place.

We’re also eyeing another trade idea for today, though. Whenever asked about the key currencies from the Asia-Pacific region, many would think of the Japanese yen (JPY), and probably the Australian dollar (AUD) and New Zealand dollar (NZD). However—and perhaps unfortunately so—the Singapore dollar (SGD) would most likely be overlooked.

Regardless, Singapore has one region’s strongest and most open economies, and it’s a very business-friendly and competitive country with an ultra-low unemployment rate (less than 2%).

The below 30-minute chart of USDSGD shows an impulsive Elliott Wave count from the December 11 swing low of 1.2471. While the count is impulsive, we won’t ignore the possibility of the move higher being corrective.
The five-wave move higher from 1.2471 to 1.2583 had a shallow correction to 1.2545, which subsequently saw another impulsive move higher to 1.2593. From here, we’ve seen a three-wave zig-zag correction to 1.2566 (see yellow wave ii).

So even in this section of the chart, we’ve seen a number of impulsive waves higher and multiple three-wave corrective moves lower. This is one reason we’re looking to buy USDSGD after the correction to yellow wave ii.

Guest Commentary: Potential Long Entry in USD/SGD



If we consider the move higher from 1.2471, then a typical third wave would end near 1.2725. If we consider this same move as being corrective, it would typically end near 1.2658. Both of these targets allow us to set up a long trade with reasonable risk reward and multiple targets using yellow wave ii as support.

Therefore, we’d propose buying USDSGD anywhere between 1.2575 and 1.2590 with a stop below the wave ii low of 1.2565. This allows for a maximum stop size of 25 pips.

In lieu of the targets discussed above, we’d propose two take-profit targets of 1.2640 and 1.2690. The first target, which is below the typical corrective target of 1.2658, sets a 50-pip target with a maximum stop size of 25 pips (risk $1 to make at least $2). The second target is below the typical impulsive target of 1.2725 and sets a 100-pip target (risk $1 to make at least $4). These risk/reward ratios are very reasonable.

However, proposing a trade solely based on one chart and calculating one Elliott Wave count is risky, but this risk can be mitigated by assessing current correlations.

The correlation chart below shows large negative percentages on the right-hand axis. This means that USDSGD and AUDUSD are “negatively correlated,” so when one pair moves higher, the other pair typically moves lower, and vice versa.

Guest Commentary: Negative Correlation for USD/SGD, AUD/USD



For a reliable correlation, ideal values are between (-75%) and (-100%), as (-75%) is a “high” reading while (-90%) is a “very high” result. This chart shows a high to very negative correlation for the majority of the last six months.
Further, a check of the AUDUSD chart (not shown) indicates a clear downtrend over the last two months (swing high October 23). This means that our preference is to find short trade set-ups for AUDUSD, and as there is a negative correlation between AUDUSD and USDSGD, we should ideally be looking for long USDSGD trade set-ups, and that’s exactly what we’re proposing here.

This five-minute USDSGD chart shows the recent corrective zig-zag to the yellow wave ii low at 1.2566. The three-wave move has an impulsive green wave a followed by a green triangle, labelled ‘b.’

Guest Commentary: Classic Elliott Wave Patterns in USD/SGD



Thrusts from triangles are terminal and typically end at 61.8% of the move leading into the triangle. The C vs. A 61.8% level was 1.2566, and it’s interesting to see that the thrust out of the triangle ended exactly at 1.2566. Funny to think that there are still people who dismiss the power of Elliott Wave!

New Long Set-up for USD/SGD

• Trade: Buy USDSGD between 1.2575 and 1.2590
• Stop loss: Place stop at 1.2565, below yellow wave ii
• Take profit: Two profit positions, half at 1.2640 and half at 1.2690
• Trade management: On reaching 1.2640, move stop to 1.2590 (irrespective of entry level)

By Todd Gordon, founder, TradingAnalysis.com


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Talking Points:

• US Dollar Breaks Higher, Sets a New Three-Month High
• S&P 500 Rebounds But Outlook Still Favors Weakness
• Gold Prices on Pace to Negate Bullish Reversal Signs

US DOLLAR TECHNICAL ANALYSIS – Prices rose as expected after putting in a bullish Piercing Line candlestick pattern. A break of resistance at 10685, the 38.2% Fibonacci expansion, has exposed the 50% level at 10723. Pushing further above that exposes the 61.8% Fib at 10760. Alternatively, reversing below 10685 aims for 10612, a former range bottom.



The Dow Jones FXCM US Dollar Index and the Mirror Trader USD basket are not the same product.
S&P 500 TECHNICAL ANALYSIS – Prices rebounded from support in the 1773.90-78.90 area, marked by the 23.6% Fibonacci retracement and the October 30 swing high. Buyers are now poised to test resistance at 1813.10, the record high set on November 29. A Bearish Engulfing candlestick pattern continues to warn of a top in the works however, with only a close above resistance negating the setup. In such a scenario, the next level of topside resistance comes in at 1823.80 (38.2% Fibonacci expansion).



GOLD TECHNICAL ANALYSIS – Prices are working to negative the potential Head and Shoulders setup identified earlier in the week. Sellers are testing below support at 1210.35, the 38.2% Fibonacci expansion, with a close beneath this barrier exposing the 50% level at 1192.62. A turn back above 1210.35 sees the first major layer of resistance at 1260.84.



CRUDE OIL TECHNICAL ANALYSIS– Prices are probing back above the 98.00 figure but a bearish Dark Cloud Cover candlestick pattern remains valid and continues to argue in favor of the downside scenario. Support is in the 95.36-74 area, marked by the 14.6% Fibonacci expansion and the November 6 high. A further push below that eyes 93.90, the 23.6% Fib. Resistance is at 98.74, the October 28 high.




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

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