Technical Analysis

Talking Points

• EUR/USD stalls at key Gann level
• USD/JPY fails at Fibonacci retracement

Price & Time Analysis: EUR/USD

• EUR/USD touched its highest level in a month yesterday before stalling out near the 1x1 gann angle line of the May high
• The close above 1.1100 has shifted our near-term trend bias higher in the exchange rate
• A push through the Gann level around 1.1180 is needed to set off a more important push higher
• A minor turn window is seen today
• A close under 1.1040 would turn us negative again on the euro

EUR/USD Strategy: Trailing stop triggered yesterday - Square

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	1.1040	1.1085	1.1115	1.1145	1.1180

USD/JPY

• USD/JPY traded to its highest level in two months on Wednesday before reversing sharply at the 88.6% retracement of the June - July decline near 125.20
• Our near-term trend bias is still higher in the exchange rate while above 124.00 (closing basis)
• Traction over 124.70 is needed to alleviate some of the immediate downside pressure and re-instill upside momentum
• A minor turn window is seen tomorrow
• A daily close under 124.00 would turn us negative on USD/JPY

USD/JPY Strategy: Like the long side while over 124.00 (closing basis)

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	123.55	124.00	124.45	124.70	125.20

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Talking Points

• EUR/USD tests key retracement
• AUD/USD probes major support zone

EUR/USD

• EUR/USD has come under fairly steady pressure since failing near the 1.1685 12th square root relationship of the year-to-date low on Monday
• Our near-term trend bias is higher in the euro while above 1.1375 (closing basis)
• The 1.1685 area remains immediate resistance ahead of some key Fibonacci attractions around 1.1800
• A minor turn window is eyed Thursday/Friday
• A daily close under 1.1375 would turn us negative on EUR/USD, but traction under 1.1325 is really needed to confirm a downside resumption

EUR/USD Strategy: Like the long side while over 1.1375

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
EUR/USD	1.1325	1.1375	1.1390	1.1475	1.1685

GOLD

• XAU/USD has fallen sharply since failing at the 61.8% retracement of the May - July decline at 1170
• A close below 1110 will shift out near-term bias to negative in the commodity
• Minor resistance is seen around 1135, but traction above 1170 is really needed to set off a more important move to the upside
• Next week looks significant for the metal from a cyclical perspective

XAU/USD Strategy: Like holding long position while above 1110

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1110	1117	1122	1135	1170

AUD/USD

The commodity currencies seem to be at an inflection point of sorts. We documented yesterday the developments in the Kiwi. AUD/USD is also testing crucial support. The zone between .7085 and .7165 marks a nice confluence of the 61.8% retracement of the 2001 – 2011 advance, the 78.6% retracement of the 2008 “Global Financial Crisis” low and 2011 high, the measured move of 2011 to early 2014 decline as well as a trendline connecting the secondary low in 2001 and the 2008 bottom. There is some timing this week as the next few days mark a 138% time relationship of the 2011 and the 2Q14 highs. However, truth be told it is not very compelling as prior timing relationships related to this cycle have had little material impact on spot. However, we should note that some more significant timing pivots are looming over the next few months with November and December looking particularly interesting. As for as gauging AUD/USD in the here and now there is not much to say. The confluence between .7085 and .7165 is a potentially important one and is the sort of price zone that can spawn a meaningful counter-trend reaction. Caution is probably warranted around it, but outside of a glaring divergence on the three week rate of change the market has given little reason to doubt the broader downtrend. Traction over .7200 would start to change things, but for now we’d need to see a close north of .7415 to get more excited about the upside. A close sub .7085 increases the risk a downside acceleration.


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Talking Points:

• S&P 500 Volatility Surges to Highest Levels Since 2008 Crisis
• Hanging Man Candlestick May Precede Reversal Downward

The S&P 500 paused to digest gains after launching higher as expected following the appearance of an Inverted Hammer candlestick. Prices recovered to within a hair of the 2000 figure in a mere two days having dropped to a 10-month low above the 1800 threshold from a range just below record highs in only four sessions. The rapid see-saw swings made for the most dramatic volatility since late 2008, when markets were gripped by the global financial crisis.

Near-term resistance is now at 2018.50, the 61.8% Fibonacci retracement. A daily close above this threshold clears a path to test range floor support-turned-resistance at 2042.70, followed by the 76.4% level at 2062.20. The formation of a Hanging Man candlestick may precede the return of selling pressure however. A reversal back below the 50% retracement at 1983.20 opens the door for a challenge of the 14.6% Fib expansion at 1951.70.

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Talking Points:

• Gold Technical Strategy: Flat, long setup stopped-out after FOMC with close below $1,155
• Continued weakness in Gold has brought prices down to a projected trend-line from the July lows.
• The longer-term bearish trend-channel is still active, and prices just crossed the mid-line of that channel, opening the door for a potential return of the ‘bigger-picture’ down-trend.

Gold prices found temporary relief to close the week, catching support on the projected mid-line of the bearish trend-channel that’s set the tone in Gold for the better part of over 2 years. But continued weakness to open the week has sent prices even further lower, and another trend-line projection is coming into play that could set the stage for setups going into this week.

The trend-line in question can be found by connecting the yearly low in Gold that was set on July 20th to the swing low on August 7th. By connecting these lows, you’ll notice the accompanying price action ride almost perfectly along this trend-line between these two dates. But perhaps more encocuraging, you’ll notice the continue support as this trend-line had projected deeper into the future. We saw another reaction to this trend-line in mid-September, and again in early October.

Traders can elect to wait for support to develop to ensure that prices don’t continue their precpitious drop right into the trader’s stop. The level of $1,125 looks especially attractive for stop placement. $1,127.03 is the 23.6% retracement of the most recent major move, and given its close proximity to the $1,125 psychological level, traders could look to set stops below this potential zone of support with targets cast towards those familiar levels of $1,150, $1,155, $1,161, and then $1,190.

Alternatively, short positions are faced with the challenge of chasing near-term downward-momentum that leaves current price action far from any recent swing-highs. The most recent swing-high on the daily chart is at $1,182, and this would be a roughly $50 stop. That would necessitate price action moving below $1,084 simply to attain a 1-to-1 risk-to-reward ratio. That can be unattractive considering the numerous support zones that would need to be broken simply to justify a 1-to-1.
Traders could take a more cautious approach concerning near-term short positions in Gold, waiting for a continued break below this projected trend-line (in red), or by allowing price action to move closer to a previous support zone (such as $1,155 or $1,161), so that a short position could be triggered with a stop above the previous swing-high, and a more justifiable target at $1,100.

Should $1,100 give way, $1,087.05 becomes a level of interest, as this is the 50% retracement of the ‘big picture’ move in Gold, taking the low in 1999 at $253.30 to the 2011 high at $1,920.80. Notice the massive amount of support that had come in at this level in latter July. Price moved higher by over $100/ounce since this level came into the market, but these lows helped to set the angle of the projected trend-line that’s coming into Gold’s price action right now. Should we break this trend-line, these lows are in play.

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Talking Points:

• Gold Technical Strategy: Flat, top-side reversal setup identified
• As USD strength continues at a break-neck pace, Gold has fallen below numerous support levels.
• Last week’s aggressive price action in Gold prices may offer reversal setups in the week ahead.

The level in question had helped to mark the lows of July, when prices were extending a trend that had begun in May as Gold lost more than $150/ounce in under two months. This is the 50% Fibonacci retracement of the ‘big picture major move’ in Gold, taking the 1999 low of $253.30 to the 2011 high of $1,920.80; and this places the 50% retracement right at $1,087.05. Notice the yellow circle on the chart, marking the July lows on the monthly chart as this pivotal support level stopped the bleeding, at least temporarily.

Near-term, this raises a couple of interesting prospects for trade setups moving forward. Most attractive given current technical setup may be the reversal given the prospect of fading a huge move after Gold prices have run into a pivotal support level. Traders can look to place stops below the low that intersected with this Fibonacci support level, and that low on Friday was $1,085.37, with short-term profit targets cast towards $1,100 (major psychological level and 76.4% of the most recent major move), $1,117.17 (61.8% Fib retracement of the same move), and then $1,125 (minor psychological level).

Traders wanting to trade the reversal with a slightly more conservative stance can look to kick stops below that July low of $1,071.28, in which case the initial target would likely need to be wider to offset this additional risk; and $1,117.17 could offer a 1-to-1.5 risk-reward ratio with current prices; $1,125 could function as the secondary target and $1,131.35 could offer a third-target, as this is the 50% Fibonacci retracement of the most recent major move.

On the short-side, traders can trade this move with inside price action or by waiting for a breakout-related entry to the downside. The Friday low of $1,085.37 could serve as the starting gun for short-side breakout entries, with entry orders placed below $1,085 in an effort of avoiding a false-breakout.





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Talking Points

• Gold hanging around key long-term retracement
• Near-term timing elements potentially supportive

GOLD: Can It Get Out Of Its Own Way?

Gold looks to be at an important price point. On Friday the metal closed the week below the 1185 50% retracement of the low from 1999 and the high recorded in 2011. With big long-term retracements I have found that it usually pays to give the market a little bit of room. Rarely will an instrument respond precisely to one of these levels, but the zone surrounding it is usually pretty important. Downside follow through has so far been limited and remains well within the “envelope”. The clear risk here is that we get some separation away from 1185 which in turn triggers another aggressive decline as the metal seeks equilibrium at lower levels. The year-to-date low around 1073.50 is an obvious pivot as a daily close below would be a clear downside trigger. Traction over 1100 is needed to alleviate this immediate concern.

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Talking Points:

• Nikkei 225 Strategy: Flexible stops/targets to protect on the downside
• Momentum builds up for a contest of lower bound and support level
• High volatility would follow a breach, next support is 50% Fibonacci at 18,918

Along with the rest of Asian stock indices, the Nikkei 225 descended near the lower bound of its current range 19,397-19,989 (61.8% to 76.45% Fibonacci). A clear downward momentum will likely retain it in this proximity, with modest chance for a breach of support.

This range, outlined by two Fibonacci levels, has trapped Nikkei’s movement since early November. However this is the first time that lower bound and support rises to attention, after persistent upward development. Lower moves or break of support are not ruled out until the session ends. Support level below that is 50% Fibonacci at 18,918.

Traders with long position may keep stop loss and target flexible in case there is a need to get out. Range traders who position for fluctuation within the range may find opportunities, as long as the lower bound withstands. Dip buying is also possible in the event of a break, however ensuing volatility triggered by stops being hit may counter profit potential.



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Talking Points:
-US Dollar Technical Strategy: Bullish Off 100-DMA into FOMC
-Consolidation before FOMC Statement Favors Upside
-Trader Sentiment Ahead of FOMC Flashing Contrarian Bullish Signals

Ahead of the December 16, FOMC meeting, markets are pricing in a 74% probability of a hike with a near 40% chance of an additional 25bps hike in March. In recent trading, the US dollar has seen the 100DMA near 12,040 act as firm support and going through FOMC, we can look at that level to hold, as the Fed’s plans for the next hike are made known. It appears now that the bearish channel (red) will soon break, and another impulsive move higher could take out the November 6 high of 12,219.

US Dollar Index is sitting on a cushion of support. The bottom of the support zone is the November opening range low at 12,013 up to the 50% retracement of the October-November range & 100-DMA at 12,040. Price has tested and held that level multiple times. Today, we saw a bullish key day ahead of the Federal Reserve rate announcement tomorrow. We will look for today’s low to hold as support going forward. The first level of resistance to break from here that would validate the bullish argument would be a move above the December 8 high of 12,157, followed by the December opening range high of 12,212 before Draghi gave a scare to EUR shorts on December 3, 2016.

Going into Wednesday, the Fed rate hike is presumed and priced in as the dollar fluctuates in preparation for the Federal Reserve’s decision on to raise interest rates for the first time since 2006. The focus in no uncertain terms is whether or not we could see a second hike rather soon. If so, we would further enhance the yield advantage of assets denominated in US currency as other currencies with a dovish central bank could fall further. Should a spread widening develop, US Dollar strength would become a dominating theme once again. As long as 12,040 holds as support, this remains the preferred view. A break below support could pour cold water on USD Bulls through the end of 2015.



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• "The US Dollar may be carving out a top after rising to the highest level since January 2011 against the Chinese Yuan in offshore trade. The appearance of a Shooting Star candlestick coupled with negative RSI divergence points to ebbing upside momentum and hints that prices may be laying the groundwork for a downswing."
• "A break below wedge support at 6.5369 confirmed on a daily closing basis sees the next major downside barrier at 6.4974, 38.2% Fibonacci retracement. Alternatively, a push above the 6.5737-5859 area marked by the December 18 high and the 23.6% Fib expansion, paves the way for a test of the 38.2% threshold at 6.6237."
• "A Shooting Star candlestick – even with support from negative RSI divergence – represents indecision rather than a firm directional signal. With that in mind, we will opt against taking a trade and wait for further confirmation reversal. In the meantime, we remain flat."

Daily price is located above SMA with period 100 (100-SMA) and above SMA with the period 200 (200-SMA) in the primary bullish market condition: the price is breaking key resistance level on the good bullish breakout.

• If the price will break 6.6097 resistance level so the bullish trend will be continuing.
• If price will break 6.5240 support so the local downtrend as the secondary correction will be started within the primary bullish condition.
• If not so the price will be ranging within the levels.

Resistance	Support
6.5923	6.5240
6.6097	6.4139

• Recommendation to go short: watch the price to break 6.5240 support level for possible sell trade
• Recommendation to go long: watch the price to break 6.6097 resistance level for possible buy trade
• Trading Summary: ranging

SUMMARY : breakout

TREND : bullish

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H4 price was on the primary bullish market condition with the secondary breakout: intra-day price broke resistance levels and it was stopped by 1128.05 key resistance on the way to the bullish breakout to be continuing. The price is started to be ranging within 1128.05 resistance and 1108.31 in the primary bullish area of the chart. Chinkou Span line of Ichimoku indicator is located to be above the price for the ranging bullish condition by direction, and Absolute Strength indicator is estimating the ranging condition to be continuing.

• "Risk aversion is increasing mightily across the global spectrum, and Central Banks have begun to sing that same familiar tune of ‘looser for longer.’ This, combined with the prospect of the Federal Reserve backing down from their expectation to hike rates four times in 2016 has helped to provide a surge in Gold prices as the Dollar sells off and few other currencies look attractive for flows to trickle in to. After all, this was really the impetus behind that magnanimous run that we saw from 2008-2011, right? TARP and then QE was triggered at full-steam and this only increased the expectations for inflation down-the-road. But that inflation never came, and more and more QE was poured into markets and Gold prices dove as more QE just served to disconnect asset prices from actual economic data even further than it already was."
• "Gold is surging right now. The Daily chart is showing higher-highs and higher-lows, and higher-highs are even beginning to become evident on the weekly chart, so we may be in for some prolonged top-side rip in Gold prices. The difficulty in setting up the long side is just like we saw on that last setup, the swings are likely to be wild here. Tight stops beware, because simple whip can trigger you out of a position that otherwise could’ve worked out beautifully. So we must take this into account in our analysis: The environment always dictates application of approach, not the other way around."

If H4 price will break 1128.05 resistance level on close bar so the primary bullish trend will be continuing.
If H4 price will break 1108.31 support level on close bar so the bearish reversal will be started with the secondary ranging: the price will be located inside Ichimoku cloud.
If not so the price will be ranging within the levels.

• Recommendation for long: watch close H4 price to break 1128.05 for possible buy trade
• Recommendation to go short: watch H4 price to break 1108.31 support level for possible sell trade
• Trading Summary: ranging

Resistance	Support
1128.05	1108.31
N/A	1094.02

SUMMARY : bullish

TREND : ranging

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