Technical Analysis

On the DAX 30 sliding below last week’s low of 9739, the trend would no longer be bullish according to classic technical analysis as the sequence of higher lows would end. Support levels below last week’s low of 9739 are the April 7 low of 9433 and the February 24 low of 9122.

The next German or European macroeconomic event, which may move the DAX is the release of tomorrow’s Eurozone Industrial Production figures, followed by first quarter German GDP on Friday.

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CAC 40 4Hour Chart

The CAC 40 continues to range, with the Index down -.35% on the day. The CAC 40 along with other European indices are relatively unchanged as markets await the release of the minutes from the U.S. Feds April FOMC meeting. With interest rates back in focus, traders are looking into last month’s meeting minutes to give insight into the possibility that rates may be hiked in the U.S when the Fed reconvenes for their next FOMC meeting on June 15.

Traders watching price action should note that the CAC 40 is again testing a key value of support below 4,300. This Index has now been locked inside of a range for the last 10 trading days, and has so far traversed this range 6 times. If prices again bounce from support, traders should note that range resistance begins near 4,350. In any range bound environment, there is always the risk of a change in market conditions. If prices continue to decline and breakout below support, it may suggest the start of a new bear trend. This would open up the Index to test the standing May low at 4,244, followed by the April’s swing low located at 4,211.

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• Silver prices slipped below the April 25 low of $16.78 after the publication of far more hawkish than expected FOMC minutes.
• The Fed may raise rates in June if economy improves.
• The short-term trend will remain bearish below the intraday high of $17.15 formed on May 18.

Yesterday evening, silver prices slipped below the April 25 low of $16.78 after the publication of a more hawkish than expected FOMC minutes release.

The main conclusions from the minutes are that most Fed members think that if the incoming data indicates second-quarter GDP will pick up, and additionally if the labor market conditions continue to be good coupled with inflation continuing to head towards the two percent target, it would be appropriate for the Fed to raise rates in June.

Concerning GDP, we already know that it may pick up, as the Atlanta Fed’s GDP now-cast model projects a rise of 2.5 % (seasonally adjusted annual rate). In regards to the other variables, it appears that the markets expect labor to remain strong and for inflation to rise, given the increased likelihood of a June rate hike.

Independently, whether the Fed raises rates or not, the minutes were hawkish enough to trigger a break to the $16.78- $17.56 range which has dominated over the last few weeks. Silver prices are now trading near the psychological support level of $16.50, followed by the April 18 high of $16.30.

A potentially short-term resistance level is the April 25 low of $16.78, which previously acted as a support but which may now turn into resistance. The short-term trend will remain bearish below the intraday high of $17.15 formed on May 18 and a few hours before the publication of the Fed minutes. The trend is bearish in the short-term, as prices have been creating lower lows and lower highs since May 16. The high preceding the $17.15 high is the May 17 high of $17.32.

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CAC 40 Daily Chart

Price action for the CAC 40 is now trading higher for the fourth consecutive session. This bullish momentum has continued since the Index broke free from a previously mentioned consolidating trading range. Now as prices advance, traders may begin looking for potential points of resistance. For today’s trading that includes a 78.6% Fibonacci retracement found at 4,536.89. This value has been found by measuring the distance from the previous swing high at 4,616.50 to the current swing low at 4,301.30. In the event that prices break above this retracement value, traders will look for prices to continue upward, and potentially put a new higher high in place.

Alternatively, if the CAC 40 finds resistance here, it would suggest that this week’s bullish momentum is part of a broader retracement in an ongoing downtrend. In this bearish scenario, traders may again look for prices to break back inside of the previously identified range. A further decline below 4,244.50 would suggest a change in momentum for the Index, and open the CAC 40 to resume its 2016 downtrend.

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We looked at the precipitous fall in Gold prices on the back of a more hawkish Federal Reserve that spent much of the month of May talking up the prospect of higher rates in the United States. This prospect of higher rates was a huge change-of-pace for markets, which had built-in the expectation for the Fed to be extremely dovish after the risk-aversion that put up sizeable moves at the beginning of the year. And that inferred dovishness was hugely helpful to Gold prices, along with Equities and Commodities, as global markets appeared to be operating under the assumption that the Fed would do what they’ve been doing for the past six years by being dovish and passive with extremely loose monetary policy.

But that about-face in May brought on a huge change of pace to the US Dollar, and this had an enormous impact on Gold prices. After tagging the $1,301 resistance level in the early portion of the month, Gold prices fell all the way back to the $1,200.41 Fibonacci level, which is the 61.8% retracement of the 45-year move in Gold prices, taking the 1968 low of $34.95 to the 2011 high at $1,920.80. Coming into June, Gold was continuing to dwindle near support at $1,207.69, which is the 38.2% retracement of the most recent major move.

Friday’s NFP report provided a dose of cold water to those June rate hike expectations, as an abysmal print gave the appearance of a weaker US economy than initially hoped, and this brought in a significant bout of USD-weakness across the currency spectrum. Gold caught a significant bid, rallying all the way into a prior zone of support at $1,245.83, which is also the 23.6% retracement of the most recent major move, taking the January 2015 high to the December 2015 low.
Since running into that resistance, price action has built-in to a box formation on the 4-hour chart, and this can be used to further help traders looking to set up the short-side position. Traders can look for a quick break of near-term price action support to denote down-side continuation potential. Should this break take place, traders can then begin to look to trigger the short position by looking for a price action reversal at resistance around current support of ~ $1,240.

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The surge in silver prices continued yesterday as near-term momentum continued after the initial rally on last Friday’s awful NFPs. In our Thursday commentary, we noted the strong upward momentum ranking high among other rallies in recent years, and given its strength we expected further short-term gains, even if those gains were to come in a choppy fashion. The chop has yet to begin, but a pullback (perhaps the beginning of some chop) is not to be unexpected at this juncture.

Silver is finding good resistance around the 17.31 level we had penciled in, so we will work with that as the first hurdle to overcome. Around 17.55 is the next top-side level to worry about, and then if things get really out of hand in the short-term we have the April peak at 18 (17.99 if you are counting pennies).

At this time, we will wait for a pullback and see how the market reacts to it before making further assessments. Risk of a pullback has become quite elevated, and while chasing momentum might be tempting, the reward is not likely to outweigh the reward.

A decline back towards the 16.70/17 area would offer a spot for silver to reload for another drive higher. This zone represents solid support from April and May, while right around 17 itself is the upper parallel from the beginning of June.
A drop below 16.70 would clearly undermine current momentum and alternate paths would need to be considered.


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The break below 16,000 seemed to have put the spotlight again on a prior low at around 15,800, as the level appears to be acting as support again, stalling further downside momentum for the moment. A move below might put the focus on the 15,380 support followed by a longer term range bottom around 15,000.

The index seems to test the trend line and the 16,000 level for resistance. If price can manage a break above, levels of interest could be the 16,500 level on a “support turned resistance” basis, followed by the 16,776 level and the 17,000 handle, with the big range resistance zone at around 17,650 lurking at the top.


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After finding support at 6.5500 the pair moved higher to test the 6.6000 handle, but has yet to manage a clear break and a hold above on a daily close basis. In fact, the pair has failed to hold above the level for two consecutive days since February.

The pair continues to test higher as the price pivots around the 6.6000 level while appearing to find short term support at 6.5880, in turn creating a situation in which the price trades in what looks like an undecided narrow range for the last couple of days.

If price is able to break above 6.6000 and hold the level, it might initially expose possible resistance at the February 3 high around 6.6500.

A break below 6.5880 may put the focus again on the 6.5500 prior support level.
A break below that level could put the spotlight on a major support confluence zone (marked blue) that combines the 6.5000 handle, 200 day SMA, trend line from October 2015, and the 6.47446 level, which is the 0.382 Fib from the long term up trend as marked from the 2014 low at 6.0150.


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After finding support at 6.5500 the pair moved higher to test the 6.6000, but has yet to manage a clear break and a hold above on a daily close basis. The pair has failed to hold above the level for two consecutive days since February.

It seems that the pair might need to “make a decision” around the 6.5880 short term support level. If the pair manages to hold above the level, buyers could potentially attempt another move higher to break the 6.6000 handle.

If price is able to break above 6.6000 and hold higher, it might initially expose possible resistance at the February 3 high around 6.6500.

A break below 6.5880 may put the focus again on the 6.5500 prior support.
A break below that level could put the spotlight on a major support confluence zone (marked blue) that combines the 6.5000 handle, 200 day SMA, trend line from October 2015, and the 6.47446 level, which is the 0.382 Fib from the long term up trend as marked from the 2014 low at 6.0150.

USD/CNH Daily Chart:

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Yesterday, the DAX tacked on over 3% in response to the upswing for the "UK to Remain" campaign over the weekend; the outsized gains experienced in European indices indicated the market was caught off guard by the latest developments in the drama leading up to the vote later this week.

Given the enormity of this week’s event, establishing positions with intent beyond day-trades doesn’t make much sense unless one is convinced of the outcome; on this end we would view it as being prudent to take a wait-and-see approach and then react accordingly.

The three-day rally pushed the DAX all the way back to a full neck-line retest of the multi-month H&S formation it broke down from last week. It could soon turn lower from here as a successful retest, but given event risk we will stand aside at this time even if momentum shifts lower and presents an attractive opportunity to enter. Regardless of the outcome, if the DAX moves much higher from here, the H&S formation will be reconfiguring itself, and while the market may still have a bearish stance once the dust settles (lower highs, lower lows from the April high), we may need to operate under a different set of technical constructs.

From a simple support and resistance standpoint, there are several intersecting lines of resistance in the ~10000/100 vicinity; H&S neckline, under-side of the Feb 11 t-line, multi-month horizontal resistance, and the underside of the 2011 t-line (a little higher).

The 'macro-tech' outlook remains intact; the period from February to April is viewed as a bounce within the broader downward channel off the 2015 highs, with price action since the April high beginning a new leg lower. Until we see the channel broken on the weekly chart, risk remains skewed to the downside.

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