Technical Analysis

The Nikkei 225 fell very sharply though October, as did many other global indexes, as a wave of trade-inspired risk aversion took its toll. The Tokyo stock benchmark is now more than 2,500 points below its 2018 peak, which was the 24,441 reached on October 1. However, the point at which its fall has so far halted is an interesting one. The 20,767.6 level reached in intraday trade on October 29 and 26 is just about exactly the second, 28.3% Fibonacci retracement of the rise up to this year's highs from the lows of June 2016.

That level has survived two downside tests in the past week and seems to be providing strong support.
Still, the Nikkei remains under near-term pressure for as long as it remains within the daily chart downtrend channel which has contained trade on the way down from October's peaks.

At present, it is threatening to break above it, but has yet to do so conclusively. If it can on a daily or weekly closing basis then the bulls can once again dream of consolidating within the old range shown on the chart above. From there they might be able to build a platform from which to take on those highs again.

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In the aftermath of EUR/GBP's largest climb in a single day since June 2016, the pair is attempting to overturn its dominant downtrend. Looking at the daily chart below, the Euro climbed against the British Pound above the descending trend line from August. However, further upside progress was notably lacking and EUR/GBP was unable to push above the October high.

In its attempt to do that, a horizontal range of resistance has formed between 0.89235 and 0.89394 (green range below). This is preventing the pair from confirming the break above the falling trend line from August. There are warning signs that this resistance area may hold, sending EUR/GBP lower and causing it to resume the dominant downtrend.

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Australian Dollar Forecast: AUD/USD, AUD/JPY and EUR/AUD Trend Lines Broken
Fading momentum in the Australian Dollar preceded losses against the greenback, Japanese Yen and Euro. With trend lines broken, AUD/USD, AUD/JPY and EUR/AUD may extend their reversals.



British Pound Forecast: Sterling Remains Weak
Both the four-hour and daily GBP/USD chart point to lower prices ahead with a re-test of the 1.2660 low on the cards.



Euro Forecast: Bottoming Efforts Under Way in Several Crosses
The Euro has seemingly halted its decline since early-October, setting the stage for bottoming efforts in several EUR-crosses, including EUR/USD.



Equities Forecast: Technical Forecast for the S&P 500, Dow Jones, DAX 30 & FTSE
Last week was a wild one and next could be too, but volatility may diminish a bit as long as support levels hold.



Gold Forecast: Price Breakout Approaching Initial Targets
A breach above the November range takes gold prices near five-month highs. Here are the targets & invalidation levels that matter on the XAU/USD charts next week.

Oil Forecast: WTI Holds Near $50/bbl; Bounce May Very Well Be Bull Trap
A sharp drop appears to have found support near $50/bbl. despite increasingly worrisome signs about global demand in 2019 possibly indicating a short-term low is in place.

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The Australian Dollar has lacked interest rate support for much of 2018, and the situation could worsen into the new year.

In public the Reserve Bank of Australia still insists that the most likely next move will be an increase in the record low, 1.50% Official Cash Rate. That has been unchanged since August 2016 and is already the longest unchanged base rate in modern Australian history.

Lower rates need not be bad news for the Australian stock market- a the very least they should support consumer spending. However, the ASX 200 tends to move very much with general risk appetite in any case which is why it currently languishes at new 2018 lows. The country’s financial sector is heavily weighted within the index, and that would certainly not welcome any move lower for the OCR.

In any case the ASX’s monthly chart shows a precipitous fall form this year’s peaks, arrested so far by support at the lows of July-November, 2016. It’s notable also that upward channel support from February of that year has been conclusively trashed.

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The Euro failed to make good on an attempted break higher from a range confining price action against the US Dollar since late October. The pair briefly breached resistance in the 1.1456-81 area but the upswing ran out of steam on a test of trend line resistance set from January 2018. A test of this barrier produced a bearish Evening Star candlestick, which was soon followed by a drop back into familiar territory.

Sellers are now eyeing counter-trend support guiding the upswing from lows set in mid-November. A daily close below this barrier – now at 1.1328 – would suggest the dominant long-term decline is ready to be reasserted. The first downside hurdle to follow is the November 12 low at 1.1216, followed by a support shelf in the 1.1110-32 zone.

The 1.1456-81 region is back as immediate resistance. Another foray above it would open the door for a test of 1.1554. This appears to be a pivotal spot for bears, marking the intersection of trend line resistance and a chart inflection area in play since November 2017. Establishing a foothold above this would go a long way toward de-fusing immediate selling pressure.

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EUR/GBP continues to make cautious progress to the upside in the aftermath of a bullish candlestick pattern. This followed a push above a descending resistance line from earlier in January which was since resulted in gains of about 2.11% at the time of this writing.

In the meantime, EUR/GBP finds itself in a horizontal resistance range between 0.88384 and 0.88108. This area consists of the lows achieved back in November 2018. This was then retested in the middle of January. A close above this area may open the door to climbing to 0.89225 next, which is the lower boundary of the next area of resistance.

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The Aussie pair that arguably made the most amount of progress last week, rising almost 2%, was GBP/AUD. It added to an impressive bullish push that began two weeks ago, as anticipated. Yet, it was unable to push beyond critical resistance at 1.8732. In addition to this past week, this area was tested back in October and then in early January. It is preventing GBP/AUD from achieving its highest daily close since June 2016, the month of the Brexit Referendum.

Arguably, sustaining this momentum should require major fundamental support. But there are numerous uncertainties that remain for the British Pound ahead as pushing back the divorce would continue keeping the markets in suspense. Meanwhile, the sentiment-linked Australian Dollar is being primarily driven by volatile risk trends.

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Gold registered a low at 1280 with price respecting slope on a close basis before recovering higher. The advance failed this week at former channel support, turned resistance, with the subsequent sell-off breaking back below the 1302 pivot zone. The decline is now testing the 61.8% retracement of the advance at 1292 and a break below this threshold would risk another test of slope support with broader bullish invalidation steady at 1275/76 where the yearly opening-range low converges on the 38.2% retracement. Ultimately, a topside breach above monthly open resistance at 1313 is needed to shift the focus higher targeting the 61.8% retracement at 1321.

The immediate risk is lower while below 1302 but ultimately, we’re looking for a new low to satisfy a larger correction. From a trading standpoint, a good place to reduce short exposure / lower protective stops.

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Last week’s strong closing candle is coming from a big area with long-term implications. The head-and-shoulders top I’ve been discussing for months had its neckline thoroughly tested after it broke in October. Retests are a common occurrence for these types of patterns before their full bearish potential is realized.

In confluence with the neckline is the decisively falling 200-day MA, the underside of the 2011 trendline which was also broken in the fall, and the low from almost exactly one year ago today.

What was helping keep sellers at bay in the interim, though, was the constructive trend off the December low, with the lower parallel of the channel acting the guide. With last week’s break of not only the lower parallel but also lows created over the past several weeks the path of least resistance is setting up for sellers to regain control.

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It’s been another busy week for Gold prices after last week’s breakdown to fresh 2019 lows. And while no new highs or lows were established this week – there may be a number of deductions that traders can move-forward with on the yellow metal. In this piece, I’m going to take a tops-down look at Gold prices, incorporating the monthly chart to focus on what got us to our current levels, and then drilling down to shorter-term variations in the effort of devising strategy. But, first and foremost – an identification of the current state of Gold prices, which is a symmetrical wedge formation that’s been building since the Q3 of last year. This formation will often lend itself to breakouts that can run for a while, as the digestion exhibited inside of the formation gives way to elongated trends.

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