Technical Analysis

Today’s gains have helped offset a string of losses as fears over increasing oil output coupled with diminishing hopes that a US China trade deal will be reached. But, crude oil prices still remain above technical support at the 50.0 percent retracement level around $60.00/bbl drawn from October’s
peak and December’s bottom last year. Positive sentiment from a technical perspective has waned, however, after bullish uptrend support from the latest 40-plus percent rally was broken earlier this month. Now, a short-term bearish downtrend has formed while a downward-sloping 34-day EMA both look to serve as headwinds to further upside in oil prices.

Focusing in on a closer perspective, it appears that the 78.6 percent Fibonacci retracement level drawn from the high and low recorded on April 23 and May 6 respectively serves as a new area of confluence around the $61.50/bbl price. Oil bulls will likely watch this level closely to see if technical support continues to hold with the 61.8 percent and 50.0 percent Fibs encompassing the $62.50-63.20/bbl price level eyed as short-term upside targets. Although, if prices fail to hold footing above $60.00/bbl, crude could quickly accelerate to the downside.

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We are tracking a bullish 5-3 wave pattern for USD/JPY. This is where you have a 5 wave motive wave to start a new trend followed by a three wave partial retracement.

The motive wave began on January 2, 2019 and carried to March 5, 2019. From there, a sideways flat pattern carved in three waves labeled (a)-(b)-(c). The wave structure from the May 13 low appears to be a leading diagonal pattern. If this interpretation is correct, then another large rally may begin soon.

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Dow Jones| Longest Losing Weekly Streak in 8 years

The Dow Jones looks set for the longest weekly losing streak in 8 years (5th consecutive week). As it stands, the outlook is relatively weak for the Dow Jones, does a close below 25500 could see losses extend towards the 25000 level. To negate the bearish momentum, eyes will be on for a break above 25700, which opens up the doors for 26100.

FTSE 100 | Key Fib Keeps the Index Above 7200

Marginal losses for the FTSE 100 as the decline in the Pound kept the index afloat. The key fib leve situated at 7200 remains pivotal for the index, which has held firm thus far. On the topside, a break above 7400 is needed to ease the bearish momentum. Given that next week will likely get of to a quiet start, the index could be somewhat rangebound.

DAX | 12000 Break May Pave the Way for Further Losses

Despite the DAX closing lower by 1.5% for the week, the index has managed to remain in an uptrend, hugging the trendline support from the 2018 low. However, failure to hold above 12000 could see support zone tested at 11800. For the softer outlook to fade a closing break above 12300 is needed. Reminder, given market holidays on Monday, volumes will most likely be lighter thus markets may be vulnerable to overextended moves.

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The breakout keeps EUR/USD constructive while above confluence support at 1.1187. Subsequent topside resistance objectives at the 61.8% retracement of the 2019 range at 1.1393 and the objective yearly open at 1.1445 – look for a more significant reaction there IF reached. A break / close below 1.1107 would be needed to mark resumption of the broader downtrend.

Bottom line: Euro held long-term slope support for over two months with the breach above channel resistance this week shifting the focus back to the long-side as we head deeper into June trade. From a trading standpoint, look to reduce long-exposure / raise protective stops on a test of the upper targets here. Ultimately, we’ll favor fading weakness while above 1.1187.Review my latest EUR/USD Price Outlook for a closer look at the near-term trading levels.

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A persistent slide in US Treasury yields, waning hopes for Chinese-US trade settlement and the possibility of new US tariffs on European goods have all added to investors’ already lengthy worry list, so it’s hardly surprising that the Yen should play its hallowed fundamental role.

Technically USDJPY’s late-June bounce seems to have petered out at this week’s highs of 108.51 or so. Still, the pair remains above the formerly pervasive downtrend line which has marked the Yen’s strengthening since late April. With the US disrupted for the Independence Day break it might yet be premature to write off the latest Dollar rally completely.

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The Japanese Yen has begun to gain again on the US Dollar once more, with the Federal Reserve’s apparent willingness to keep interest rate cuts on the table, despite last week’s good news from the labor market, providing the fundamental backdrop for this latest bout of Greenback weakness.
Technically, USDJPY’s short-term daily chart bias would appear to be to the downside too, if not quite conclusively yet. The pair is flirting with a break of a quite well-respected uptrend line which has so far market the bounce seen from the effective 2019 lows reached in late June.

Clearly a daily or weekly close below that line looks highly likely at this point and, unless Dollar bulls can reassert themselves, the base of the current trading range looks set for a revisit. That comes in at 108.80 and its hard to see any conclusive falls below that failing to retest the year’s low, probably quite quickly.

The range top at 108.98 provides those Dollar bulls with their most obvious upside target, but they would probably need to consolidate in that region before they could dare to dream of retaking all of the sharp falls seen on May 31. The pair would need to rise back to 109.60 if it is to fully erase them. That looks like a tall order.

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GBP/JPY – Back to the Sideways Move

On July 15 GBP/JPY continued its downside move and on the following days printed new multi-month low at 133.85 . However, the price rallied after and Yesterday closed above 135.00 handle.
Alongside this, on July 17 the Relative Strength Index (RSI) U-turned from below 30 towards 35 then remained flat after, emphasizing the sellers losing momentum on one hand, and the buyers unable to be in charge on the other.

Looking at the daily chart we notice last week GBP/JPY entered the lower trading zone 133.40 – 133.55 and stuck after in a trendless move. Yesterday, the pair printed its highest level in a week however, failed to test the high end of the current trading zone.

Therefore, if the buyers were successful to force a close above the high end of the zone, this may lead the price towards 136.40. Although, the weekly resistance level underlined on the chart (zoomed in) should be kept in focus.

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Last week the Relative Strength Index (RSI) could not cross above 50, reflecting the buyers lack of momentum to start uptrend move. This week, the oscillator dropped from 41 to 32 emphasizing the seller's domination.

Looking at the daily chart we notice, on Monday USDTRY moved to the lower trading zone 5.4635 – 5.6550 and currently eyes a test of the low end of this zone. Hence, a close below the low end of the zone may send the price towards 5.3033. However, the weekly support levels marked on the chart (Zoomed in) need to be watched along the way.

On the flip-side, any failure to close below the low end of this zone could push the price towards the high end. Further close above the high end may cause more bullishness towards 5.8250. Although, the weekly resistance zones highlighted on the chart ( zoomed in) should be kept in focus.

Looking at the four-hour chart we notice, on July 26 USD/TRY started a downtrend creating lower highs with lower lows. Yesterday, the downtrend accelerated after breaking below the July 4 low at 5.5849 and today the pair printed its lowest level in nearly three months.
Hence, a break below 5.4786 could send the price towards 5.4262 contingent on clearing the low end of the aforementioned trading zone. Additionally, the daily support level underlined on the chart should be considered.

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We move into a new trading week and season with critical technical levels under pressure or collapsing. The US indices are on the cusp of volatile but rigid ranges while the Dollar has extended its charge to a fresh multi-year high. Breakouts are likely, but follow through can remain a tripping point if not properly appointed with speculative momentum. Be ready for transition in market conditions.

The US Dollar surged to multi-year highs last week as the greenback continues to show its strength, but does USD have room to run or will technical resistance keep upward momentum at bay?

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