Sharp reversal from key resistance.
EUR/USD has reversed sharply from key overhead resistance (including an important 2 year trend-line) and pushed back into the 200-day MA (1.4102).
A close beneath the 200-day MA will warn of an emotionally charged bull-trap and ultimately a further downside momentum through 1.3799 (26th Oct low) and 1.3653 (18th Oct low), with scope into 1.3146 (Oct swing low).
Further pressure may weigh from broad risk-related proxies such as the developed equity markets. The euro currently shares a high correlation of 0.85% with the S&P500 which is now unwinding from new multi-week highs.
Inversely, the USD Index has turned higher ahead support at 74.10 and 73.40. The bulls are likely to recapture the recent 6 month highs near 80.
Speculative (net long) liquidity flows are holding steady around their recent spike highs (3 standard deviations from the yearly average). This will likely remain strong and help resume the USD’s major bull-run from its historic oversold extremes (momentum, sentiment and liquidity).
STRATEGY: Sell Stop 3: 1.3950, Obj: 1.3840/1.3650/1.3470, Stop: 1.4110.
Meets initial resistance close to the 200 day moving average.
GBP/USD has seen a return to test the 200 day moving average ahead of the latest set back. However, structure from 1.5272 is suggestive of a potential higher low versus 1.5632, for a return to 1.6153 and then higher still.
We remain wary of the general range bound nature of this market in the medium-term time frame.
While above 1.5632 a further leg higher is favoured. However, if this region fails to contain the current corrective phase, then the bias will turn negative again.
GBP/USD has already experienced a large devaluation versus the US Dollar, therefore any strengthening in the US Dollar may not see the full participation of GBP/USD. Instead GBP/USD is favoured to remain stronger than most.
STRATEGY: Buy limit 3 at 1.5840, Objs: 1.5940/1.6153/1.6400, Stop: 1.5740.
USD/JPY intervention favours test of 80.00.
USD/JPY’s latest intervention by the BOJ favours a test of that all-important psychological level at 80.00. This marks the BOJ’s third time to officially intervene on the rate this year, after it carved out yet another new post WWII record low at 75.35.
Multiple DeMark buy signals were also triggered within the multi-week base pattern which has now broken higher (as had been expected by our low volatility measures).
The medium/long-term view is more bullish, favouring a sustained move above our initial upside trigger level at 80.00, near 80.24 (post BOJ intervention II high).
Keep in mind that such a scenario would help reactivate the longer-term technical bias, including prior monthly DeMark™ exhaustion signals, within the ending diagonal pattern, which was part of a major Elliott Wave cycle. Only a sustained weekly close below 76.25 will lead to a reassessment of the view and extend temporary weakness into 74.55.
STRATEGY: Buy Stop at 78.20, Obj: 80.05/82.00/83.30, Stop: 76.50.
Further recovery anticipated while above 0.8600.
Stop raised to entry.
USD/CHF continues to trade close to the 200 day moving average. Given the structure of the fall from the recent high at 0.9316, a larger recovery is now anticipated towards 0.9000 initially. However, failure to hold above the entry level of the strategy below, at 0.8600, will warn of a larger fall to the 0.8000 region.
In any case a further recovery leg higher is anticipated eventually. Movement in USD/CHF is likely to be affected by the SNB attempting to maintain EUR/CHF around 1.2200. However, back under 0.7712 is required to change the long-term bullish bias.
A push back over 0.9083 is required to open up a return towards the recent high at 0.9316.
STRATEGY: Long 3 at 0.8600, Objs: 0.9000/0.9200/0.9316, Stop: 0.8600.
Bears push back under the psychological 1.0000 level.
USD/CAD’s short-term price activity remains negative, as the bears push back under the all-important psychological 1.0000 level (prior trading range).
Only a sustained close beneath here will extend bearish setbacks into the long-term 200-day MA at 0.9813 and 0.9726 (31st Aug low). Only a close beneath here will change the long-term positive view and encourage a sell trade setup in our model portfolio.
Meanwhile, positive momentum needs to push above 1.0264 and 1.0400 to rebuild the potential major upside reversal higher above the old resistance level at 1.0673 (August high & Congestion zone).
A strong directional confirmation above here will open a much larger recovery into 1.0850 plus. This would extend the upside breakout from the rate’s ending triangle pattern, which was part of a major Elliott Wave cycle.
EUR/CAD is extending above its 200-day MA, within a large multi-month trading range. Key resistance continues to hold at 1.4379 (June swing high), which has for some time marked a strong distribution pattern.
CHF/CAD is retesting its support nearby the 200-day MA at 1.1265, following the dramatic price slide lower (triggered by the SNB intervention). The cross-rate has now retraced more than half of its 2011 gains.
STRATEGY:Buy Stop 3: 1.0050, Objs:1.0270/1.0660/1.0850, Stop: 0.9890.
Resistance at 1.0765 caps explosive recovery.
AUD/USD’s explosive rally is currently unwinding from overbought conditions, ahead key resistance at 1.0765 (01st Sept high).
This level is likely to cap gains back into the 200-day MA (1.0405) and potentially resume downside pressure on the rate’s multi-year uptrend.
The bears need to confirm beneath 1.0322 (26th Oct low) and 1.0188 (18th Oct low). A break here will unlock sharp setbacks into 1.0000.
Elsewhere, the Aussie dollar remains stable against the New Zealand dollar. The pair is still locked within its new bear cycle structure while it holds beneath its 200-day MA. Key support can be found at 1.2320 and 1.2100.
The Aussie dollar is also gaining further against the Japanese yen, after spiking above the long-term 200-day MA which is currently at 83.12. Near-term support continues to hold at 77.63 (18th Oct low). A break here will resume downside scope into 76.70.
STRATEGY: Sell Stop 3: 1.0550, Obj: 1.0230/1.0010/0.9710, Stop: 1.0750.
Clear break over 123.31 suggests scope for a larger recovery.
Short exited.
GBP/JPY has been affected by the intervention last night of the BOJ in USD/JPY. This has led to a breach above the key 123.31 level, which now warns of a much larger corrective phase higher.
In fact a return towards 129.00/130.00 is now possible given the daily structure present since 116.84. A push back under 121.39 is required to negate this positive structure. Assuming that further short-term strength can be realised, a lower high would be anticipated close to 129.00. Thus the region between 129.00 and 130.00 would be attractive for renewed short positioning.
STRATEGY: Await fresh signal. Possibly looking to sell higher.
Breaks out of a falling channel.
Short exited.
EUR/JPY has seen a significant break higher out of a falling channel, leaving a false break lower at 100.76, in the daily timeframe. Potential now exists for a higher low to form versus 100.76 for a further recovery leg higher.
This is further bolstered by the failure to remain below 108.03, which opens up a return towards the 200 day moving average, currently at 112.67.
Should the region near 112.67 be met a lower high would be favoured to form in that region. In the meantime, scope is seen for a higher low versus 104.75. Failure to maintain a foot hold over this level will negate expectations of a return towards the 200 day moving average.
STRATEGY: Await fresh signal.
Returns to test the 200 day moving average.
EUR/GBP has returned to test the 200-day moving average, which is currently at 0.8739.
As mentioned in prior reports the rise seen since 0.8530/0.8531 is viewed as corrective, with a push back under 0.8670 required to negate the possibility of a further squeeze higher to test the 0.8886/85 region.
Should this move be realised, it would also take us close to the upper end of the recent trading range. There is an increased probability of general range bound trade, thus short entry at higher levels is also supported by the potential of a return to a period similar to that between 2003 and 2007 (not shown).
A move back over 0.8960 is required to neutralise our mild bearish bias, in a generally rangebound environment.
STRATEGY: Sell limit 3 at 0.8870, Objs: 0.8750/0.8580/0.8400, Stop: 0.8970.
Breaks under the support of an hourly channel.
EUR/CHF failed to garner momentum after meeting supply close to the resistance of an hourly rising channel and has subsequently fallen under the support of this same structure. This now warns of a return to the key high near 1.1973, close to the 1.2000 floor in EUR/CHF. Should a re-test of the 1.2000 region take place with a fall under 1.1973 also taking place, this would warn of the end of the recovery seen since 1.0075, increasing the probability of a return to this level.
This also brings back into focus the 1.2500 – 1.3000 zone where resistance was always anticipated.
A sustained move under 1.2024 will alter our near-term bullish bias.
STRATEGY:Await fresh trading signal.
Risk of a larger decline beneath $1530.
Gold remains bearish after its dramatic 20% price fall, which helped confirm the extreme overbought conditions (marked by DeMark™ indicators). This also timed a key cycle peak, ahead of that all-important $2000 glass-ceiling.
Most concerning is that speculative (net long) flows have recently breached a key downside level which may threaten over 2 years of sizeable long gold positions.
In price terms, Gold’s latest 20% bearish slide is still worth less than the largest average drawdown measured since the start of the yellow metal’s long-term bull market in 1999.
There is heightened risk of a much larger decline if we confirm a weekly close beneath $1600 and $1554-30 (200-day MA/swing low), which has not been breached in 3 years!
A number of “bargain hunting” trend-followers will be watching this benchmark “line in the sand” for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000. Remember, this would still offer a unique buying opportunity in the near future.
STRATEGY: Sell Stop 3: 1710, Obj: 1600/1530/1300, Stop: 1760.
Key support at $26.0700.
Silver’s latest price capitulation is a painful reminder to the investment community that lightning can strike twice. Note, this marks the second time silver has crashed, following its 30% fall last April.
The move was triggered following a DeMark™ exhaustion sell signal and has now wiped out almost 50% of silver’s prior gains (taken from Silver’s all-time high at 49.7900) which was last seen in 1980.
Such a dramatic move traditionally produces volatile trading ranges. This allows the market to have enough time to recover and accumulate renewed buying interest.
Expect a large trading range to hold between $37.0000-26.0700 over the multi-week/month horizon, with downside macro risk into $21.5165 (61.8% Fib-1999 bull market) and $20.0000. This would still maintain silver’s long-term uptrend and help offer a potential buying opportunity for the eventual resumption higher.
Continue to watch the gold-silver “mint” ratio which has now accelerated higher by 67%, suggesting further risk aversion over the next few weeks.
STRATEGY: Sell Stop 3: 34.1300, Obj: 29.9700/26.0700/23.3400, Stop: 35.6880.
Source http://www.fxstreet.com/technical/analysis-reports/technical-trading-strategies/2011-10-31.html
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