FOREX SRBIJA
Analize i predviđanja => Tehnička analiza => Temu započeo: HotForex 22.09.2014, 11:02:44
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U.S. Dollar hovering near its highs – Gold nearing 1-year lows
In a quite Monday kick off for the FOREX markets the U.S. Dollar remains near its highs against a basket of major currencies. The dollar is still supported by expectations that U.S. Federal Reserve will raise its base interest rates sooner than later and that as soon as it does it will do so with increased pace.
EUR/USD touched a new 14-month low on Friday night, trading as low as 1.2823 before recouping this morning to trade at 1.2865. The pair still looks bearish with support levels remaining intact at 1.2837 and 1.2755 thereafter.
GBP/USD surprised all traders expecting to move to the North on the back of the confirmed “no” vote on Friday. The pair instead closed Friday near it’s Thursday’s opening after recording a spike, as it traded up to 1.6533 just after the official referendum result was announced. Concerns on further political instability within the U.K. ahead of next May’s general election weighted on traders’ decision to sell the pound against major counter currencies.
AUD/USD continued its recent downtrend on Friday and this morning too. The pair is now trading just above 0.89 which has been the first intermediate major support level (May’s2014 low) ahead of yearly lows down to 0.8659. The pair however technically looks way oversold on the daily chart and it might need a consolidation period before a break lower is accomplished.
Gold sellers have also dominated the precious metal market with spot Gold trading this morning as low as 1208 $/ounce, and nearing 5-year lows at 1182$/ounce recorded earlier this year and in mid 2013s. Gold which is a non-bearing interest asset has been heavily wounded by increased expectations for a FED interest rate hike, having lost since 10th of June -10.50% against the U.S. Dollar.
(https://blog.hotforex.com/wp-content/uploads/2014/09/blog22.png)
Having cleared an eventful week that included the FOMC decision, ECB stimulus and Scottish referendum the markets are set to focus on important fundamental data to be released this week. Today economic calendar is free of high importance data, but important data such as German and U.S. PMIs will be coming into the picture from tomorrow onwards.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Euro on the focus today as Eurozone Inflation and German Unemployment figures are due
After a quite kick start in the week for the FOREX markets, all the focus has been concentrated in the Euro and the related data to be released later today.
EUR/USD attempted a bounce from its recent lows yesterday, trading as high as 1.2717 but it slowly retreated back below 1.27. The Euro is still weighted by increased uncertainty surrounding a proposed referendum in Catalonia, and the weak data stemming from the Eurozone. Yesterday German inflation was steady at 0.8%, with the focus now turned to Eurozone data. If the data to be released later this morning, appear weaker than expected for the Euro, we would expect a break below the 2-years low support level at 1.2659, and to open the way towards the next technical support level May’s 2012 low at 1.2286.
https://blog.hotforex.com/wp-content/uploads/2014/09/blog30.png
German unemployment data for September will be released at 07:55 GMT, and Eurozone inflation September data at 09:00 GMT. Later this afternoon Canadian GDP figures will be announced for the month of July at 12:30 GMT, and U.S. consumer confidence for September at 14:00 GMT.
All the data of course might give a small impact on the markets if the traders fear of aggressive positioning ahead of the U.S. Non Farm Payrolls that will be released on Friday.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Euro on the focus today as Eurozone Inflation and German Unemployment figures are due
After a quite kick start in the week for the FOREX markets, all the focus has been concentrated in the Euro and the related data to be released later today.
EUR/USD attempted a bounce from its recent lows yesterday, trading as high as 1.2717 but it slowly retreated back below 1.27. The Euro is still weighted by increased uncertainty surrounding a proposed referendum in Catalonia, and the weak data stemming from the Eurozone. Yesterday German inflation was steady at 0.8%, with the focus now turned to Eurozone data. If the data to be released later this morning, appear weaker than expected for the Euro, we would expect a break below the 2-years low support level at 1.2659, and to open the way towards the next technical support level May’s 2012 low at 1.2286.
(https://blog.hotforex.com/wp-content/uploads/2014/09/blog30.png)
German unemployment data for September will be released at 07:55 GMT, and Eurozone inflation September data at 09:00 GMT. Later this afternoon Canadian GDP figures will be announced for the month of July at 12:30 GMT, and U.S. consumer confidence for September at 14:00 GMT.
All the data of course might give a small impact on the markets if the traders fear of aggressive positioning ahead of the U.S. Non Farm Payrolls that will be released on Friday.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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EURUSD trading near the 1.2600 level in the European session. US ADP Non-Farm Employment Change on focus.
EURUSD dropped yesterday and closed at 1.2630. The CPI Flash Estimate in the Eurozone dropped to a level of 0.3 percent on an annual basis in September. The Unemployment Rate in the currency union remained stable at 11.5 percent. Data from the United States showed that the CB Consumer Confidence dropped to a reading of 86.0 in September. The Chicago PMI also failed to meet the market expectations coming at a reading of 60.5 in September.
Data released today indicated that the Final Manufacturing PMI in the Eurozone dropped to a level of 50.3 in September.
Investors are now looking forward for the ADP Non-Farm Employment Change and the ISM Manufacturing PMI releases due from the United States.
Support for the EURUSD is seen at 1.2586 and resistance is seen at 1.2716.
(https://blog.hotforex.com/wp-content/uploads/2014/10/EURUSD-01-October-2014.jpg)
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Need for safe haven increases demand for gold
Since the International Monetary Fund (IMF) lowered its estimation for global growth for 2015, the equity markets have seen a sizeable correction. Last week, before the correction in stock indices was reversed, over $3.2 trillion was momentarily wiped out from the value of the global stock market. In addition to this, various worries ranging from the spread of the Ebola virus to the Federal Reserve (Fed) tightening its monetary policy, added to the general feel of the investment world as we’ve known it over the last four to five years, coming, if not to and end, at least close to it. This translated into strength in Gold which is often viewed as a safe haven when global threats arise or when the Fed expands its balance sheet. It is clear from the charts that when things got jittery, money flowed out of the other markets, but not from gold. Instead, gold gained after it touched a long term support level. According to the Financial Times, flows into gold investment funds hit an eight week high in the week to October 15th. At the same time the comments from the St. Louis Fed president Mr. Bullard have left the door open for further expansion of the Fed’s balance sheet. Based on all of the above, it is safe to assume that gold prices will be either sustained above the latest weekly low (support level at 1183) or trend higher over the coming months.
For recent and upcoming economic reports see: HotForex Economic Calendar
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold-weekly.png)
Gold, weekly
Over the last two and a half weeks gold has been moving higher from an important support level (blue horizontal line). While the most important weekly resistance levels (red horizontal lines) are far away from the current market price, we should pay attention to the Fibonacci cluster levels on the above chart (black horizontal lines). Based on several major highs in the recent sideways move in 2013 and 2014, as well as the latest market low, it is possible to draw several Fibonacci retracement levels. Because there is no single right way of choosing the low/high points for the analysis, different people draw the Fibonacci levels from different price points. Fibonacci cluster analysis provides us the areas important to the majority of analysts by eliminating all the other levels and focusing on those that cluster together. This analysis provides us with the following areas of importance in Gold. Support (area below current price) 1215 – 1220 and Resistance (area above price): 1260 – 1268. The third area of importance for Fibonacci analysts is where the price currently fluctuates. This area coincided with the weekly low from June this year. Price action below this weekly low is likely to be range bound and the range best visible (and tradeable) in the smaller time frames (4h and 1h). I base this view on what happened the last time gold was moving up from the same support level and prices reached the previous weekly pivot low (in January this year). Then, Gold moved sideways for three weeks before breaking above the resistance area created by the mentioned weekly pivot low.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold-4h.png)
Gold, 4h
In the above chart we have the same levels in a 4h chart. Price has been moving fairly steadily without strong extensions outside the Bollinger Bands, but some weariness in momentum is visible as the latest directional move hasn’t been strong enough to take gold to the upper end of the channel. This indicates that even though buyers have been able to work their way through the Fibonacci cluster at the weekly low, they are confronted with further supply at these levels.
If price breaks lower from here, potential supporting areas are the 4h Bollinger Bands that coincide with the daily low from Friday 17th and the penetrated resistance (see above chart) which has already proven itself as an area where buyers are willing to step in. It is worth noting that this level (a supporting Fibonacci cluster at 1215 to 1220) is roughly the area of former resistance from September this year and should the price move back there this would be a potential support and worth keeping an eye on.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold-1h.png)
Gold, 1h
Price is currently hovering at the lower 1h Bollinger bands while it moves sideways just above one of the Fibonacci cluster levels drawn earlier, but seems to be slipping lower. If gold can’t close above the descending red trend line but keeps on drifting lower, I would look at the 4h (240 min.) Bollinger Bands as potential support or first target for short trades. If momentum analysis (e.g. in 15 and 5 min. charts) confirms that this area of potential support is likely to hold, then long entries could be considered at or around the level.
Conclusion: Keeping in mind that we are at price levels where psychology has changed substantially in June (the market turned from bearish to bullish right at current levels). This might mean that immediate upside is limited and that the market needs to dip lower to gather strength for another attempt to break through the above resistance. This is not very clearly visible in price action yet, but as I pointed out earlier the latest move higher in the 4h chart isn’t as strong as those before it. Therefore, it makes sense to prepare for the possibility of gold breaking lower and be ready to take long trades at potential support levels. However, if current minor support at Bollinger Bands and close to the level of rising trend line holds, it would be advisable for traders to act accordingly and follow the direction of the rising trendline in their trading.
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BoE concerned about Euro area slow down impacting UK
The Bank of England’s MPC meeting yesterday (Oct. 22nd) voted 7:2 against rate hikes. This was expected by the analysts and the same members, Weale and McCafferty, voted for a 0.25% hike as the last time. The rate stayed the same at 0.5%. Members voting against the rate hike were concerned about weak wage growth and couldn’t justify a rate hike in the current low inflationary environment. The UK Consumer Price Index (CPI) has been trending lower since October 2011 and is currently at 1.2, well below the BoE’s Q3 inflation expectations of 1.8%. This allows the Central Bank to have an ultra loose monetary policy without worrying excessively about price stability. Members of the committee were also concerned about a rate hike exposing UK to economical shocks and the slow down in the euro area being contagious. In light of recent weak data (low CPI and jobless claims for September falling less than expected), it may well be that those voting against rate hikes in the November meeting will have even stronger majority.
Today and tomorrow the focus will be on Friday’s Preliminary Gross Domestic Product (GDP) figure for the UK. This is the first release of the 3 versions of UK GDP. They are released a month apart – Preliminary, Second Estimate, and Final. The Preliminary release is the earliest and tends therefore to have the biggest impact on Pound Sterling.
The UK economy grew by 0.9% in the second quarter. Slightly beating expectations (0.8%) and was in line with Q1′s GDP reading of 0.8%. At that time, the IMF also upgraded its annual GDP forecasts for the U.K., which was then one of the better performers among the major economies. A weaker growth rate pace is projected for Q3, as manufacturing and services activity has slowed during the period. The analysts’ expectation for the Q3 GDP reading is 0.7%. A strong deviation (in either direction) from this figure is likely to translate into a stronger than average move in Pound Sterling pairs.
For recent and upcoming economic reports see: HotForex Economic Calendar
(https://blog.hotforex.com/wp-content/uploads/2014/10/GBPUSD-Weekly.png)
GBPUSD, weekly: has been trending lower, now hovering at 50% Fibonacci retracement level (measured from July 2013 low to July 2014 high). Has bounced from proximity of weekly support at 1.5855. Weekly support: 1.5855 – 1.5875 and weekly resistance 1.6252 coincides with 38.2% Fibonacci level. Stochastic oscillator is oversold but showing some bullish divergence (Stochastics has moved higher while price has moved lower). This suggests to me that the downside is limited as the market is turning and probabilities are on the long side once the intra-day charts signal the timing for longs is correct. Weekly and daily pictures give us the frame work and an understanding of what kind of process the price is going through. Intra-day charts provide us with timing tools.
(https://blog.hotforex.com/wp-content/uploads/2014/10/GBPUSD-Daily.png)
GBPUSD, daily: This weeks high (1.6185) coincided with a Fibonacci cluster 1.6170 – 1.6197. These clustering levels are measured from the highs in the down move to the latest low. The fact that several Fibonacci levels and a weekly high coincide at same levels emphasizes the importance of, not only Fibonacci cluster analysis but also the level as a resistance. Another cluster above this one is at 1.6250 – 1.6274, a level where the Bollinger Bands are at the moment as well. Supporting Fibonacci cluster (blue lines) is roughly at the same level with the always so important 50% retracement (measured from July 2013 low to July 2014 high). In addition, the pair has just broken out of bullish wedge formation three days ago and has now retraced to the trendline that used to limit its move higher. This too is a sign to look for long opportunities in shorter time frame charts.
(https://blog.hotforex.com/wp-content/uploads/2014/10/GBPUSD-1h.png)
GBPUSD, 1h: The most interesting area to consider long trades is the potential support area (1.5940 – 1.5965) provided by the daily Bollinger Bands and the October 16th low. At the time of writing, price is still creating lower lows and highs and seems to be edging lower. This might well be due to the uncertainty caused by the coming GDP update on Friday. If there will be no major negative surprise (the UK GDP figure is close to expectations) the above mentioned support levels could provide day trading opportunities with the 21st October low being the first target. Above that potential target levels would be 1.6180 and 1.6220.
Conclusion: Based on the above analysis GBPUSD is currently at levels that favour long trades. We have a market that is close to a support after long move lower, and it is showing signs of momentum change: bullish wedge and breakout with a divergence in Stochastics. The downside seems to be limited as downside momentum is waning and probabilities are therefore on the long side. We should keep in mind though that intra-day signals should be closely monitored in order to increase chances to get the timing for longs right. In addition, it is unlikely that this market will make major moves before the preliminary GDP publication tomorrow. If there is no intra day momentum reversal signal and the price keeps on moving lower, this setup is negated and traders should act accordingly.
HotForex Blog: https://blog.hotforex.com/boe-concerned-about-euro-area-slow-down-impacting-uk/ (https://blog.hotforex.com/boe-concerned-about-euro-area-slow-down-impacting-uk/)
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Why to trade with multiple time frame charts? | Part 1
As the traders who read my articles are aware by now I do not favour an idea of basing one’s analysis and trades on price action in a single time frame chart. New traders are often fascinated by the constant action visible in the 1 minute or 5 minute time frames. This is the same crowd that loves trading platforms with flashing lights, blinking windows and buzzing buzzers. The more eye candy and action, the better. I’ve been there and done that, so I can’t blame them. But, believe me, after watching price action for over 16 years, I’ve got no need for such hyper activity any longer. I am only interested in knowledge and information that has quality, validity, and hopefully, also some predictive value.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Untitled.png)
The main problem with the lowest time frame charts is the thing called noise. Noise can be defined as unwanted signals that obscure the real signals and therefore harm the quality of your analysis. In other words, 1 minute charts for instance, have so many spikes, ranges, mini trends, hammers, shooting stars, breakouts and false breakouts that these “setups” are only going to wear you out – and drain your trading account. You are free to try out, but unless you are extraordinarily lucky it’s likely that you will, sooner or later, become physically, mentally and financially exhausted. If you recognise some (or all) of these symptoms, take a step back and start again with (multiple) higher time frame charts and do some analysis that adds value to your trading career.
Another major problem with single time frame analysis is the fact that you are constantly out of touch with what is really happening in the market that you are trying to trade. How can that be true? Let’s give it some thought. First, what logical reason would there be to assume that the price action in, for example, a 5 minute chart would give us any relevant clues on what the big market operators, such as banks or hedge funds are focusing on. Their operations generally last longer than the time period a newbie trader typically focusses on (when watching his small time frame charts). These market participants are those that have the power to really move the markets and I have not yet heard of any central bank action or other major currency operation that would be completed intra day.
For instance, when a big company buys another from abroad for billions of dollars, this deal needs a currency transaction in order to be completed. The buyer needs to exchange the local currency to the currency of the target country. The FX market is the biggest market in the world, but selling or buying billions does mean that the position has be accumulated over a few days. Obviously the traders try to complete the buy operation in such a way that they don’t push the prices higher. If we do our analysis properly, we can find the levels that are meaningful for the big operators as well. These levels are likely to be important daily and weekly highs and lows, not minor one or five minute levels.
In addition, if one limits his or her view into a single time frame chart, the understanding of the current process and context at which this price action is taking place is kind of difficult (if not impossible) to grasp. With a process I mean for instance a situation where price is bouncing off from a higher time frame support level or it has reached a major resistance level and the momentum is waning. Should a trader focus only on a 5 minute chart or 1h chart for that matter, he or she would be likely to keep on shorting the bounces next to a major support. In other words, shorting even though price has reached a level that is likely to attract institutional buying. These shorts have much fewer probabilities on their side than those opened close to a major resistance level after there is confirmation that prices are indeed likely to turn lower. The old adage goes: buy low and sell high, but we need the bigger time frame to understand what the low and high actually mean.
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Why to trade with multiple time frame charts? | Part 1
As the traders who read my articles are aware by now I do not favour an idea of basing one’s analysis and trades on price action in a single time frame chart. New traders are often fascinated by the constant action visible in the 1 minute or 5 minute time frames. This is the same crowd that loves trading platforms with flashing lights, blinking windows and buzzing buzzers. The more eye candy and action, the better. I’ve been there and done that, so I can’t blame them. But, believe me, after watching price action for over 16 years, I’ve got no need for such hyper activity any longer. I am only interested in knowledge and information that has quality, validity, and hopefully, also some predictive value.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Untitled.png)
The main problem with the lowest time frame charts is the thing called noise. Noise can be defined as unwanted signals that obscure the real signals and therefore harm the quality of your analysis. In other words, 1 minute charts for instance, have so many spikes, ranges, mini trends, hammers, shooting stars, breakouts and false breakouts that these “setups” are only going to wear you out – and drain your trading account. You are free to try out, but unless you are extraordinarily lucky it’s likely that you will, sooner or later, become physically, mentally and financially exhausted. If you recognise some (or all) of these symptoms, take a step back and start again with (multiple) higher time frame charts and do some analysis that adds value to your trading career.
Another major problem with single time frame analysis is the fact that you are constantly out of touch with what is really happening in the market that you are trying to trade. How can that be true? Let’s give it some thought. First, what logical reason would there be to assume that the price action in, for example, a 5 minute chart would give us any relevant clues on what the big market operators, such as banks or hedge funds are focusing on. Their operations generally last longer than the time period a newbie trader typically focusses on (when watching his small time frame charts). These market participants are those that have the power to really move the markets and I have not yet heard of any central bank action or other major currency operation that would be completed intra day.
For instance, when a big company buys another from abroad for billions of dollars, this deal needs a currency transaction in order to be completed. The buyer needs to exchange the local currency to the currency of the target country. The FX market is the biggest market in the world, but selling or buying billions does mean that the position has be accumulated over a few days. Obviously the traders try to complete the buy operation in such a way that they don’t push the prices higher. If we do our analysis properly, we can find the levels that are meaningful for the big operators as well. These levels are likely to be important daily and weekly highs and lows, not minor one or five minute levels.
In addition, if one limits his or her view into a single time frame chart, the understanding of the current process and context at which this price action is taking place is kind of difficult (if not impossible) to grasp. With a process I mean for instance a situation where price is bouncing off from a higher time frame support level or it has reached a major resistance level and the momentum is waning. Should a trader focus only on a 5 minute chart or 1h chart for that matter, he or she would be likely to keep on shorting the bounces next to a major support. In other words, shorting even though price has reached a level that is likely to attract institutional buying. These shorts have much fewer probabilities on their side than those opened close to a major resistance level after there is confirmation that prices are indeed likely to turn lower. The old adage goes: buy low and sell high, but we need the bigger time frame to understand what the low and high actually mean.
HotForex Blog https://blog.hotforex.com/why-to-trade-with-multiple-time-frame-charts-part-1/ (https://blog.hotforex.com/why-to-trade-with-multiple-time-frame-charts-part-1/)
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How to trade with multiple time frame charts | Part 2 - HotForex Blog https://blog.hotforex.com/how-to-trade-with-multiple-time-frame-charts/ (https://blog.hotforex.com/how-to-trade-with-multiple-time-frame-charts/)
In this article you will learn:
A simple setup for entering trades that have a high probability of success.
Those reading my analysis should, by now, have a good understanding of what to include in their analysis. We need to, among other things, pay attention to weekly, daily and intra day support and resistance areas as well as price formations and Fibonacci levels clustering together. For a more detailed explanation, please refer to my earlier analysis on the USA 500 index, Gold and GBPUSD. The purpose of this educational article is to give HotForex clients a very practical example on how to benefit from the analysis that I produce. On Wednesday 22nd I wrote a report on Gold (you can find it here https://blog.hotforex.com/need-for-safe-haven-increases-demand-for-gold/ (https://blog.hotforex.com/need-for-safe-haven-increases-demand-for-gold/)).
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold_240_min.png)
Chart #1: Gold, 4h
As we now see, the analysis was correct and gold has, since then, been hovering between the two levels that I suggested as potential supports. The higher one was penetrated and has been acting as a resistance as price has been consolidating just below it. I still think it is likely that we will see gold touching the lower level.
Last week’s gold analysis suggested that because the price was right at a weekly resistance and the price action in 4h chart was losing momentum, gold could break the rising trend line and move lower. This information can be used in several different ways. First of all, those holding long positions and hoping they would have even greater gains from a further up move were given a heads up and an opportunity to exit longs while in profit. Secondly, traders that considered longs against the rising trend-line might have waited for price to break lower, settle or reverse at the lower levels and then look for buy signals from a better cost base.
The third option (shorting while price breaks lower) is the one we are going to explore here. So, how do we identify shorting opportunities in similar situations? First of all, we know from the weekly and four hour analysis that momentum was fading and gold was staying below the (red) down trend-line I drew (see Chart #1). This trend-line itself provided a guideline on where to take short trades at.
However, there is yet another way of identifying profitable opportunities when similar breakdown is just about to happen or is under way. For this we need three things: 1) 50 period moving average below 100 period moving average 2) a retracement to Bollinger Bands and 3) a sign of momentum fading, (= a narrow range candle or a shooting star).
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold_15_min.png)
Chart #2: Gold, 15 min.
Here’s the setup (Chart #2) in a 15 minute chart. At the time of the publication of my analysis, gold was breaking lower. My comment then was: “…(the price of gold) moves sideways just above one of the Fibonacci cluster levels drawn earlier, but seems to be slipping lower. If gold can’t close above the descending red trend-line but keeps on drifting lower, I would look at the 4h (240 min.) Bollinger Bands as potential support or first target for short trades.” Once the bullish traders decided to drive gold up to a level that coincided with 15 min. Bollinger Bands, the setup was almost ready: fast moving average (50 ma) was below the slower (100 ma) and price had reached the Bollinger Bands (see the point two in Chart #2).
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold_5_min.png)
Chart #3: Gold, 5 min.
The only thing that was missing when the price arrived at the bands was the momentum confirmation. This confirmation however came relatively soon. As the price of gold reached the bands, momentum of this upsurge started to falter. It was visible both in 15 and 5 min. charts. The price in the 15 min. chart created a shooting star candle (a candle with a narrow body and a spike higher) and the momentum indicator in 5 min. chart had bearish divergence or a lower high, while the price on closing basis made a higher high (see Charts #2 and #3). Once at the bands, price started to stall and also the five minute chart produced a shooting star candle. With a stop above the recent highs this trade had the probabilities on its side. The next opportunities to short gold using the same setup occurred again later on that same day, as price turned lower from the 15 min. Bollinger Bands. Should a trader use leverage wisely, these kind of setups can give handsome profits. And the good thing is that they occur relatively often.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold_15_min_2.png)
Chart #4: Gold, 15 min.
Later, as the price of gold kept on trending lower this setup occurred three times. The price hits the Bollinger Bands, the move stalls and turns.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold_5_min_2.png)
Chart #5: Gold, 5 min.
Here is the first one of the setups (numbered in the Chart #4) in five minute resolution. As the move against the trend starts to weaken, the first signs of it can be seen in the Momentum and Stochastic indicators. The other two occasions have similar characteristics, which you are welcome to study. Studying the historical price action is an excellent way of learning to understand how the price in different time frames develops.
Conclusion:
In similar cases to the above gold setting you can follow this simple procedure. Once you have read my analysis (and provided that your own analysis agrees with it), start to look for shorting opportunities. Create a 15 minute chart with the 50 and 100 period (simple) moving averages together with the Bollinger Bands. You can use either the standard 20 period and 2 standard deviation setting or both the 2 and 1.5 stdv. bands like I do. Then wait until the 50 ma is below the 100 and look for the price to move up to the bands. See then if the above mentioned signs of fading momentum occur to confirm the setup. Don’t forget to place a protective stop above on of recent highs and remember to use a reasonable leverage. Obviously no setup is 100% guaranteed, i.e. they don’t always work out but get stopped. However as long as they are based on solid analysis and proper risk management (no over leveraged positions and correctly placed stops) is used, the long term odds are stacked in the favour of the trader. Note: a similar setup can be used to find long opportunities. This will be covered in one of the future educational articles.
Janne Muta
Chief Market Analyst
HotForex
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Is Fed Being Bullish About US Economy Enough? - Read more at HotForex Blog https://blog.hotforex.com/is-fed-being-bullish-about-us-economy-enough/ (https://blog.hotforex.com/is-fed-being-bullish-about-us-economy-enough/)
The Federal Reserve statement cited “solid job gains and lower unemployment rate” and suggested that there is a positive trend in labour resource utilisation: “a range of labor market indicators suggests that underutilization of labor resources is gradually diminishing”. The Fed continues to lean on its verbal arsenal rather than real action, such as QE. The first case of such verbal action was two weeks ago when Mr Bullard appeared on Bloomberg and suggested that there should be more QE. This appearance coincided with the US stock market being at major technical support; the stock market rallied from the level after his comments.
Now the Fed seemingly hopes to support the equity market by being bullish about growth in the USA. Even though the statement included a promise to keep the borrowing costs low for a “considerable time”, a wording that they have used frequently in the recent past, it is likely that interest rates will rise eventually and the Fed needs all the verbal bullishness it can muster. This in fact is the only option the Fed has if it wants to keep steering off from Quantitative Easing.
In Japan the Bank of Japan governor Kuroda is scheduled to appear before the parliament today and tomorrow will be the Bank of Japan press conference. Markets are not expecting new QE announcements from Japan tomorrow as only three of 32 economists surveyed by Bloomberg News this month predicted that policy makers would expand asset purchases at a meeting on Friday. According to Bloomberg the central bank buys about $64 billion of bonds each month.
For recent and upcoming economic reports see: HotForex Economic Calendar
(https://blog.hotforex.com/wp-content/uploads/2014/10/USDJPY-W.png)
USDJPY, Weekly
USDJPY has moved higher from a support level and approaches the latest highs and weekly Bollinger Bands, a potential resistance area. USDJPY has been this high the last time in 2008. The weekly candle (hammer) suggests the trend higher will eventually continue and that the current resistance is eventually cleared. This is supported by the current view that the Fed is not likely to start another QE program while the Bank of Japan will continue being aggressive in their efforts to increase inflation via Quantitative Easing. Should there be changes to this underlying setup, the markets would surely re-price the USDJPY. In the near term we are likely witness some range bound price action as the USD bulls are trying to push the pair higher.
(https://blog.hotforex.com/wp-content/uploads/2014/10/USDJPY-4h.png)
USDJPY, 4h
The pair has been rising higher in a well defined trend channel. After yesterday’s FOMC statement it shot up like a rocket and reached the level of daily Bollinger Bands. They coincide with the proximity of the upper end of the channel. At the same time the Stochastic Oscillator is deep in the overbought area. All this is reflected in the 4h candle forming a bearish shooting star (a sign of momentum reversal). Therefore I am expecting USDJPY to move lower from the current levels to the support below. The nearest 4h support level is also the daily high from 27th Oct at 108.40.
(https://blog.hotforex.com/wp-content/uploads/2014/10/USDJPY-1h.png)
USDJPY, 1h
The 60 minute chart reveals a support level approximately at 108.90-108.95 which coincides with a 50 period SMA in the 15 minute chart. This area could theoretically act as a support, but the immediate upside seems to be limited. It isn’t typical for prices to keep on going higher if they’ve been moving in an uptrend and then get shot up to a resistance after a news event. In my experience buying after such a move is too risky and does not usually produce trades with good profit potential.
Conclusion: The pair is at a resistance area, but keeping the likely future central bank actions in mind it makes sense to expect USD to gain further against the JPY. However, the resistance has to be cleared first and this probably means that the price has to consolidate a bit and retrace to support areas before the 4h trend higher can continue. Look for buy opportunities if the support 108.40 is touched. A return move there and we should be looking for signs of momentum reversal to go long. Sell high and buy low as the saying goes. Look to sell against a resistance and buy against a support.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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The dollar strength pushes gold lower - HotForex Blog https://blog.hotforex.com/the-dollar-strength-pushes-gold-lower/ (https://blog.hotforex.com/the-dollar-strength-pushes-gold-lower/)
The US Federal Reserve ended the asset purchases as expected just two days ago and now Bank of Japan, against all expectations, has increased its stimulus program. This has caused Gold (priced in USD) to fall further. According to Bloomberg, the Bank of Japan is now targeting an 80 trillion yen ($726 billion) expansion in the monetary base. This move together with expected stimulus from the ECB supports the US dollar. Investors have been buying gold over recent years mainly as a hedge against the unprecedented expansion of the Fed’s balance sheet. Now that the Fed has wound down their Quantitative Easing program and is not signaling that it would be ready to initiate a new one, investors seem to be turning away from gold to other, better yielding assets classes.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold-W.png)
Gold, Weekly
The Fed’s hawkishness is causing dollar strength against the major currencies and gold is not an exception in this regard. Many people think of gold as a currency and because it is priced in USD, the dollar strength means weakness for gold. Gold is at the time of writing breaking the weekly level that supported the price since June 2013. Last week the price formed a weekly shooting star right below a resistance level and has moved substantially lower turning the technical picture bearish for gold. I was expecting the price to form a trading range below that weekly resistance and then move higher from there. This scenario was based on the collection of fear factors in the world (which would translate into support gold on safe haven basis) and the fact that the last time gold moved up from the same support it was at first range bound for a while under a similar weekly resistance level before eventually moving higher. However, as this scenario didn’t play out, we need to find the current resistance and support levels for gold. The weekly low (1156) from July from 2010 is a very potential candidate for a support. As for a resistance, it is likely that the former support at 1183 will now act as resistance.
(https://blog.hotforex.com/wp-content/uploads/2014/10/DXY-and-Gold.png)
Gold and DXY, Daily
Over the course of this year gold has reacted higher each time the US Dollar index (DXY) has reacted lower from a resistance, and vice versa. The Dollar index is a measure of the dollar value of USD against a basket of major currencies. The weights of these currencies in the index are as follows: EUR 57.6%, JPY 13.6%, GBP 11.9%, CAD 9.1%, SEK 4.2% and CHF 3.6%. DXY is now approaching a reaction high while Gold is well below the coinciding reaction low. Therefore it is possible that the timing of gold reaching the support DXY trading at the reaction high could coincide. Should this happen simultaneously there would be an increased likelihood that we could see a reaction higher from the 1156 support. But what might be the trend in the price of gold after that reaction? Now that the Bank of Japan is even more aggressive with their QE than anticipated and the ECB is expected go along the same route it seems likely that the DXY will keep on moving higher. This would mean further weakness for gold.
(https://blog.hotforex.com/wp-content/uploads/2014/10/Gold-4h1.png)
Gold, 4h
Apart from the penetrated weekly support (at 1183, now resistance) the next resistance levels are at 1195 and 1208. Should the price rally to these levels I would be looking to short the signs of momentum reversals (in lower timeframe charts) with a tight stop and reasonable leverage. The latest low and the weekly support at 1156 could work as targets for these trades. However, please remember that these are just guidelines for you on how to do your own analysis. You should never trade blindly on someone else’s ideas but rather see if the price action at suggested levels supports the idea given to you.
Conclusion
The weekly shooting star candle from last week and the breaking of major support suggests further weakness and rallies to resistances should provide shorting opportunities. The current central bank policies support the USD and therefore increase the likelihood of DXY moving into new highs and gold moving lower. A very sharp reversal with a weekly close above the 1183 level would mean a revaluation of the current analysis would be necessary.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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US Dollar Index in four year highs
The markets’ focus this week will be on US Non-Farm Employment change which will be reported on Friday. Expectation is that the US economy has added 229 000 new jobs while the previous month’s figure was 248 000 which beat analysts expectations. Traders will get a preview on employment data tomorrow as private Automatic Data Processing Inc. publishes their estimation of the Non-Farm figures. The ADP figure doesn’t always track well with the official number, but it is still an event that markets pay attention to. It is expected that ADP will report 214 000 new jobs outside the farming industry and should there be a significant deviation from the expected number of jobs, there would be stronger market reaction in the dollar pairs.
(https://blog.hotforex.com/wp-content/uploads/2014/11/DXY-Weekly.png)
DXY Weekly:
The US Dollar Index (DXY) is trending higher as slowdown in global economic activity once again means that the US economy is the cleanest dirty shirt in the laundry basket. There is an element of flight to quality combined with the fact that the Federal Reserve is expected to raise rates sooner than other central banks in major economies. The Index has reached a four year high which has brought it to a weekly pivot from June 2010 (red lines). This has caused the sideways move we have seen lately. Support can be found at the latest weekly high (blue line) and the weekly target is the high of the weekly pivot (from June 2010). This coincides with the 4.250 Fibonacci extension target calculated from the price action from May to June this year.
(https://blog.hotforex.com/wp-content/uploads/2014/11/DXY-240-min.png)
DXY 240 min:
The current sideways move in the 4h chart is due to a Fibonacci extension cluster (navy lines in the chart) and the historical weekly pivot low creating a resistance. Index is getting close to the upper end of the trend channel and the Money Flow Index (MFI) is overbought, but that is typical in an uptrend. I look for a continuation of the trend, but would not rule out a short lived correction to the nearest 4h support. Should the index have a correction I would look to trade against the area of the recent gap and the previous high. I believe this area will attract dollar buyers if it is reached. The Fibonacci extension level could well be the first target as it coincides with trend channel top. The numbers 1 to 3 in the chart help the readers to see which points I have used in drawing the Fibonacci extension target.
(https://blog.hotforex.com/wp-content/uploads/2014/11/DXY-60-min.png)
DXY 60 min:
The intraday price action is at the time of writing taking place at an intraday support zone created by a previous low and the pivot high before that (blue lines). My experience is that support levels are not exact levels but rather areas or zones. That is why I don’t focus on one single point value as a support but rather draw couple of levels and have zone between them. The Index is at lower Bollinger Bands that coincide with this support. While MFI is oversold in this timeframe, this support level could provide an opportunity for dollar longs. If the level breaks look for trades at the support at 240 min. gap.
(https://blog.hotforex.com/wp-content/uploads/2014/11/DXY-and-JPY-4h.png)
DXY and USDJPY, 240 min.
Conclusion
The US Dollar Index is at a historical resistance (weekly pivot from 2010) that coincides with a Fibonacci extension cluster calculated from pivots in a 4 hour chart. I expect the trend to continue with the first target in the region of 1.618 Fibonacci extension and the channel top. If the current support in 1h chart does not hold then I would look for long USD trades (i.e. short EUR, AUD or JPY for instance) close at the area of 4h gap and previous weekly high. However, we have to remember that all currency pairs are individual markets with their own characteristics. Therefore, pay attention to potential support and resistance areas in currency pairs you intend to trade. In other words, traders should do their own analysis as well reading mine. By doing analysis on DXY my intention is to provide traders with a framework by which the moves in USD pairs can be better understood. As can be seen from the chart above the price action in DXY future helps in understanding what is likely to happen for instance in USDJPY. In order to increase the probabilities of winning, it is advisable to trade the USD against weak currencies such as AUD, JPY and EUR and not the likes of GBP. As we have already seen GBPUSD has relative strength while the USD has been moving higher.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Euro off its lows against the U.S. Dollar ahead of critical ECB meeting - https://blog.hotforex.com/euro-off-its-lows-against-the-u-s-dollar-ahead-of-critical-ecb-meeting/ (https://blog.hotforex.com/euro-off-its-lows-against-the-u-s-dollar-ahead-of-critical-ecb-meeting/)
The Euro managed to trade off its yesterday’s lows during Asian trading session managing a consolidation just above 1.25 against the U.S. Dollar. Investors will be closely looking today’s ECB meeting despite the fact that no fresh stimulus is expected to be announced. The recent rumors that some members of ECB were unhappy with Draghi’s aggressive stimulus push have given an extra interest in today’s policy rate meeting.
On the other hand, Bank of England’s policy rate meeting is expected to be a non-event for the markets as no change in policy is expected. The Pound has been struggling against the U.S. Dollar after the Scottish referendum and has recently being hovering around 1.60. Yesterday GBP/USD attempted a break below the recent tight trading range having touched 1.5875 but it quickly bought up to trade 15 pips short of 1.6 just before European market opening.
USD/JPY continued its uptrend recording a fresh 6-year high earlier this morning at 115.50 before retreating fiercely to trade in the area of 114.30. The price movement has been closely correlated with a Japanese stocks selloff, but it better explained as a profit taking, position closing ahead of the policy rate meetings later today and the market moving U.S. NFPs tomorrow afternoon.
XAU/USD traded to new 4- year lows yesterday managing a break from the recent lows to trade as low 1137.60 $/ounce. The precious metal is now consolidating near that area with the bearish sentiment still in place.
BOE policy rate meeting takes place at 12:00 GMT and will be followed 45 minutes later by ECB announcement. Mario Draghi’s press conference which will be expected with great interest will be held at 13:30 GMT.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Coffee time?
The price of coffee has risen since the November 2013 lows by almost 80% while the latest high from October 2014 is slightly more than 112 % higher from the same low. This momentous move was caused by two things coinciding relatively close to each other. Firstly, after a long period of decline the price of coffee reached an important historical support level (December 2008 low) which led to the price of coffee breaking out of the descending trend channel. Secondly, the market was flooded with new demand as news about worsening drought conditions in Brazil hit the news wires. The country is the biggest coffee producer and exporter in the world. Just lately, we have seen the price of coffee declining due the reversion of the same theme. According to Bloomberg, hedge funds decreased their positions in coffee futures as rains brought relief to the droughts in Brazil. So, is it all about the weather? Would we need to know the future rain patterns in Brazil in order to benefit from this market? It certainly seems like a sensible proposition. However, there is another option. We can define the technically important levels, wait for the market to approach those levels and trade this market based purely on price action.
(https://blog.hotforex.com/wp-content/uploads/2014/11/KC-weekly.png)
Coffree, Weekly
The price of coffee has been swinging wildly between the July 2014 low and the October 2014 high. We now have a higher high but it was created with a lower volume than the previous high from April this year. This can be seen both in the volume and Money Flow Index (MFI) and has resulted in a lower high in MFI, meaning we had a bearish divergence associated with the latest move into the resistance. It is interesting that this move into resistance happened on the same day that Bloomberg had a news piece with a headline: “Coffee futures jump to 32 month high, on Brazil crop woes”. Yes, the news was true but the price didn’t move higher but rather stalled at resistance. Nine days later the futures opened with a sizeable gap and headed south. This was a clear example of how traders should pay attention to technical levels and use the technical toolkit available to them. Now the price of coffee is at a weekly pivot from September this year and has been edging slowly lower. As the price is close to an area that attracted buyers the last time, I would be monitoring the price action in lower time frames in order to find signs of momentum reversal. Support at September low and nearest resistance at a gap coinciding with weekly Bollinger Bands and a former resistance from July and Septembe240-min.png[/img]
Coffee, 240 min.
The fact that price has reached a potential support area can be seen in how the price reacts. While the price is still moving lower in a descending trend channel it is forming a wedge like formation as the navy colored trend at the lower end of the channel is approaching the top of the channel. This suggests that the balance in supply and demand is slowly turning to favor the long side. There is a 4h support area right below the current price action and we have had one quick move inside this level. The move was rejected, but the price (a hammer candle was created) has again edged closer to the level. This suggests to me that we might not see an explosive move higher from here, but rather a gradual change in the direction of the price. The nearest 4h resistance level is at the high of the wide range up bar that followed the hammer candle and coincides with the Bollinger Bands. The next resistances are likewise at the highs of the pivot bars. This could act as targets for short-term scalping trades.
(https://blog.hotforex.com/wp-content/uploads/2014/11/KC-60-min.png)
Coffee, 60 min.
The picture we get from the 1h chart is not that different to the 4h chart. A confirmation of the first signs of momentum reversal would be a move outside the wedge and the descending trend channel accompanied with a higher low or steady up move outside the channel.
Conclusion:
The fundamental picture has, at least momentarily, changed with the recent rain in Brazil. Therefore it can be questioned whether the price of coffee will be able to create yet another higher high. At the same time though, we are at a technical level. This level has attracted buyers in the past and if the signs of momentum reversal continue, then we have a case for a long trade. Look for breakout above the channel as a confirmation of this view.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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European dilemma: to QE or not to QE?
The malaise of the economies in the euro zone is not news anymore. The same applies to, European Central Bank president, Mario Draghi’s readiness to revive the European economies by quantitative easing (QE). Mr. Draghi, being an Italian, has a special motivation to boost the economic activity in Europe as his own country is one of the most troubled economies in the euro zone. However, the Germans, who have seen the devastating impact of hyperinflation in the not so distant history, are unwilling to start a QE program. This, added to the fact that European leaders are famous for their slow decision making process, could mean that the QE program is further delayed or implemented smaller than expected. Whether there is another QE program or not, the European economies will remain weak for an extended period of time. Europe needs structural reforms in order to become competitive and these changes tend to take time before they can be implemented and the benefits can be reaped. In addition, another flood of cheap QE money would not solve these problems, but only delay these reforms that eventually have to be implemented.
As the EUR has such a heavy weighting in the DXY index (almost 60%), it is often almost a mirror image of the EURUSD.” to “As the EUR has such a heavy weighting in the DXY index (almost 60%), the DXY is often almost a mirror image of the EURUSD
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-w.png)
EURUSD, Weekly
The pair is now between resistance and support. EURUSD has reached a weekly pivot high from July 2012 and reacted higher from it. At the same time we have the September weekly low right above us. That should keep the downward pressure on EURUSD and limit moves higher from the current levels. In light of the above it is reasonable to expect to have EURUSD fluctuating between the support and resistance over the coming week. In the longer term picture, the pair is at a lower end of a multi-year sideways move. Thus far, traders have not been able to push EURUSD below the support zone above $1.20. Part of the reason for EURUSD fluctuating in this huge trading range is the fact that we have two central banks on both sides manipulating their currencies. That is a reason to stay alert and see how the price reacts close to this historical support level.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-d.png)
EURUSD, Daily
EURUSD is forming a big wedge as it fluctuates close to the bottom of the longer term sideways move. When price forms a wedge after a longish down move it is a signal that the downside momentum is getting weaker. However, the pair is still moving lower as per traditional trend analysis (it is making lower highs and lower lows). Since Thursday last week the pair has moved up to a resistance after touching the weekly support at 1.2390. The price action from 31st Oct. to 5th Nov. (at and above of the current levels) is already causing slowing of momentum and is likely to act as a resistance. This area should provide us with opportunities on the short side.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-4h.png)
EURUSD, 240 min
There is a confluence area above the current price. The price is not only facing the resistance created by Wednesday’s low from last week but also the descending 50 period moving average and the descending upper end of the trend channel. In addition, the 4h Bollinger Bands are relatively close and the Money Flow Index (MFI) is turning lower while in over bought zone. Therefore, I am expecting the price to turn lower again somewhere between the current levels and the Bollinger Bands. Look for signs of momentum reversal (such as shooting stars) to confirm this view and the timing of the shorts.
(https://blog.hotforex.com/wp-content/uploads/2014/11/DXY-4h.png)
US Dollar Index (DXY), 240 min
As the EUR has such a heavy weighting in the DXY index (almost 60%), it is often almost a mirror image of the EURUSD. Therefore, the EURUSD analysis we have made should be confirmed by the price action in the DXY futures. As we can see DXY is reacting higher from a supportive area that coincides (timing wise) with the resistance area in the EURUSD. This supports the idea of selling EURUSD at the levels suggested in my analysis
Conclusion:
The pair is in at an important weekly support level which has already proven to be valid enough to cause price to rally from it. However, at the same time the fundamentals support the view that the EUR should move lower and the USD higher. Therefore the resistance level above the current price should keep any rallies in check. The bias is on the short side as the pair is now close to very potential resistance area. We are looking for short trades between the current levels and the 4h Bollinger Bands if there is confirmation of a momentum reversal in intraday timeframes. Look to take profits when price approaches the weekly support at 1.2390.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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In an uptrend but with some underlying weakness
Quite often we can find clues on market psychology by analysing the S&P 500 sectors’ performance in relation to the main index itself. If a safe haven sector such as utilities is gaining ground and the financial sector is lagging well behind, we then have a hint of market participants becoming more risk averse. This is based on the fact that the long only funds cannot but stay in stocks whatever the market circumstances. Therefore, if they are worried about market prospects over the coming weeks or months their only option is to move away from higher volatility and growth stocks into less volatile dividend plays such as utility stocks. Without this manoeuvre they would take a risk of taking a hit that is likely to going to be bigger than the potential down move in the index. This of course will cause the utility stocks to move higher while stocks in riskier sectors decline in relation to S&P 500 index.
Over the last month the undisputed market leader has been the industrial sector. Financials that usually lead the market when the move is strong have had a close to average performance with the technology and utilities sectors and only slightly better than the performance of the S&P 500. This is not a strong signal to either direction. If we focus on the last six trading days, the picture is slightly different. Now we have the utility stocks over performing both the S&P 500 and financials and the technology. Utility sector has (in relation to the S&P 500) gained +0.34% while the financial sector is down by -0.28% and technology by -0.71%. Therefore, we have a notion of bearishness in the way the professionals have been allocating their assets over the last few days.
(https://blog.hotforex.com/wp-content/uploads/2014/11/ES-Weekly.png)
Weekly
The E-mini S&P 500 futures (ES) charts are showing some signs of momentum slow down. Last week’s bar had quite a narrow range compared to the previous week. If this is repeated and we have another sluggish week with a narrow range, the likelihood of the market correcting lower from the newly made highs increases. We will not obviously know this before we have seen what happens over the rest of the week and therefore should not jump to conclusions about the longer term trend.
But what is the longer term trend and how well it is doing? At the moment the trend is still higher, but in the previous US stock market analysis I wrote at the end of October, I suggested that we might have a sideways market ahead as the market made a lower weekly low for the first time since the 2011 topping formation (that lead to a sizeable correction in the fall of 2011). In addition, the more risky small and medium capitalisation stock index, Russell 2000, has been underperforming the major indices since March this year. At the time of writing, Russell 2000, alongside the more volatile German DAX , has not been able to move with the major indices (Dow Jones and S&P 500) into new highs. I should also point out that the number of stocks rising versus the number of stocks falling in the New York Stock Exchange has been getting smaller since October 22nd. These are all signs of underlying weakness in the current up move.
Now that ES has made a new high I have to obviously re-evaluate my analysis and ask the question whether my view of potential sideways move is still relevant. An uptrend is defined as a series of higher highs and higher lows, which means that by this definition the market is still moving higher in a trend. The existence of the aforementioned underlying weaknesses however means that we need to pay attention to how the market behaves (in intraday timeframes) at key levels. This in turn will define the outcome on the weekly level.
(https://blog.hotforex.com/wp-content/uploads/2014/11/ES-240.png)
240 min.
Judging from a daily ES chart one of these key levels is an area between the September 19th high and November 3rd high (2014.50 – 2019.25). Please note that these point values refer to E-mini S&P futures contract and the point values in other indices tracking S&P 500 index may have a slight variation to it. I have however included the dates so that it is convenient and easy for you to verify the levels from your own charting platform. This key area almost coincides with the rising trend line (currently above the levels). I believe that the level should attract buyers that want to trade against the recent high (previous resistance = current support). In addition to the support from September high and trend line, the 50 period simple moving average (SMA) coincides with the same level. This is an additional reason to believe that a significant number of traders will view this area as important. If price moves to this level, I suggest looking for momentum reversal confirmations such as hammer candles in order to enter into long trades. However, for the price to reach these levels it needs first to move below a Fibonacci extension cluster (black lines) that currently supports the price. As can be seen from the chart, this cluster is actually pretty much spot on at the same level as the rising trend line.
Conclusion:
Weekly momentum appears to be fading but this week’s close defines the picture for the coming weeks. The weekly close obviously has greater indication value of what is happening with the momentum than the midweek price action we are now witnessing. There is underlying weakness which suggests that the price will correct to levels close to the September high, which could provide us with opportunities on the long side. We would need to see a sizeable rally (into new highs) from that level to change the weekly picture in terms of the momentum fade (that I have been writing about) otherwise we will have another narrow range or potentially even downward candle. That would indicate more bearish market conditions and a possibly a correction below the September 19th high. If the price reaches the ES 2014.50 – 2019.25 area, look for hammer candles and other signs of reversal of downside momentum in the 60 min. timeframe. After these signals we should see a fast move higher to confirm the idea. In case the price starts to move sideways and does not have a healthy and fast reaction from the level, it is likely that it has to find lower levels to bounce from.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
https://blog.hotforex.com/in-an-uptrend-but-with-some-underlying-weakness/ (https://blog.hotforex.com/in-an-uptrend-but-with-some-underlying-weakness/)
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US shale oil, the new North Sea
The strength of the dollar has been a driver for the lower price in oil but there have also been other factors. Saudi Arabia, the largest oil producer in the world cut recently oil the price of oil it sells to the United States. This was a sign that the oil cartel OPEC is not likely to cut production in order to prop up the market and stop the decline in the price of oil. This far Saudi Arabia has been the one bearing the lion’s share whenever there have been production cuts. The other members of the cartel have enjoyed the higher prices following the price cuts but have not cut their own production. This is not sitting well with the Saudis and this time they might keep the production going in order to discourage new investment in shale oil production in the US. In other words they are protecting their market share.
While demand is lacklustre the supply side has remained strong and is even increasing. The Russian supply has not decreased even though the west has imposed sanctions on them and at the same time US shale oil production is still on the increase. According to the US Energy Information Administration (EIA) an average new well in North Dakota increases production by 100 barrels per day. Some analysts have referred to US shale oil production as the new North Sea. The findings in the oil fields of North Sea in 1986 had a major impact on oil prices. During years of 1984 and 1985 the price of US crude oil had been ranging between $24.66 and $31.50 per barrel, but in 1986 the price of oil plummeted to $9.75 (a drop of 69%). For the rest of the decade the price of oil fluctuated between the $9.75 low and the high of $22.76 per barrel. Oil price was not able to sustain levels above $23 before the year 2000, except for a brief period time between July 1990 and January 1991 as the Gulf war one broke out.
If the analysts are right about the US being the new North Sea, we still see lower prices for crude oil as the difference with the June 2014 high and yesterday’s close is only 28.6%. The world economy is slowing down as the central banks have not been able to manipulate the economies back into growth path with their QE programs and the supply of oil is still increasing. Therefore, further declines in the price of oil should be expected and once the low has been reached we should prepare for a period of lower prices unless a large scale geopolitical conflict significantly disrupts oil production. Further decline in prices will eventually have an impact on the supply side investments and this will in due course cause the price oil to stabilise. What might this “in due course” mean time wise? It is very challenging to estimate this based on the fundamental trends as the price of oil is a sum of numerous outside forces from monetary policy to terrorist attacks. From the technical perspective the price of oil has reached levels that have been psychologically important in the past. Therefore it is interesting to follow the price action as these levels are approached.
Crude Oil, Weekly
Close to weekly support of $72.52, a weekly pivot from May 2010. This level has turned the prices higher in the past which means that the price action needs to be monitored closely here. At some level there we will have a situation where price turn higher before the news and fundamentals get better. Therefore, there will be a disconnect between the price action and the news about the fundamentals. However, at the moment we are still in a downtrend and there are no signs of bottoming or major divergence between the price and the oscillators. It takes in average 3 or 4 months to reverse the trend in crude oil market after a significant decline.
Crude Oil, 240 min
A very clear downtrend with attempts to get above recent supports turned into resistances. The Money Flow Index is overbought and the price is close to Bollinger Bands with a resistance right above the current price action. The first two moves (A and B) after a support was broken have been equal in size. Meaning that price has moved roughly a similar distance before rising back to the former support level (red lines). This time (move C) the price of oil turned higher earlier and has reached the resistance without touching the price projection level. This suggests weakness in downside momentum but we are still seeing reversal of contra trend momentum at 76.43 resistance (60 min shooting star), which is a sell signal for me in this context. Should a move higher happen, we have a potential resistance level close to 61.8% Fibonacci retracements (drawn from point 1 to point 2) that coincides with the descending trend line at around $77.30. I have switched the other Fibonacci levels off to make the chart more readable.
Crude Oil, 60 min.
Conclusion:
The short term bias is down. Even though we have seen some weakness in downside momentum, the price is still in downtrend. Look to participate at resistance levels if the price action confirms the validity of the level (by momentum reversal signals). In the longer term timeframe we are close to levels that have potential to act as major support and turn the price of oil higher. We will not obviously know beforehand when prices turn but for the last 30 years or so it has taken on average 3 to 4 months to create a trend reversal in oil after a major move lower. Therefore, there is no hurry to get to the long side. Rather we should concentrate on trading against the resistances as long as those trades work and buy the positions back at levels where the risk of price rebounding higher is increased. I would look to cover my shorts as the price approaches the levels close to weekly support at $73.25.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
Read the full analysis on blog.hotforex.com
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US shale oil, the new North Sea
The strength of the dollar has been a driver for the lower price in oil but there have also been other factors. Saudi Arabia, the largest oil producer in the world cut recently oil the price of oil it sells to the United States. This was a sign that the oil cartel OPEC is not likely to cut production in order to prop up the market and stop the decline in the price of oil. This far Saudi Arabia has been the one bearing the lion’s share whenever there have been production cuts. The other members of the cartel have enjoyed the higher prices following the price cuts but have not cut their own production. This is not sitting well with the Saudis and this time they might keep the production going in order to discourage new investment in shale oil production in the US. In other words they are protecting their market share.
While demand is lacklustre the supply side has remained strong and is even increasing. The Russian supply has not decreased even though the west has imposed sanctions on them and at the same time US shale oil production is still on the increase. According to the US Energy Information Administration (EIA) an average new well in North Dakota increases production by 100 barrels per day. Some analysts have referred to US shale oil production as the new North Sea. The findings in the oil fields of North Sea in 1986 had a major impact on oil prices. During years of 1984 and 1985 the price of US crude oil had been ranging between $24.66 and $31.50 per barrel, but in 1986 the price of oil plummeted to $9.75 (a drop of 69%). For the rest of the decade the price of oil fluctuated between the $9.75 low and the high of $22.76 per barrel. Oil price was not able to sustain levels above $23 before the year 2000, except for a brief period time between July 1990 and January 1991 as the Gulf war one broke out.
If the analysts are right about the US being the new North Sea, we still see lower prices for crude oil as the difference with the June 2014 high and yesterday’s close is only 28.6%. The world economy is slowing down as the central banks have not been able to manipulate the economies back into growth path with their QE programs and the supply of oil is still increasing. Therefore, further declines in the price of oil should be expected and once the low has been reached we should prepare for a period of lower prices unless a large scale geopolitical conflict significantly disrupts oil production. Further decline in prices will eventually have an impact on the supply side investments and this will in due course cause the price oil to stabilise. What might this “in due course” mean time wise? It is very challenging to estimate this based on the fundamental trends as the price of oil is a sum of numerous outside forces from monetary policy to terrorist attacks. From the technical perspective the price of oil has reached levels that have been psychologically important in the past. Therefore it is interesting to follow the price action as these levels are approached.
(https://blog.hotforex.com/wp-content/uploads/2014/11/CL-Weekly.png)
Crude Oil, Weekly
Close to weekly support of $72.52, a weekly pivot from May 2010. This level has turned the prices higher in the past which means that the price action needs to be monitored closely here. At some level there we will have a situation where price turn higher before the news and fundamentals get better. Therefore, there will be a disconnect between the price action and the news about the fundamentals. However, at the moment we are still in a downtrend and there are no signs of bottoming or major divergence between the price and the oscillators. It takes in average 3 or 4 months to reverse the trend in crude oil market after a significant decline.
(https://blog.hotforex.com/wp-content/uploads/2014/11/CL-4h.png)
Crude Oil, 240 min
A very clear downtrend with attempts to get above recent supports turned into resistances. The Money Flow Index is overbought and the price is close to Bollinger Bands with a resistance right above the current price action. The first two moves (A and B) after a support was broken have been equal in size. Meaning that price has moved roughly a similar distance before rising back to the former support level (red lines). This time (move C) the price of oil turned higher earlier and has reached the resistance without touching the price projection level. This suggests weakness in downside momentum but we are still seeing reversal of contra trend momentum at 76.43 resistance (60 min shooting star), which is a sell signal for me in this context. Should a move higher happen, we have a potential resistance level close to 61.8% Fibonacci retracements (drawn from point 1 to point 2) that coincides with the descending trend line at around $77.30. I have switched the other Fibonacci levels off to make the chart more readable.
(https://blog.hotforex.com/wp-content/uploads/2014/11/CL-1h.png)
Crude Oil, 60 min.
Conclusion:
The short term bias is down. Even though we have seen some weakness in downside momentum, the price is still in downtrend. Look to participate at resistance levels if the price action confirms the validity of the level (by momentum reversal signals). In the longer term timeframe we are close to levels that have potential to act as major support and turn the price of oil higher. We will not obviously know beforehand when prices turn but for the last 30 years or so it has taken on average 3 to 4 months to create a trend reversal in oil after a major move lower. Therefore, there is no hurry to get to the long side. Rather we should concentrate on trading against the resistances as long as those trades work and buy the positions back at levels where the risk of price rebounding higher is increased. I would look to cover my shorts as the price approaches the levels close to weekly support at $73.25.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
Read the full analysis on blog.hotforex.com (http://blog.hotforex.com)
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RBA worried about Chinese Property Market https://blog.hotforex.com/rba-worried-about-chinese-property-market/ (https://blog.hotforex.com/rba-worried-about-chinese-property-market/)
According to the minutes of the monetary policy meeting of the Board of Reserve Bank of Australia from 4th November, the bank decided to leave the interest rate unchanged at 2.5%. This decision was influenced by the worries related to what the bank described as “considerable uncertainty to the outlook for the Chinese property market and the broader implications for the Chinese economy”. This is understandably a major worry to Australia as China is the most important trading partner for the Australians. The GDP (Gross Domestic Product) growth was expected to stay below the trend during the years 2014 and 2015 with some acceleration expected in 2016. Low interest rates support the economic activity, but the spare capacity in the labour force mean that inflationary pressures stay low. The Australian dollar is still overvalued in light of most estimates and according to the bank “the exchange rate was offering less assistance than would normally be expected in achieving balanced growth in the economy”. Based on the above, the Reserve Bank of Australia, like so many other central banks, would like to see their currency at lower levels. This means that they are not likely to increase interest rates in the foreseeable future. Still, compared to Europe the Australian economy is so much more robust and therefore a better bet from an investment point of view. This and the interest rates differential means that the Australian dollar is likely attract more money than the euro in the long run. However, at the moment we have a short to medium term technical setup that seems to favour the euro.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURAUD-W.png)
EURAUD, Weekly
In September the pair found buyers at a historical support from 2011 that coincided with a rising trend line. Since EURAUD has now created a higher low at the beginning of November I am betting that it will eventually move higher. The pair is currently trying to push through a resistance area between 1.4592 and 1.4706. If we will see a move lower from this resistance, I expect the weekly high of 1.4440 (see the daily chart below) to provide support and help to create a new higher low in EURAUD. This in turn would support the view that the pair is indeed going to move higher. Once this resistance area has been penetrated, the next target is a weekly high at 1.5022.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURAUD-D.png)
EURAUD, Daily
Daily chart supports the picture gained from the weekly. The Stochastic Oscillator is entering into overbought territory and EURAUD has reached the resistance area and seems to be creating a shooting star. However, it has also created a slightly higher low above the support at 1.4223 suggesting some underlying strength. At the moment the pair is still in a range mode and therefore might provide opportunities at both ends of the range. At the time of writing we have signs of momentum reversal and we should obviously trade accordingly as long as the pair stays in the range.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURAUD-4h1.png)
EURAUD, 240 min
EURAUD has countered resistance and we are seeing momentum reversal happening. The first potential level for short exits and long entries would be either the weekly high at 1.4440 or the 1.4376 intraday support. This level has recently been acting both as a support and as a resistance. Again, look for hammers to confirm your entries and exits at these levels. Obviously the low end of the range at 1.4223 is another key area.
Conclusion:
EURAUD has now created a weekly higher low at the beginning of November and I am betting that it will eventually move higher. The pair is currently trying to push through a resistance between 1.4592 and 1.4706 but has encountered resistance and is forming a daily shooting star. If there is a move lower from this resistance I would expect the weekly high of 1.4440 or the 1.4376 intraday support to give the price a new higher low and help it to move higher. We have had some short signals at current levels (the resistance). Should the price move lower I will be focusing on potential buy signals at the weekly high of 1.4440 or at the intraday level of 1.4376. As my medium term bias is on the long side I would be more careful with the short trades and trade the long side with an expectancy of longer lasting moves.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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EURUSD ranging before the CPI releases https://blog.hotforex.com/eurusd-ranging-before-the-cpi-releases/ (https://blog.hotforex.com/eurusd-ranging-before-the-cpi-releases/)
Business confidence in Germany rose for the first time in seven months. On Monday the German IFO business climate survey surprised to the upside being 104.7 instead of 103.0 as expected. The German GDP figures (0.1%) for the last quarter were left well behind of those released in the US on Tuesday. The preliminary GDP in the US was more positive than analysts expected with the figure being at 3.9%. That is 0.6% better than expected. On Thursday we will have preliminary inflation figures from Germany and then the euro area CPI estimate on Friday. The logic from the fundamental side suggests that should these statistics show that there is no inflation the pressure on the ECB to act sooner will grow. The focus of the central bank is now on inflation and therefore signs that the euro area might be heading towards deflation should cause the market participants to adjust their positions accordingly and sell euro.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-M.png)
EURUSD, Monthly
From technical point of view EURUSD is now at a major support area that has been able to turn traders from bearish to bullish (and price higher) in several occasions in the past. Since 2006 none of the moves below the current level have been sustainable in medium to long term. In 2009 this very level turned price higher in two occasions and in 2010 we had an attempt to take EURUSD below 1.20. This failed even though the euro crisis was at its worst and market participants sought safety from the US Dollar. Many analysts interviewed in Bloomberg TV at the time shared their views on how they expected EUR to move to parity with the US Dollar (one euro would be worth one US Dollar). Now, we have stimulus promises from the ECB president Mario Draghi that have made analysts suggest that EUR will move as low as 1.15. This would mean euro visiting levels it has not seen since November 2003. Will the coming QE mean it is different this time and this move to 1.15 might actually happen? Obviously this is possible, but in the light of current price action it is not likely to happen immediately. This far Mr. Draqhi has been able to talk the market down but in terms of tangible and meaningful action he has not been able to deliver much. In terms of economic growth prospects in the euro area and the United States it makes sense assume that the Dollar will be favoured by the markets in the long run but as we are looking for short term trading opportunities it makes sense to concentrate on the current price action as it develops and technical setups available for us today and over the rest of the week. The downside momentum has clearly slowed down with market being close to forming a small narrow range bar in monthly time frame. The price is at a monthly pivot from 2010 and at the Bollinger bands. If the support holds for the rest of the week and through the euro area CPI releases, we have a monthly narrow range bar indicating that market is at a turning point. In my experience technical levels will prevail unless some unexpected news exceeds the expectations and traders have to quickly revalue the underlying assets and their strategies. This could cause the market move beyond major technical support and resistance levels.
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-D.png)
EURUSD, Daily
In the daily chart we can see that EURUSD is forming a bullish wedge. In fact, it can be seen in both weekly and daily charts. Both RSI and Stochastic Oscillator have bullish divergence as price moves below 1.2360 have been rejected twice. This has created a short term double bottom. In addition, the pair has once again moved away from the regression channel, a further indication of momentum slowdown. Resistance levels at daily pivot candle are also weekly resistance levels. As they coincide with a descending trendline and the proximity of Bollinger Bands I am looking for short signals between 1.2512 and the daily Bollinger Bands (1.5 stdv Band currently at 1.2568).
(https://blog.hotforex.com/wp-content/uploads/2014/11/EURUSD-240.png)
EURUSD, 240 min
In the four hour chart the pair is in a range, so selling the resistance levels and buying at support is the preferred strategy. The price is now approaching the 1.2512 resistance (weekly and daily pivot) with the Bollinger bands stalling the current move a bit. Pay attention to the area between weekly resistance at 1.2512 and a daily high at 1.2568 that also coincides with the descending trend line. I am looking for short signals at or above 1.2512 (a momentum reversal confirming the trade idea). As we are in a range I would look to buy either in the region of 1.2400 or close the support at 1.2360. Again the momentum changes in 15 min and or 60 min resolutions will help us to decide whether to stay short or cover.
Conclusion:
From technical point of view EURUSD is now at a major support area that has been able to turn traders from bearish to bullish (and price higher) in several occasions in the past. The downside momentum has clearly slowed down with market being close to forming a small narrow range bar in monthly time frame. The price is at a monthly pivot from 2010 and at the Bollinger bands. If the support holds for the rest of the week and through the euro area CPI releases, we have a monthly narrow range bar indicating that market is at a turning point. In weekly and daily chart we can see that EURUSD is forming a bullish wedge. In the four hour chart the pair is in a range, so selling the resistance levels and buying at support is the preferred strategy. I am looking for short signals at or above 1.2512 (a momentum reversal confirming the trade idea). As we are in a range I would look to buy either in the region of 1.2400 or close the support at 1.2360. Momentum changes in 15 min and or 60 min resolutions will help us to decide whether to stay short or cover.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Disappointing Black Friday sales turns S&P 500 futures lower
Retailers struggled to entice shoppers with their Black Friday offerings. Spending dropped by an estimated 11% over the weekend. Consumer spending fell to $50.9 billion from $57.4 billion in 2013 and made this the second Black Friday in the row that saw the sales figures tumbling. Even though retailers had aggressive discounts and longer opening hours many of the shoppers stayed at home. It was estimated that more than six million shoppers that had been expected to come did not want to or just simply could not afford to join the Black Friday shopping circus. This has raised concerns of how well the recovery in the US economy is doing.
(https://blog.hotforex.com/wp-content/uploads/2014/12/Weekly-with-NYSE-Volume.png)
S&P 500, Weekly
The S&P 500 emini future (ES) created a narrow range candle last week. This implies no demand at those levels and increases probabilities of a sizeable correction. Up volume in the NYSE (New York Stock Exchange) has moved to so high levels that in the light of recent history cannot be sustained. In the past this has caused the market to move sideways and/or correct lower. ES has now moved below the last week’s low of 2060.75 which should limit any immediate rally attempts while the Stochastic Oscillator is overbought and about to roll over. A more significant weekly support level can be found at September high of 2014.50 with a Fibonacci level nearby at 2010.44, while weekly resistance levels are at 2060.75 and 2075.25 (the range of this weekly pivot high).
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-240-min.png)
S&P 500, 240 min
Money Flow Index and Stochastics have had bearish divergence while volume has been trending lower over the month of November. This means that there has been less participation in this market and has had obviously bearish implications. Since 21st November the decline in the average volume has been intensifying but it can be at least partly explained by the long weekend due to the thanks giving day in States. However, the bearish indication that this kind of development has was confirmed by the creation of a weekly narrow range candle last week and price now moving below it. Trading started this week with a gap opening lower, which is a further indication of weakness in demand. The last time we’ve had a gap opening lower after a period of rising prices, was on 22nd of September and lead to a 9% correction in the S&P emini and stocks in general.
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-60_1-min.png)
S&P 500, 60 min
Daily high from 18th November has provided some support this morning but the intraday resistance between 2057.50 and 2059.50 has at the time of writing provided a short term sell signal (a 15 min shooting star in the insert) and confirmed the downward bias for today.
Conclusion
A narrow range candle last week is an implication that there is no demand at those levels and increases probabilities of a correction. At the same time oscillators are rolling over from overbought zone and trading started this week with a gap opening lower, all these are further indications of weakness in demand. The last time we’ve had a gap opening lower after a period of rising prices, was on 22nd of September. This lead to a 9% correction in the S&P emini and it therefore makes sense to therefore look for a correction to at least to the next important weekly support level at 2014.50, the weekly pivot high from September. If the price keeps on making lower highs in the intraday charts and keeps on giving sell signals at resistance levels (similar to the 15 min insert) I would keep on trading them and look to go long only if this pattern is broken or ES moves to the 2014.50 support where I believe we have some potential of finding more lasting support. Always look for momentum reversal signals to confirm the support and resistance levels.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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“There is a tremendous shortage of physical gold in the world”
This week started with a big rally in the price of gold even though the news that Swiss voters rejected the proposal to buy
more physical Gold should have sent the price lower. The upsurge in the price of Gold from 1141 to 1221 (a move of 7%) has been credited by analysts with the price of Crude Oil surging higher at the same time. With the price of Crude Oil being an important component in inflation measurements an up move in the price of oil would therefore create a need to hedge against inflation, which is what Gold is widely thought to be.
However, the fact that this move in the price of Gold took place after it was confirmed that the 7% annual demand increase for physical Gold by the Swiss central bank is not going to happen is an important indication that the market participants are now willing to step in and buy Gold futures (paper gold).
This brings the paper market in Gold more in line with reports that there is actually a global shortage of Gold. According to McAlvany Financial Group, a firm specializing in physical precious metals markets, gold buyers in Far East are currently paying premium prices for physical Gold. This means that buyers are not only willing to pay the market price for their physical Gold but actually add some on top. At the same time central banks, such as China are buying physical gold and others are repatriating their gold reserves that have been stored abroad. Global Research, a research center for globalization; published an article this week saying that “Netherlands has moved 122 tons of gold worth $5 billion from New York, and similar demands are now being made in France. Last year, Germany asked to have 680 tons of gold repatriated, which is mostly kept in the United States, but some also in the United Kingdom and France. Berlin receives only 5 tons, with the promise to get the rest back by 2020.”
According to Global Research ““And even those 5 tons Germany got back was not the same they had given to the Fed, those were newly cut bars. So it does mean that the Fed clearly did not have anywhere near the gold necessary to send back to Germany. Because it was most probably either leased to the market or sold – this is what central banks are doing – they are lending gold to the market or selling gold in order to push the price of gold down,” Egon von Greyerz said stressing that there is a tremendous shortage of physical gold in the world.” One day when the people who hold paper gold ask for delivery, there will not be any physical gold to deliver.
(https://blog.hotforex.com/wp-content/uploads/2014/12/Gold-M.png)
Gold, Monthly
Gold is at historical support (provided by a monthly pivot candle high from February 2010. The monthly candle for November was a narrow range candle with open and close only $4 apart. This indicates that supply and demand were in balance in November and now this balance could be tipping over to favour the demand side, at least temporarily. This price action coincided with the monthly Bollinger Bands which also limited the move lower and was then followed by a strong rally in the price of Gold higher after the news from Switzerland (the Swiss rejected the law to increase the country’s Gold reserves) caused the market to gap open slightly lower than the close on Friday. If market rallies strongly after news that on face value is negative for Gold, then we have reason to conclude that the market participants are collectively ready to defend (to buy) the recent lows of 1230 – 1240 and they see Gold representing value even if the additional boost of demand from Switzerland is not going to be there.
We still have this market trending lower in the technical sense as it still has lower highs and lower lows. However, the monthly narrow range candle at Bollinger bands suggests that we might have a turning point at hand and Gold could move higher towards the upper end of the down sloping trend channel. There is bullish divergence in RSI even though Gold has been moving lower for four months since July this year, therefore it might well be the time for a move higher after so many downward months.
Longer term Fibonacci levels are clustering at three different areas. The supporting cluster is between 1045 and 1090, while clusters between 1270 and 1306 and again at higher levels between 1383 and 1406 are likely resistance areas in the longer term picture. I have left these levels off the chart to keep it more readable.
The resistance area (1204 to 1226) above the current price action is created by monthly lows and closing prices from this and last year. This level obviously needs to be cleared before Gold can advance sustainably but the fact that we now have a narrow range candle with Bollinger Bands right below and a very positive price reaction to negative news increases possibilities of this happening. However, should the price stay below this level for a one more week it would negate the bullish indications we now have had and increases possibilities of supporting demand eroding at the 1230 to 1240 support area.
(https://blog.hotforex.com/wp-content/uploads/2014/12/Gold-W.png)
Gold, Weekly
Trend the weekly Gold price is lower both in short to medium term and longer term as well. The medium term weekly trend lower is defined by descending regression channel from the pivot in July this year. Currently the price is close to the lower end of long term downtrend channel and a historical monthly pivot candle as well as both monthly and weekly Bollinger Bands near the current lows. These technical factors limit the immediate downside and have in November translated into a narrow range candle (or a Doji as it is also known) with a rising RSI line (bullish divergence). On the upside the weekly pivot high at 1226 from November has acted as a resistance and sent the price to the current levels. The latest high (1221) that was just 3 dollars shy of the low of this pivot candle. The medium term down sloping regression channel top is also close which could mean that Gold needs to have more sideways fluctuation before more upside can be gained.
(https://blog.hotforex.com/wp-content/uploads/2014/12/Gold-4h.png)
Gold, 240 min
Price is fluctuating above a recent 4h pivot (green arrow) and below the pivot high from Monday. The 1191 used to be a level that supported price earlier and it acts as a support again. The price being between two pivots has created a very narrow range which on a daily chart looks like a pennant (flag) formation. If this pennant is resolved to the upside it gives us a target of about 1280, a former support level from July and August this year. If Gold corrects lower, look for buy signals at or near to the 1159.50 support created by the 4h pivot.
Conclusion:
Gold is close to an important support with several technical factors supporting the price. If the current narrow range is resolved to the downside (which looks likely to me based on the current market action), the pivot low between 1141 and 1159.50 is a potential support and should be monitored as an exit level for shorts and entry level for long trades. Look for hammers and bullish wedges in 15 and 60 min timeframes to confirm the momentum reversal. If the DXY, US dollar index moves strongly to the upside the bullishness of the above technical indications is negated and it is more likely that the price of Gold will move below the recent lows.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Employment in focus on both sides the border https://blog.hotforex.com/?p=6655&preview=true (https://blog.hotforex.com/?p=6655&preview=true)
In Canada the central bank’s focus is on employment and the recent figures don’t encourage the Bank of Canada to raise rates even though the inflation figures have lately been positive. The employment change reported last Friday was -10.7K instead of positive expectation of 5.3K. This compares quite badly to the same period a year earlier with employment increasing by 146K. On the southern side of Canada’s border the US employment figures are developing above expectations. Non-Farm Payrolls increased by 321.000 instead of 231.000 jobs expected by analysts and the average hourly earnings came in last Friday at 0.4% instead of 0.2% expectations. At the same time the analysts are expecting the Fed to drop their “low rates for considerable time” language soon. It is expected that the Fed will raise rates in six months’ time should this happen. The Bank of Canada’s governor Poloz speaks this Thursday (11th December). He is known to be dovish and the markets are expecting that after the last Friday’s employment figures he will continue with dovish statements. All this is likely to support USDCAD which is still trending higher.
(https://blog.hotforex.com/wp-content/uploads/2014/12/USDCAD-W.png)
USDCAD, Weekly
The market has been trending higher since June and the pair has pushed through a pivot high that was accompanied with a very long term 50% Fibonacci level (calculated from March 2009 peak to July 2011 low). USDCAD is now approaching levels of a weekly pivot from July 2009 (61.8% Fibonacci retracement level at 1.1674 coincides with this pivot). In terms of nearest support and resistance levels, the proximity of the low of the pivot at 1.1544 is likely to cause some resistance while the peak from March this year (at 1.1278) is a major support.
(https://blog.hotforex.com/wp-content/uploads/2014/12/USDCAD-D.png)
USDCAD, Daily
The pair is trending steadily in a channel with a recent breakout from a triangle formation. The width of this formation points to the weekly resistance level of 1.1544 and suggests that we need to pay attention to price action at this resistance area. It could be a good target level for short term trades after the pair pulls back a bit. Stochastics Oscillator is getting to the overbought territory suggesting that the price move is nearing levels that we should not consider as entry levels for long trades. Rather it would make sense to buy retracements back to support levels. Pull backs close to the weekly support of 1.1278 should be monitored closely for momentum reversal signals in smaller time frame charts. The 23.6% and 38.2% Fibonacci retracement levels coincide with two other technical levels. The 23.6% retracement is roughly at level with the two recent peaks when considered on closing basis (focusing on daily closing prices rather than the high values) while the 38.2% Fibonacci level coincides with a pivot in a four hour chart.
(https://blog.hotforex.com/wp-content/uploads/2014/12/USDCAD-240.png)
USDCAD, 240 min
If the momentum stays strong the market can find support at higher levels (closer to the current price). However, should we get moves to the lower levels such as 1.1278 it the risk of further corrections after our entries would be smaller. We should obviously feel therefore more confident deeper pull backs closer to the major support level at 1.1278.
Conclusion
USDCAD is in an uptrend but approaching a higher time frame historical resistance area that has potential to cause this market to correct closer to the lower end of the up trending channel. We are looking for long opportunities at the levels identified in different timeframes. The fundamentals favour this trade idea with the US economy being stronger than the Canadian. Look for corrections to the support levels and then intraday momentum reversal signals before entering long trades.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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The Fed pushed the US stocks to recent highs https://blog.hotforex.com/the-fed-pushed-the-us-stocks-to-recent-highs/ (https://blog.hotforex.com/the-fed-pushed-the-us-stocks-to-recent-highs/)
Janet Yellen promised that the Fed would keep the interest rates low, or at least that it would not rush to hike the rates. This helped the stocks to rally to levels that we are interested in selling should the price action justify that. We are already seeing momentum reversal and it seem that this is a low risk area to take a contrarian view to the latest rally. Yes, the US economy is doing better than the rest of the world but a quick rally to levels that in the recent past have not been attractive enough for investors to keep buying could very well be followed by a technical correction lower. Let’s see what the charts are telling about the current market activity.
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-W-0.png)
S&P 500, Weekly
After a long term trend higher the S&P 500 futures market is experiencing a higher volatility with the price taking back the ground lost during the previous week’s sell off. This move has taken the market to a weekly pivot high between 2063 (open) and 2079 (high). This looks like a return move, meaning that the chances are it gets sold right at the current levels. This weekly pivot high has been an area that I have called a no demand zone earlier this month and judging from the price action in the four hour chart we might get another move lower from here.
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-D-0.png)
S&P 500, Daily:
The Stochastics Oscillator is getting into the overbought territory and the daily candle looks like it is forming into a shooting star. This will happen if the price cannot close much higher than the current levels. If the market cannot penetrate this (weekly pivot) resistance level but moves lower from here, then the risk of price actually moving much further down increases. The potential support levels are as follows: 2011.25, 1961 and 1883.25.
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-240-0.png)
S&P 500, 240 min
The 240 min chart has already a Doji candle (open and close near to each other) with the Stochastics about to roll over. Both of these signal momentum slowdown and quite possibly momentum reversal taking place. With the price being close to a recent market high, inside a weekly pivot high and very close to a long term (weekly) channel top, I would not be looking to buy at these levels. Rather it makes sense to sell against the recent intraday highs with a view of taking partial profits when price approaches the former intraday resistance (now a potential support) at 2011.25. This is the very same level that provided us with two nice short setups until on the third attempt the price went through. This could be the target one for short trades opened at the current levels.
(https://blog.hotforex.com/wp-content/uploads/2014/12/ES-60.png)
S&P 500, 60 min
We have already had a 60 min Shooting Star inside this weekly pivot high. This implies that the momentum reversal is actually taking place. There is some minor support at the current levels which might mean that there will be another attempt to take the market slightly higher intraday. This could provide a great short entry level at (or inside) the 60 min pivot candle, therefore my preference would be to short between 2068 and 2073.75 with the first target near to the previous resistance at or around 2011.25, and should the price action justify then I would look to close the rest of the shorts at either 1961 or close to the daily pivot from 15th November at 1883.25.
Conclusion:
Price is inside a recent weekly pivot high and close to the long term channel top. This has been a no demand zone in the past. The 240 and 60 min charts have signs of momentum reversal. I would look to short against the current levels with an aim to close some the short positions at or close to 2011.25 or should there be no signs of momentum reversing, then the next target would be at 1961 or area close to the 1883.25 pivot.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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HotForex Blog: https://blog.hotforex.com/portfolio-diversification-supports-gold-price/ (https://blog.hotforex.com/portfolio-diversification-supports-gold-price/)
I wrote in the beginning of December how the price of gold was supported by many technical factors. I also pointed out that even the negative news that Swiss voted against increasing the country’s gold reserves couldn’t push the price lower. Instead it actually rallied on the next trading day after the results of the vote came out. If negative news can’t push the price down, then the market sentiment is rather positive. This combined with the fact that the price action was showing signs of downtrend running out of steam helped me to conclude that the downside is limited and that the price should move towards the higher end of the long term trend channel. At the same time the analysts focusing only on the fundamentals kept on repeating the same arguments about the improving U.S. economy, the continued better labor picture, the lack of inflation, very strong stocks and the very strong dollar pushing the price of gold lower. By this they justified their views that gold is going to keep on moving lower.
Now analysts are focusing on renewed fears over the EU economics and the potential exit of Greece and suggest that the weakness in equities globally will support the gold prices. This is what typically happens with analyst expectations and market moves. The market reacts first and those who know how to read the market will have an advantage over the analysts that are still focused on something the markets as a whole have already dropped from the radar. At the time I wrote my analysis on Gold (5th December) the internet was flooded with analyst views on how the price of Gold will depreciate further due to strong dollar and low inflation and continued economic recovery, of which the strong stock market was a proof. Since the publication of this article the US Dollar index (DXY) has risen over 4% and Gold is up by 2%, so much for the strong dollar sending Gold prices lower. In addition, the so called strong stock market has not been that strong. I pointed out in my analysis on 12th November that there was underlying weakness in the stock market (S&P emini futures traded at 2021 at the time and are now 1.5% lower) and in another piece from 29th October I suggested that there might be sideways markets ahead. The S&P 500 has not been able to maintain the levels it moved to since then and is now trading only roughly 1.7% higher.
All this supports the view that the appetite for risk is gone and the market participants are looking for ways to diversify their portfolios by selling equities and adding exposure to Gold.
(https://blog.hotforex.com/wp-content/uploads/2015/01/Gold-M.png)
Gold, Monthly
Gold is still relatively close to a historical support (provided by a monthly pivot candle high from February 2010), while the monthly candle for November was a narrow range candle with open and close only $4 apart. This indicates that supply and demand were in balance in November. Even though Gold is still inside a long term downtrend channel we now have a monthly pivot candle (one higher monthly low value on both sides) right at the Bollinger Bands, which is a rather significant technical indication of momentum change. If this month’s trading closes above 1167.30 we have yet another higher low which would further indicate that the price of Gold is gaining upside momentum.
(https://blog.hotforex.com/wp-content/uploads/2015/01/Gold-W.png)
Gold, Weekly
Price of Gold has now moved above the down sloping regression channel that formed a medium term downtrend. This week price has been moving outside the channel while the last week’s candle created a third higher low since it pivoted at 1131.50 in November. There is a symmetric triangle created with lower weekly highs and higher weekly lows. The fact that the price is relatively close to a historical support and in a process of reacting higher from this support, we might well see that the price will break out to the upside. A weekly close above the last week’s high would be a further bullish sign. Should the breakout happen the Fibonacci Extension Levels of 1.00 and 1.618 (drawn by using the points a, b and c) would indicate potential short to medium term target levels. Their significance is increased by the fact that they coincide with monthly pivot candle high and low from July 2014. The nearest weekly resistance is at 1226.30 (a weekly shooting star candle low from October).
https://blog.hotforex.com/wp-content/uploads/2015/01/Gold_D.png
Gold, Daily
The trend in the daily chart is sideways but the price making higher lows each time it retraces to the Bollinger Bands and moves inside the 7th November pivot candle range (the green highlight). The weekly resistance and support levels limit the current sideways move with assistance from the daily Bollinger Bands. Look for Momentum Reversal Signals inside the green support area to either go long or exit the short trades. The area to look for short MR Signals would be above the 1226.30 level.
Conclusion:
Even though Gold is still inside a long term downtrend channel we now have a monthly pivot candle (one higher monthly low value on both sides) right at the Bollinger Bands, which is a rather significant technical indication of momentum change. This week price has been moving outside the medium term downward channel while the last week’s candle created a third higher low since it pivoted at 1131.50 in November. The trend in the daily chart is sideways but the price makes higher lows each time it retraces to the Bollinger Bands and moves inside the 7th November pivot candle range (the green highlight). At the same time the stock market has been sluggish which suggests that the market participants are not that eager to buy stocks but they might instead be diversifying their portfolios and moving money into safe havens such as Gold. All these factors point to the price of Gold moving higher over the coming weeks and months, however the sideways range could provide actionable trade setups at both ends for traders who understand the Momentum Reversal Signals and Multi Time Frame Analysis. Those wanting to learn how to trade professionally open an account with HotForex and gain access to my past and future educational webinars. I will take you through all the aspects of analyzing the markets and trading them the way the professionals do.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Low Energy Prices Pressuring Corn HotForex Blog https://blog.hotforex.com/low-energy-prices-pressuring-corn/ (https://blog.hotforex.com/low-energy-prices-pressuring-corn/)
Weak US exports and falling energy costs have reduced the appeal for renewable fuels which are largely made from grains and oilseeds. According to the U.S. Energy Information Administration, ethanol stockpiles have had risen by 751,000 barrels to 18.85 million barrels by 2nd January. This was the largest weekly rise in nearly two years. Corn prices have been coming down since the beginning of the year as low oil prices mean that demand from ethanol manufacturers is reduced. According to industry analysts, it is unlikely that ethanol manufacturers and blenders will be able to pay close to $4 for corn. This has put a damper on price. Furthermore, the recent rise in the price of corn is likely to encourage farmers to increase the acreage of corn. This would lead to an increase in supply over the year 2015 and put pressure on corn prices.
(https://blog.hotforex.com/wp-content/uploads/2015/01/Corn-weekly.png)
Corn, Weekly
Price rallied 30% from the September low and has since hit a resistance at around 415’6, which was a weekly support in the Q4 2013. The price has reacted lower from the resistance and sits now at a minor support at 392. The outside reversal bar in the weekly picture took the market lower by almost 6% in one week and suggests that the corn price will be under pressure in the coming weeks. The Stochastics, MFI and RSI are rolling over from overbought levels.
(https://blog.hotforex.com/wp-content/uploads/2015/01/Corn-daily.png)
Corn, Daily
The daily chart reveals how there was a rally from the 392 support, but the rally couldn’t penetrate the bottom of the rising regression channel. This created a lower high and confirmed that the uptrend is over. A lower high after the price has had a strong move lower from a resistance level tells about the balance of supply and demand being in favour of the bears. The levels close to the 38.2% Fib level (at around 380) could be significant support as it was a resistance in August 2014 and price pivoted at this level on 18th of August last year. When price moved higher from this level the last time (4th December), a pivot candle was formed and was followed by a gap opening higher. The current daily support at 392 coincides with the Bollinger Bands and the 23.6% Fibonacci level, but in the light of the price moving so strongly down from resistance and creating a lower high, it seems unlikely that the support will hold.
Conclusion:
The potential increase in the acreage and the low energy prices suggest that Corn will be under pressure. The technical picture is weak with the price reaction lower from a resistance and creating a lower high in the daily chart. The first target level for short trades is at around 380, close to the 38.2% Fibonacci retracement level. This view would be negated by market moving above the latest weekly high 417. I look forward to seeing you in the webinars where I will teach you how to take advantage of trading opportunities that occur daily in Corn and other markets.
Those wanting to learn how to trade professionally open an account with HotForex and gain access to my past and future educational webinars. Over the course of the webinars I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and be early to secure a seat!
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Verbal QE has been weighing on Euro - HotForex Blog:https://blog.hotforex.com/verbal-qe-has-been-weighing-on-euro/ (https://blog.hotforex.com/verbal-qe-has-been-weighing-on-euro/)
The EURUSD has reached a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003 and in 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. This could mean that chances for immediate and extensive moves lower are now limited. The last time EURUSD reached a historical weekly pivot it moved sideways for three weeks before breaking lower. The trend is still down and there is no reason in the charts to turn bullish with Euro. In addition, the economic problems in the euro area together with the verbal QE from Mr. Draghi are likely to drag the EURUSD even lower.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-M.png)
EURUSD, Monthly
The EURUSD is at a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003. In 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. The pair has created lower highs since 2007 and has now moved below an important support area that was able to turn the market higher in three separate occasions.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-W.png)
EURUSD, Weekly
The weekly trend is down but is has extended outside the regression channel. This means that the trend is now more vulnerable for retracements. The 1.1795 level that has provided support is a weekly pivot high from November 2005. With Stochastics and RSI firmly oversold and price at a historical weekly support extensive and immediate downside could be limited.
EURUSD, D
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-D.png)
EURUSD, Daily
The daily short term daily trend is down with price inside the regression channel. Price has retraced back to a daily low from 5th January at 1.1868. The oscillators are oversold. The last time Euro was able to move against the prevailing trend it lasted for two days, if the current resistance holds now it is likely that the Euro will at least test the recent lows but there is a likelihood that the problems in the euro area together with the verbal QE from Mr. Draghi will drag the EURUSD even lower.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-240.png)
EURUSD, 240 min
The price has moved out from the descending regression channel to resistance that coincides with the 20 period Bollinger Bands. The resistance is created by pivotal low at 1.1868. Now that price has moved to the level momentum is drying up with Stochastics being ready roll over and 4h bar ranges becoming very narrow. We have a daily resistance at 1.1868, but a weekly support at around 1.1795 is still relatively fairly close. Oscillators are overbought as price moves sideways at the upper Bollinger Bands. There is also a cluster of Fibonacci levels that coincide with the current resistance level and another between 1.1934 and 1.1949. I have left the levels off to increase the readability.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-60.png)
EURUSD, 60 min
A minor uptrend that has reached the 1.1868 and shows signs of weakening. Now the price is about to create a shooting star at the resistance which indicates price will move lower from here.
Conclusion:
The EURUSD has reached a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003 and in 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. This could mean that chances for immediate and extensive moves lower are now limited. The last time EURUSD reached a historical weekly pivot it moved sideways for three weeks before breaking lower. The trend is still down and there is no reason in the charts to turn bullish with Euro. In addition, the economic problems in the euro area together with the verbal QE from Mr. Draghi are likely to drag the EURUSD even lower. In the intraday chart (240 min) price has moved out from the descending regression channel to a resistance that coincides with the 20 period Bollinger Bands. The resistance is created by pivotal low at 1.1868. Momentum is drying up with Stochastics being ready roll over and 4h bar ranges becoming very narrow. In a 60 min time frame we can see that as the minor uptrend has reached the resistance it shows signs of weakening (a lower high). In the process price also created a shooting star candle at the resistance. This indicates that price will move lower from here. Traders looking to short against the 1.1868 resistance should monitor the levels around 1.1795 for Momentum Reversal Signals to exit short trades as the weekly support possibly provides temporary support to the market.
For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217 (https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217) to register and secure your seat!
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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The Sideways move in S&P 500 Continues
It is common that market is soft whenever a higher time frame Doji candle forms after a sizeable move higher. This has happened in several occasions over the last seven years and the investors should pay attention. For traders however, this means usually more opportunities as the lower time frames tend to have more price fluctuation. We have plenty of economic releases today from the US, which should help the traders in that regard and cause more volatility in the market. We have import and export data, business inventories, Fed Beige Book, Crude Oil Stocks Change but the most interesting and the publication of Retail Sales data, an event that has potential to move the markets the most. The analysts are expecting the figure to come in at -0.1%, which is considerably lower than the previous 0.7%. A strong deviation from the expectations should move the market significantly and create more opportunities to trade the market.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-Monthly.png)
S&P 500, Monthly
Trend wise the market is still inside the rising regression channel, even though it has had one move outside of it in October last year. The last completed candle from December is an interesting one. The long term stock market Bulls don’t really want to see something like this developing in the world’s most important stock market, especially not combined with a plunge in the price of copper (down almost 5% today). The December candle is what’s known as a Doji, a candle with open and close near to each other. When such a candle appears after an uptrend we know one thing: the demand and supply were in balance. In other words the bulls were not in control anymore. The last time a similar monthly candle appeared after a long uptrend was in October 2007. Then the candle marked the end of the previous bull market. Is it likely that the Monthly Doji candle will again turn the market lower? The importance lies in the price action over the coming two months. If we get lower lows and lower highs followed with increasing volatility, then the probabilities of uptrend being over are much higher. We don’t yet know if this will be the case, but what we know is that the market usually corrects lower after these kinds of candles after the market has been trending higher.
The RSI has been overbought since the beginning of year 2013, which is what often happens in a strong uptrend. Now RSI is breaking below a level of 66.58 that has supported the index in August 2013 and January 2014. The RSI has also diverged from the S&P500 with lower highs while the stock market has been moving higher. This is known as bearish divergence. The nearest monthly S/R levels are at 1961.50 and 2088.75 and a couple of Fibonacci levels cluster at 1845 – 1832. This is not much of a cluster but the fact that they coincide with a monthly low from October makes the level between 1813 and 1845 significant.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-weekly.png)
S&P 500, Monthly
Trend wise the market is still inside the rising regression channel, even though it has had one move outside of it in October last year. The last completed candle from December is an interesting one. The long term stock market Bulls don’t really want to see something like this developing in the world’s most important stock market, especially not combined with a plunge in the price of copper (down almost 5% today). The December candle is what’s known as a Doji, a candle with open and close near to each other. When such a candle appears after an uptrend we know one thing: the demand and supply were in balance. In other words the bulls were not in control anymore. The last time a similar monthly candle appeared after a long uptrend was in October 2007. Then the candle marked the end of the previous bull market. Is it likely that the Monthly Doji candle will again turn the market lower? The importance lies in the price action over the coming two months. If we get lower lows and lower highs followed with increasing volatility, then the probabilities of uptrend being over are much higher. We don’t yet know if this will be the case, but what we know is that the market usually corrects lower after these kinds of candles after the market has been trending higher.
The RSI has been overbought since the beginning of year 2013, which is what often happens in a strong uptrend. Now RSI is breaking below a level of 66.58 that has supported the index in August 2013 and January 2014. The RSI has also diverged from the S&P500 with lower highs while the stock market has been moving higher. This is known as bearish divergence. The nearest monthly S/R levels are at 1961.50 and 2088.75 and a couple of Fibonacci levels cluster at 1845 – 1832. This is not much of a cluster but the fact that they coincide with a monthly low from October makes the level between 1813 and 1845 significant.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-daily.png)
S&P 500, Daily
The daily trend is sideways as I suggested some months ago. The price moved briefly to new highs in the end of December but has since formed a lower high and is now possibly forming a bullish hammer candle. The levels below the pivotal high from September last year (2014.50) seem to attract buyers as evidenced by the last rally from the current levels. However, that was followed by a lower high which dampens the bullishness of the current picture. The 38.2% Fibonacci retracement together with Bollinger Bands supported the price in the previous daily pivot low and now the price is fairly close to the same levels and trying to create a higher low. This indicates that the bulls are looking to take this market to test the 2060.75 resistance. If that is cleared and held (a higher low above the level) the picture becomes much more positive. This is negated if the last week’s low is taken out.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-240.png)
S&P 500, 240 min
Stochastics indicate some bullish divergence and the last complete candle is a bullish hammer. This suggests that the current levels could be a new base for a move higher. The price action however over the last hour has not exactly been explosive to the upside. That is due to the fact that the market participants are waiting for the economic releases.
Conclusion:
The long term picture is getting weaker with a monthly Doji candle appearing. The market now would need a higher high with an ability to main the new highs should the bearish indications in a monthly Doji were to be negated. The weakness indicated by the Doji candle should lead to increased volatility in smaller time frame charts and provide the traders with more opportunities in both directions (long and short). In the daily and 4h charts the price is now close the previous pivot low and we therefore should be looking for short term long trades. The four hour hammer candle confirms the trade idea but there has been no follow through as the market waits for the economic releases. We should be looking for signals to go long at or close to the January 6th pivot low.
For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217 (https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217)
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Markets move sideways before the ECB meeting tomorrow https://blog.hotforex.com/markets-move-sideways-before-the-ecb-meeting-tomorrow/ (https://blog.hotforex.com/markets-move-sideways-before-the-ecb-meeting-tomorrow/)
A lot of the European Central Bank (ECB) QE program is already priced in to the EURUSD but the fact remains that the European economies are in mess when compared to the US. Some commentators have suggested that the reason ECB has delayed its QE program is not in fact the Germans, but the fact that they themselves don’t believe the QE would have a significant impact on European economies. It is true that the problems in the euro area are structural, i.e. relating to labour laws and inflexible policies coupled with the aging European population. All of this combined results in degrading competitiveness in the euro area. The Chinese economy (an important export area for EU countries and Germany especially) is slowing down and in addition to this, it is unlikely that bringing lending rates even lower via QE will result in a significant enough increase in lending that would translate into economic growth. The only measurable impact of the QE has already been seen in the value of euro. The lower the value of the euro against the other currencies, the better the chances that European countries, that depend on exporting will benefit.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-Daily.png)
EURUSD
In the previous EURUSD analysis I wrote that it is likely that the problems in the euro area together with the verbal QE from Mr. Draghi will drag the EURUSD even lower than the latest lows at the time. I expected some sideways move before that taking place but the removal of EURCHF peg by the Swiss National Bank (SNB) accelerated the decline.
The weekly pivot low at 1.1639 from November 2005 has acted as a resistance both on Friday last week and Monday this week. Even though the price has been moving sideways it is forming a descending triangle, a bearish formation. The current sideways move that forms the triangle is a reaction to huge market move caused by the SNB actions last week. It is common that the markets take a breather after fast and furious moves.
The nearest daily support and resistance levels are at 1.4600 and 1.1639, with the next resistance levels being at 1.1754 and 1.1870. The 1.1754 level coincides roughly with 23.6% Fibonacci retracement level (measure from November 2014 weekly high to the latest low). The next significant weekly resistance level is the weekly pivot low from July 2013 at 1.2042 which coincides with the 50% Fib retracement level. These levels could come into play should the ECB decide not to move forward with the QE program. At the moment the trend is down and we should keep on selling rallies until we have evidence the trend has changed.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURUSD-2401.png)
EURUSD, 240 min
Price is moving sideways in a narrow range and is likely to do so until the results of tomorrow’s ECB meeting are published. Today should be pretty much flat as the market participants don’t want to commit to any view before an important meeting.
Conclusion:
We don’t know what kind of volatility we will have tomorrow but it makes sense to seek for shorting opportunities (momentum reversal signals) at daily and weekly levels identified in this analysis and stay away from the middle of the ranges. Outside of the QE considerations it remains a fact that the US economy will be in a much better shape than Europe. We therefore should have no reason to be bullish on EURUSD. The only reason that could flip this equation on its head would be a new QE program from the US and at the moment there are now signs of it happening.
For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217 (https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217)
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
-
Syriza Election Victory Did Not Push Euro Lower
Syriza has promised to renegotiate the terms of their debt with the European lenders and is calling for a Europe where tax revenues from northern countries, such as Germany, would be used in Greece to fund the government. This sets Syriza and the new Greek government at a collision course with Germany and other wealthier nations in Europe and could eventually cause Greece exiting the Euro.
The market reactions to news are always interesting and telling. I find it significant that EURUSD, although it is still in a downtrend, has not moved significantly lower on the news Syriza winning the Greek elections. Rather it is ticking higher after the smallish initial drop. This suggests that market participants think that the probabilities of Greece leaving Euro area are now higher. This would be bullish for the currency as it would open the door for other weak economies possibly abandoning the single currency. Euro area would then consist of stronger economies, a reason for the currency to appreciate in value in the long run. Obviously, we have the first ECB QE program just starting and this should mean the pressure on Euro will stay on for quite a while but it does not exclude Euro rallying from time to time and this would give us opportunities against the weaker currencies.
Market reactions are important as was proven with my analysis with Gold. A positive reaction to a news item that should have been negative for Gold hinted that it was time to buy the yellow metal, regardless all the negative fundamental analysis available at the time. This proved to be exactly the right time to buy Gold. Now, this same logic when combined with technical analysis could provide us with a trade opportunity in Euro against weaker currencies.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURAUD-Weekly.png)
EURAUD, Weekly
After falling for five weeks the pair found support at a weekly pivot low from September 2014 and reacted higher from the general area close to the pivot. This encourages us to look for buy opportunities in EURAUD. The overall trend is sideways and the pair has moved to the lower Bollinger Bands which most of the time means that the momentum might be reversing. Oscillators confirm the setup by being well into oversold territory. Support and resistance levels: 1.3967 and 1.5022. There is also some resistance 1.4223 which could lead to further sideways move between 1.3967 and 1.4223.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURAUD-Daily.png)
EURAUD, Daily
The daily trend is down but the price has reached a weekly support area and moved sideways above it for the last week. This resulted in a Doji candle signaling a rejection of the 1.3967 level and indicates an attempt to turn this market higher is at hand. Oscillators point sideways after a period of bullish divergence. Weekly support level is below at 1.3967 and the nearest daily resistance level is at 1.4408.
(https://blog.hotforex.com/wp-content/uploads/2015/01/EURAUD-240-min.png)
EURAUD, 240 min
Although the longer term trend in this time frame is down we’ve seen sideways movement over the last week. The spikey rejection candle at the 3967 support indicates institutional buying at these levels. Oscillators are pointing higher and should there be moves down to the Bollinger Bands (currently at 4082 and 4040) I would be looking to go long at those levels. The first resistance area at 4329 to 4408 coincides with the upper Bollinger Bands and probably slows the upside momentum down.
Conclusion:
Judging from the weekly chart this pair is at support and has potential to move quite a lot higher as the next weekly resistance area is at 1.5022 once the 4h and daily resistance levels are cleared out. There is a rejection candle in the daily and 4h charts, which suggest that the reversal of downtrend is taking place. In addition, the fact that Greek election was won by a radical left wing party increases the probabilities for Greek exit from Euro which would be bullish event for Euro. I am looking at 1.4372 as my first target, then 1.4780 as target two and then target three at 1.5020. There is some resistance 1.4223 which could lead to further volatility between 1.3967 and 1.4223 and could therefore provide us with long entry opportunities at the lower end of the range.You are welcome to utilize my analysis in your trading providing it agrees with your own market observations and analysis.
I will be presenting a Live Analysis Webinar tomorrow. So if you want to learn how to find, analyse and trade above kind of setups you most warmly welcome to join me! Click HERE to register and secure your seat!
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Apple’s Record Breaking Results and Forex Worries
Apple posted record breaking results yesterday after US markets closed. The company sold 74.4 million iPhones and 21.4 million iPads in the last quarter. The earnings per share ($3.06 vs. $2.60) were even better than the most optimistic expectations from Wall Street analysts. This lifted the stock by 5% in the aftermarket trading. The rise might have been even higher, but for the worries of investors, who are reported to have started having concerns about the impact of strong dollar in future earnings.
Since my last analysis, the financial sector rallied a bit from the rising trend line but then fell back again from resistance. Utilities and healthcare stocks are overbought when compared to the rest of the market, while technology stocks fell back down to the support after rallying since my last report. The energy sector broke out of the wedge formation and the industrials look to me as if they’d be ready to move higher.
All this gives slightly mixed signals. As the dividend paying healthcare, utilities and consumer staples are still very much overbought in relation to the S&P500 index (both in one and three month periods), it suggests that market participants are still safety oriented and hesitant about the future trend. No wonder the market has been in a sideways mode. At the same time the small caps (Russell 2000 index) have been stronger than the S&P over the last week, which means that some of the risk appetite is coming back into the market.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-D.png)
S&P 500
In the weekly picture the index is still inside the uptrending regression channel but has moved sideways since I suggested this in November last year. This also the same period of time that the safe have sectors (Utilities, Health Care and Consumer Staples) have been sucking money from other riskier sectors. We now have another higher weekly low from last week, which is technically an encouraging sign and a support level relatively close at 2014.50. This is also a new potential pivot low in the daily time frame.
(https://blog.hotforex.com/wp-content/uploads/2015/01/ES-2401.png)
S&P 500, 240 min
The four hour picture reveals a sideways move with lower highs below the 2060 target area. This target was hit after my latest analysis and the market has since formed a lower high suggesting that we could see another move lower to the 2026.50 and 2014.50 support area. Should the correction be deeper the next support level is at 1997.50.
Conclusion:
I am still positive on this market eventually moving higher but first we might see some volatility or sideways move accompanied a test (or tests) of the support area between 2026.50 and 2014.50. I would be interested in long entries inside this support range and should we get the signals to go long, then the target levels I am looking at are: Target 1 at 2062 and Target 2 at 2088.
For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat!
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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EURUSD at a resistance level, but potential support is near
https://blog.hotforex.com/eurusd-at-a-resistance-level-but-potential-support-is-near/ (https://blog.hotforex.com/eurusd-at-a-resistance-level-but-potential-support-is-near/)
Now that the Dollar Index (DXY) has reacted lower from a historical resistance area and EURUSD (the heaviest component in the DXY) has created a narrow range bar in the weekly time frame we have potential in EURUSD for a larger than usual corrective move against the trend. The narrow range candle signals that supply and demand where in balance last week, something that doesn’t sit well with those holding on to their shorts. We’ve also had the pair moving outside the trend channel that used to contain the move. This increases the likelihood that we will get a larger than usual contra trend move. Oscillators are oversold but edging higher with price crossing above the lower Bollinger Bands. Fibonacci levels (23.6%, 38.2% and 61.8%) coincide with the resistance levels I have identified in the chart.
(https://blog.hotforex.com/wp-content/uploads/2015/02/EURUSD-d.png)
EURUSD, Daily
I wrote on Monday after the Syriza election victory in Greece: “I find it significant that EURUSD, although it is still in a downtrend, has not moved significantly lower on the news Syriza winning the Greek elections. Rather it is ticking higher after the smallish initial drop… Market reactions are important as was proven with my analysis with Gold. A positive reaction to a news item that should have been negative for Gold hinted that it was time to buy the yellow metal, regardless all the negative fundamental analysis available at the time. This proved to be exactly the right time to buy Gold. Now, this same logic when combined with technical analysis could provide us with a trade opportunity in Euro against weaker currencies”. The price action on that day resulted in a hammer bar and the price has moved higher ever since, proving once again that the market reaction to the news is more important than the news itself. Price has reached a resistance level at 1.1540 and Stochastics is getting into overbought area. This has stalled the advance. We have a support level at 1.1368 and the next resistance area coinciding with the 50% Fibonacci level is at 1.1755, fairly close to the upper Bollinger Bands.
(https://blog.hotforex.com/wp-content/uploads/2015/02/EURUSD-4h.png)
EURUSD, 240 min
Price moved outside the regression channel before Greek elections and has now made an over shoot in the opposite direction. A shooting star candle at the 1.1540 resistance indicates selling pressure but there has not been much downside momentum after the candle was created. Stochastics indicate that the momentum is reversing. The nearest support level is at 1.1368.
Conclusion:
The narrow range candle in the weekly time frame signals that supply and demand where in balance last week, something that doesn’t sit well with those holding on to their shorts. We’ve also had the pair moving outside the trend channel that used to contain the move. This increases the likelihood that we will get a larger than usual contra trend move.
EURUSD is overbought in terms of Stochastics in the 4h chart and signals that there is potentially a momentum reversal taking place. However, the downside momentum after the shooting star candle has been sluggish. This could be explained by the 1.1368 support being relatively close. Price can turn lower from here but the shorts trades are likely to be short lived with a daily support area being so close. This might put off some market participants and limit the downside potential from these levels. The 1.1755 is likely to be a better level for high probability trades as several technical factors coincide in the proximity of this level.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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Increased Volatility in Crude Oil
The price of oil has collapsed with the strengthening dollar and has reached levels that were last seen in the later stages of the financial crisis in 2008. This suggests that the current levels are deeply oversold both fundamentally and technically. The world economy is certainly slowing down but it is in a better shape than it was in the first quarter of 2009 when the US Crude Oil futures dropped to $33.35. Therefore, it makes sense to expect Crude Oil to be relatively close to the levels it could find a bottom.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-D-2009.png)
Crude Oil, Daily 2009
Over the last 30 years it has taken in average 2 to 3 months for oil to bottom out after a major downside move. It would therefore be safe to assume that the bottoming process will provide us with plenty of opportunities to join the long side, or to scale into long positions thus lowering the timing related risks. In terms of price velocity the downward move seen over the last few months has been similar to the one seen in 2008. When this downside move finally ended the market moved sideways for a period of time allowing low risk entries at Bollinger Bands.
(https://blog.hotforex.com/wp-content/uploads/2015/02/XLE-Daily.png)
XLE, Daily
I mentioned some time ago in my S&P 500 analysis that the energy sector etf is forming a bullish wedge and that this would be confirmed by a breakout. Now the breakout has happened and we have a higher low in place. This obviously signals that the market participants are turning bullish on energy related stocks, a clear indication that they believe that the downside in oil is in their view limited.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-W.png)
Crude Oil, Weekly
The price of oil is close to the 2009 lows but is still inside a weekly downward trend channel. The latest reaction from a resistance level that coincided with the channel top was relatively strong. However, this kind of volatility is typical when prices get close to levels where the trend might turn. Last week the price closed inside the lower 1.5 stdv Bollinger Band for the first time since September 2014. The nearest support and resistance levels are at 43.58 and 53.60.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-D.png)
Crude Oil, Daily
Price has broken out of the descending regression channel and created a higher high. If we now get a higher low the bullish indication is rather strong but even a roughly equal low would mean that the buyers are gaining control in this market. Volatility has definitely increased which is not only evidenced by the higher high but also by the Stochastic indicator it has not been in overbought territory since July last year.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-240-min.png)
Crude Oil, 240 min
Price has retraced to 61.8% Fibonacci level that coincides with a descending trendline. Stochastic is oversold and the price is reacting higher from the lower Bollinger Bands.
Conclusion:
The increase in volatility at levels that are close to the bottoming formation from 2009 is a reason to pay attention to the price action in Crude Oil in the near future. This is confirmed by the bullish breakout in the US energy sector shares ETF (XLE). If this turns out to be the range in which the market bottoms then the best levels to be a buyer are those that are close to the bottom of the range. However, the fact that so many technical tools indicate support for Crude Oil in the 4h time frame we could look for intraday buy signals in the general area of current price action.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Janne Muta
Chief Market Analyst
HotForex
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GBPUSD moved past several weekly highs - https://blog.hotforex.com/gbpusd-moved-past-several-weekly-highs/ (https://blog.hotforex.com/gbpusd-moved-past-several-weekly-highs/)
The pair has moved briskly past three weekly highs this week. The move comes after it formed what looks to be a higher weekly low now that the pair has closed above the resistance levels. This is the first time GBPUSD has been able to close above so many weekly highs since the downtrend began in July last year. Even though the weekly candle is still inside the regression channel such strength signals a turnaround in this pair. This is even more likely as the move comes from levels that were able to stop the decline and turn the market into an uptrend in 2013. Stochastics are edging higher and the support and resistance levels are: 1.4954 weekly low and 1.5541 weekly low in proximity of the 23.6% Fibonacci level.
(https://blog.hotforex.com/wp-content/uploads/2015/02/GBPUSDdaily.png)
GBPUSD, Daily
The pair has broken out of the descending regression channel. I tweeted yesterday that GBPUSD was at resistance and looking weak. The reasoning behind this was that the candle from day before was a shooting star candle and the hourly chart yesterday showed signs of momentum reversal just below the 1.5269 resistance and the daily Bollinger bands. These indications proved to be wrong and the price shot higher through the resistance. All this put together indicates that the market is pretty firmly in the hands of the bulls. The former resistance levels are now likely to be supports. The current support and resistance levels identified from the daily chart are: 1.4988, 1.5096, 1.5224, 1.5269 and 1.5487 1.5541. The 38.2% and 61.8% Fibonacci levels coincide with 1.5269 support and 1.5487 resistances. Stochastics are getting into the overbought area.
(https://blog.hotforex.com/wp-content/uploads/2015/02/GBPUSD60.png)
GBPUSD, 60 min
The hourly trend is higher with price at the upper end of the bull channel. The 1.5269 coincides with the lower end of the channel and with the Bollinger Bands. In addition, the 23.6% Fibonacci level is also in the proximity of the channel bottom. The other potential levels are the Fibonacci retracements and the 1.5096 support level should there be a deeper retracement. It always pays to look for momentum reversal signals once price comes back to the levels.
Conclusion:
With such a show of strength the only logical conclusion is to look for buying opportunities until we have price action based evidence to the contrary. Retracements to support levels should be monitored for momentum reversal signals. Levels that have several technical factors supporting the trade idea are always more likely to provide us with good trade entries. In this regard the 1.5260 to 1.5270 region is interesting but should today’s US Non-Farm Payroll figure deviate strongly from the expectations then we could see increased volatility and the lower levels could come into play. For successful swing entries I would be looking the 1.5487 to 1.5541 the target area.
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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NFP Release Not Enough to Excite the Stock Markets https://blog.hotforex.com/nfp-release-not-enough-to-excite-the-stock-markets/ (https://blog.hotforex.com/nfp-release-not-enough-to-excite-the-stock-markets/)
The weekly trend in S&P500 is still contained in the bullish regression channel and the weekly support level has formed roughly to the area of the previous pivot high. Financial sector ETF (XLF) has rallied from the rising trendline. This is important as the markets rarely rise without the support from the banking stocks. Friday’s reaction to Non-Farm Payroll figures wasn’t very encouraging as the S&P 500 closed lower and so did the XLF. The support at 1961 to 1974 area has been holding well which will add pressure to the resistance level at 2063 area. In an uptrend it is more likely that a resistance level will give in and the support levels hold. Other key sectors such as energy (XLE), industrials (XLI) and basic materials (XLB) look technically sound in the weekly picture. The utilities sector (XLU) lost 4,12% on Friday suggesting that the run for the safety is now over as the long only funds move money from safety oriented investments to higher beta (more riskier) stocks. Many sectors have risen a lot over the last few days so we might well have a reaction lower from the current levels.
(https://blog.hotforex.com/wp-content/uploads/2015/02/ES-D.png)
S&P500, Daily
Sideways move has been pretty well defined with the support at 1974 and resistance at 2062.50. Friday’s candle was a no demand candle at resistance and indicates a move lower from the current levels. The daily Bollinger bands coincide with the resistance level and the overbought Stochastics support bearish indication by the no demand candle.
(https://blog.hotforex.com/wp-content/uploads/2015/02/ES-240-min.png)
S&P500, 240 min
The short term trend higher from the 1974 support was reversed at resistance and we are looking at support levels that could stop the decline. There is support at 2025 region where a pivot low and the daily Bollinger bands coincide. The pivot low is at 2020.75 and the 1.5 stdv Bollinger band is currently at 2028. This area also has the 50% Fibonacci level at 2021 which together with the other technical factors suggests that this region is a potential support level. Should this level not hold, then the support at 1974 area would come into play.
Conclusion:
The long term technical picture in the US stock market is still healthy but in the short term picture we still have signs of indecision (range bound trading). Friday’s market reaction to better than expected employment figures wasn’t brilliant but at the same time we have money moving away from dividend paying safety stocks (utilities sector) into banks, basic material related stocks and energy stocks which means that the risk appetite is increasing. The overall picture is therefore slightly mixed. This means that the market remains as a traders’ market with opportunities at technical support and resistance levels. The daily no demand candle from Friday indicates that the levels above the current market price have resistance and we should therefore see a move lower today. The levels with most potential are those at the edges of this sideways move. However, the levels inside the range can provide opportunities as well. Just look for price based confirmation to confirm the analysis before taking trades.
You are warmly welcome to join me to a Live Analysis Webinar tomorrow at 12:30 GMT. Book your seat here! - https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217 (https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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EURJPY Close To Weekly Resistance Levels - https://blog.hotforex.com/eurjpy-close-to-weekly-resistance-levels/ (https://blog.hotforex.com/eurjpy-close-to-weekly-resistance-levels/)
The pair has moved significantly lower since the November highs last year and then reversed from a 2013 consolidation area. The weekly pivot candle had a narrow range between open and closing price and since then price has moved close to 38.2% Fibonacci retracement at 137.64. The level coincides with a weekly high and is therefore a likely resistance level. Stochastics and Relative Strength Index (RSI) are crossing over from oversold levels giving bullish indication. However, the sideways market from July to October last year is a likely resistance area and I am expecting it to bring to price closer to latest weekly lows again.
(https://blog.hotforex.com/wp-content/uploads/2015/02/EURJPY-D1.png)
EURJPY, Daily
EURJPY has broken out of the down trend after an overshoot to the downside. The 26th January candle was a rejection candle and formed the pivot low for this potential bottoming formation. Stochastics has moved into overbought territory for the first time since November last year and price is edging closer to a resistance level at 137.26 and the 38.2% Fibonacci level at 137.72. There is a support level (former resistance) that roughly coincides with the 23.6% Fibonacci level and was supporting price at the time of writing. The next level of support is in the 133.68 region, while the daily Bollinger Bands are also worth keeping an eye on especially when they are in the proximity of the previous downward channel high.
(https://blog.hotforex.com/wp-content/uploads/2015/02/EURJPY-4h1.png)
EURNZD, 240 min
Price has reacted from the upper end of a short term bull channel and reached the recent sideways range that is now supporting price. Should this support fail, the next significant support area is at 133.42 to 133.67 where the 50% Fibonacci level, the lower Bollinger bands and the channel low coincide.
Conclusion:
The pivot candle from two weeks ago had a narrow range between open and closing price, which implies that the big time frame supply and demand were in balance at those levels. Stochastics and Relative Strength Index (RSI) are crossing over from oversold levels which together with the weekly pivot candle (being relatively close to the current price) gives a longer term bullish indication. However, the fact that this is taking place just below a sideways range from the latter half of 2014 means that there is resistance above. In the daily picture the Stochastics have moved into overbought territory for the first time since November last year and the pair is now getting closer to a resistance level at 137.26 and the 38.2% Fibonacci level at 137.72. This is a long term bullish but short term bearish indication as the price is likely to correct lower from overbought levels but in the longer term picture this is a sign of the down move is likely now over. As usual, I am interested in shorts against the resistance levels and longs at supports providing the multi time frame analysis and momentum reversal signals confirm the validity of the levels.
If you want to learn the ever so important basics on market analysis or wish to hone your skills with more advanced trading concepts, I encourage you to join me to FREE educational and Live Analysis webinars. Book your free ticket HERE!https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Crude Oil Has Been Attracting Buyers - https://blog.hotforex.com/crude-oil-has-been-attracting-buyers/ (https://blog.hotforex.com/crude-oil-has-been-attracting-buyers/)
Crude Oil is now trading at levels near to the 2009 lows. As the world economy is sluggish but nowhere near to the paralysis caused by the 2008 credit crunch it is safe to assume that the levels are oversold both in fundamental and technical sense. The supply of oil has increased as the US shale oil has entered the market and the Saudis have decided to defend the market share rather than price but the ever growing world population means that the limited oil resources have to be shared by an increasing number of consumers. As the population and its wealth grow the consumption of oil can only go up. The passenger trends in air travel are a good example of this. According to the International Air Transport Association the global airline industry is expected see a 7% growth in passenger traffic in 2015 with the average annual growth rate being at 5.5%. This energy intensive industry will therefore be carrying almost 30% more customers in 2020 and is likely to hedge aviation fuel costs at the current price levels. As the global GDP is still expected grow by 3.2% in 2015, it is likely that other likely hedgers include the businesses in other forms of transport and cargo business as well as mutual funds, hedge funds and other institutional investors.
(https://blog.hotforex.com/wp-content/uploads/2015/02/InvDXY-and-CL.png)
US Dollar index (inverted) and Crude Oil, Daily
As the above chart very clearly shows the price of oil has been inversely correlated with the DXY, US Dollar Index. The blue line is the inverted DXY while the black line is the price of Crude Oil. Now that the trend in DXY is getting showing signs of indecision the Crude Oil price has become more volatile.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-W3.png)
Crude Oil, Weekly
The price is fluctuating relatively close to 2009 low and is showing strength by closing last week above the last four weekly highs. This has not happened since last summer. Also, we now have a weekly pivot candle with two higher lows on each side for the first time since the August 2014. This and last week the price has established a new support level at the proximity of the high (48.35) of this pivot candle. The nearest resistance is still at the 53.60 area. Price has traded inside the lower 1.5 stdv Bollinger band for almost three weeks, yet another long term bullish sign. On the bearish side we have a potential long legged Doji candle (looks like a cross) with open and close currently fairly close to each other. While the previous candle showed strength with open way below the closing price the current candle cannot give the same indication unless we will see a strong move higher from current levels. This would in the current context have short term bearish indications.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-D2.png)
Crude Oil, Daily
After breaking out of the descending regression channel the price of oil is now moving sideways between the resistance at weekly low at 53.60 and the high of weekly pivot candle at 48.35. We now have a higher high, and two higher lows at 48.35 support which suggests that the buyers are willing support price at higher levels after each retracement from the 53.60 resistance level. If this reoccurs without price creating a lower high it will create pressure against the sellers at the 53.60 resistance area.
(https://blog.hotforex.com/wp-content/uploads/2015/02/CL-4h1.png)
Crude Oil, 240 min
The price is now at sideways range in 4h chart and has found support twice from the level just above the 61.8% Fibonacci level. I suggested in my previous analysis that we could look for intraday buy signals at approx. at this level. Now the price is at the upper Bollinger bands and Stochastics (and RSI) is indicating that it is becoming overbought.
Conclusion:
The levels close to previous market low are always interesting and a potential support area. Now that the price is close to 2009 lows it is likely that several hedgers are interested in stepping in. This is very likely already happening as we are seeing many bullish signs in the weekly picture: 1) a close above the last four weekly highs for the first time since the last summer, 2) a weekly pivot candle with two higher lows on each side (the first time since the August 2014), 3) the price has traded inside the lower 1.5 stdv Bollinger band for almost three weeks (again the first occurrence since the last summer). Buyers are taking the upper hand. On the bearish side the weekly chart might create a long legged Doji candle (looks like a cross) with open and close currently fairly close to each other. While the previous candle showed strength with open way below the closing price the current candle cannot give the same indication unless we will see a strong move higher from current levels. This would have short term bearish indications and mean that probabilities for move closer to the bottom end of the range would increase.
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Several Technical Factors Supporting Gold - https://blog.hotforex.com/several-technical-factors-supporting-gold/ (https://blog.hotforex.com/several-technical-factors-supporting-gold/)
Price corrected lower from the levels around 1280 to 1284 as per my previous analysis and has now reached a key support area (1203 – 1220). The long term weekly trend is still down but the medium term bullish channel is more relevant for the current price action. The last week’s candle has a relatively small range and the close was not that far below from the open. This is a sign of momentum slowing down. Price is at an area that resisted price moves higher in December last year (now support) and the rising trendline is getting close. In addition, the 50% Fibonacci level is right at the last week’s low. Nearest support and resistance levels are at 1222 and 1251, while the next levels are at 1203 and 1284. Fibonacci retracement levels of 50% and 61.8% coincide with the 1222 and 1203 support levels.
Gold, D
Gold, Daily:
The regression channel tool provides us a slightly different picture of the rising medium term trend. The move above 1284 level was an overshoot and now the price has reached the lower end of the channel. As the lower Bollinger Bands also reside at the current levels it is safe to assume that this is an important price region in technical sense. In addition the Stochastics oscillator is giving a signal that momentum is reversing while the indicator is below the oversold threshold. The nearest important support and resistance levels are the same in the daily time frame: 1222 and 1251.
Gold, 4h
Gold, 240 min:
Price followed roughly the bear trend channel I drew in my previous analysis and provided many shorting opportunities for our traders. Now that the price has reached an important support level it has reacted higher. The Stochastics is getting close to overbought area and the price is approaching both the upper Bollinger bands and a sideways move between 1233 and 1245. This should slow the price down and cause it to test the support area again.
Conclusion:
There is a very good chance that Gold has bottomed and will now create a higher low somewhere close to the current levels. There are several technical factors supporting price and the price movements since the Swiss election (rejecting the increase in country’s Gold reserves) have been pretty much what I anticipated at the time (a move higher to the upper end of the long term channel). Now price is at key support levels and at the upper end of the potential bottoming formation (between 1131 and 1222). It is likely that this will act as a zone from which the price of Gold can launch higher. This view is confirmed if we’ll now see a higher weekly low (last week’s candle hints that we might get one) close to the current levels. In fact, the whole range As I said before these are the levels where I would be interested in adding to longer term Gold positions. A lower high would be a negative and increase a risk of price moving lower.
In the short term picture, the price is at the time of writing close to a minor resistance level at which the price action should be monitored for momentum reversal signals. As the price usually never turns on a dime, it is reasonable to expect that there will be volatility or sideways move before the price of Gold can turn higher in the weekly time frame. Short term traders should take advantage of this and look for intraday momentum reversal signals (as per my teaching in the webinars) and some of those intraday positions could be turned in to swing trades as the price is at key higher timeframe support levels.
If you would like to learn more or enhance your understanding of market basics, please join us on FREE Market Basics II webinar on Tuesday 17th February. Register HERE and as usual it is better to log in early to get your seat! - https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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I questioned in my previous analysis (https://blog.hotforex.com/coffee-time/ (https://blog.hotforex.com/coffee-time/)) on Coffee in November last year whether the price of coffee can move into new highs and pointed out that there was room for short term long trades from the levels the market was trading at the time. The short term bull moves happened pretty much according to my analysis and the targets were hit as expected and the market was not able to stage another rally into new highs. When a market can’t move higher it is likely to move lower, especially after such a big rally in 2014.
According to Bloomberg news in January it was expected that the rainfall in January and February might not be enough for the coffee crops that are in a delicate blossom phase and could be damaged. This was bullish for coffee but the market participants did not see it that way and the technical picture has since then deteriorated. The rain in February has been below average in key regions in Brazil but as we can see the price keeps on breaking support levels and heading south. This is yet another case where the price action and price reactions to news are more relevant in understanding the market than the fundamental news itself.
(https://blog.hotforex.com/wp-content/uploads/2015/02/KC-W1.png)
Coffee, Weekly
The price of coffee has now broken below a support after it formed a huge top above 159.40. This break is happening with decisively higher participation (volume) which suggests that the move below the support is significant. This former support is now a resistance while there is some support at 144.92, a level that has had a varying role in the past (sometimes support and sometimes a resistance). A Fibonacci extension level coincides approximately with this level suggesting that it could act as a target one for short positions. In addition the 61.8% Fibonacci retracement level (drawn from the 2013 low to 2014 high) at 148.80 being in the general area of the level adds to its significance. I have left the retracement levels off the chart for better readability.
Now that the price has broken a neckline in a huge top formation we obviously would be interested in knowing how much lower the current move could take us. Should the width of the top give any clues then the low would eventually be just above 93 dollars, a price level not seen since 2005. This would be a very sizeable move but as we have seen this market is capable of creating huge moves. We have seen excessive moves in the past: 87% from 1997 top to 2001 low and 67% from 2011 high to 2013 low.
(https://blog.hotforex.com/wp-content/uploads/2015/02/KC-D.png)
Coffee, Daily
In the daily chart we have a downward channel with a bottom coinciding with the 144.90 level further increasing the technical significance of the level. Should the market retrace back to the resistance level just below 160 dollars this would give an opportunity to join this downside move and the region 144.90 would then be a reasonable target level for the trade.
(https://blog.hotforex.com/wp-content/uploads/2015/02/KC-4h.png)
Coffee, 240 min.
The four hour chart gives us some potential intraday reference points with the nearest resistance levels being at 155.28 and 156.36. The latter level coincides with the 23.6% Fibonacci level. These levels create a potential zone for short entries but they should be used only if the lower time frame price action confirms their validity . If market is weak or in other words strongly bearish, it will turn lower from these levels. Should there be a fast move higher and through this zone, then the zone between 157.60 and 159.40 becomes important and a very potential level to look for short trades.
Conclusion:
The rain in February has been below average in key regions in Brazil but as we can see the price keeps on breaking support levels and heading south. This is yet another case where the price action and price reactions to news are more relevant in understanding the market than the fundamental news itself. The price of Coffee is trading below an important level that used to support price and is now a resistance. The move last year was excessive to the upside, therefore the move lower can be very sizeable as well. I look for short signals in lower time frames at the level identified in the above charts. My Target I is at 145 and Target II at 125 dollars.
Join me on Live Analysis Webinar on Tuesday 24th February at 12:30 pm GMT. Register HERE https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217and as usual it is better to log in early to get your seat!
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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S&P 500 in new all time highs - https://blog.hotforex.com/sp-500-in-new-all-time-highs/ (https://blog.hotforex.com/sp-500-in-new-all-time-highs/)
I pointed out in my previous S&P 500 analysis that the support at 1961 to 1974 area has been holding well which will add pressure to the resistance level at 2063 area. In an uptrend it is more likely that a resistance level will give in and the support levels hold. I also said that the key sectors such as energy (XLE), industrials (XLI) and basic materials (XLB) look technically sound in the weekly picture while utilities sector (XLU) lost 4,12% on Friday suggesting that the run for the safety is now over as the long only funds move money from safety oriented investments to higher beta (more riskier) stocks. There were some indications of short term weakness as well but they did not materialize. Instead the market broke above the 2062.50 resistance and has since then moved into new all-time highs.
Over the last month the riskier sectors such as Materials, Energy, Technology and Industrials have been outperforming S&P 500 and attracting money more than Utilities, Consumer Staples and Health Care that are viewed as safe havens for long only funds. The Financials have been neutral when compared to the S&P 500. The Financials sector performance could have been stronger but it has been slowed down by technical resistance at the weekly pivot candle. Other sectors at or near resistance are technology (close to a long term channel top), energy (at a historical resistance) and consumer staples (at the recent highs).
Further sector analysis reveals that over the last six trading days the money flows have once again favoured the Utilities and Health Care sectors over all the others with Energy and Financials lagging the most. All this put together indicates that we could see the S&P 500 slowing down over the next few trading days. However, in the longer term picture the trend and the risk appetite among the professional investors looks healthy.
https://blog.hotforex.com/wp-content/uploads/2015/02/SP-500-W.png
S&P 500, Weekly
The weekly trend is healthy as the market has once again been able to push into new highs after making higher lows in this time frame. However, at the same time the index has been now trading close to upper Bollinger Bands with the Stochastics being in overbought territory. If this week’s close will happen at the current levels then we have a candle that signals demand drying up (upward momentum slowing down). This would not be surprise after market moving higher for over three weeks in a row. The previous resistance levels at 2062.50 and 2088.75 are now support levels. While almost everything else looks rather bullish Money Flow Index is diverging strongly (bearish divergence) suggesting that the current move into new highs was not as strong as the previous one in December.
https://blog.hotforex.com/wp-content/uploads/2015/02/SP-500-D.png
S&P 500, Daily
The daily trend is contained in a relatively narrow channel while the Stochastics, RSI and MFI all are moving almost sideways in the overbought area. The market has not corrected lower for 10 trading days which suggests that an increase in volatility and a correction cannot be that far in the future. The potential support levels are the previous resistance levels: 2088.75 and 2062.50. The upper level coincides with the proximity of 23.6% Fibonacci level and the lower one with 38.2% level.
https://blog.hotforex.com/wp-content/uploads/2015/02/SP-500-4h1.png
S&P 500, 240 min
The 4h trend is showing some signs of weakness. The moves from the supporting uptrend line are getting weaker as evidenced by the red line. In other words the market is wedging which indicates the potential for a correction has increased. The divergence in the Stochastics is in line with this view. The nearest 4h support levels are at 2099.50 and 2082.25.
Conclusion:
The long term trend is healthy but in the medium term the volatility has been so low that we might see some increase and a correction to support levels. As evidenced by the sectors the market participants are not concerned about the safety aspect anymore and have been willing to take bets even in the riskier sectors. However, when turning attention to a shorter term picture it is worth mentioning that the sector analysis also reveals how over the last six trading days the money flows have been once again favouring the Utilities and Health Care sectors over all the other sectors, while Energy and Financials have lagged the most. All this put together indicates that we could see the S&P 500 slowing down and possibly correcting lower in the course of the next few trading days.
In the longer term picture the trend and the risk appetite among the professional investors looks healthy. Short term fluctuations aside this is a sign of a healthy market and moves to support levels should be used as buying opportunities. Index being close to the weekly Bollinger Bands and the 4h chart giving first indications of momentum slowing a correction to these levels should not be that far in the future. However, as usual we want to see the intraday price action confirming the validity of my analysis and suggested support levels.
Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE and as usual it is better to log in early to get your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Traders Buy the USD as the US Core CPI Came in at +0.2%
(http://analysis.hotforex.com/wp-content/uploads/2015/02/EURUSD-W1.png)
After a couple weeks of low volatility the EURUSD moved lower yesterday driven by the US inflation figures. The core CPI (change in the price of consumer goods and services excluding food and energy) rose by 0.2% instead of 0.1% expected by the economists. The CPI that includes the more volatile items (food and energy) fell by 0.7%, most since 1998. This is explained by the substantial fall in Crude Oil prices. The Fed policy makers focus on the Core CPI and therefore markets reacted to the higher than expected figure and bought the dollar as they concluded this will encourage the Fed to raise interest rates this year. However, economists believe that the effects of lower energy prices and a strong dollar will work their way to the Core CPI and cause low reading in the near future.
EURUSD has been really tame since the last time I wrote analysis on it. The weekly picture has not changed much as the downtrend still prevails and there is a shooting star candle indicating that the price will stay in the downtrend. The combination of resistance level at 1.1460 and the 23.6% retracement level held the pair down. The current support and resistance levels nearest to the current price are 1.1098 and 1.1460.
(http://analysis.hotforex.com/wp-content/uploads/2015/02/EURUSD-4h1.png)
EURUSD, 240 min
Now that the EURUSD has been moving sideways the daily and 4h charts are so similar that I will only comment on the latter. Price is currently resting at a pivot candle high at 1.1203 and the Stochastics are well into the oversold territory while price has moved inside the Bollinger Bands. This suggests that there should be an intraday rebound higher probably to the nearest resistance level at 1.1287. This level coincides with the 50% retracement level drawn from the Wednesday’s high to the latest low yesterday.
Conclusion:
This market is still in a downtrend which means that the support levels are more likely broken and resistance levels honoured. However, the price is now relatively close to the weekly low and sitting at a 4h pivot candle. In addition the price is outside the daily lower Bollinger Bands and the 4h Stochastics are oversold. Therefore a move higher should be in the cards. This should however, be only an intraday rebound as we resistance levels and a sideways range above. Should this move take place I would be looking to benefit from the weekly trend by selling short at the resistance levels, providing the lower time frame charts confirm the idea.
Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE for FREE and as usual it is better to log in early to get your seat!
https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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GBP a safehaven currency in Europe - Read more: http://analysis.hotforex.com/blog/2015/03/02/gbp-a-safehaven-currency-in-europe/ (http://analysis.hotforex.com/blog/2015/03/02/gbp-a-safehaven-currency-in-europe/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-W.png)
Now that EUR is weak due to both economic, geopolitical and Greece related risks Sterling starts to look like a safe haven currency with its economy rebounding. The UK job market is recovering, Industrial activity expanding and GDP at healthy 2.7% level (almost back to its 2007 pre-crisis levels). This creates a stark contrast to the ailing Euro Area but at the same time the risk is one of contagion: Euro Area being so important trading partner to the UK its can impact the growth in the UK negatively. However, the EURGBP pair is in a downtrend and reflects both the stark differences in the economic front and the interest rate hike expectations. The Bank of England is expected to raise rates either in the third or fourth quarter while the ECB is obviously committed to the QE program announced in January.
Price is now bouncing from general region of a 0.7255 support level, a historical pivot high. Stochastics in both weekly and daily timeframes are oversold and there is no divergence in these time frames. Out of major EUR crosses, it is the EURGBP that is the weakest and therefore makes it an ideal market to sell the rallies. The nearest resistance (a weekly low) is at 0.7340.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-D.png)
EURGBP, Daily
Since my previous analysis price moved lower and is moving sideways in the region of 0.7255 support area. Stochastics is edging closer to its moving average indicating lack of downside momentum at this support. This could of course change later in today’s trading but it shows how relevant this level was for the market participants. The pair is now moving at the lower end of the regression channel but potential resistance levels are not that far from the current levels. The nearest daily resistance levels are: 0.7300, 0.7317 and 0.7348.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-240.png)
EURGBP, 240 min
I expected price find support at 0.7255 and it did almost to a pip, rallied and then was sold again from 0.7300 level. This led to a move that touched the channel line. The current move higher is taking place after a touch at the lower end of a short term bear channel and after there was a higher low in the Stochastics (bullish divergence). There is a resistance area from 0.7300 to 0.7314 that coincides with a midline in the channel. In addition the upper Bollinger Bans are not that far above the zone either.
Conclusion:
With price being at a historical pivot high and close to the short term channel bottom it makes sense to wait for better levels to enter into short trades. The zone from 0.7300 to 0.7314 is an area we should be looking for momentum reversal signals as the channel midline and the upper Bollinger Bands coincide with the zone. For UK and Euro Area economic releases, see our economic calendar here: HotForex Economic Calendar https://www.hotforex.com/en/trading-tools/economic-calendar.html (https://www.hotforex.com/en/trading-tools/economic-calendar.html)
Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE for FREE and as usual it is better to log in early to get your seat! - https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Gold Trades Sideways At Key Support Level - http://analysis.hotforex.com/blog/2015/03/04/gold-trades-sideways-at-key-support-level/ (http://analysis.hotforex.com/blog/2015/03/04/gold-trades-sideways-at-key-support-level/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Gold-W.png)
Lately many market participants have been focusing on this week’s jobs report from the US. This Friday the US Bureau of Labour Statistics releases the Non-Farm Payroll report, the most important piece of macro data before the next Fed meeting. This report is seen as an important indicator on when the Fed might start hiking the interest rates. Some participants expect the rate hike happen in June while most are looking to September as potential starting point for the Fed’s rate hike cycle. However, some prominent analysts believe that the Fed will be patient and start the rate hikes next year. Higher interest rates support the dollar and historically Gold has not done that well during the periods of rising dollar. At the same time demand for physical Gold is solid in Asia. India alone is consuming 800 to 1000 tons of Gold annually and imports to the country are increasing. In addition, China’s interest rate cuts in November 2014 and last Saturday are an indication that the Peoples Bank of China has moved into an easing cycle. This is a factor supporting demand for Gold in China.
The price of Gold reached the medium term ascending trendline a bit more than a week ago and has since been trading between the support at 1200 and a weekly low from the beginning of February. This level also coincides with the 50% Fibonacci retracement level. Gold is getting oversold in terms of Stochastics and I am looking for a move higher over this week or latest the next week.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Gold-D.png)
Gold, Daily
The resistance level at 1220 coinciding with the 50% Fibonacci level has held the price down while the 1200 area has supported price. Price is ranging sideways which is quite common after downtrend is broken and the market participants fight over the future direction of the gold price. At the moment we have a higher low in place (from yesterday) which indicates that buyers are ready bid for Gold between 1190 and 1200. There is further support from a daily pivot candle from January 2nd this year and the lower Bollinger bands (currently at 1179 and 1188).
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Gold-240-min.png)
Gold, 240 min
Levels outside the lower Bollinger bands and a pivot candle from 24th February have been attracting buyers lately. There was an attempt to take the price higher last week and price was making higher lows and higher highs until the resistance at 1223 proved too much for the buyers. There was rejection candle yesterday (a candle with a long shadow below). This confirms the idea of 1190 to 1200 being an important range for buyers.
Conclusion:
Price is now at key levels and I am looking for a move higher from this support. In the recent past it has taken two to three weeks for the price Gold to turn from support levels. Therefore should there be a rally in not so distant future. But as the market participants are looking at this Friday’s jobs release from the US as a potential indication on when Fed might be raising rates the price of Gold might be moving sideways until Friday. Should Friday’s NFP figures be a disappointment, the likelihood of Fed raising rates early would be smaller and this should support the price of Gold. Levels close to or inside the 1190 – 1200 support range should be monitored for price action based buy signals. If you want to learn about price action based trading signals, just join me to educational and live analysis webinars.
Join me on Live Analysis Webinar on Tuesday 10th of March at 12:30 pm GMT. Register for FREE and as usual it is better to log in early to get your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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S&P Moving Sideways Above The Dec 2014 High - http://analysis.hotforex.com/blog/2015/03/06/sp-moving-sideways-above-the-dec-2014-high/ (http://analysis.hotforex.com/blog/2015/03/06/sp-moving-sideways-above-the-dec-2014-high/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/ES-W.png)
I suggested in my previous S&P 500 analysis http://analysis.hotforex.com/blog/2015/02/25/sp-500-in-new-all-time-highs/ (http://analysis.hotforex.com/blog/2015/02/25/sp-500-in-new-all-time-highs/) that the market could be correcting lower. This was based on both technical and sector analysis. On February 25th I wrote: over the last six trading days the money flows have been once again favouring the Utilities and Health Care sectors over all the other sectors, while Energy and Financials have lagged the most. All this put together indicates that we could see the S&P 500 slowing down and possibly correcting lower in the course of the next few trading days. Index was trading at 2011.25 points at the time of my analysis and is trading at the time of writing at 2098.75 (-87 points).
Today’s an NFP Friday and the markets are likely to be in a waiting mode as the unemployment readings are important indicators for the Fed in deciding the timing of the first rate hike. Consensus expectation is 240K new jobs and should the number deviate strongly to the downside it’d be likely that the Fed would be more patient and delay the start of the rate hikes. Another important data point is the Average Hourly Earnings which will give an indication on the ability of consumers to consume. The Nonfarm Payrolls, Average Hourly Earnings, Labour Force Participation Rate and Unemployment Rate for the month of February are published today at 13:30 GMT. For other economic releases, see the HotForex Economic Calendar here.https://www.hotforex.com/en/trading-tools/economic-calendar.html (https://www.hotforex.com/en/trading-tools/economic-calendar.html)
The last two weekly bars have been narrow bodied Dojis. This indicates lack of demand and increases probabilities that this market will correct lower. As there has been no upside momentum over the last two weeks, Stochastics is overbought and turning lower. In addition, the upper Bollinger Bands are near and have been limiting upside. Support and resistance levels in weekly picture are: 2062.50, 2088.75 and 2117.75.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/ES-D.png)
S&P 500, Daily
After wedging a bit at the time of my previous analysis S&P 500 e-mini future (ES) moved out of the rising regression channel. Price has been supported by the pivot high at 2088.75 and 23.6% Fibonacci level with a new resistance at the latest high (2117.75). Support at 2062.50 coincides with the lower Bollinger Bands and the 38.2% Fibonacci retracement. Should ES correct further the next important support level is 2020.50. The fact that price has been reacting higher from the proximity of 2088.75 level in suggests that this level is seen as an important support.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/ES-240.png)
S&P 500, 240 min
Index futures have attracted buyers at 2085 area but the resistance from both the descending trendline and the previous support at 2101 level have this far blocked the moves higher. At the time of writing there isn’t much momentum to either direction as market waits for the NFP release but the moves from 2085 have been strong (hammer candles). This suggest there will be buyers at this level today. Should this level be broken the next support level at 2062.50 coincides roughly with the 1.618 Fibonacci extension level. It is also a former resistance which adds to the significance of this level.
Conclusion:
In the longer term picture US stock market is now fairly overbought and the last two weeks’ weekly narrow body candles indicate that there is not much willingness to pay higher prices for equities but no strong need to sell off either. At the same time technology, the heaviest sector in the S&P 500 index is close to channel top and Apple the heaviest weighted stock in this sector looks like it could correct lower after a bearish weekly candle last week. Even if this correction takes place I still believe this market can move higher and therefore look for buying opportunities at support levels.
Technicals and macro view are giving a slightly mixed message: if the employment numbers are weak the Fed is likely to start rate hikes later which would be good for the stock market. However, at the same time strong employment numbers would indicate an improving economy, which again is a reason to stay long in Stocks. Market reactions to today’s NFP release are therefore an important indicator of things to come in the near future. If market finds support either at 2085 or 2062.50 and reacts higher with good momentum (that takes ES into new highs) the technical picture stays positive and supports the long term bullish view.
In regards to short term trading ideas I am looking for minor time frame reversal signals at the above mentioned support and resistance levels once the employment numbers are released and the market is likely to have some volatility again. Market is not likely to move strongly before the employment release later on today. Should there be no strong deviation from the consensus expectation the nearest technical levels will be honoured but higher deviation from expectations will be translated into stronger whipsaws in price. If the latter is the case, then momentum reversal traders should be looking to trade levels further away from the current price.
Join me on Live Analysis Webinar on Tuesday 10th of March at 12:30 pm GMT. Register HERE for FREE and as usual it is better to log in early to get your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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EURGBP Setups Have Made Hundreds of Pips - http://analysis.hotforex.com/blog/2015/03/11/yet-another-eurgbp-setup-that-made-hundreds-of-pips/ (http://analysis.hotforex.com/blog/2015/03/11/yet-another-eurgbp-setup-that-made-hundreds-of-pips/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-W1.png)
We got it right again in EURGBP. The pair rallied to a resistance level I gave in my last analysis and has then sold off heavily. My view on March 2nd EURGBP analysis was that out of major EUR crosses, it is the EURGBP that is the weakest and therefore makes it an ideal market to sell the rallies. I wrote then that the zone from 0.7300 to 0.7314 is an area we should be looking for momentum reversal signals as the channel midline and the upper Bollinger Bands coincide with the zone. EURGBP rose to 0.7301 on that day and has since dropped over 200 pips. We have now had two very good sell signals in EURGBP lately. The first sell signal as per my analysis came at just below 0.7596 and now the other in proximity of 0.7301. My analysis and the signals that I teach in my webinars have made several hundred pips in EURGBP for our traders. If you would like to learn how to catch moves like this you are welcome to join me to free webinars here. https://www.hotforex.com/en/landing-pages/hf-webinars.html?id=118 (https://www.hotforex.com/en/landing-pages/hf-webinars.html?id=118)
As the EURGBP is basically collapsing at the time of writing the weekly picture does not provide us with a lot to analyse. With trend lower indicators are oversold and price is hugging the lower Bollinger Bands. The nearest weekly support and resistance levels are 0.7022 a former resistance level from 2006 and 2007 and the last week’s low at 0.7183.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-D1.png)
EURGBP, Daily
Price has extended below the regression channel and has for the first time since January 26th closed outside the lower Bollinger Bands. This suggests that the trend has moved too far too quickly. This increases probabilities for a corrective move against the prevailing trend over the coming few days.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/EURGBP-2401.png)
EURGBP, 240 min
EURGBP trend is extended in 4h chart as well. In case there will be a move against the trend over the coming few days potential resistance levels that could turn price lower again are 0.7130 and 0.7180. The lower level is clearly a minor resistance level as it is a spot where price tried to hold the channel bottom. This caused a sideways move visible in the 60 min chart and could act as a resistance should the market be weak.
Conclusion
As long as the market keeps on moving lower and there is no price based evidence to the contrary there is no hurry to close the short trades. Exception to this would be price hitting the 0.7022 support level which could well bounce the price higher and therefore is a logical target level. Price is in a downtrend and we should be looking to sell rallies as long as the approach works. However, once the 0.7022 target is hit the pair is at a major consolidation level and selling rallies might get trickier. Currently I am looking at 0.7130 and 0.7180 as potential shorting levels in case there is a rally higher and 0.7022 area as a target for short trades.
Join me on Free Webinar on Tuesday 17th of March at 12:30 pm GMT. I will show you live how to analyse the markets and look for setups for high probability trades. Register HERE https://www.hotforex.com/en/trading-tools/trading-webinars.html (https://www.hotforex.com/en/trading-tools/trading-webinars.html)for FREE and as usual it is better to log in early to get your seat!
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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CADJPY Trading In A Range After A Shooting Star Candle - Read more: http://analysis.hotforex.com/blog/2015/03/13/cadjpy-trading-in-a-range-after-a-shooting-star-candle/ (http://analysis.hotforex.com/blog/2015/03/13/cadjpy-trading-in-a-range-after-a-shooting-star-candle/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/CADJPY-W.png)
CADJPY has weakened substantially since November last year and has over the last weeks bounced higher from a support at 91.78. The support is loosely defined by the lower Bollinger Bands and a pivot candle from March 2014. Last week price reacted lower from a weekly low creating a shooting star candle and confirming a resistance level at 96.74. A couple of weeks ago the pair bounced from 94.17 forming a support level.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/CADJPY-D.png)
DCADJPY, Daily
There was a shooting star last week in the daily chart as well. CADJPY has since then moved sideways between resistance at 96.74 and a rising trendline. The resistance coincides roughly with 38.2% Fibonacci level (drawn from December 2014 high to the January 2015 low) and upper Bollinger Bands. Bollinger Bands are narrowing which indicates that the pair is nearing a breakout but to which direction? The last two days indecision is clearly visible in the chart. Stochastic Oscillator is close to being oversold and is about to cross over its signal line. This together with the rising trendline encourages the bulls but the above shooting stars and resistance that are relatively close dampens the enthusiasm.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/CADJPY-240.png)
240CADJPY, 240 min
The pair has been making lower highs and breaking support levels since the move to 96.74 was rejected. Fluctuations created a triangle that was resolved to the downside and provided one shorting opportunity on a rebound as the pair tested the lower end of the triangle and failed to penetrate it. Since then we have had a new lower low and lower high as the pair has been moving towards the lower end of the range. Projection from triangle points to 50% Fibonacci level (near 94.17 support). Should that support fail the next interesting support level is at 93.03 as it coincides with a 261.8% Fibonacci extension. I have left the extension levels off from the chart to improve readability.
Conclusion
Trading in the middle of the range is always tricky while the easiest money is made at the edges and the pair is currently trading pretty much in the middle of the range. However, the weekly and daily shooting stars at 96.74 resistance level indicate willingness to sell the CADJPY at those levels while the lower highs and lower lows in 4h chart suggest that the pair should be testing the 94.17 level in not so distant future. This far the 38.2% Fibonacci level and the rising trendline have prevented the price moving lower. In addition there was bullish divergence in the Stochastic Oscillator at the time the pair bounced higher from the trendline. The intraday picture therefore has both bullish and bearish elements while the weekly shooting star points to lower prices from current levels.
The wide range candle from the beginning of February indicates that demand between 91.78 and 94.17 was strong. Quick moves into this area should be therefore met by willingness to bid the pair higher. Should such a quick move happen I would be interested in long signals at or near to the 93.03 support. I will be monitoring the levels close to the upper daily Bollinger Bands (at around 96.20) and the shooting star high.
Join me on Free Webinar on Tuesday 17th of March at 12:30 pm GMT. I will show you live how to analyse the markets and look for setups for high probability trades. Register HERE for FREE and as usual it is better to log in early to get your seat!
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Copper’s Relative Strenght Due To China Read more here: http://analysis.hotforex.com/blog/2015/03/16/coppers-relative-strenght-due-to-china/ (http://analysis.hotforex.com/blog/2015/03/16/coppers-relative-strenght-due-to-china/)
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Copper-M1.png)
Copper is in a long term bear channel and moved in February to a level that has supported price in the past. This was also the first time since year 2008 that Money Flow Index moved into overbought zone in Monthly timeframe. In February 2007 price touched 2.40 level and moved higher over the next two years. Now there was another bounce from the same level and the price of Copper is on the rise for the second month in a row. The nearest resistance level is approx. at 2.72 while the next major resistance is at 2.88.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Copper-W1.png)
Copper, Weekly
Copper (an industrial metal) has been stronger performer than precious metals since the latest US Jobs report came in with a surprisingly high number and strenhgtened the US dollar. While Gold and Silver have declined by almost 3% since March 5th Copper has at the time of writing gained 1.1%. However, the US rate hike expectations mean the US dollar strengthens and buying power amongst non-USD based investors decreases for dollar based assets such as Copper. This combined with slowing economic growth in China slows down the Copper bulls and has caused the price to fluctuate below resistance levels. On the other the hand price has held up and even edged higher as market participants believe that easier lending conditions should improve demand in China, the biggest consumer of Copper globally. The price of copper has made two weekly lower highs since touching the 2.72 resistance level (a former support from June 2010) while the MFI (7) is overbought and Stochastics are close to the same levels and hinting that the momentum is waning. This could lead to further fluctuation between the 2.59 support and a high of 2.73 from couple of weeks ago. Other support levels are 2.55 and 2.40, a high and low of the January pivot candle high and low.
(http://analysis.hotforex.com/wp-content/uploads/2015/03/Copper-D1.png)
Copper, Daily
The price of copper is near to the upper Bollinger Bands and Stochastics is getting overbought. Price has just recently bounced from a support at 2.59 forming yet another higher low. This was technically a good sign as it confirmed the level that used to resist price moves higher is now a support. The fact that this level now coincides with the lower daily Bollinger Bands makes it more significant support area.
Conclusion
Fundamental factors that both support the price of Copper and resist its move higher translate into a ranging market, price action that honours the technical levels at both ends of the range. Levels near to 2.59 support level used to resist moves higher and are now providing support while the move to 2.72 resistance was rejected. This suggests that short term traders should look for trade opportunities at or close to these levels while longer term position traders might want to consider longs closer to the 2.40 support and shorts closer to the 2.88 resistance levels. This is the likely range copper futures over the coming weeks and months as major news stories or surprises on either the US Federal Reserve’s rate policy or Chinese consumption of Copper they might provide the trigger to move the price of Copper to these levels. Chinese premier Li Keqiang commented that the government will be ready to support the Chinese economy should the slowdown in growth affect employment and incomes. He wasn’t specific on the measures the government might use but a hope of economic stimulus in China should support the price of Copper. Against this backdrop traders might want to be buyers near support levels rather than trying to find shorts. This view would be negated if the US Fed indicated that it would hike rates more than expected. However, it is likely that the Fed will be cautious in raising rates.
Join me on Free Webinar on Tuesday 17th of March at 12:30 pm GMT. I will show you live how to analyse the markets and look for setups for high probability trades. Register HERE for FREE and as usual it is better to log in early to get your seat! https://www.hotforex.com/en/landing-pages/webinar-market.html?id=118 (https://www.hotforex.com/en/landing-pages/webinar-market.html?id=118)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Weekly Hammer At Support Send USDCAD Higher
(http://analysis.hotforex.com/wp-content/uploads/2015/03/USDCAD-W.png)
USDCAD (weekly) has been moving sideways since the beginning of February. The proximity of the year 2009 high has caused the sideways move. I suggested in my analysis at the time that USDCAD should move above the latest highs as US economy is stronger than the economy in Canada. The fact that USDCAD has maintained the support well and has now created a weekly hammer candle at the support supports my view. Bears might point out that Stochastics oscillator and RSI (7) have created lower highs and therefore signal that the momentum is waning. This however, is what happens each time price moves sideways. Therefore, oscillators do not tell us anything we wouldn’t know by reading price action. Nearest support and resistance levels are at 1.2409 and 1.2835. The year 2009 high at 1.3064 would be the next major resistance once price moves beyond the 1.2835.
Follow the link to read the full analysis
http://analysis.hotforex.com/blog/2015/03/30/weekly-hammer-at-support-send-usdcad-higher/ (http://analysis.hotforex.com/blog/2015/03/30/weekly-hammer-at-support-send-usdcad-higher/)
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Approaching Resistance After NFP Disappointment
(http://analysis.hotforex.com/wp-content/uploads/2015/04/EURUSD-Daily.png)
The EURUSD rallied after the combination of a disappointing NFP release, and downward back revisions in the figures. The pair is approaching a resistance area created by a combination of technical factors. The resistance levels of 1.1052 and 1.1098 coincide with 50 day MA and the upper Bollinger Bands. This resistance has been tested twice and after the latest test EURUSD made a higher low. This suggests the pair will be trying to move higher from here. The next important daily resistance levels are closer to the 1.1460 which could well come into play now that the NFP release was such a disappointment. Price action at the resistance levels is going to be interesting to follow. If the pair corrects lower from it I expect the correction to be rather subdued. The surprisingly weak jobs figure means that now the Fed doves have further evidence of softening economy and a better case to postpone the rate hike. This is seen in the markets across the board as the USD is being sold against other currencies across the board.
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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GBPNZD Ranging Above Support
(http://analysis.hotforex.com/wp-content/uploads/2015/04/GBPNZD-W.png)
The pair has just recently moved higher from weekly support level 1.9379 while another one supported price at 1.9244 sent price higher in the beginning of January. For the last three to four weeks price has been bouncing between this support and a resistance created by a weekly low (at 2.000) from December last year. Stochastics is oversold and price action takes place near lower Bollinger Bands suggesting the pair should have more upside than downside potential. On the bearish side however I should mention the fact that the pair creates lower weekly highs suggesting selling pressure coming in at fairly close to the support. This is not a very bullish sign and could lead to further consolidation at support or eventually price breaking lower.
(http://analysis.hotforex.com/wp-content/uploads/2015/04/GBPNZD-D.png)
GBPNZD, Daily
Price is reacting lower from a resistance at 1.9700. This resistance is created by a daily pivot candle from April 7th and coincides with a 50% Fibonacci level at 1.9691. Stochastics are pointing higher and the RSI has created a higher low while the latest low at 1.9380 was roughly equal to the low from March this year. This bullish divergence supports the upside bias but the price needs to break above the current resistance in order to create a higher high. Should the pair keep on making lower pivotal highs the pressure against the support would increase and the support could break. It is therefore essential to follow the price action over the coming days.
GBPNZD, 240 min
The four hour picture shows...
Follow the link to read the analysis
http://analysis.hotforex.com/blog/2015/04/14/gbpnzd-ranging-above-support/ (http://analysis.hotforex.com/blog/2015/04/14/gbpnzd-ranging-above-support/)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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Weekly chart: Gold’s likely to move lower
(http://analysis.hotforex.com/wp-content/uploads/2015/04/Gold-W.png)
Gold, Weekly
In my latest Gold analysis from March 18th I wrote: These levels are exactly the levels that attracted buyers in Q4 2014 which suggests that there might still be some demand for Gold just below the current price. However, the psychology might have changed since December last year. Strong growth in the US labour market we have seen since then coupled with the rate hike expectations could lead to Gold breaking the support this time around. I am not taking a view that it will happen as support is support as long as it works. A close above yesterday’s high at 1159.30 would be a positive signal while a close above the 1165.70 resistance in would improve it even further. This would warrant buying intraday dips after over the coming few days with a target at 1190.
Now we’ve seen Gold closing moving higher from the support level and hitting my target at 1190. In addition, this market has moved beyond the target and turned lower at 1224.50 resistance. At the same time Gold created a bar with a narrow range between the open and closing prices hinting a move lower. This has since then materialised and Gold has moved lower this week. This is suggesting further moves lower in the coming two weeks or so. The next important weekly support is likely to be found near the lower weekly Bollinger Bands and 1131.50 to 1142 range. Long term picture is still bearish while in the medium term I expect Gold to move sideways between the above mentioned support and resistance levels.
(http://analysis.hotforex.com/wp-content/uploads/2015/04/Gold-D.png)
Gold, Daily
In the daily picture Gold is trading close to the 50% Fibonacci level and the Stochastics are getting close to the oversold levels. This suggests that the move lower over the last few days could slow down a bit. Yesterday we saw a rally from the 50% Fibonacci level but..
Read the full analysis here: http://analysis.hotforex.com/blog/2015/04/15/weekly-chart-golds-likely-to-move-lower/ (http://analysis.hotforex.com/blog/2015/04/15/weekly-chart-golds-likely-to-move-lower/)
Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
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HOW TO FIND HIGH PROBABILITY TRADES?
(http://analysis.hotforex.com/wp-content/uploads/2015/04/Gold-60-min-.png)
In my analysis from April 15th I wrote: We could see Gold retesting the resistance levels at 1198 and 1208. The latter coincides with the upper Bollinger Bands and should price rally there we’d be looking for momentum reversal signals close to it.
As we now know, Gold turned at the resistance and provided us with a great shorting opportunity!
Join me in today’s Live Analysis Webinar and learn how to identify similar opportunities over the coming few days. I will teach you how to analyse the markets successfully and how to read price action when entering and exiting your trades.
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Janne Muta
Chief Market Analyst
HotForex