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STOCKS

Dow (21830.31, +0.15%) continues to rise and looks potentially bullish for the near term. Immediate target is 22000 for the next few sessions.

Dax (12162.70, -0.40%) is testing support near current levels and while that holds, the index has fair chances of moving up towards 12750-13000 levels in the coming sessions. Only a break of the support, if seen could force us to look at lower levels.

Shanghai (3262.86, +0.30%) has resumed its rally and is heading towards 3280 in the next few sessions before facing slight rejection from there. Near term looks bullish.

Nikkei (19946.32, -0.07%) could possibly be ranged or move down in the near term while Dollar Yen is headed towards 110-109. Although the index itself looks potentially bullish the strength in Yen is preventing an immediate rise in Nikkei. Near term trade expected in the 19800-20200 region.

Nifty (10014.50, -0.06%) is trading within the near term up channel and could remain in the 10200-9900 region for the next few sessions. Immediate trend is up but we could expect some interim corrections while the index rises gradually.

COMMODITIES

Gold (1268) moved higher and hovering around our target of 1270. Now it is trading within the range of 1258-70.Gold is overbought in near term time frame, thus we are not confident about the sustainability beyond 1270 regions. There is a possibility of a correction towards 1245 in short term time frame, but we will remain bullish on Gold while it is trading above 1245 regions. Silver (16.72) is also out of its recent bearish zone and trading within the range of 16.50- 17. Recent strength in copper has supported Silver to trade above 16.50 levels.

Copper (2.90) moved higher in line with our expectation and looks on a firm footing while it is trading above 2.78 levels. Midterm resistance comes at 3.12 regions from where we may see some correction due to profit taking.

Brent (52.34) is out of its midterm bearish channel as it is trading above 51.30 regions. Immediate resistance comes at 53 levels and a close above that could open up 56 as well. WTI (49.87) is also moved higher and a close above 51 could be the end of midterm bearish trend in WTI too. We are bullish on oil since 10th of July onward and there is no reason to change our bullish stance while Brent and WTI are trading above 51 and 48 levels on a weekly closing basis.

FOREX

US GDP is back to its steady growth but no sign of any exciting acceleration keeps the chances of Fed taking any further hawkish steps low. Dollar remains weak and the majors keep their upside momentum intact.

Dollar Index (93.41) has lost of the most of the gains made from the low of 93.15 and the chances of retesting 93.00 or even 92.00 look stronger now, in line with our expectations. Euro (1.1734) is stalling near the high of 1.1777 registered last week but the target of 1.1800 and 1.2000 remain unchanged.

Repeat - Euro is in the most overbought condition since 2008 and Dollar in the most oversold condition since 2011, which warrants a consolidation phase at least if not an outright sharp correction. So follow the trend without underestimating the possibility of a sharp reversal in the coming sessions.

Dollar-Yen (110.55) is testing our support zone of 110.50-30 but no strong recovery has been seen yet. If 110.30 fails to contain the decline, it may fall further towards 109.50. On the other hand, a bounce from the current levels can take it higher to the resistance of 111.40-112.00. The price action at the current levels may determine the near term path. Bias neutral.

Pound (1.3126) has not managed a break above the major resistance of 1.32 so far which keeps the possibility of a break below 1.30 open. In case 1.30 breaks down, the trend may reverse to the downside in the near term with targets of 1.28 and lower.

Aussie (0.7973) hit a high of 0.8065 last week, close to our initial target of 0.8100. With the current consolidation expected to be over by the end of the week, the larger uptrend may resume for higher targets of 0.8100-70. Repeat - only a break below 0.7925 may signal a consolidation phase in the range of 0.7870-0.8050 for a few days to be followed by a fresh rise.

Closing below 64.25 has weakened Dollar Rupee (64.15) technical structure and increased the chances of a break below 64.09 considerably. This week may see 63.90 on a break below 64.09 and even lower levels if 63.90 fails to hold.

INTEREST RATES

Sideways move had been seen in across all The US yields . As mentioned earlier, yield s could remain stable in the coming sessions before we see another down leg. The 30Yr (2.88%) is targeting 3% while the 10YR (2.28%) and the 5Yr (1.82%) are targeting levels near 2.40% and 2% respectively.If these resistances hold then We might see some fresh buying in U.S Bonds in coming weeks.

A snapshot of large speculator's poitioning from the weekly CFTC report and analysis of related futures markets.

US Dollar index is now net short for the first time since June 2014

• The Canadian Dollar saw the largest week change of net positioning (+18.6k) which saw an increase of 10.4k long contracts and -8.2k short contracts.
• Overall it was minor adjustments to net positioning last week. With the exception of CAD, all other majors saw weekly net change below 10k

DXY: The US Dollar Index is now net short for the first time since June 2014. Momentum suggests we could be in for a break of 93 this week and head for the 91.92 low. This would be a significant event if this were to break, although we doubt it would do so upon first attempt. For now the near-term bias is for losses, although we are also aware of the potential for this to correct. Euro (below) made a suspiciously small bullish close last week to warn of sideways trading, and commodity currencies remain our preferred long bets this week.

EUR: The close above the 2015 finally saw Euro break out of the 2.5yr range and likely has further to go from here. However, as last week’s range was relatively low and we have seen a slight reduction of hope interest, we suspect a pause in the rally may be due with potential for a correction. Even if we were to see sideways trading it would allow for rice to retest the bullish trendline where it could then make a run for 1.20.

JPY: The third consecutive bullish week presented a hanging man candle to warn of potential weakness. However, we have seen a drop of short interest and long interest which also brings into question the strength of the past three weeks. As long interest is on the decline we doubt it will break above 9,192, although if we are to see this break to the upside we would want to see an increase in long positioning to confirm it.

AUD: Net positioning is the most bullish since May 2016, although we also note a minor uptick in short interest. RBA are likely to verbally intervene as a rising currency creates issues for exports and growth, and this week’s RBA meeting may be the time to expect it. Technically it looks like it wants to push for the 0.8150 high, which is a likely outcome if the US Dollar continues to fall. As it is the Dollar’s weakness, not what RBA say that is the key driver here, so whilst US remains weak then AUD is on our bullish watchlist and RBS intervention is more likely to create a minor pullback over a reversal.

CAD: The close above the 2016 high last week puts the Canadian Dollar at its highest level since July 2015. The rally has been seen on rising bullish and falling bearish interest, making it a healthy trend with further upside potential. As BoC are less likely to verbally intervene, this makes CAD longs preferred over AUD, although both have potential to rise.

Price has managed to stay above the 0.7484 major broken static resistance and now is pressuring the warning line (WL3) again, a valid breakout will bring us a very good buying opportunity. However a rejection followed by a drop below the 0.7484 will confirm a drop towards the 0.7375 and towards the fourth warning line (wl4).

The USD/JPY is trading in the red and looks determined to resume the corrective phase, is trading right above the 110.50 level, but should touch the 109.50 very soon.

Personaly, I believe that the Yen will dominate the currency market in the upcoming weeks as the Nikkei could drop much deeper after several false breakouts above the 20058 major static resistance. JP225 is expected to approach and reach the 19700 level, a valid breakdown below this obstacle will open the door for more declines.

USD/JPY should reach the 50% retracement level and the warning line (wl1) of the former ascending pitchfork.

Price edges higher on the Daily chart and should reach fresh new highs in the upcoming period, is strongly bullish as the USDX has plunged again. The yellow metal move sideways, but with a bullish perspective, is located in the buyer’s territory after a valid breakout above some major resistance levels.

Gold has taken advantage of the weak dollar, the USDX should drop much deeper on the Daily chart because looks too heavy to be stopped. USDX is still expected to reach the 92.49 static support, where he could find support again, right now we don’t have any reversal sign because the United States data continues to come in mixed.

The Gold could climb much higher in the fresh start of the week if the Australian data will come in better, the HIA New Home sales and the MI Inflation will be released first, while the Private Sector Credit could increase by 0.4% and could match the 0.4% growth in the former reading period.

The Chinese Manufacturing PMI may increase from 51.7 to 51.5 signalling a further expansion, the Non-Manufacturing PMI will be released as well, a positive data will boost the Aussie, which will increase versus the greenback.

Price rallied on Friday and touched the 1270 level, should climb much higher in the upcoming days, the next upside target will be at the 38.2% retracement level. Most likely will ignore the mentioned obstacle if the USDX will slide further and could reach the 23.6% retracement level, which also represents the sideways movement resistance.

You can notice that the rate continues to move in range, but most likely will escape from this pattern after the breakout above the sliding line (descending dotted line).

USDCHF - With the pair rallying strongly higher the past week, more weakness is likely. On the downside, support lies at the 0.9650 level. A turn below here will open the door for more weakness towards the 0.9600 level and then the 0.9550 level. On the upside, resistance resides at the 0.9750 level where a break will clear the way for more strength to occur towards the 0.9800 level. Further out, resistance comes in at the 0.9850 level. Threatening further upside pressure. All in all, USDCHF faces further strength on price rally.

EURUSD - With the pair retaining its upside pressure the past week, more strength is likely in the new week. Resistance comes in at 1.1800 level with a cut through here opening the door for more upside towards the 1.1850 level. Further up, resistance lies at the 1.1900 level where a break will expose the 1.1950 level. Its weekly RSI is bullish and pointing higher suggesting more strength. Conversely, support lies at the 1.1700 level where a violation will aim at the 1.1650 level. A break of here will aim at the 1.1600 level. All in all, EURUSD faces further corrective downside pressure.

We know classic support and resistance forms where price has seen a reaction somewhere in the past, but traders want to look forward for EXPECTED support/resistance. Traders use forward looking support/resistance targets such as pivot points, average daily ranges or even fib extensions to get their fix. However, the most obvious of all is just a simple round number!

With the Aussie Dollar at a key psychological level, I thought it would be a good chance to take a look at why markets react at psychological round numbers. Anything with an 00 on the end grabs attention. It's simple human nature for us to be drawn into round numbers like this.

This is because as humans, we value simplicity. Psychological round numbers work as support/resistance because we think they work. It's a self fulfilling prophecy. Because we think they work, traders will place their stops and limit orders on either side of them, causing price to continue reacting and keeping the cycle of fulfillment alive. When order flow is altered in this way, price is going to react.

As a simple test oh the human psych effect to round numbers, ask someone how much they paid for their lunch today. If it was $4.99, then most likely they will round it up to $5.00 without even thinking.

Take a look at the Aussie Dollar today:

AUD/USD Daily:

The 80c resistance level has been tested, stops were cleared through it, the daily candle closed below the level and price is now heading back down. Yes, the psychological round number level has once again been respected.

Being based in Australia, the Aussie Dollar has added significance for me personally. Every finance section of news reports lead with AUD/USD and the 80c level is ALWAYS mentioned.

'The Aussie Dollar is back below the 80c US mark…'

As you can see on the AUD/USD chart above, it's all just self fulfilling.

I encourage you to watch for round numbers and how price reacts to them. You'll be surprised just how much markets are a reflection of human idiosyncrasies.

Appetite to Sell the Dollar

There remains real appetite to sell the USD even after the brash dollar sell off post-FOMC as it's becoming evident to all the Greenback has problems, and the can of worms is barely open.

The Dovish FOMC combined with the US political imbroglio saw little appetite for dollars heading into weeks end. But complicating the narrative this week will be month end flow, Eurozone CPI, GDP and US payrolls this week. However, on Tuesday the key US Price Consumption Expenditures index or PCE figures are released which could provide more transparency into the inflation as transitory narrative.

Inflation concerns remain in the FED spotlight, and with the market split on whether the FOMC may or may not raise interest rates again in 2017, any and all inflation metrics will be in focus. But given the PCE is Fed's preferred inflation gauge, the print could be this week's primary focal point.

Emerging from the Fed blackout traders turn to speeches by the Loretta Mester and John Williams, both scheduled for Thursday night.And while they're expected to toe the plank it's possible they may offer some fresh insight regarding the central bank's balance sheet “ relative soon” timeline

Euro

It's a huge week on the data front, but for USD bulls there's an unpalatable reality that with ECB members sounding increasingly hawkish and their FOMC counterparts ever so dovish anything to confirm this bias will be pounced on by traders.

With that in mind, it's a busy week on the EU economic diary, so a higher than expected Eurozone CPI on Monday and a strong follow up Eurozone GDP on Tuesday could see the single currency push above 1.1800 as the greenback struggles to find buyers on the dovish Fed narrative.

The current Euro strength is as much about broad USD weakness and with the plausibility that positioning is still not stretched, it not only suggests investors buying dips will cushion the downside but that the pair could accelerate much higher on sturdy EU economic data prints.

Japanese Yen

JPY had been enjoying a quiet Friday until the Japanese government reported that North Korea has test fired another missile. Yen immediately picked up the haven appeal and fell through 110.75 support on its way to 110.50

The geopolitical overhang will likely keep top side moves in check early in the week as the disorganised US and China policy towards North Korea is not helping matters

Australian Dollar

The Aussie moves have been nothing short of incredible, but we should be in for well overdue consolidation phase.But the AUDUSD at 80 cents is looking very expensive especially in the wake of Governor Lowe's speech which cut short any domestic rate hike expectation. However, the real play here is the weak USD and more specifically the dovish Fed which has encouraged the carry trade as speculators continue to pile in.

Little change expected on tomorrow's RBA decision given the recent guidance from both Debelle and Lowe. However, the domestic retail sales on Friday should be interesting as given the high level of household indebtedness, which begs the question are retail still spending?

EUR/USD surged further to as high as 1.1776 last week and outlook is unchanged. Whole rise from 1.0339 low is still in progress and should target 1.2 handle next. Nonetheless, considering bearish divergence condition in 4 hour MACD, break of 1.1612 will indicate short term topping and bring lengthier consolidation first.

In the bigger picture, an important bottom was formed at 1.0339 on bullish convergence condition in weekly MACD. Sustained break of 55 month EMA (now at 1.1760) will pave the way to key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516. While rise from 1.0339 is strong, there is no confirmation that it's developing into a long term up trend yet. Hence, we'll be cautious on strong resistance from 1.2516 to limit upside. But for now, medium term outlook will remain bullish as long as 1.1295 support holds, in case of pull back.

In the long term picture, 1.0339 is now seen as an important bottom as the down trend from 1.6039 (2008 high) could have completed. It's still early to decide whether price action form 1.0339 is developing into a corrective or impulsive move. But in either case, further rally would be seen to 38.2% retracement of 1.6039 to 1.0339 at 1.2516