Sample Category Title

Key Points:

• ABC wave looking fairly likely to take shape.
• EMA crossover should see the B leg complete properly.
• Long-term trend line should cap downside risks at the end of the wave.

The Swissy has an interesting set up developing which could lead to both some upside and downside trading opportunities over the coming weeks. In the near-term, gains could continue to be posted all the way back up to the 1.0187 handle. In the medium-term however, we could see the USDCHF sinking back to test the trend line around the 0.9789 mark.

One of the key drivers of these moves is the development of a rather solid looking ABC wave. These waves have been seen for many crosses since the post-election rally and there is no real reason to suspect that the Swissy will be much different. Although, before we can be certain that this is indeed an ABC wave, we will have to see this pair move back to the 1.0187 mark.

Fortunately, we have some evidence to suggest that this is likely to come to pass within the next few weeks. Firstly, the daily EMA’s are on the cusp of having a bullish crossover which typically denotes a shift in sentiment from bearish to bullish. Indeed, the parabolic SAR has already inverted to signal that bullish momentum is on the rise and should be carrying the pair higher. Moreover, now that the USDCHF has closed above the key 38.2% Fibonacci level, there should be little in its way.

However, the brevity of this rally may be somewhat more pronounced than we would typically expect. This comes largely by virtue of the historical zone of resistance around the 1.0187 handle which should prove to be our reversal point. Whilst, yes, the pair has pushed beyond this price recently, the fact that it also coincides with the appropriate retracement for the B leg of the corrective wave should hinder attempts to break through again.

Once this reversal has occurred, losses should extend back to around the 0.9789 level before the USDCHF reaches yet another impasse. At this level, some strong historical support will come into play as a result of the long-term ascending trend line. Interestingly, this point once again coincides with the appropriate retracement typical of the forecasted ABC wave which won’t go unnoticed by traders.

Ultimately, whether or not this pattern eventuates is largely dependent on both US and Swiss economic data, alongside Trump’s day-to-day influence. However, due the likely uptick in market fears as Brexit approaches, we can expect the Franc’s safe haven status to begin to drag the pair lower in the medium-term. Of course, this broadly fits with the technical analysis above and is worth keeping in mind.

EUR/USD

The EUR/USD pair fell briefly below the 1.0600 threshold for the first time in over three weeks, as the "Trump-trade" continues firming up, with Wall Street reaching all-time highs for a third consecutive session. Action across the forex board was limited, as the calendar was extremely light in this first day of the week, although plenty of first-tier data will be released during the upcoming days, with German inflation, EU preliminary Q4 GDP, UK inflation and US PPI among the most relevant for this Tuesday. The positive mood was triggered by comments from US President Trump, after spending the weekend with Japanese PM Abe, who said that "bilateral co-operation is essential," between the two nations, somehow, toning down his rhetoric about foreign policy. Weighing on the common currency were comments from IMF Lagarde, who said that the organism can agree special deals for any country. The bailout program of the troubled country is under review, with the parts unable to reach an agreement that can save Athens from default.

The EUR/USD pair settled around the 1.0600 level by the end of the day, with a clear bearish stance having took one step further in its way to breaking below the critical 1.0565 support, the 23.6% retracement of the November/January decline. In the 4 hours chart, a bearish 20 SMA keeps containing the downside, now converging with the 200 SMA at 1.0650, whilst technical indicators hold within bearish territory, although with no certain directional strength, amid limited volumes. Advances up to the 1.0700/20 region will be likely be seen as selling opportunities, although a break beyond this last could see the recovery extending up to 1.0800/40, should upcoming US data disappoint big.

Support levels: 1.0590 1.0565 1.0520

Resistance levels: 1.0650 1.0690 1.0720

USD/JPY

The USD/JPY pair added modest 40 pips at the beginning of the week, surprisingly limited, despite rising US yields and equities. Early Monday, Japan released its Q4 GDP figures, showing that the economy expanded by 0.2% in the three months to December, and by 1% annually. The figures were slightly below market's expectations of 0.3% and 1.1% respectively, although Japan’s finance minister, Nobuteru Ishihara, said that the soft growth didn't affect the government’s view that the economy remains in a moderate recovery. During the upcoming Asians session, the country will release its December industrial production figures, with better-than-expected readings fueling confidence among local investors and resulting in the JPY easing further. From a technical point of view, the upward potential remains limited, given that the pair is below the critical 114.50/60 region, the 23.6% retracement of the latest bullish run, and where a bearish 200 SMA stands in the 4 hours chart. In the same time frame, the Momentum indicator has turned sharply lower, but remains within positive territory, while the RSI has also turned modestly lower around 60. The daily low was set at 113.43, the immediate support and the level to break to see the pair easing further below the 113.00 mark.

Support levels: 113.40 113.00 112.60

Resistance levels: 114.00 114.55 114.90

GBP/USD

The GBP/USD pair closed the day marginally higher around the 1.2500 level, with Pound's bulls offsetting moderate dollar's demand. Investors are waiting for the upcoming releases in the UK this week, with the kingdom set to publish its wholesale and retail inflation figures for January this Tuesday, generally expected above December final readings, and employment numbers next Wednesday. Focus will be on inflation, as a faster-than-expected pace of price growth, may force the BOE to revert its latest decision to cut rates to record lows, pushing the Pound higher as speculative interest rushes to price in the possible Central Bank's move. From a technical point of view, the pair met selling interest around the 23.6% retracement of the January/February rally this at 1.2535, the level to surpass to consider a more constructive outlook. In the 4 hours chart, the price is stuck around a horizontal 20 SMA, whilst technical indicators head nowhere around their mid-lines, reflecting the current investors' wait-and-see stance. Short term buying interest is aligned between 1.2470 and 1.2480, with a break below it probably resulting on a test of 1.2430, the next Fibonacci support.

Support levels: 1.2470 1.2430 1.2390

Resistance levels: 1.2535 1.2585 1.2620

GOLD

Spot gold fell to $1,219.26 a troy ounce this Monday, as risk appetite dominate the scene. The bright metal, however, bounced from the level to close the day around 1,226.50, on physical demand at the bullion market, as Indian jewelers bought to meet the wedding season demand. Also, limiting the slide were higher base-metal prices, on fears of copper shortages amid a strike in one of Chile's largest mine. The daily chart for gold indicates that the upward potential eased, but it's too early to call for a retracement, given that the price remains well above a bullish 20 DMA that remains above the 100 DMA, whilst technical indicators retreat, but remain within positive territory. In the 4 hours chart, the price is below a bearish 20 SMA that holds a few cents above the 50% retracement of the post-US election decline, this last around 1,230.00, while technical indicators have recovered within negative territory, holding below previous daily highs. Renewed selling interest below the mentioned daily low will likely see the commodity approaching the critical 1,200 region this Tuesday, where the latest bullish movement will be at risk of reversing.

Support levels: 1,219.20 1,210.10 1,200.00

Resistance levels: 1,230.00 1,237.10 1,244.70

WTI CRUDE

West Texas Intermediate crude oil futures advanced for a second consecutive day, with the commodity setting a couple of cents above 53.00. WTI set a daily high of $53.20 a barrel, still underpinned by Wednesday's news, showing an unexpected draw in US gasoline stockpiles that suggest rising demand for the commodity. Despite a large build in crude inventories, the commodity advanced for a second consecutive day, although the price continues developing within the range set mid December. Technically, the daily chart shows that the price is now around a flat 20 SMA, whilst technical indicators have turned flat around their mid-lines, indicating a limited upward scope. In the 4 hours chart, the price advanced beyond a still bearish 20 SMA, but is currently struggling with the 100 and 200 SMAs, both flat, whilst the Momentum indicator heads higher above its 100 level and the RSI remains flat around 54, in line with the longer term view.

Support levels: 52.50 51.80 51.10

Resistance levels: 53.20 53.65 54.20

DJIA

US equities extended their Thursday's rally, with all of the three major indexes closing the day at all-time highs. On Friday, the Dow Jones Industrial Average added 96 points or 0.48% to end at 20,269.37, while the S&P gained 0.36% to 2,316.10. The Nasdaq Composite settled at 5,734.13, up by 18 points. Stocks rallied on Trump's promises of an upcoming tax reform, and a recovery in oil prices that lifted the energy sector. Within the Dow, Caterpillar led gainers, up by 2.50%, followed by NIKE that added 1.65% and Boeing, up by 1.19%. On the losing side, Coca-Cola topped losers' list, down 1.62%, followed by Wal-Mart Stores that shed 1.53%. From a technical point of view, the upside is favored given that in the daily chart the Dow is well above a modestly bullish 20 SMA, whilst the RSI indicator heads higher around 70, with the Momentum indicator, however, diverging, neutral around its 100 line. In the 4 hours chart, the bias is firmly bullish with the index well above a bullish 20 SMA, the Momentum indicator heading north near overbought readings and the RSI hovering around 72.

Support levels: 20,228 20,157 20,090

Resistance levels: 20,297 20,350 20,415

FTSE 100

The FTSE 100 closed the day at 7,278.92, up by 20 points or 0.28%, underpinned by an advance in mining-related equities. Despite Pound's strength, a strike in Chile's largest copper mine kept the benchmark afloat. Anglo American gained 4.21%, Rio Tint 3.0% while Glencore added 2.56%, all topping gainers´ list. Capita, on the other hand, was the worst performer, down by 2.38%, followed by Fresnillo that lost 1.99%. In the daily chart, the upward momentum is fading in technical indicators, although they remain within positive territory, whilst the index stands above a bearish 20 DMA, currently at 7,190. In the shorter term and according to the 4 hours chart, the risk is towards the upside, as technical indicators have turned flat near overbought readings, but the benchmark stands above a bullish 20 SMA and not far from the record high posted last January at 7,354.

Support levels: 7,208 7,163 7,128

Resistance levels: 7,275 7,326 7,354

DAX

The German DAX advanced 108 points or 0.92% to close at its highest in over two weeks, as European equities benefited from a rally in basic resources´ stocks that began in Asia. Volkswagen was the best performer, up by 2.42%, while Deutsche Bank also made it to the top ten list, closing up 1.65%. Commerzbank was unable to follow suit, ending the day 0.34% lower. The index is biased higher according to technical readings in the daily chart, as it stands above a horizontal 20 DMA, whilst the Momentum indicator aims modestly higher around its 100 level, and the RSI indicator heads north around 62. In the shorter term, and according to the 4 hours chart, the 20 SMA has turned higher, now converging with the 100 SMA around 11,640, the Momentum indicator advances near overbought readings, whilst the RSI indicator consolidates within overbought readings, also maintaining the risk towards the upside.

Support levels: 11,745 11,694 11,640

Resistance levels: 11,815 11,854 11,891

Daily Pivots: (S1) 1.0572; (P) 1.0615 (R1) 1.0639; More.....

EUR/USD's fall from 1.0828 is still in progress and intraday bias remains on the downside. Corrective rise from 1.0339 should have completed at 1.0828 already. Decline from there should target a test on 1.0339 low first. Decisive break there will confirm resumption of medium term down trend. On the upside, however, above 1.0713 minor resistance will delay the bearish case and turn bias neutral first.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 113.37; (P) 113.77; (R1) 114.13; More...

USD/JPY's rebound from 111.58 is still in progress and intraday bias remains on the upside. Correction from 118.65 should have completed at 111.58, on bullish convergence condition in 4 hour MACD. Further rally would be seen to 115.36 resistance. Break will confirm this bullish case and target 118.65 high next. In that case, the larger rally from 98.97 could be resuming. On the downside, below 112.85 minor support will dampen this bullish view and could extend the correction from 118.65. In that case, downside should be contained by 38.2% retracement of 98.97 to 118.65 at 111.13 and bring rebound.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. The impulsive structure of the rise from 98.97 suggests that the correction is completed and larger up trend is resuming. Decisive break of 125.85 will confirm and target 61.8% projection of 75.56 to 125.85 from 98.97 at 130.04 and then 135.20 long term resistance. Rejection from 125.85 and below will extend the consolidation with another falling leg before up trend resumption.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.2483; (P) 1.2511; (R1) 1.2551; More...

GBP/USD is staying in range of 1.2346/2705 and intraday bias remains neutral. Price actions from 1.1946 are viewed as a consolidation pattern, with rise from 1.1986 as the third leg. In case of another rise, we'd expect upside to be limited by 1.2774 to bring larger down trend resumption. On the downside, below 1.2346 will revive the case that such consolidation is completed at 1.2705 already. In that case, intraday bias will turn back to the downside for retesting 1.1946 low.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term bottoming yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.0026; (P) 1.0048; (R1) 1.0077; More.....

USD/CHF's rebound from 0.9860 short term bottom is still in progress and intraday bias remains the upside. Sustained trading above 55 day EMA (now at 1.0038) will pave the way for a test on 1.0342 high. On the downside, below 0.9985 minor support will turn focus back to 0.9860 instead.

In the bigger picture, prior rejection from 1.0327 resistance argues that USD/CHF is staying in a medium term sideway pattern. In any case, decisive break of 1.0342 resistance is needed to confirm underlying strength. Otherwise, we'll stay neutral in the pair first. In case of another fall, we'd expect strong support from 0.9443/9548 support zone. Meanwhile firm break of 1.0342 will target 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 0.7620; (P) 0.7650; (R1) 0.7670; More...

Intraday bias in AUD/USD remains neutral for the moment. With 0.7510 support intact, further rise cannot be ruled out. However, lost of upside momentum is seen in bearish divergence condition in 4 hours MACD. We'd expect strong resistance from 0.7777/7833 resistance zone to limit upside and bring near term reversal. On the downside, break of 0.7510 minor support will indicate that rise from 0.7158 has completed already and turn bias back to the downside for this key near term support level.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seek to 55 month EMA (now at 0.8205) and above.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Daily Pivots: (S1) 1.3041; (P) 1.3099; (R1) 1.3139; More...

USD/CAD is staying in range of 1.2968/3211 and intraday bias remains neutral. Near term outlook stays mixed. On the upside, break of 1.3387 resistance will confirm that fall from 1.3598 has completed at 1.2968. And more importantly, rise from 1.2460 is still in progress. In that case, intraday bias will be turned back to the upside for 1.3598 and above. On the downside, below 1.2968 will revive the case that rise from 1.2460 is completed and turn outlook bearish for this low. Overall, choppy rise from 1.2460 is still seen as a corrective move.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg could be completed at 1.3598 and fall from there is tentatively seen as the third leg. Break of 1.2460 will target 50% retracement of 0.9460 to 1.4689 at 1.2075 before completing the correction. In case of another rise, we'd look for reversal signal above 61.8% retracement of 1.4689 to 1.2460 at 1.3838.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box

Near term crude oil outlook:

No change as the market remains in that $55.25/$50.71 range that has been in place since Jan 3rd. Still seen as a large topping near the ceiling of the rising wedge pattern since Jun, and with eventual declines to the base/bullish trendline from Aug (currently at $44.50/00). However as been discussing for some time, there is no confirmation of such a top "pattern-wise" (5 waves down for example), leaving open scope for a further period of this ranging and even a retest of the ceiling of the wedge before finally rolling over (see in red on daily chart below). Also may be forming a triangle/pennant from that Jan high, generally seen as a continuation pattern and adds to the near term risk of a final pop above that $55.25 to that ceiling of the wedge (currently at $55.50/00) and before rolling over (triangles are generally viewed as continuation patterns). Nearby support is seen at $52.50/75 and the base of the triangle (currently at $51.10/35, close below would argue a larger rolling over). Nearby resistance is seen at the ceiling/bearish trendline from Jan 3rd (currently at $51.10/35). Bottom line: view of an important top/topping and eventual declines to the bull trendline from Aug/base of rising wedge (currently at $44.50/00) remains, but still risk for a further period of topping first.

Strategy/position:

With scope for more ranging and even a retest of the ceiling of the huge wedge (and only if more aggressive), would now buy $0.25 above the base of the triangle and then initially stopping on a close $0.25 below. However with such upside likely limited/short-lived (in the bigger picture), will want to get much more aggressive with stops on nearby gains and especially an upside resolution of the triangle/bear trendline from the Jan high (to maintain a good risk/reward in the position).

Long term outlook:

As discussed above, no change as the market continues to form that large rising wedge pattern since last June. Seen as a topping/reversal pattern and along with technicals that have not confirmed the last few months of gains and generally poor upside momentum, suggests a more significant topping. Note too that the longer term market remains bearish from a "simple" supply/demand standpoint as EIA inventories remain well above their 5 year average and are pushing back to their June peaks (see 3rd chart below). But wedge patterns break down into 5 legs and in turn leaves open scope for a more extended period of ranging (at least another few months) before finally rolling/resolving lower (see in red on weekly chart/'2nnd chart below). Long term resistance above the ceiling of the wedge is seen at seen at $59.00/25 (38% retracement from the Aug 2013 high at $112.24) and the ceiling of the bearish channel from Jun 2014 (currently at $60.75/25). Bottom line: important topping near the ceiling of the rising wedge since June but scope for at least another few months of large swings in both directions in the pattern before finally rolling over.

Strategy/position:

With a potentially more important top also forming, would await higher confidence of at least a short term top before entering.

Current:

Nearer term : if more aggressive, buy $0.25above base of triangle from Jan for final pop to new highs.
Last : short Dec 12 at $53.50, took prof Jan 20 above t-line frm high ($52.15, closd $52.42, $1.08 prof).

Longer term : important topping, await higher confidence of at least near term top to switch to bear.
Last : bear bias Dec 12th at $53.50 to neutral Jan 20th at $52.42.

STOCKS

Overall the major indices are trading higher and look potentially strong for the week.

Dow (20412.16, +0.70%) has broken above the 20400 levels without seeing any rejection yet. The bulls look strong and if it maintains above 20400, it could move up towards 20600 or even higher in the near term. A rejection from either 20600 or 20800 is possible in the middle term while the index remains above 20400.

Dax (11774.43, +0.92%) also moved up but could not break above 11820 yesterday. We may see a test of 11820-11930 region in the next few sessions before coming off again.

Nikkei (19431.46, -0.14%) is trading a little lower today. Resistance near 19620 may hold good in the near term bringing back the index towards 19260 or lower. Overall the broad 19000-19620 region could be the band for the next few sessions.

Shanghai (3213.19, -0.10%) looks positive and while above 3200, it can continue the rally towards 3300 in the near term.

Nifty (8805.05, +0.13%) could test 8900-8970 levels in the near term before a corrective dip is seen. Immediate trend is up.

COMMODITIES

Gold (1226.46) has weakened a bit due to a firm Dollar (100.97) but the medium term uptrend remains intact as long as the major support of 1205-1200 holds. This week may see a continued sideways consolidation un the range of 1220-50.

Silver (17.85) is stalling near the resistance of 18.00-10 as expected but near term weakness would be confirmed only on a break below 17.50. Till then, it can oscillate in the narrowing range of 17.50-18.10.

Both Brent (55.78) and WTI (53.08) have suffered rejection at the higher end of their respective ranges as expected which keep the medium term broader ranges of 53-58 and 50-55 intact. This sideways consolidation may continue for the rest of the week.

Copper (2.79) is consolidating the sharp gains made this week but to keep the bullish momentum intact and higher targets of 2.90-95 open, it must hold above the interim support of 2.75

FOREX

The January Consumer Inflation expectations in US has hit a 19-month high, keeping the Dollar firm against the other majors but the Fed chair Yellen’s Congressional testimony tonight may be the near term decider.

Dollar Index (100.99) is sustaining the higher levels as no rejection is visible from the resistance of 101.00. The chances of further rise to 101.75-102.00 have increased now but the near term path may depend on the Yellen testimony tonight.

Euro (1.0598) is trading near an interim support at 1.0590 but may decline further to test 1.0530-00 levels depending on the Yellen testimony.

Dollar-Yen (113.72) has been holding above the support of 113.50 but needs a break above the minor resistance of 114.30 to extend the rise to 115-116.

Pound (1.2523) keeps oscillating in the range of 1.2350-1.2700 which may continue for the rest of the week. From a larger perspective, it must be noted that any Brexit related issues are not impacting the currency that much.

Aussie (0.7672) is stuck in a contracting range of 0.76-0.77 for the 9th session but may break out of the range soon enough. Repeat - while the trend is still up, the proximity of the major resistance near 0.7750-0.7800 warrants caution as the chances of a sudden reversal can’t be ruled out.

Dollar Rupee (67.01) is trading sideways in the range of 66.80-67.07, keeping the bias neutral. Only a break on either side of the 66.80-67.07 range may give immediate direction clarity.

INTEREST RATES

The US yields have risen slightly. The 5Yr (1.93%), 10YR (2.45%) and the 30YR (3.04%) are higher from previous levels of 1.91%, 2.43% and 3.03% respectively. The 30Yr and the 10Yr yield is headed towards 3.1% and 2.50-2.75% respectively in the near term.

The Japanese 30YR (0.85%) yield has risen slightly and could head towards 0.9% in the near term.

The UK yields are also trading higher. The 5Yr (0.48%), 10Yr (1.39%) and the 20YR (1.87%) are all higher from previous levels of 0.45%, 1.34% and 1.83% respectively.