10/04/2015: US dollar looks to consolidate the gains on a quiet end to the week

Market Overview

Since the FOMC minutes were released on Wednesday, what had been a consolidation is turning back into a trend of dollar strength once more. There have been some key breaks on major forex pairs that show the dollar bulls are regaining the upper hand. A spike higher in Treasury yields yesterday also backs this assertion. Equity markets have been mixed recently, with Wall Street being held back by concerns over how the strength of the dollar will impact on earnings season that is just going, whilst also a fear of what Fed tightening might also do. The S&P 500 again struggled to gain any traction with a close of +0.4% (despite the sharp gains in Europe yesterday. Asian markets were supported overnight, with the Nikkei positive again as the Japanese yen weakened. There were also signs of a stabilization in Chinese inflation which held at 1.4%. European markets once again are trading mildly higher, remaining supported by yesterday’s news that Greece was able to repay its €450m loan from the IMF thus meaning that its back could continue to access emergency funding.

Forex trading shows that there is a slightly mixed outlook today, with sterling again under pressure but the yen just holding on once more. There is little from a European perspective for traders to get too worked up over today, however the UK Industrial Production numbers will certainly be of interest to sterling traders. There is an expectation of a dip to +0.4% for the year on year data at 0930BST. Other than that it is just Canadian unemployment at 1330BST, which is expected to stay steady at 6.8%.

Chart of the Day – Silver

The medium term technical aspects on the silver chart are beginning to look  little concerning again. Since the shooting star candle was posted on Monday there have been three sharply negative candles which have done some significant damage to the outlook. A decisive break of the support at $16.40 has come with the Stochastics and RSI falling sharply. Furthermore, there has also been a MACD crossover sell signal. This is all coming as several moving averages (55,89,144) have all converged to turn down in bearish sequence. This would suggest that selling into strength looks to now be the strategy. Interestingly if you take the breakdown at $16.40 as a small double top there can be a downside target of $15.50 extrapolated. This coincides with a retest of the old lows from December, January and March. The neckline at $16.40 becomes the near term resistance, and today’s attempted rally looks to be  chance to sell. It would need a move above the historic pivot level at $16.70 to abort the bearish control now.

Silver   10042015


The selling pressure is beginning to impact on the euro once more. Yesterday we saw a breakdown of the support at $1.0712 which took the pair to a new 3 week low, but more importantly now suggests that the rebound that we had seen in the wake of the latest FOMC meeting is coming to an end. The fact that the breakdown yesterday came in the session following a slightly hawkish set of FOMC meeting minutes should also not go unnoticed. The technical momentum indicators on the daily chart are certainly now beginning to deteriorate, with the Stochastics falling and at their lowest in three weeks. However we are yet to see confirmation across the board with the MACD lines yet to complete a bearish cross and the RSI just holding up. Watch the intraday hourly chart for an opportunity to sell now. With plenty of overhead supply in the band between $1.0712/$1.0800 now in place any rally intraday should be seen as a chance to sell. I expect that there will now be a move back towards a test of the low at $1.0612 before further losses towards the key low at $1.0456.

EURUSD   10042015


A sharp deterioration in the latter part of the session yesterday ensured a significantly negative daily candle was posted on Cable which now leaves a test of the key low at $1.4632 wide open. There has been a deterioration in the momentum indicators with RSI and Stochastics both confirming the move. Turning negative again around 38, the RSI certainly has further downside potential and it would appear to be only a matter of time before serious pressure is applied to $1.4632 and a likely further decline. The intraday hourly chart shows that there is a basis of support around $1.4700 which has again looked to hold up the sell-off but it would appear that rallies should now be seen as a chance to sell again. There is now a strong band of near term resistance between $1.4750/$1.4800. It would probably need a move above $1.4860 resistance to avert the bear control now.

GBPUSD   10042015


It appears as though the dollar bulls are now gradually asserting control, however how sustainable the move is remains to be seen. Dollar/Yen is a chart that is littered with false dawns and I am somewhat loathe to back a strong run higher in the knowledge that consistently in the past few weeks when it looks as though a trend is beginning to form, there is a retracement to unwind all the good work. However we do see the RSI and Stochastics at a 3 week high confirming a move above the near term resistance band 120.30/120.60, whilst the pair is also trading above all the moving averages. The intraday hourly chart now shows two higher lows have been posted above the 119.40 pivot level, at 119.60 and then with a bullish key one hour reversal at 119.83. These are levels the bulls now need to keep hold of. Furthermore, confirmation of the breakout above 120.60 needs to be seen today. There has been some consolidation early today, but a break back above the 120.74 peak from yesterday re-opens 121.20 and ultimately the key high at 122.00.

USDJPY   10042015


The correction on gold has now seen four successive bearish candles as the move has dragged the price back below $1200 once more. I spoke yesterday above the support of the old low at $1190.90 and this held yesterday and has held so far during the Asian trade. Taking a step back, gold still holds on to the higher low in place at $1178.00 and until this is breached then the medium term bears cannot be in control. Also the 21 day moving average (at $1188.60) which had been resistance is now supportive and the RSI is still above 50, just. I see this as more of a range play between $1178/$224 for now, especially if the support at $1190.90 continues to hold today. Yesterday’s minor reaction high at $1202.50 is the near term resistance and a breach would also help to suggest a range play. Upside resistance would then be at $1207 and $1214.20.

Gold   10042015


The sharp retracement of Wednesday formed some consolidation just in time to keep the bulls still in near to medium term control on WTI. The uptrend that has formed since the 18th April low remains intact and probably more importantly the support of the pivot level around $50, as shown on the hourly chart, remains intact.  This is an important level that is a key near term tipping point on the difference between a bullish outlook for a test of the key resistance around $54.24 and simply a continuation of the range for a likely dip back towards the support at $47.00. Daily technical indicators are mixed with a cross on the Stochastics certainly not going to enthuse the bulls. This makes today’s trading important for the near term outlook as the bolstering of support at $50 will give the bulls confidence. Yesterday’s reaction high at $52.07 is the near term resistance that is now preventing a run back to the highs again at $54.24.

WTI   10042015

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