Last updated: May 3rd, 2017 at 09:59 pm
Market sentiment has picked up as a confluence of factors that have been collectively driving safe haven flows have started to subside. The details of the proposals that Greece will put forward to the creditors on Friday seemed to show a willingness to make concessions on taxation, pensions and privatisation. The Greek parliament will vote on the proposals today and if passed then the submission will be debated over the weekend with the Eurozone leaders. Additionally, the huge sell-off in Chinese equities has bottomed (at least for now), whilst this has also helped the oil price to find support. Traders are turning away from safe haven assets such as the German Bund and the Japanese yen and this is allowing equities and riskier currencies to rebound. The markets are by no means out of the woods yet though with still big uncertainty over the outcome of the Greek negotiations, but at least for now there is an improvement in market sentiment.
Equity markets have been mixed, with a slightly higher close on Wall Street (S&P 500 up 0.2%), whilst the volatility continues in China, but this time a bounce of around 5% has been seen. The Japanese Nikkei was 0.4% lower. The European markets are strongly higher on the prospects of a deal. Forex trading shows a reversal in the fortunes of the currencies that had come under so much pressure earlier in the week, with all forex majors outperforming the dollar today, aside from the yen. Commodity prices are also benefitting as gold, silver and oil are all higher today.
There is little by way of economic data for traders to focus on today aside from UK trade balance at 0930BST which is forecast to be -£9.7bn, and Canadian unemployment at 1330BST which is expected to tick slightly higher to 6.9% from 6.8%. It is likely therefore that traders will move on newsflow around Greece once more.
Fibonacci strikes again! Or at least that is what seems to have happened as an upside projection of the 1.1916/1.2562 rally measured from the correction nadir at 1.2124 has found resistance for the past three days at the 100% Fib projection level at 1.2765. The price now appears to be rolling over. In the very least this is a consolidation around the Fib level but could turn into a correction again. Look at the momentum indicators, with the RSI peaking over 70 and crossing back below (a basic RSI sell signal) and the Stochastics now also threatening to cross back below 80 (a classic Stochastics sell signal). The fact also that this is all happening close to the key overhead resistance at 1.2833 is also interesting. The intraday hourly chart shows a loss of momentum whilst the key ear term support is at 1.2660which is coming under big pressure again. The loss of this support would complete a near term top pattern which would imply 1.2540, which interestingly enough is the next support area. USD/CAD is consolidating for now but the signals suggest it could be about to move into correction mode.
I am expending a lot of useless energy trying to figure out the why and the wherefores of movements on the euro at the moment. Perhaps I should simply just accept that the outlook for the chart will be determined by the negotiations over the weekend. It has almost got to a stage at which I think the rest of the market is in the same boat. The technicals are in a difficult moment as there is a lack of any conviction from a day to day basis in the candles and the momentum indicators that I use (RSI, Stochastics and MACD are giving little away. The intraday hourly chart shows a fairly rangebound outlook (which is fairly understandable). The overnight rally is now approaching the resistance at $1.1120, which without any further newsflow could well confine the bulls now as hourly momentum is beginning to roll over. Yesterday’s low at $1.0990 is supportive as is the key low at $1.0915. How I wish for an end to this sorry newsflow driven phase of trading.
After selling pressure that has lasted for around 3 weeks, there was an element of calm and support returned for sterling yesterday. The question is, how sustainable this is. A small up day yesterday was not as positive as it might have been as the closing price on the candle was below half of the daily range. Still though there has been another positive move today and perhaps it is a gradual recovery. The momentum indicators on the daily chart show nothing substantial yet, although the Stochastics are threatening to bottom. The intraday hourly chart is similarly nascent in its recovery as it currently just looks to be a consolidation move. The hourly RSI and MACD lines have unwound and are now up to a level at which previously within this bear phase over the past 3 weeks, the selling pressure has resumed. This makes trading today potentially quite important. Overhead resistance will be interesting, the initial $1.5420 being breached would be a positive as it would be a move back above yesterday’s high, but the main line of resistance is around $1.5470 which is also the 61.8% Fibonacci retracement of $1.5188/$1.5928 which capped a rebound earlier in the week.
During these times of changeable newsflow and shifting trading sentiment, you can often get sharp changes of outlook (or should that be false breaks?). In the past two days following what seemed to be a decisive break lower on Dollar/Yen, the move has been followed by a strong rebound. Yesterday was a day of testing the first key resistance of the 61.8% Fibonacci retracement at 121.54. A consistent ceiling barrier was being hit until late last night when the Asian session took over. This resistance was subsequently broken and then used as a basis of support. The old 122 breakout level has since become the basis of resistance, but this is now being put under pressure. There has been support now formed near term around 121.20 to 121.54 and dips are now being bought into. This could of course change completely over the weekend but for now at least the bulls are fighting back.
Gold is still a market to sell into strength. The candles in recent days have very long tails which suggests firstly a lack of conviction and secondly an inability for the bulls to gain any sort of control. The series of lower highs continues and with this in mind these attempted rallies back towards the resistance band that is now in place between $1170/$1174.70 look to be a chance to sell. The daily chart shows all moving averages in decline, with momentum indicators all bearish. The hourly chart shows a minor rebound in the past few days but again this is well contained within the overhead resistance and even already there seems to be a struggle overcoming resistance in the $1164/$1165 area. For now the very near term outlook is fairly settled and indecisive, but there is still an overriding bear pressure through the daily chart which suggests rallies will be sold into for a test of the lows at $1146.75 and then potentially $1142.85.
The WTI price has developed into a volatile consolidation, but is now looking to form a near term base pattern. The daily Stochastics have turned higher, whilst thedaily RSI has crossed back above 30 (both arguably bullish near term signals). The intraday hourly chart shows real pressure and the rebound has been testing resistance around $53.50 for a couple of days now. With hourly momentum indicators improving (after bullishly diverging) the prospects of a continued rebound are improving as early upside pressure today has seen the price breaking above $53.50. A decisive move above the resistance at $53.50 would now imply a rebound back towards $56.00. This would still constitute a pullback to the medium term key breakdown level at $56.50, and a near term technical rally. Intraday support comes in at $52.10 and $51.50 before Tuesday’s low at $50.58.
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