Last updated: May 3rd, 2017 at 09:58 pm
As we run up to the Fed statement on Wednesday sentiment has turned more cautious, however the decline in the oil price back towards its key medium term support has not helped either. Once another monthly decline in China industrial profits has been also considered, the outlook for the news trading day in Europe has not been too great. Wall Street drifted to slight losses at the close with the S&P 500 off 0.2%, whilst Asian markets were also mixed to weaker with the Nikkei down 0.9%. So this has left European markets trading on the back foot in early moves and few positives to point towards to drive any bullish sentiment today. As such there is a negative bias towards trading today and the downside pressure on oil is not helping.
Forex trading has been interesting as there has been a slight turnaround in the dollar positive sentiment that we finished last week with. A slight element of profit-taking has seen some of these major pairs unwinding their moves. This is something that began yesterday on the euro and Japanese yen, whilst the gold price is also looking to now be averting the previous slide. The oil price is a significant concern though, with $43.20 key support on WTI now within touching distance (the equivalent is around $46.00 on Brent Crude).
European traders will be looking out for the first reading of UK GDP at 0930GMT which is forecast to come in at around 0.6% for the quarter. The US Durable Goods Orders are at 1230GMT (remember the clock change!) which are forecast to fall by -1.2% for the month. The Case Shiller Home Prices are forecast to improve to 5.1% for the year on year data at 1300GMT, whilst the US Consumer Confidence is at 1400GMT and is expected to stay at 103.00.
I have spoken frequently over the past few weeks about the range that Euro/Yen has been trading in. The support continues to return around 133 before a rally back towards 137. Once more the support around 133 seems to be doing a good job as the market has bounced on an intraday basis to form a positive “bull hammer” candle. Whilst the pair has slide back again today, this hammer candle would suggest that the buyers are ready to return again and the prospect of meaningful support again around 133 is high. There is little currently in the momentum indicators that would suggest a decisive break of the 133 support will be seen, with the RSI around levels where the rallies have been based from in the past 6 weeks. The intraday hourly chart shows that the near term momentum has improved and the initial resistance band at 133.90/134.25 needs to be breached for this range play to continue.
After two precipitous days of selling, the euro finally found some sort of a near term low at $1.0987 yesterday to form a decent recovery candle. However, the euro has now bounced back into what I now see as a 50 pip band of medium term resistance between $1.1050/$1.1100. The old pivot band which had been supportive for so many weeks could well now be seen as a basis of resistance. With the change of outlook, these little technical rallies are likely to now be seen as a chance to sell, so it will be interesting to see how far this bounce can go. The daily momentum indicators are bearishly configured but not excessively so. The intraday hourly chart suggests this move has been simply helping to unwind oversold conditions and is unlikely to be long before the selling pressure resumes. Above the pivot band there is also a near term resistance at $1.1140, above which would certainly improve the near term outlook.
I still see Cable as a choppy rangeplay and within that the $1.5200 support is increasingly important for the overall perception of the outlook. A failure here would suggest the pressure of the dollar bulls was mounting for a real test of the range lows. However whilst $1.5200 is intact, the outlook will remain fairly neutral. The moving averages are all rather benign, whilst the momentum indicators are also neutral (aside from the Stochastics which have been falling to reflect the recent decline, but even that is beginning to slow). So with the minor support forming at $1.5300 with a (semi) bullish candle the sterling bulls will have been happier. Although Cable is 50 pips off yesterday’s low, there is still a slight bearish bias near term, with the intraday hourly chart showing the series of lower highs in the past few days. The hourly momentum shows a degree of unwinding oversold momentum and with overhead supply of resistance at $1.5280 and more significantly around $1.5415, the bias would be to use this rally as a near term selling opportunity. However whilst $1.5200 is intact as a support the strategy will be for short term trading.
Once more, the rangeplay is alive and well. The resistance formed yesterday has left a high at 121.51 which is below the key August rebound high at 121.70. I said in my analysis video yesterday that I felt it interesting that the 144 day moving average was also a barrier (currently at 121.60), as was the 61.8% Fibonacci retracement at 121.90. The daily momentum indicators have rolled over again, with the Stochastics close to a near term sell signal again. The intraday hourly chart shows the slide in the price in the past day or so and the need to now hold above the support at 121.20. There has been an unwinding of the stretched momentum and if the dollar bulls are looking for a serious test of the range resistance then they will have to return to support today again around 120.45 to maintain an uptrend that has been in place since 15th October. A move back below the old pivot level around 120.00 would neutralise the outlook within the range once more.
There is a real uncertainty with the outlook at the moment. The last three completed candles have all got very small bodies which suggest there has been no overall control on the day for either the bulls or the bears. The fact that this is coming within the support band of $1156/$1170 that I have been talking about is something that I find increasingly interesting. The recent trading has settled what had previously threatened to become a corrective outlook that may abort the increasingly positive outlook. However, it may be a slow burner this one as the bulls are still holding above the 144 day moving average, the momentum indicators on the daily chart are still broadly in positive configuration and the corrective slide has been calmed at $1158.80. Certainly the hourly chart suggests that it has become more of a range play now as the hourly RSI fluctuates around 30 to 70 and the hourly moving averages have settled. Perhaps this will be the case in the run up to the Fed now, but we await the next decisive signal. A move back above $1170 would be a positive signal with the key near term resistance now at $1180.30.
The price of WTI has now fallen for 9 of the past 11 sessions and continues to slide to within touching distance now of the key support at $43.20. Daily momentum indicators continue to reflect the negative momentum and suggest downside pressure remains high with both the RSI and Stochastics falling at 2 month lows and the MACD lines also now in decline. Interestingly, the 2.0 standard deviation Bollinger Bands remain flat with the lower band currently at $43.35. This is another factor suggesting pressure on $43.20, but also could help to prevent a decisive breach. The intraday hourly chart shows the near term resistance at $44.90 growing as rallies continue to fall over at lower levels, with further resistance at $46.00 and $46.50. A move below $43.20 and there is little real support until the critical low at $37.75.
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