Daily EURUSD & GBPUSD Analysis by HotForex

Stan · Nov 26, 2014

EURUSD ranging before the CPI releases

Business confidence in Germany rose for the first time in seven months. On Monday the German IFO business climate survey surprised to the upside being 104.7 instead of 103.0 as expected. The German GDP figures (0.1%) for the last quarter were left well behind of those released in the US on Tuesday. The preliminary GDP in the US was more positive than analysts expected with the figure being at 3.9%. That is 0.6% better than expected. On Thursday we will have preliminary inflation figures from Germany and then the euro area CPI estimate on Friday. The logic from the fundamental side suggests that should these statistics show that there is no inflation the pressure on the ECB to act sooner will grow. The focus of the central bank is now on inflation and therefore signs that the euro area might be heading towards deflation should cause the market participants to adjust their positions accordingly and sell euro.

EURUSD, Monthly

From technical point of view EURUSD is now at a major support area that has been able to turn traders from bearish to bullish (and price higher) in several occasions in the past. Since 2006 none of the moves below the current level have been sustainable in medium to long term. In 2009 this very level turned price higher in two occasions and in 2010 we had an attempt to take EURUSD below 1.20. This failed even though the euro crisis was at its worst and market participants sought safety from the US Dollar. Many analysts interviewed in Bloomberg TV at the time shared their views on how they expected EUR to move to parity with the US Dollar (one euro would be worth one US Dollar). Now, we have stimulus promises from the ECB president Mario Draghi that have made analysts suggest that EUR will move as low as 1.15. This would mean euro visiting levels it has not seen since November 2003. Will the coming QE mean it is different this time and this move to 1.15 might actually happen? Obviously this is possible, but in the light of current price action it is not likely to happen immediately. This far Mr. Draqhi has been able to talk the market down but in terms of tangible and meaningful action he has not been able to deliver much. In terms of economic growth prospects in the euro area and the United States it makes sense assume that the Dollar will be favoured by the markets in the long run but as we are looking for short term trading opportunities it makes sense to concentrate on the current price action as it develops and technical setups available for us today and over the rest of the week. The downside momentum has clearly slowed down with market being close to forming a small narrow range bar in monthly time frame. The price is at a monthly pivot from 2010 and at the Bollinger bands. If the support holds for the rest of the week and through the euro area CPI releases, we have a monthly narrow range bar indicating that market is at a turning point. In my experience technical levels will prevail unless some unexpected news exceeds the expectations and traders have to quickly revalue the underlying assets and their strategies. This could cause the market move beyond major technical support and resistance levels.

EURUSD, Daily

In the daily chart we can see that EURUSD is forming a bullish wedge. In fact, it can be seen in both weekly and daily charts. Both RSI and Stochastic Oscillator have bullish divergence as price moves below 1.2360 have been rejected twice. This has created a short term double bottom. In addition, the pair has once again moved away from the regression channel, a further indication of momentum slowdown. Resistance levels at daily pivot candle are also weekly resistance levels. As they coincide with a descending trendline and the proximity of Bollinger Bands I am looking for short signals between 1.2512 and the daily Bollinger Bands (1.5 stdv Band currently at 1.2568).

EURUSD, 240 min

In the four hour chart the pair is in a range, so selling the resistance levels and buying at support is the preferred strategy. The price is now approaching the 1.2512 resistance (weekly and daily pivot) with the Bollinger bands stalling the current move a bit. Pay attention to the area between weekly resistance at 1.2512 and a daily high at 1.2568 that also coincides with the descending trend line. I am looking for short signals at or above 1.2512 (a momentum reversal confirming the trade idea). As we are in a range I would look to buy either in the region of 1.2400 or close the support at 1.2360. Again the momentum changes in 15 min and or 60 min resolutions will help us to decide whether to stay short or cover.

Conclusion:

From technical point of view EURUSD is now at a major support area that has been able to turn traders from bearish to bullish (and price higher) in several occasions in the past. The downside momentum has clearly slowed down with market being close to forming a small narrow range bar in monthly time frame. The price is at a monthly pivot from 2010 and at the Bollinger bands. If the support holds for the rest of the week and through the euro area CPI releases, we have a monthly narrow range bar indicating that market is at a turning point. In weekly and daily chart we can see that EURUSD is forming a bullish wedge. In the four hour chart the pair is in a range, so selling the resistance levels and buying at support is the preferred strategy. I am looking for short signals at or above 1.2512 (a momentum reversal confirming the trade idea). As we are in a range I would look to buy either in the region of 1.2400 or close the support at 1.2360. Momentum changes in 15 min and or 60 min resolutions will help us to decide whether to stay short or cover.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Dec 1, 2014

Disappointing Black Friday sales turns S&P 500 futures lower

Retailers struggled to entice shoppers with their Black Friday offerings. Spending dropped by an estimated 11% over the weekend. Consumer spending fell to $50.9 billion from $57.4 billion in 2013 and made this the second Black Friday in the row that saw the sales figures tumbling. Even though retailers had aggressive discounts and longer opening hours many of the shoppers stayed at home. It was estimated that more than six million shoppers that had been expected to come did not want to or just simply could not afford to join the Black Friday shopping circus. This has raised concerns of how well the recovery in the US economy is doing.

S&P 500, Weekly

The S&P 500 emini future (ES) created a narrow range candle last week. This implies no demand at those levels and increases probabilities of a sizeable correction. Up volume in the NYSE (New York Stock Exchange) has moved to so high levels that in the light of recent history cannot be sustained. In the past this has caused the market to move sideways and/or correct lower. ES has now moved below the last week’s low of 2060.75 which should limit any immediate rally attempts while the Stochastic Oscillator is overbought and about to roll over. A more significant weekly support level can be found at September high of 2014.50 with a Fibonacci level nearby at 2010.44, while weekly resistance levels are at 2060.75 and 2075.25 (the range of this weekly pivot high).

S&P 500, 240 min

Money Flow Index and Stochastics have had bearish divergence while volume has been trending lower over the month of November. This means that there has been less participation in this market and has had obviously bearish implications. Since 21st November the decline in the average volume has been intensifying but it can be at least partly explained by the long weekend due to the thanks giving day in States. However, the bearish indication that this kind of development has was confirmed by the creation of a weekly narrow range candle last week and price now moving below it. Trading started this week with a gap opening lower, which is a further indication of weakness in demand. The last time we’ve had a gap opening lower after a period of rising prices, was on 22nd of September and lead to a 9% correction in the S&P emini and stocks in general.

S&P 500, 60 min

Daily high from 18th November has provided some support this morning but the intraday resistance between 2057.50 and 2059.50 has at the time of writing provided a short term sell signal (a 15 min shooting star in the insert) and confirmed the downward bias for today.

Conclusion

A narrow range candle last week is an implication that there is no demand at those levels and increases probabilities of a correction. At the same time oscillators are rolling over from overbought zone and trading started this week with a gap opening lower, all these are further indications of weakness in demand. The last time we’ve had a gap opening lower after a period of rising prices, was on 22nd of September. This lead to a 9% correction in the S&P emini and it therefore makes sense to therefore look for a correction to at least to the next important weekly support level at 2014.50, the weekly pivot high from September. If the price keeps on making lower highs in the intraday charts and keeps on giving sell signals at resistance levels (similar to the 15 min insert) I would keep on trading them and look to go long only if this pattern is broken or ES moves to the 2014.50 support where I believe we have some potential of finding more lasting support. Always look for momentum reversal signals to confirm the support and resistance levels.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Dec 5, 2014

“There is a tremendous shortage of physical gold in the world”

This week started with a big rally in the price of gold even though the news that Swiss voters rejected the proposal to buy more physical Gold should have sent the price lower. The upsurge in the price of Gold from 1141 to 1221 (a move of 7%) has been credited by analysts with the price of Crude Oil surging higher at the same time. With the price of Crude Oil being an important component in inflation measurements an up move in the price of oil would therefore create a need to hedge against inflation, which is what Gold is widely thought to be.

However, the fact that this move in the price of Gold took place after it was confirmed that the 7% annual demand increase for physical Gold by the Swiss central bank is not going to happen is an important indication that the market participants are now willing to step in and buy Gold futures (paper gold).

This brings the paper market in Gold more in line with reports that there is actually a global shortage of Gold. According to McAlvany Financial Group, a firm specializing in physical precious metals markets, gold buyers in Far East are currently paying premium prices for physical Gold. This means that buyers are not only willing to pay the market price for their physical Gold but actually add some on top. At the same time central banks, such as China are buying physical gold and others are repatriating their gold reserves that have been stored abroad. Global Research, a research center for globalization; published an article this week saying that “Netherlands has moved 122 tons of gold worth $5 billion from New York, and similar demands are now being made in France. Last year, Germany asked to have 680 tons of gold repatriated, which is mostly kept in the United States, but some also in the United Kingdom and France. Berlin receives only 5 tons, with the promise to get the rest back by 2020.”

According to Global Research ““And even those 5 tons Germany got back was not the same they had given to the Fed, those were newly cut bars. So it does mean that the Fed clearly did not have anywhere near the gold necessary to send back to Germany. Because it was most probably either leased to the market or sold – this is what central banks are doing – they are lending gold to the market or selling gold in order to push the price of gold down,” Egon von Greyerz said stressing that there is a tremendous shortage of physical gold in the world.” One day when the people who hold paper gold ask for delivery, there will not be any physical gold to deliver.

Gold, Monthly

Gold is at historical support (provided by a monthly pivot candle high from February 2010. The monthly candle for November was a narrow range candle with open and close only $4 apart. This indicates that supply and demand were in balance in November and now this balance could be tipping over to favour the demand side, at least temporarily. This price action coincided with the monthly Bollinger Bands which also limited the move lower and was then followed by a strong rally in the price of Gold higher after the news from Switzerland (the Swiss rejected the law to increase the country’s Gold reserves) caused the market to gap open slightly lower than the close on Friday. If market rallies strongly after news that on face value is negative for Gold, then we have reason to conclude that the market participants are collectively ready to defend (to buy) the recent lows of 1230 – 1240 and they see Gold representing value even if the additional boost of demand from Switzerland is not going to be there.

We still have this market trending lower in the technical sense as it still has lower highs and lower lows. However, the monthly narrow range candle at Bollinger bands suggests that we might have a turning point at hand and Gold could move higher towards the upper end of the down sloping trend channel. There is bullish divergence in RSI even though Gold has been moving lower for four months since July this year, therefore it might well be the time for a move higher after so many downward months.

Longer term Fibonacci levels are clustering at three different areas. The supporting cluster is between 1045 and 1090, while clusters between 1270 and 1306 and again at higher levels between 1383 and 1406 are likely resistance areas in the longer term picture. I have left these levels off the chart to keep it more readable.

The resistance area (1204 to 1226) above the current price action is created by monthly lows and closing prices from this and last year. This level obviously needs to be cleared before Gold can advance sustainably but the fact that we now have a narrow range candle with Bollinger Bands right below and a very positive price reaction to negative news increases possibilities of this happening. However, should the price stay below this level for a one more week it would negate the bullish indications we now have had and increases possibilities of supporting demand eroding at the 1230 to 1240 support area.

Gold, Weekly

Trend the weekly Gold price is lower both in short to medium term and longer term as well. The medium term weekly trend lower is defined by descending regression channel from the pivot in July this year. Currently the price is close to the lower end of long term downtrend channel and a historical monthly pivot candle as well as both monthly and weekly Bollinger Bands near the current lows. These technical factors limit the immediate downside and have in November translated into a narrow range candle (or a Doji as it is also known) with a rising RSI line (bullish divergence). On the upside the weekly pivot high at 1226 from November has acted as a resistance and sent the price to the current levels. The latest high (1221) that was just 3 dollars shy of the low of this pivot candle. The medium term down sloping regression channel top is also close which could mean that Gold needs to have more sideways fluctuation before more upside can be gained.

Gold, 240 min

Price is fluctuating above a recent 4h pivot (green arrow) and below the pivot high from Monday. The 1191 used to be a level that supported price earlier and it acts as a support again. The price being between two pivots has created a very narrow range which on a daily chart looks like a pennant (flag) formation. If this pennant is resolved to the upside it gives us a target of about 1280, a former support level from July and August this year. If Gold corrects lower, look for buy signals at or near to the 1159.50 support created by the 4h pivot.

Conclusion:

Gold is close to an important support with several technical factors supporting the price. If the current narrow range is resolved to the downside (which looks likely to me based on the current market action), the pivot low between 1141 and 1159.50 is a potential support and should be monitored as an exit level for shorts and entry level for long trades. Look for hammers and bullish wedges in 15 and 60 min timeframes to confirm the momentum reversal. If the DXY, US dollar index moves strongly to the upside the bullishness of the above technical indications is negated and it is more likely that the price of Gold will move below the recent lows.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Dec 9, 2014

Employment in focus on both sides the border https://blog.hotforex.com/employment-in-focus-on-both-sides-the-border/

In Canada the central bank’s focus is on employment and the recent figures don’t encourage the Bank of Canada to raise rates even though the inflation figures have lately been positive. The employment change reported last Friday was -10.7K instead of positive expectation of 5.3K. This compares quite badly to the same period a year earlier with employment increasing by 146K. On the southern side of Canada’s border the US employment figures are developing above expectations. Non-Farm Payrolls increased by 321.000 instead of 231.000 jobs expected by analysts and the average hourly earnings came in last Friday at 0.4% instead of 0.2% expectations. At the same time the analysts are expecting the Fed to drop their “low rates for considerable time” language soon. It is expected that the Fed will raise rates in six months’ time should this happen. The Bank of Canada’s governor Poloz speaks this Thursday (11th December). He is known to be dovish and the markets are expecting that after the last Friday’s employment figures he will continue with dovish statements. All this is likely to support USDCAD which is still trending higher.

USDCAD, Weekly

The market has been trending higher since June and the pair has pushed through a pivot high that was accompanied with a very long term 50% Fibonacci level (calculated from March 2009 peak to July 2011 low). USDCAD is now approaching levels of a weekly pivot from July 2009 (61.8% Fibonacci retracement level at 1.1674 coincides with this pivot). In terms of nearest support and resistance levels, the proximity of the low of the pivot at 1.1544 is likely to cause some resistance while the peak from March this year (at 1.1278) is a major support.

USDCAD, Daily

The pair is trending steadily in a channel with a recent breakout from a triangle formation. The width of this formation points to the weekly resistance level of 1.1544 and suggests that we need to pay attention to price action at this resistance area. It could be a good target level for short term trades after the pair pulls back a bit. Stochastics Oscillator is getting to the overbought territory suggesting that the price move is nearing levels that we should not consider as entry levels for long trades. Rather it would make sense to buy retracements back to support levels. Pull backs close to the weekly support of 1.1278 should be monitored closely for momentum reversal signals in smaller time frame charts. The 23.6% and 38.2% Fibonacci retracement levels coincide with two other technical levels. The 23.6% retracement is roughly at level with the two recent peaks when considered on closing basis (focusing on daily closing prices rather than the high values) while the 38.2% Fibonacci level coincides with a pivot in a four hour chart.

USDCAD, 240 min

If the momentum stays strong the market can find support at higher levels (closer to the current price). However, should we get moves to the lower levels such as 1.1278 it the risk of further corrections after our entries would be smaller. We should obviously feel therefore more confident deeper pull backs closer to the major support level at 1.1278.

Conclusion

USDCAD is in an uptrend but approaching a higher time frame historical resistance area that has potential to cause this market to correct closer to the lower end of the up trending channel. We are looking for long opportunities at the levels identified in different timeframes. The fundamentals favour this trade idea with the US economy being stronger than the Canadian. Look for corrections to the support levels and then intraday momentum reversal signals before entering long trades.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Dec 19, 2014

The Fed pushed the US stocks to recent highs https://blog.hotforex.com/the-fed-pushed-the-us-stocks-to-recent-highs/

Janet Yellen promised that the Fed would keep the interest rates low, or at least that it would not rush to hike the rates. This helped the stocks to rally to levels that we are interested in selling should the price action justify that. We are already seeing momentum reversal and it seem that this is a low risk area to take a contrarian view to the latest rally. Yes, the US economy is doing better than the rest of the world but a quick rally to levels that in the recent past have not been attractive enough for investors to keep buying could very well be followed by a technical correction lower. Let’s see what the charts are telling about the current market activity.

S&P 500, Weekly

After a long term trend higher the S&P 500 futures market is experiencing a higher volatility with the price taking back the ground lost during the previous week’s sell off. This move has taken the market to a weekly pivot high between 2063 (open) and 2079 (high). This looks like a return move, meaning that the chances are it gets sold right at the current levels. This weekly pivot high has been an area that I have called a no demand zone earlier this month and judging from the price action in the four hour chart we might get another move lower from here.

S&P 500, Daily:

The Stochastics Oscillator is getting into the overbought territory and the daily candle looks like it is forming into a shooting star. This will happen if the price cannot close much higher than the current levels. If the market cannot penetrate this (weekly pivot) resistance level but moves lower from here, then the risk of price actually moving much further down increases. The potential support levels are as follows: 2011.25, 1961 and 1883.25.

S&P 500, 240 min

The 240 min chart has already a Doji candle (open and close near to each other) with the Stochastics about to roll over. Both of these signal momentum slowdown and quite possibly momentum reversal taking place. With the price being close to a recent market high, inside a weekly pivot high and very close to a long term (weekly) channel top, I would not be looking to buy at these levels. Rather it makes sense to sell against the recent intraday highs with a view of taking partial profits when price approaches the former intraday resistance (now a potential support) at 2011.25. This is the very same level that provided us with two nice short setups until on the third attempt the price went through. This could be the target one for short trades opened at the current levels.

S&P 500, 60 min

We have already had a 60 min Shooting Star inside this weekly pivot high. This implies that the momentum reversal is actually taking place. There is some minor support at the current levels which might mean that there will be another attempt to take the market slightly higher intraday. This could provide a great short entry level at (or inside) the 60 min pivot candle, therefore my preference would be to short between 2068 and 2073.75 with the first target near to the previous resistance at or around 2011.25, and should the price action justify then I would look to close the rest of the shorts at either 1961 or close to the daily pivot from 15th November at 1883.25.

Conclusion:

Price is inside a recent weekly pivot high and close to the long term channel top. This has been a no demand zone in the past. The 240 and 60 min charts have signs of momentum reversal. I would look to short against the current levels with an aim to close some the short positions at or close to 2011.25 or should there be no signs of momentum reversing, then the next target would be at 1961 or area close to the 1883.25 pivot.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 9, 2015

Low Energy Prices Pressuring Corn - HotForex Blog https://blog.hotforex.com/low-energy-prices-pressuring-corn/

Weak US exports and falling energy costs have reduced the appeal for renewable fuels which are largely made from grains and oilseeds. According to the U.S. Energy Information Administration, ethanol stockpiles have had risen by 751,000 barrels to 18.85 million barrels by 2nd January. This was the largest weekly rise in nearly two years. Corn prices have been coming down since the beginning of the year as low oil prices mean that demand from ethanol manufacturers is reduced. According to industry analysts, it is unlikely that ethanol manufacturers and blenders will be able to pay close to $4 for corn. This has put a damper on price. Furthermore, the recent rise in the price of corn is likely to encourage farmers to increase the acreage of corn. This would lead to an increase in supply over the year 2015 and put pressure on corn prices.

Corn, Weekly
Price rallied 30% from the September low and has since hit a resistance at around 415’6, which was a weekly support in the Q4 2013. The price has reacted lower from the resistance and sits now at a minor support at 392. The outside reversal bar in the weekly picture took the market lower by almost 6% in one week and suggests that the corn price will be under pressure in the coming weeks. The Stochastics, MFI and RSI are rolling over from overbought levels.

Corn, Daily

The daily chart reveals how there was a rally from the 392 support, but the rally couldn’t penetrate the bottom of the rising regression channel. This created a lower high and confirmed that the uptrend is over. A lower high after the price has had a strong move lower from a resistance level tells about the balance of supply and demand being in favour of the bears. The levels close to the 38.2% Fib level (at around 380) could be significant support as it was a resistance in August 2014 and price pivoted at this level on 18th of August last year. When price moved higher from this level the last time (4th December), a pivot candle was formed and was followed by a gap opening higher. The current daily support at 392 coincides with the Bollinger Bands and the 23.6% Fibonacci level, but in the light of the price moving so strongly down from resistance and creating a lower high, it seems unlikely that the support will hold.

Conclusion:

The potential increase in the acreage and the low energy prices suggest that Corn will be under pressure. The technical picture is weak with the price reaction lower from a resistance and creating a lower high in the daily chart. The first target level for short trades is at around 380, close to the 38.2% Fibonacci retracement level. This view would be negated by market moving above the latest weekly high 417. I look forward to seeing you in the webinars where I will teach you how to take advantage of trading opportunities that occur daily in Corn and other markets.

Those wanting to learn how to trade professionally open an account with HotForex and gain access to my past and future educational webinars. Over the course of the webinars I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and be early to secure a seat!

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 12, 2015

Verbal QE has been weighing on Euro - HotForex Blog:https://blog.hotforex.com/verbal-qe-has-been-weighing-on-euro/

The EURUSD has reached a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003 and in 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. This could mean that chances for immediate and extensive moves lower are now limited. The last time EURUSD reached a historical weekly pivot it moved sideways for three weeks before breaking lower. The trend is still down and there is no reason in the charts to turn bullish with Euro. In addition, the economic problems in the euro area together with the verbal QE from Mr. Draghi are likely to drag the EURUSD even lower.

EURUSD, Monthly

The EURUSD is at a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003. In 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. The pair has created lower highs since 2007 and has now moved below an important support area that was able to turn the market higher in three separate occasions.

EURUSD, Weekly

The weekly trend is down but is has extended outside the regression channel. This means that the trend is now more vulnerable for retracements. The 1.1795 level that has provided support is a weekly pivot high from November 2005. With Stochastics and RSI firmly oversold and price at a historical weekly support extensive and immediate downside could be limited.
EURUSD, D

EURUSD, Daily

The daily short term daily trend is down with price inside the regression channel. Price has retraced back to a daily low from 5th January at 1.1868. The oscillators are oversold. The last time Euro was able to move against the prevailing trend it lasted for two days, if the current resistance holds now it is likely that the Euro will at least test the recent lows but there is a likelihood that the problems in the euro area together with the verbal QE from Mr. Draghi will drag the EURUSD even lower.

EURUSD, 240 min

The price has moved out from the descending regression channel to resistance that coincides with the 20 period Bollinger Bands. The resistance is created by pivotal low at 1.1868. Now that price has moved to the level momentum is drying up with Stochastics being ready roll over and 4h bar ranges becoming very narrow. We have a daily resistance at 1.1868, but a weekly support at around 1.1795 is still relatively fairly close. Oscillators are overbought as price moves sideways at the upper Bollinger Bands. There is also a cluster of Fibonacci levels that coincide with the current resistance level and another between 1.1934 and 1.1949. I have left the levels off to increase the readability.

EURUSD, 60 min

A minor uptrend that has reached the 1.1868 and shows signs of weakening. Now the price is about to create a shooting star at the resistance which indicates price will move lower from here.

Conclusion:

The EURUSD has reached a support area that has been psychologically important in the past. The level acted as a resistance in 1998 and in 2003 and in 2005 the level turned a downtrend in EURUSD to an up move that lasted for more than two years. This could mean that chances for immediate and extensive moves lower are now limited. The last time EURUSD reached a historical weekly pivot it moved sideways for three weeks before breaking lower. The trend is still down and there is no reason in the charts to turn bullish with Euro. In addition, the economic problems in the euro area together with the verbal QE from Mr. Draghi are likely to drag the EURUSD even lower. In the intraday chart (240 min) price has moved out from the descending regression channel to a resistance that coincides with the 20 period Bollinger Bands. The resistance is created by pivotal low at 1.1868. Momentum is drying up with Stochastics being ready roll over and 4h bar ranges becoming very narrow. In a 60 min time frame we can see that as the minor uptrend has reached the resistance it shows signs of weakening (a lower high). In the process price also created a shooting star candle at the resistance. This indicates that price will move lower from here. Traders looking to short against the 1.1868 resistance should monitor the levels around 1.1795 for Momentum Reversal Signals to exit short trades as the weekly support possibly provides temporary support to the market.

For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217 to register and secure your seat!

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 14, 2015

The Sideways move in S&P 500 Continues

It is common that market is soft whenever a higher time frame Doji candle forms after a sizeable move higher. This has happened in several occasions over the last seven years and the investors should pay attention. For traders however, this means usually more opportunities as the lower time frames tend to have more price fluctuation. We have plenty of economic releases today from the US, which should help the traders in that regard and cause more volatility in the market. We have import and export data, business inventories, Fed Beige Book, Crude Oil Stocks Change but the most interesting and the publication of Retail Sales data, an event that has potential to move the markets the most. The analysts are expecting the figure to come in at -0.1%, which is considerably lower than the previous 0.7%. A strong deviation from the expectations should move the market significantly and create more opportunities to trade the market.

S&P 500, Monthly

Trend wise the market is still inside the rising regression channel, even though it has had one move outside of it in October last year. The last completed candle from December is an interesting one. The long term stock market Bulls don’t really want to see something like this developing in the world’s most important stock market, especially not combined with a plunge in the price of copper (down almost 5% today). The December candle is what’s known as a Doji, a candle with open and close near to each other. When such a candle appears after an uptrend we know one thing: the demand and supply were in balance. In other words the bulls were not in control anymore. The last time a similar monthly candle appeared after a long uptrend was in October 2007. Then the candle marked the end of the previous bull market. Is it likely that the Monthly Doji candle will again turn the market lower? The importance lies in the price action over the coming two months. If we get lower lows and lower highs followed with increasing volatility, then the probabilities of uptrend being over are much higher. We don’t yet know if this will be the case, but what we know is that the market usually corrects lower after these kinds of candles after the market has been trending higher.

The RSI has been overbought since the beginning of year 2013, which is what often happens in a strong uptrend. Now RSI is breaking below a level of 66.58 that has supported the index in August 2013 and January 2014. The RSI has also diverged from the S&P500 with lower highs while the stock market has been moving higher. This is known as bearish divergence. The nearest monthly S/R levels are at 1961.50 and 2088.75 and a couple of Fibonacci levels cluster at 1845 – 1832. This is not much of a cluster but the fact that they coincide with a monthly low from October makes the level between 1813 and 1845 significant.

S&P 500, Daily

The daily trend is sideways as I suggested some months ago. The price moved briefly to new highs in the end of December but has since formed a lower high and is now possibly forming a bullish hammer candle. The levels below the pivotal high from September last year (2014.50) seem to attract buyers as evidenced by the last rally from the current levels. However, that was followed by a lower high which dampens the bullishness of the current picture. The 38.2% Fibonacci retracement together with Bollinger Bands supported the price in the previous daily pivot low and now the price is fairly close to the same levels and trying to create a higher low. This indicates that the bulls are looking to take this market to test the 2060.75 resistance. If that is cleared and held (a higher low above the level) the picture becomes much more positive. This is negated if the last week’s low is taken out.

S&P 500, 240 min

Stochastics indicate some bullish divergence and the last complete candle is a bullish hammer. This suggests that the current levels could be a new base for a move higher. The price action however over the last hour has not exactly been explosive to the upside. That is due to the fact that the market participants are waiting for the economic releases.

Conclusion:

The long term picture is getting weaker with a monthly Doji candle appearing. The market now would need a higher high with an ability to main the new highs should the bearish indications in a monthly Doji were to be negated. The weakness indicated by the Doji candle should lead to increased volatility in smaller time frame charts and provide the traders with more opportunities in both directions (long and short). In the daily and 4h charts the price is now close the previous pivot low and we therefore should be looking for short term long trades. The four hour hammer candle confirms the trade idea but there has been no follow through as the market waits for the economic releases. We should be looking for signals to go long at or close to the January 6th pivot low.

For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 21, 2015

Markets move sideways before the ECB meeting tomorrow https://blog.hotforex.com/markets-move-sideways-before-the-ecb-meeting-tomorrow/

A lot of the European Central Bank (ECB) QE program is already priced in to the EURUSD but the fact remains that the European economies are in mess when compared to the US. Some commentators have suggested that the reason ECB has delayed its QE program is not in fact the Germans, but the fact that they themselves don’t believe the QE would have a significant impact on European economies. It is true that the problems in the euro area are structural, i.e. relating to labour laws and inflexible policies coupled with the aging European population. All of this combined results in degrading competitiveness in the euro area. The Chinese economy (an important export area for EU countries and Germany especially) is slowing down and in addition to this, it is unlikely that bringing lending rates even lower via QE will result in a significant enough increase in lending that would translate into economic growth. The only measurable impact of the QE has already been seen in the value of euro. The lower the value of the euro against the other currencies, the better the chances that European countries, that depend on exporting will benefit.

EURUSD

In the previous EURUSD analysis I wrote that it is likely that the problems in the euro area together with the verbal QE from Mr. Draghi will drag the EURUSD even lower than the latest lows at the time. I expected some sideways move before that taking place but the removal of EURCHF peg by the Swiss National Bank (SNB) accelerated the decline.

The weekly pivot low at 1.1639 from November 2005 has acted as a resistance both on Friday last week and Monday this week. Even though the price has been moving sideways it is forming a descending triangle, a bearish formation. The current sideways move that forms the triangle is a reaction to huge market move caused by the SNB actions last week. It is common that the markets take a breather after fast and furious moves.

The nearest daily support and resistance levels are at 1.4600 and 1.1639, with the next resistance levels being at 1.1754 and 1.1870. The 1.1754 level coincides roughly with 23.6% Fibonacci retracement level (measure from November 2014 weekly high to the latest low). The next significant weekly resistance level is the weekly pivot low from July 2013 at 1.2042 which coincides with the 50% Fib retracement level. These levels could come into play should the ECB decide not to move forward with the QE program. At the moment the trend is down and we should keep on selling rallies until we have evidence the trend has changed.

EURUSD, 240 min

Price is moving sideways in a narrow range and is likely to do so until the results of tomorrow’s ECB meeting are published. Today should be pretty much flat as the market participants don’t want to commit to any view before an important meeting.

Conclusion:

We don’t know what kind of volatility we will have tomorrow but it makes sense to seek for shorting opportunities (momentum reversal signals) at daily and weekly levels identified in this analysis and stay away from the middle of the ranges. Outside of the QE considerations it remains a fact that the US economy will be in a much better shape than Europe. We therefore should have no reason to be bullish on EURUSD. The only reason that could flip this equation on its head would be a new QE program from the US and at the moment there are now signs of it happening.

For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 26, 2015

Syriza Election Victory Did Not Push Euro Lower

Syriza has promised to renegotiate the terms of their debt with the European lenders and is calling for a Europe where tax revenues from northern countries, such as Germany, would be used in Greece to fund the government. This sets Syriza and the new Greek government at a collision course with Germany and other wealthier nations in Europe and could eventually cause Greece exiting the Euro.
The market reactions to news are always interesting and telling. I find it significant that EURUSD, although it is still in a downtrend, has not moved significantly lower on the news Syriza winning the Greek elections. Rather it is ticking higher after the smallish initial drop. This suggests that market participants think that the probabilities of Greece leaving Euro area are now higher. This would be bullish for the currency as it would open the door for other weak economies possibly abandoning the single currency. Euro area would then consist of stronger economies, a reason for the currency to appreciate in value in the long run. Obviously, we have the first ECB QE program just starting and this should mean the pressure on Euro will stay on for quite a while but it does not exclude Euro rallying from time to time and this would give us opportunities against the weaker currencies.

Market reactions are important as was proven with my analysis with Gold. A positive reaction to a news item that should have been negative for Gold hinted that it was time to buy the yellow metal, regardless all the negative fundamental analysis available at the time. This proved to be exactly the right time to buy Gold. Now, this same logic when combined with technical analysis could provide us with a trade opportunity in Euro against weaker currencies.

EURAUD, Weekly
After falling for five weeks the pair found support at a weekly pivot low from September 2014 and reacted higher from the general area close to the pivot. This encourages us to look for buy opportunities in EURAUD. The overall trend is sideways and the pair has moved to the lower Bollinger Bands which most of the time means that the momentum might be reversing. Oscillators confirm the setup by being well into oversold territory. Support and resistance levels: 1.3967 and 1.5022. There is also some resistance 1.4223 which could lead to further sideways move between 1.3967 and 1.4223.

EURAUD, Daily
The daily trend is down but the price has reached a weekly support area and moved sideways above it for the last week. This resulted in a Doji candle signaling a rejection of the 1.3967 level and indicates an attempt to turn this market higher is at hand. Oscillators point sideways after a period of bullish divergence. Weekly support level is below at 1.3967 and the nearest daily resistance level is at 1.4408.

EURAUD, 240 min
Although the longer term trend in this time frame is down we’ve seen sideways movement over the last week. The spikey rejection candle at the 3967 support indicates institutional buying at these levels. Oscillators are pointing higher and should there be moves down to the Bollinger Bands (currently at 4082 and 4040) I would be looking to go long at those levels. The first resistance area at 4329 to 4408 coincides with the upper Bollinger Bands and probably slows the upside momentum down.

Conclusion:
Judging from the weekly chart this pair is at support and has potential to move quite a lot higher as the next weekly resistance area is at 1.5022 once the 4h and daily resistance levels are cleared out. There is a rejection candle in the daily and 4h charts, which suggest that the reversal of downtrend is taking place. In addition, the fact that Greek election was won by a radical left wing party increases the probabilities for Greek exit from Euro which would be bullish event for Euro. I am looking at 1.4372 as my first target, then 1.4780 as target two and then target three at 1.5020. There is some resistance 1.4223 which could lead to further volatility between 1.3967 and 1.4223 and could therefore provide us with long entry opportunities at the lower end of the range.You are welcome to utilize my analysis in your trading providing it agrees with your own market observations and analysis.

I will be presenting a Live Analysis Webinar tomorrow. So if you want to learn how to find, analyse and trade above kind of setups you most warmly welcome to join me! Click HERE to register and secure your seat!

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Jan 28, 2015

Apple’s Record Breaking Results and Forex Worries

Apple posted record breaking results yesterday after US markets closed. The company sold 74.4 million iPhones and 21.4 million iPads in the last quarter. The earnings per share ($3.06 vs. $2.60) were even better than the most optimistic expectations from Wall Street analysts. This lifted the stock by 5% in the aftermarket trading. The rise might have been even higher, but for the worries of investors, who are reported to have started having concerns about the impact of strong dollar in future earnings.

Since my last analysis, the financial sector rallied a bit from the rising trend line but then fell back again from resistance. Utilities and healthcare stocks are overbought when compared to the rest of the market, while technology stocks fell back down to the support after rallying since my last report. The energy sector broke out of the wedge formation and the industrials look to me as if they’d be ready to move higher.

All this gives slightly mixed signals. As the dividend paying healthcare, utilities and consumer staples are still very much overbought in relation to the S&P500 index (both in one and three month periods), it suggests that market participants are still safety oriented and hesitant about the future trend. No wonder the market has been in a sideways mode. At the same time the small caps (Russell 2000 index) have been stronger than the S&P over the last week, which means that some of the risk appetite is coming back into the market.

S&P 500

In the weekly picture the index is still inside the uptrending regression channel but has moved sideways since I suggested this in November last year. This also the same period of time that the safe have sectors (Utilities, Health Care and Consumer Staples) have been sucking money from other riskier sectors. We now have another higher weekly low from last week, which is technically an encouraging sign and a support level relatively close at 2014.50. This is also a new potential pivot low in the daily time frame.

S&P 500, 240 min

The four hour picture reveals a sideways move with lower highs below the 2060 target area. This target was hit after my latest analysis and the market has since formed a lower high suggesting that we could see another move lower to the 2026.50 and 2014.50 support area. Should the correction be deeper the next support level is at 1997.50.

Conclusion:

I am still positive on this market eventually moving higher but first we might see some volatility or sideways move accompanied a test (or tests) of the support area between 2026.50 and 2014.50. I would be interested in long entries inside this support range and should we get the signals to go long, then the target levels I am looking at are: Target 1 at 2062 and Target 2 at 2088.

For those who would like to learn how to trade professionally, please join me at my free trading webinars. Over the course of the series, I will take you through all the aspects of analyzing the markets and trading them the way the professionals do. Click HERE to register and secure your seat!https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Feb 4, 2015

EURUSD at a resistance level, but potential support is near
https://blog.hotforex.com/eurusd-at-a-resistance-level-but-potential-support-is-near/
Now that the Dollar Index (DXY) has reacted lower from a historical resistance area and EURUSD (the heaviest component in the DXY) has created a narrow range bar in the weekly time frame we have potential in EURUSD for a larger than usual corrective move against the trend. The narrow range candle signals that supply and demand where in balance last week, something that doesn’t sit well with those holding on to their shorts. We’ve also had the pair moving outside the trend channel that used to contain the move. This increases the likelihood that we will get a larger than usual contra trend move. Oscillators are oversold but edging higher with price crossing above the lower Bollinger Bands. Fibonacci levels (23.6%, 38.2% and 61.8%) coincide with the resistance levels I have identified in the chart.

EURUSD, Daily

I wrote on Monday after the Syriza election victory in Greece: “I find it significant that EURUSD, although it is still in a downtrend, has not moved significantly lower on the news Syriza winning the Greek elections. Rather it is ticking higher after the smallish initial drop… Market reactions are important as was proven with my analysis with Gold. A positive reaction to a news item that should have been negative for Gold hinted that it was time to buy the yellow metal, regardless all the negative fundamental analysis available at the time. This proved to be exactly the right time to buy Gold. Now, this same logic when combined with technical analysis could provide us with a trade opportunity in Euro against weaker currencies”. The price action on that day resulted in a hammer bar and the price has moved higher ever since, proving once again that the market reaction to the news is more important than the news itself. Price has reached a resistance level at 1.1540 and Stochastics is getting into overbought area. This has stalled the advance. We have a support level at 1.1368 and the next resistance area coinciding with the 50% Fibonacci level is at 1.1755, fairly close to the upper Bollinger Bands.

EURUSD, 240 min

Price moved outside the regression channel before Greek elections and has now made an over shoot in the opposite direction. A shooting star candle at the 1.1540 resistance indicates selling pressure but there has not been much downside momentum after the candle was created. Stochastics indicate that the momentum is reversing. The nearest support level is at 1.1368.

Conclusion:

The narrow range candle in the weekly time frame signals that supply and demand where in balance last week, something that doesn’t sit well with those holding on to their shorts. We’ve also had the pair moving outside the trend channel that used to contain the move. This increases the likelihood that we will get a larger than usual contra trend move.

EURUSD is overbought in terms of Stochastics in the 4h chart and signals that there is potentially a momentum reversal taking place. However, the downside momentum after the shooting star candle has been sluggish. This could be explained by the 1.1368 support being relatively close. Price can turn lower from here but the shorts trades are likely to be short lived with a daily support area being so close. This might put off some market participants and limit the downside potential from these levels. The 1.1755 is likely to be a better level for high probability trades as several technical factors coincide in the proximity of this level.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Feb 5, 2015

Increased Volatility in Crude Oil

The price of oil has collapsed with the strengthening dollar and has reached levels that were last seen in the later stages of the financial crisis in 2008. This suggests that the current levels are deeply oversold both fundamentally and technically. The world economy is certainly slowing down but it is in a better shape than it was in the first quarter of 2009 when the US Crude Oil futures dropped to $33.35. Therefore, it makes sense to expect Crude Oil to be relatively close to the levels it could find a bottom.

Crude Oil, Daily 2009

Over the last 30 years it has taken in average 2 to 3 months for oil to bottom out after a major downside move. It would therefore be safe to assume that the bottoming process will provide us with plenty of opportunities to join the long side, or to scale into long positions thus lowering the timing related risks. In terms of price velocity the downward move seen over the last few months has been similar to the one seen in 2008. When this downside move finally ended the market moved sideways for a period of time allowing low risk entries at Bollinger Bands.

XLE, Daily

I mentioned some time ago in my S&P 500 analysis that the energy sector etf is forming a bullish wedge and that this would be confirmed by a breakout. Now the breakout has happened and we have a higher low in place. This obviously signals that the market participants are turning bullish on energy related stocks, a clear indication that they believe that the downside in oil is in their view limited.

Crude Oil, Weekly

The price of oil is close to the 2009 lows but is still inside a weekly downward trend channel. The latest reaction from a resistance level that coincided with the channel top was relatively strong. However, this kind of volatility is typical when prices get close to levels where the trend might turn. Last week the price closed inside the lower 1.5 stdv Bollinger Band for the first time since September 2014. The nearest support and resistance levels are at 43.58 and 53.60.

Crude Oil, Daily

Price has broken out of the descending regression channel and created a higher high. If we now get a higher low the bullish indication is rather strong but even a roughly equal low would mean that the buyers are gaining control in this market. Volatility has definitely increased which is not only evidenced by the higher high but also by the Stochastic indicator it has not been in overbought territory since July last year.

Crude Oil, 240 min

Price has retraced to 61.8% Fibonacci level that coincides with a descending trendline. Stochastic is oversold and the price is reacting higher from the lower Bollinger Bands.

Conclusion:
The increase in volatility at levels that are close to the bottoming formation from 2009 is a reason to pay attention to the price action in Crude Oil in the near future. This is confirmed by the bullish breakout in the US energy sector shares ETF (XLE). If this turns out to be the range in which the market bottoms then the best levels to be a buyer are those that are close to the bottom of the range. However, the fact that so many technical tools indicate support for Crude Oil in the 4h time frame we could look for intraday buy signals in the general area of current price action.

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Janne Muta
Chief Market Analyst
HotForex

Stan · Feb 9, 2015

NFP Release Not Enough to Excite the Stock Markets https://blog.hotforex.com/nfp-release-not-enough-to-excite-the-stock-markets/

The weekly trend in S&P500 is still contained in the bullish regression channel and the weekly support level has formed roughly to the area of the previous pivot high. Financial sector ETF (XLF) has rallied from the rising trendline. This is important as the markets rarely rise without the support from the banking stocks. Friday’s reaction to Non-Farm Payroll figures wasn’t very encouraging as the S&P 500 closed lower and so did the XLF. The support at 1961 to 1974 area has been holding well which will add pressure to the resistance level at 2063 area. In an uptrend it is more likely that a resistance level will give in and the support levels hold. Other key sectors such as energy (XLE), industrials (XLI) and basic materials (XLB) look technically sound in the weekly picture. The utilities sector (XLU) lost 4,12% on Friday suggesting that the run for the safety is now over as the long only funds move money from safety oriented investments to higher beta (more riskier) stocks. Many sectors have risen a lot over the last few days so we might well have a reaction lower from the current levels.

S&P500, Daily

Sideways move has been pretty well defined with the support at 1974 and resistance at 2062.50. Friday’s candle was a no demand candle at resistance and indicates a move lower from the current levels. The daily Bollinger bands coincide with the resistance level and the overbought Stochastics support bearish indication by the no demand candle.

S&P500, 240 min

The short term trend higher from the 1974 support was reversed at resistance and we are looking at support levels that could stop the decline. There is support at 2025 region where a pivot low and the daily Bollinger bands coincide. The pivot low is at 2020.75 and the 1.5 stdv Bollinger band is currently at 2028. This area also has the 50% Fibonacci level at 2021 which together with the other technical factors suggests that this region is a potential support level. Should this level not hold, then the support at 1974 area would come into play.

Conclusion:
The long term technical picture in the US stock market is still healthy but in the short term picture we still have signs of indecision (range bound trading). Friday’s market reaction to better than expected employment figures wasn’t brilliant but at the same time we have money moving away from dividend paying safety stocks (utilities sector) into banks, basic material related stocks and energy stocks which means that the risk appetite is increasing. The overall picture is therefore slightly mixed. This means that the market remains as a traders’ market with opportunities at technical support and resistance levels. The daily no demand candle from Friday indicates that the levels above the current market price have resistance and we should therefore see a move lower today. The levels with most potential are those at the edges of this sideways move. However, the levels inside the range can provide opportunities as well. Just look for price based confirmation to confirm the analysis before taking trades.

You are warmly welcome to join me to a Live Analysis Webinar tomorrow at 12:30 GMT. Book your seat here! - https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Feb 13, 2015

Crude Oil Has Been Attracting Buyers - https://blog.hotforex.com/crude-oil-has-been-attracting-buyers/

Crude Oil is now trading at levels near to the 2009 lows. As the world economy is sluggish but nowhere near to the paralysis caused by the 2008 credit crunch it is safe to assume that the levels are oversold both in fundamental and technical sense. The supply of oil has increased as the US shale oil has entered the market and the Saudis have decided to defend the market share rather than price but the ever growing world population means that the limited oil resources have to be shared by an increasing number of consumers. As the population and its wealth grow the consumption of oil can only go up. The passenger trends in air travel are a good example of this. According to the International Air Transport Association the global airline industry is expected see a 7% growth in passenger traffic in 2015 with the average annual growth rate being at 5.5%. This energy intensive industry will therefore be carrying almost 30% more customers in 2020 and is likely to hedge aviation fuel costs at the current price levels. As the global GDP is still expected grow by 3.2% in 2015, it is likely that other likely hedgers include the businesses in other forms of transport and cargo business as well as mutual funds, hedge funds and other institutional investors.

US Dollar index (inverted) and Crude Oil, Daily

As the above chart very clearly shows the price of oil has been inversely correlated with the DXY, US Dollar Index. The blue line is the inverted DXY while the black line is the price of Crude Oil. Now that the trend in DXY is getting showing signs of indecision the Crude Oil price has become more volatile.

Crude Oil, Weekly

The price is fluctuating relatively close to 2009 low and is showing strength by closing last week above the last four weekly highs. This has not happened since last summer. Also, we now have a weekly pivot candle with two higher lows on each side for the first time since the August 2014. This and last week the price has established a new support level at the proximity of the high (48.35) of this pivot candle. The nearest resistance is still at the 53.60 area. Price has traded inside the lower 1.5 stdv Bollinger band for almost three weeks, yet another long term bullish sign. On the bearish side we have a potential long legged Doji candle (looks like a cross) with open and close currently fairly close to each other. While the previous candle showed strength with open way below the closing price the current candle cannot give the same indication unless we will see a strong move higher from current levels. This would in the current context have short term bearish indications.

Crude Oil, Daily

After breaking out of the descending regression channel the price of oil is now moving sideways between the resistance at weekly low at 53.60 and the high of weekly pivot candle at 48.35. We now have a higher high, and two higher lows at 48.35 support which suggests that the buyers are willing support price at higher levels after each retracement from the 53.60 resistance level. If this reoccurs without price creating a lower high it will create pressure against the sellers at the 53.60 resistance area.

Crude Oil, 240 min

The price is now at sideways range in 4h chart and has found support twice from the level just above the 61.8% Fibonacci level. I suggested in my previous analysis that we could look for intraday buy signals at approx. at this level. Now the price is at the upper Bollinger bands and Stochastics (and RSI) is indicating that it is becoming overbought.

Conclusion:

The levels close to previous market low are always interesting and a potential support area. Now that the price is close to 2009 lows it is likely that several hedgers are interested in stepping in. This is very likely already happening as we are seeing many bullish signs in the weekly picture: 1) a close above the last four weekly highs for the first time since the last summer, 2) a weekly pivot candle with two higher lows on each side (the first time since the August 2014), 3) the price has traded inside the lower 1.5 stdv Bollinger band for almost three weeks (again the first occurrence since the last summer). Buyers are taking the upper hand. On the bearish side the weekly chart might create a long legged Doji candle (looks like a cross) with open and close currently fairly close to each other. While the previous candle showed strength with open way below the closing price the current candle cannot give the same indication unless we will see a strong move higher from current levels. This would have short term bearish indications and mean that probabilities for move closer to the bottom end of the range would increase.

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Feb 16, 2015

Several Technical Factors Supporting Gold - https://blog.hotforex.com/several-technical-factors-supporting-gold/

Price corrected lower from the levels around 1280 to 1284 as per my previous analysis and has now reached a key support area (1203 – 1220). The long term weekly trend is still down but the medium term bullish channel is more relevant for the current price action. The last week’s candle has a relatively small range and the close was not that far below from the open. This is a sign of momentum slowing down. Price is at an area that resisted price moves higher in December last year (now support) and the rising trendline is getting close. In addition, the 50% Fibonacci level is right at the last week’s low. Nearest support and resistance levels are at 1222 and 1251, while the next levels are at 1203 and 1284. Fibonacci retracement levels of 50% and 61.8% coincide with the 1222 and 1203 support levels.

Gold, Daily:

The regression channel tool provides us a slightly different picture of the rising medium term trend. The move above 1284 level was an overshoot and now the price has reached the lower end of the channel. As the lower Bollinger Bands also reside at the current levels it is safe to assume that this is an important price region in technical sense. In addition the Stochastics oscillator is giving a signal that momentum is reversing while the indicator is below the oversold threshold. The nearest important support and resistance levels are the same in the daily time frame: 1222 and 1251.

Gold, 240 min:

Price followed roughly the bear trend channel I drew in my previous analysis and provided many shorting opportunities for our traders. Now that the price has reached an important support level it has reacted higher. The Stochastics is getting close to overbought area and the price is approaching both the upper Bollinger bands and a sideways move between 1233 and 1245. This should slow the price down and cause it to test the support area again.

Conclusion:

There is a very good chance that Gold has bottomed and will now create a higher low somewhere close to the current levels. There are several technical factors supporting price and the price movements since the Swiss election (rejecting the increase in country’s Gold reserves) have been pretty much what I anticipated at the time (a move higher to the upper end of the long term channel). Now price is at key support levels and at the upper end of the potential bottoming formation (between 1131 and 1222). It is likely that this will act as a zone from which the price of Gold can launch higher. This view is confirmed if we’ll now see a higher weekly low (last week’s candle hints that we might get one) close to the current levels. In fact, the whole range As I said before these are the levels where I would be interested in adding to longer term Gold positions. A lower high would be a negative and increase a risk of price moving lower.

In the short term picture, the price is at the time of writing close to a minor resistance level at which the price action should be monitored for momentum reversal signals. As the price usually never turns on a dime, it is reasonable to expect that there will be volatility or sideways move before the price of Gold can turn higher in the weekly time frame. Short term traders should take advantage of this and look for intraday momentum reversal signals (as per my teaching in the webinars) and some of those intraday positions could be turned in to swing trades as the price is at key higher timeframe support levels.

If you would like to learn more or enhance your understanding of market basics, please join us on FREE Market Basics II webinar on Tuesday 17th February. Register HERE and as usual it is better to log in early to get your seat! - https://www.hotforex.com/en/trading-tools/trading-webinars.html

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Feb 20, 2015

I questioned in my previous analysis (https://blog.hotforex.com/coffee-time/) on Coffee in November last year whether the price of coffee can move into new highs and pointed out that there was room for short term long trades from the levels the market was trading at the time. The short term bull moves happened pretty much according to my analysis and the targets were hit as expected and the market was not able to stage another rally into new highs. When a market can’t move higher it is likely to move lower, especially after such a big rally in 2014.

According to Bloomberg news in January it was expected that the rainfall in January and February might not be enough for the coffee crops that are in a delicate blossom phase and could be damaged. This was bullish for coffee but the market participants did not see it that way and the technical picture has since then deteriorated. The rain in February has been below average in key regions in Brazil but as we can see the price keeps on breaking support levels and heading south. This is yet another case where the price action and price reactions to news are more relevant in understanding the market than the fundamental news itself.

Coffee, Weekly

The price of coffee has now broken below a support after it formed a huge top above 159.40. This break is happening with decisively higher participation (volume) which suggests that the move below the support is significant. This former support is now a resistance while there is some support at 144.92, a level that has had a varying role in the past (sometimes support and sometimes a resistance). A Fibonacci extension level coincides approximately with this level suggesting that it could act as a target one for short positions. In addition the 61.8% Fibonacci retracement level (drawn from the 2013 low to 2014 high) at 148.80 being in the general area of the level adds to its significance. I have left the retracement levels off the chart for better readability.

Now that the price has broken a neckline in a huge top formation we obviously would be interested in knowing how much lower the current move could take us. Should the width of the top give any clues then the low would eventually be just above 93 dollars, a price level not seen since 2005. This would be a very sizeable move but as we have seen this market is capable of creating huge moves. We have seen excessive moves in the past: 87% from 1997 top to 2001 low and 67% from 2011 high to 2013 low.

Coffee, Daily

In the daily chart we have a downward channel with a bottom coinciding with the 144.90 level further increasing the technical significance of the level. Should the market retrace back to the resistance level just below 160 dollars this would give an opportunity to join this downside move and the region 144.90 would then be a reasonable target level for the trade.

Coffee, 240 min.

The four hour chart gives us some potential intraday reference points with the nearest resistance levels being at 155.28 and 156.36. The latter level coincides with the 23.6% Fibonacci level. These levels create a potential zone for short entries but they should be used only if the lower time frame price action confirms their validity . If market is weak or in other words strongly bearish, it will turn lower from these levels. Should there be a fast move higher and through this zone, then the zone between 157.60 and 159.40 becomes important and a very potential level to look for short trades.

Conclusion:

The rain in February has been below average in key regions in Brazil but as we can see the price keeps on breaking support levels and heading south. This is yet another case where the price action and price reactions to news are more relevant in understanding the market than the fundamental news itself. The price of Coffee is trading below an important level that used to support price and is now a resistance. The move last year was excessive to the upside, therefore the move lower can be very sizeable as well. I look for short signals in lower time frames at the level identified in the above charts. My Target I is at 145 and Target II at 125 dollars.

Join me on Live Analysis Webinar on Tuesday 24th February at 12:30 pm GMT. Register HERE https://www.hotforex.com/en/trading-tools/trading-webinars.html?refid=37217and as usual it is better to log in early to get your seat!

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Feb 25, 2015

S&P 500 in new all time highs - https://blog.hotforex.com/sp-500-in-new-all-time-highs/

I pointed out in my previous S&P 500 analysis that the support at 1961 to 1974 area has been holding well which will add pressure to the resistance level at 2063 area. In an uptrend it is more likely that a resistance level will give in and the support levels hold. I also said that the key sectors such as energy (XLE), industrials (XLI) and basic materials (XLB) look technically sound in the weekly picture while utilities sector (XLU) lost 4,12% on Friday suggesting that the run for the safety is now over as the long only funds move money from safety oriented investments to higher beta (more riskier) stocks. There were some indications of short term weakness as well but they did not materialize. Instead the market broke above the 2062.50 resistance and has since then moved into new all-time highs.

Over the last month the riskier sectors such as Materials, Energy, Technology and Industrials have been outperforming S&P 500 and attracting money more than Utilities, Consumer Staples and Health Care that are viewed as safe havens for long only funds. The Financials have been neutral when compared to the S&P 500. The Financials sector performance could have been stronger but it has been slowed down by technical resistance at the weekly pivot candle. Other sectors at or near resistance are technology (close to a long term channel top), energy (at a historical resistance) and consumer staples (at the recent highs).

Further sector analysis reveals that over the last six trading days the money flows have once again favoured the Utilities and Health Care sectors over all the others with Energy and Financials lagging the most. All this put together indicates that we could see the S&P 500 slowing down over the next few trading days. However, in the longer term picture the trend and the risk appetite among the professional investors looks healthy.

S&P 500, Weekly

The weekly trend is healthy as the market has once again been able to push into new highs after making higher lows in this time frame. However, at the same time the index has been now trading close to upper Bollinger Bands with the Stochastics being in overbought territory. If this week’s close will happen at the current levels then we have a candle that signals demand drying up (upward momentum slowing down). This would not be surprise after market moving higher for over three weeks in a row. The previous resistance levels at 2062.50 and 2088.75 are now support levels. While almost everything else looks rather bullish Money Flow Index is diverging strongly (bearish divergence) suggesting that the current move into new highs was not as strong as the previous one in December.

S&P 500, Daily

The daily trend is contained in a relatively narrow channel while the Stochastics, RSI and MFI all are moving almost sideways in the overbought area. The market has not corrected lower for 10 trading days which suggests that an increase in volatility and a correction cannot be that far in the future. The potential support levels are the previous resistance levels: 2088.75 and 2062.50. The upper level coincides with the proximity of 23.6% Fibonacci level and the lower one with 38.2% level.

S&P 500, 240 min

The 4h trend is showing some signs of weakness. The moves from the supporting uptrend line are getting weaker as evidenced by the red line. In other words the market is wedging which indicates the potential for a correction has increased. The divergence in the Stochastics is in line with this view. The nearest 4h support levels are at 2099.50 and 2082.25.

Conclusion:

The long term trend is healthy but in the medium term the volatility has been so low that we might see some increase and a correction to support levels. As evidenced by the sectors the market participants are not concerned about the safety aspect anymore and have been willing to take bets even in the riskier sectors. However, when turning attention to a shorter term picture it is worth mentioning that the sector analysis also reveals how over the last six trading days the money flows have been once again favouring the Utilities and Health Care sectors over all the other sectors, while Energy and Financials have lagged the most. All this put together indicates that we could see the S&P 500 slowing down and possibly correcting lower in the course of the next few trading days.

In the longer term picture the trend and the risk appetite among the professional investors looks healthy. Short term fluctuations aside this is a sign of a healthy market and moves to support levels should be used as buying opportunities. Index being close to the weekly Bollinger Bands and the 4h chart giving first indications of momentum slowing a correction to these levels should not be that far in the future. However, as usual we want to see the intraday price action confirming the validity of my analysis and suggested support levels.

Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE and as usual it is better to log in early to get your seat! https://www.hotforex.com/en/trading-tools/trading-webinars.html

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Feb 27, 2015

Traders Buy the USD as the US Core CPI Came in at +0.2%

After a couple weeks of low volatility the EURUSD moved lower yesterday driven by the US inflation figures. The core CPI (change in the price of consumer goods and services excluding food and energy) rose by 0.2% instead of 0.1% expected by the economists. The CPI that includes the more volatile items (food and energy) fell by 0.7%, most since 1998. This is explained by the substantial fall in Crude Oil prices. The Fed policy makers focus on the Core CPI and therefore markets reacted to the higher than expected figure and bought the dollar as they concluded this will encourage the Fed to raise interest rates this year. However, economists believe that the effects of lower energy prices and a strong dollar will work their way to the Core CPI and cause low reading in the near future.

EURUSD has been really tame since the last time I wrote analysis on it. The weekly picture has not changed much as the downtrend still prevails and there is a shooting star candle indicating that the price will stay in the downtrend. The combination of resistance level at 1.1460 and the 23.6% retracement level held the pair down. The current support and resistance levels nearest to the current price are 1.1098 and 1.1460.

EURUSD, 240 min

Now that the EURUSD has been moving sideways the daily and 4h charts are so similar that I will only comment on the latter. Price is currently resting at a pivot candle high at 1.1203 and the Stochastics are well into the oversold territory while price has moved inside the Bollinger Bands. This suggests that there should be an intraday rebound higher probably to the nearest resistance level at 1.1287. This level coincides with the 50% retracement level drawn from the Wednesday’s high to the latest low yesterday.

Conclusion:

This market is still in a downtrend which means that the support levels are more likely broken and resistance levels honoured. However, the price is now relatively close to the weekly low and sitting at a 4h pivot candle. In addition the price is outside the daily lower Bollinger Bands and the 4h Stochastics are oversold. Therefore a move higher should be in the cards. This should however, be only an intraday rebound as we resistance levels and a sideways range above. Should this move take place I would be looking to benefit from the weekly trend by selling short at the resistance levels, providing the lower time frame charts confirm the idea.

Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE for FREE and as usual it is better to log in early to get your seat!
https://www.hotforex.com/en/trading-tools/trading-webinars.html

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Stan · Mar 2, 2015

GBP a safehaven currency in Europe - Read more: http://analysis.hotforex.com/blog/2015/03/02/gbp-a-safehaven-currency-in-europe/

Now that EUR is weak due to both economic, geopolitical and Greece related risks Sterling starts to look like a safe haven currency with its economy rebounding. The UK job market is recovering, Industrial activity expanding and GDP at healthy 2.7% level (almost back to its 2007 pre-crisis levels). This creates a stark contrast to the ailing Euro Area but at the same time the risk is one of contagion: Euro Area being so important trading partner to the UK its can impact the growth in the UK negatively. However, the EURGBP pair is in a downtrend and reflects both the stark differences in the economic front and the interest rate hike expectations. The Bank of England is expected to raise rates either in the third or fourth quarter while the ECB is obviously committed to the QE program announced in January.

Price is now bouncing from general region of a 0.7255 support level, a historical pivot high. Stochastics in both weekly and daily timeframes are oversold and there is no divergence in these time frames. Out of major EUR crosses, it is the EURGBP that is the weakest and therefore makes it an ideal market to sell the rallies. The nearest resistance (a weekly low) is at 0.7340.

EURGBP, Daily

Since my previous analysis price moved lower and is moving sideways in the region of 0.7255 support area. Stochastics is edging closer to its moving average indicating lack of downside momentum at this support. This could of course change later in today’s trading but it shows how relevant this level was for the market participants. The pair is now moving at the lower end of the regression channel but potential resistance levels are not that far from the current levels. The nearest daily resistance levels are: 0.7300, 0.7317 and 0.7348.

EURGBP, 240 min

I expected price find support at 0.7255 and it did almost to a pip, rallied and then was sold again from 0.7300 level. This led to a move that touched the channel line. The current move higher is taking place after a touch at the lower end of a short term bear channel and after there was a higher low in the Stochastics (bullish divergence). There is a resistance area from 0.7300 to 0.7314 that coincides with a midline in the channel. In addition the upper Bollinger Bans are not that far above the zone either.

Conclusion:

With price being at a historical pivot high and close to the short term channel bottom it makes sense to wait for better levels to enter into short trades. The zone from 0.7300 to 0.7314 is an area we should be looking for momentum reversal signals as the channel midline and the upper Bollinger Bands coincide with the zone. For UK and Euro Area economic releases, see our economic calendar here: HotForex Economic Calendar https://www.hotforex.com/en/trading-tools/economic-calendar.html

Join me on Live Analysis Webinar on Tuesday 3rd of March at 12:30 pm GMT. Register HERE for FREE and as usual it is better to log in early to get your seat! - https://www.hotforex.com/en/trading-tools/trading-webinars.html

Janne Muta
Chief Market Analyst
HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

Daily EURUSD & GBPUSD Analysis by HotForex

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