Daily Global Macro Technicals Trend Bias/Key Levels (Mon 21 May)
Kelvin Wong May 21, 2018 3:07 AM
JPY continues to underpeform while Nikkei 225 & DAX are still showing elements of outperformance among major stock indices.
FX – Mix bag with JPY continues to underperform
- EUR/USD – Trend bias: Sideways with risk of a mean reversion rebound. The pair continued to trade within a tight range again of 73 pips on last Fri, 18 May and ended the U.Ss session with a "Spinning Top" - small body candlestick pattern holding above the 1.1730/1700 short-term support (the swing lows area of 21 Nov/12 Dec 2017 + 38.2% Fibonacci retracement of the 1 year of up move from 03 Jan 2017 low to 16 Feb 2018 high). No change, maintain neutrality stance between 1.1730/1700 and 1.1830 (former minor swing low areas of 09/15 May 2018 + close to 23.6% Fibonacci retracement of the recent decline from 14 May high to yesterday, 16 May low of 1.1763). A break above 1.1830 (an hourly close above it) is likely to open up scope for a short-term rebound to retest the next intermediate resistance at 1.1935/1970 (minor swing high area of 15 May 2018 + pull-back resistance of former minor ascending trendline from 09 May 2018 low). On the other hand, failure to hold at 1.1700 sees an extension of the down move to target the key medium-term support zone at 1.1570/1480 (former medium-term range resistance from 15 May 2015/02 May 2016 + medium-term ascending channel support from 03 Jan 2017 low + close to 50% Fibonacci retracement of the 1 year of up move from 03 Jan 2017 low to 16 Feb 2018 high).
- GBP/USD – Trend bias: Sideways. No change, maintain neutrality stance between 1.3430 and 1.3607 (minor range resistance in place since 08 May 2018). A clearance above 1.3607 (an hourly close above it) shall validate a potential mean reversion rebound towards the next intermediate resistance at 1.3700/3770 (pull-back resistance of the former medium-term ascending channel support from 14 Mar 2017 low + former swing low areas of 09 Feb/01 Mar 2018). On the flipside, a break below 1.3430 ( an hourly close below its) opens up scope for a fresh impulsive downleg to target the next supports at 1.3280 follow by 1.3200 (former congestion area of 13 Oct/01 Nov 2017 + 50% Fibonacci retracement of the 1 year of up move from 16 Jan 2017 low to 17 Apr 2018 high).
- AUD/USD - Trend bias: Sideways with risk of a further mean reversion rebound. Traded sideways with a tight range of 40 pips on last Fri, 18 May. Interestingly, it ended last week with a weekly bullish "Hammer" candlestick pattern following a prior similar price action seen in the previous week of 7/11 May 2018. These observations suggest that the downside momentum of the on-going short-term downtrend in place since 19 Apr 2018 has continued to abate. Maintain neutrality stance between 0.7560 (minor range resistance in place sine 04 May 2018) and 0.7410 (minor swing low of 09 May 2018). A clearance above 0.7560 (an hourly close above it) opens up scope for a potential rebound to retest the 0.7625/7655 resistance (pull-back resistance of the former major “Ascending Wedge” support from Jan 2016 low + 50%/61.8% Fibonacci retracement of the down move from 19 Apr high to 09 May 2018 low). On the flipside, a break below 0.7410 reinstates the bearish tone for an extension of the down move to target the next intermediate support at 0.7330 (minor swing low of 09 May 2017).
- NZD/USD - Trend bias: Sideways. No change, maintain neutrality stance between 0.6938 and 0.6850 (minor swing low of 16 May 2018). A clearance above 0.6938 (an hourly close above it) opens up scope for a potential mean reversion rebound to target the next intermediate resistance at 0.7050/7060 (minor swing high area of 04 May 2018 + 38.2% Fibonacci retracement of the recent steep decline from 13 Apr high to 16 May 2018 low). On the flipside, a break below 0.6850 reinstates the bearish tone for a further downside extension to target 0.6800 support next (the medium-term swing low areas of 11 May/17 Nov 2017 + psychological).
- USD/JPY - Trend bias: Uptrend remains intact. Pull-backed as expected from the intermediate resistance of 111.00 to print a low of 110.58 on last Fri, 18 May U.S. session. Maintain bullish bias in any dips above adjusted key short-term support that remains at 110.40 (former minor range resistance from 16/17 May 2018 + minor ascending trendline from 14 May 2018 low) for a further potential push up to target the next intermediate resistance at 111.40 (Fibonacci projection cluster) follow by the lower limit of a major resistance at 112.00 (the major descending trendline from Jun 2015 high + former swing low). However, a break below 110.55 negates the bullish tone for a deeper pull-back towards the 110.00/109.90 support (former range resistance from 03/10 May 2018 + medium-term ascending channel support from 26 Mar 2018 low.
Stock Indices (CFD) – Japan and Germany continue to outperform while S&P 500 has started to turn bullish
- US SP 500 – Trend bias: Up move likely to have resume. Gapped up by 22 points (0.8%) in the first hour of today, 21 May Asian session reinforced by a positive turn in U.S, and China trade relations as U.S. Treasury secretary reported that President Trump will put planned tariffs against China on hold for now. Technically, the Index has broken above the minor descending trendline resistance from 14 May 2018 now turns pull-back support at 2724 and still managed to hold above it after 1 hour had passed in today, 21 May Japan (Asian) session. Therefore, we have left with only one potential minor consolidation scenario which is the flat/sideways range configuration after the “Symmetrical Triangle” has been invalidated based on current price actions. Based on Elliot Wave/Fractal analysis, the short-term price move of the Index from 16 May 2018 low of 2702 has started to turn impulsive, thus we flip back to a bullish bias with key short-term support now at 2712 (minor ascending trendline from 16 May 2018 low) with 2741 (minor swing high of 14 May) as the upside trigger level where an hourly close above it shall reinforce a further potential impulsive upleg to target the next intermediate resistance at 2760/65 next in the first step (minor swing high area of 15/16 Mar 2018 + 1.236 Fibonacci projection from 03 May 2018 low). On the other hand, failure to hold at 2712 negates the bullish tone that put the minor consolidation scenario back into play for a slide down to test the 2700/2690 support (pull-back support of the former medium-term “Symmetrical Triangle” range resistance from 29 Jan 2018).
- Japan 225 – Trend bias: Up move remains intact. Gapped up and almost met the first short-term resistance/target of 23000 as expected in today, 21 May Asian session. No change, maintain bullish bias in any dips with adjusted key short-term support now at 22820 (last Fri, 18 May U.S. session low) for a further potential push up to target the next intermediate resistances at 23100 follow by 23280 next (Fibonacci projection/retracement cluster + upper boundary of minor ascending channel from 03 May 2018 low). However, failure to hold at 22820 shall negate the bullish tone for another round of pull-back to retest the 22700/620 support (16 May 2018 minor swing low + medium-term ascending channel support from 23 Mar 2018 low).
- Hong Kong 50 – Trend bias: Sideways with signs of bullish elements. No change, maintain neutrality stance between 30800 and 31320. Only a clear break above 31320 (an hourly close above it) reinstates the push up scenario towards 31800 (medium-term range resistance where a failure bullish breakout occurred on 21 Mar 2018). On the flipside, failure to hold at 30800 sees a deeper pull-back towards the next intermediate support at 30500/400 (61.8% Fibonacci retracement of the up move from 04 May low to 14 May 2018 high).
- Australia 200 – Trend bias: Pull-backed towards key medium-term support where a potential up move may occur. Recalled that on last Fri, 18 May, we maintained our short-term neutrality due to the risk of a deeper minor pull-back below 6150 and the Index had indeed broken below the 6087/78 (lower limit of the neutrality range) and tumbled towards the downside target of 6054/40 (key medium-term support zone, ascending trendline from 04 Apr 2018 low + 23.6% Fibonacci retracement of the on-going 6-weeks of up move from 04 Apr low to 10 May 2018 high) as it printed a low of 6057 in last Fri, 18 May U.S. session. Gapped up by 23 points (0.4%) in today, 21 May Asian opening session and continued to inch upwards to print a current intraday high of 6095 (current price action is backed above the 6087/78 lower limit neutrality range). Therefore, we flip back to a bullish bias given the positive price actions seen right above the predefined 6054/40 key medium-term support for a further potential push up to target 6098 (18 May 2018 minor swing high) before the range resistance of 6150 in place since 10 May 2018. However, a break below 6040 negates the bullish tone for a deeper slide to retest 5980 (pull-back support of the former medium-term “Symmetrical Triangle” range resistance from 09 Jan 2018 high).
- Germany 30 – Trend bias: Up move remains intact. Last Fri, 18 May pull-backed in price action had managed to hold right above the 13020 predefined key short-term as expected (printed a low of 13050 in last Fri, U.S. session). No change, maintain bullish bias with key short-term support remains at 13020 (the former minor range resistance from 11/17 May 2018) for a further potential push up to target the next intermediate resistance at 13245/75 (Fibonacci projection cluster + minor swing high area of 01 Feb 2018 before the previous steep decline of 12% occurred). On the other hand, a reintegration back below 13020 negates the bullish tone for a deeper pull-back to retest the 12900/830 support (lower boundary of the medium-term ascending channel from 04 Apr 2018 low + minor range support from 10/15 May 2018).
*Levels are obtained from City Index Advantage TraderPro platform
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.