Daily Global Macro Technicals Trend Bias/Key Levels (Wed 16 May)

Resurgence of USD strength. Mix bag on stock indices as S&P 500 faces the risk of a further pull-back. Short-term weakness in Gold after yesterday's bearish breakdown from a 3-month medium-term range configuration.

FX –  Resurgence of USD strength

  • EUR/USD – Trend bias: Medium-term downtrend resumes. The pair broke below the 1.1885 key short-term support and staged a deeper slide to challenge the 09 May 2018 low of 1.1821. Yesterday’s price action has invalidated the short-term mean reversion rebound phase to kickstart another round of  impulsive downleg of its on-going medium-term downtrend in place since 16 Feb 2018 high of 1.2555. Flip back to a bearish bias in any bounce below key short-term resistance at 1.1880 (close to yesterday, 15 May U.S. session high + minor descending trendline from 14 May 2018 high) for a further potential drop to target the next support at 1.1730/1700 (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). However, a clearance above 1.18830 negates the bearish tone for a squeeze up towards the next intermediate resistance at 1.1930/40 (the pull-back resistance of the former minor ascending trendline support from 09 May 2018 low +  61.8% Fibonacci retracement of the recent decline from 14 May high to 16 May 2018 current Asian session intraday low of 1.1815.
  • GBP/USD - Trend bias: Sideways with risk of a continuation of its medium-term downtrend. The pair had managed to hold above its 1.3430 key short-term support but no conviction now to see a short-term mean reversion rebound scenario above 1.3607 (the minor range resistance in place since 08 May 2018 high) given the resurgence of USD strength seen in other major pairs. Prefer to turn neutral now between 1.3430 and 1.3607. 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: Medium-term downtrend resumes. The pair broke below the 0.7520 key short-term support that invalidated the second leg of the short-term mean reversion rebound scenario. Flip back to a bearish bias in any bounce below key short-term resistance at 0.7485 (close to yesterday, 15 May U.S. session high + minor descending trendline from 14 May 2018 high) for a further potential push down to retest the recent 09 May swing low area of 0.7420/10 in the first step. However, a clearance above 0.7485 negates the bearish tone for further bonce towards the recent minor range resistance of 0.7540/7560 in place since 04 May 2018.
  • NZD/USD - Trend bias: Medium-term downtrend resumes. Broke below the 0.6900 lower limit of the short-term neutrality zone that validated another round of bearish impulsive downleg.  Flip back to a bearish bias in any bounce below key short-term resistance at 0.6910/25 (former minor swing low of 10 May 2018 + 23.6% Fibonacci retracement of the on-going down move from 26 Apr 2018 high to 16 May current Asian session low of 0.6851) for a further potential push down to target 0.6820/0.6800 support next (the medium-term swing low areas of 11 May/17 Nov 2017) in the first step. On the other hand, a break above 0.6920 negates the bearish tone for a squeeze back up to retest 0.7000 (former minor swing low areas of 02/07 May 2018 & minor swing high areas of 09/11 May 2018).
  • USD/JPY - Trend bias: Impulsive upleg of medium-term uptrend resumes. The pair broke above the 110.00 upper limit of the short-term neutrality zone that has validated a continuation of the impulsive upleg of its on-going medium-term uptrend in place since 26 Mar 2018 low. Flip back to a bullish bias in any dips above 109.90 key short-term support (former minor range resistance of 02/10 May 2018 for a further potential push up to target the next resistance at 110.85/111.00 in the first step (the former medium-term swing low area of 27 Nov 2017 & the 61.8% Fibonacci retracement of the multi-month decline from 06 Nov 2017 high to 26 Mar 2018 low). However, failure to hold at 109.90 negates the bullish tone a slide back towards the minor range support of 109.35/20 which also confluences with the minor ascending trendline from 04 May 2018 low.

Stock Indices (CFD) – Mix bag with S&P 500 sees the risk of a further pull-back

  • US SP 500 – Trend bias: Further minor pull-back within medium-term  uptrend. The Index broke below the 2717 adjusted key short-term support within the first hour of yesterday, 15 May U.S. session that invalidated the residual push up scenario towards 2760/65. Right now, it is likely to be undergoing a minor pull-back/consolidation to retrace some of the gains of the recent up move from 03 May 2018 low. Flip to a bearish bias in any bounce below 2717 key short-term resistance (former minor swing low of 11/12 May 2018 + minor descending trendline from 14 May 2018 high) for a further potential push down to target the next support at 2690 and event the key medium-term support of 2680 (the pull-back support of the former “Symmetrical Triangle” range resistance from 29 Jan 2018 high + 38.2% Fibonacci retracement of the up move from 03 May low to 14 May 2018 high). However, a break above 2717 resumes the bullish upleg towards the 2760/65 resistance.
  • Japan 225 – Trend bias: Sideways. The Index has continued to hold at the 22700 predefined key short-term support (minor ascending channel support from 03 May 2018 low + 23.6% Fibonacci retracement of the up move from 03 May low to 15 May 2018 high) but conviction has been reduced for a push up towards the 23000/23090 resistance due to weakness seen in the S&P 500. Prefer to turn neutral now between 22700 and 22840 (close to the 61.8% Fibonacci retracement of the on-going pull-back from 15 May high to today, 16 May current Asian session intraday low of 22696). Only a clear break above 22840 (an hourly close above it) reinstates the bullish tone towards 23000/23090 resistance. On the flipside, failure to hold at 22700 sees a deeper pull-back towards the 22550 support (former minor swing high areas of 02/08 May 2018 + ascending channel support from 03 Apr 2018 low).
  • Hong Kong 50 – Trend bias: Sideways. The Index has managed to stage a bounce right at the lower limit of the predefined 30970/800 key short-term support (former minor range resistance from 20 Apr/10 May 2018 + 23.6% Fibonacci retracement of the on-going up move from 04 May low to 14 May U.S. session high of 31628) after a weak opening in today, 16 May Asian session). Due to weakness seen in in the S&P 500, conviction has been reduced for the push up scenario towards the 31800 key medium-term range resistance. Prefer to turn neutral first between 30800 and 31320 (61.8% Fibonacci retracement of the on-going pull-back from 14 May high to 16 May, current Asian session low of 30762 + former minor swing high area of 11 May 2018). Only a break above 31320 (an hourly close above it) reinstates the push up scenario towards 31800. 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: Sideways. The Index has continued to hold at the 6087 predefined key short-term support but conviction has been reduced for the push up scenario to target the 6150 intermediate resistance follow by 6210 due to weakness seen in the S&P 500. Prefer to turn neutral first between 6087 and 6150. A break below 6087 (a hourly close) sees a deeper pull-back towards the 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).
  • Germany 30 – Trend bias: Sideways. Conviction has been reduced for the push up scenario towards the 13140/150 resistance (76.4% Fibonacci retracement of the steep down move from 23 Jan high to 06 Feb 2018 low) due to weakness seen in the S&P 500. Prefer to turn neutral first between 13050 and 12900. Only a break above 13050 (a hourly close) reinstates the bullish tone towards 13140/150 and on the flipside, failure to hold at 12900 sees a deeper pull-back towards the 12830/800 support (minor swing low area of 07 May 2018 + ascending channel support from 04 Apr 2018 low).

Commodities –Further potential short-term weakness in Gold

  • WTI Crude (Jun 2018) – Trend bias: Unclear. Pushed up but failed to break above the 71.63 upper limit of the short-term neutrality zone (printed an intraday high of 71.91 in yesterday, 15 May European session but no hourly close above 71.63). No change, maintain neutrality stance between 70.27 and 71.63 (minor swing high area of 11 May 2018).  Only a break above 71.63 (an hourly close) is likely to reinstate the bullish tone for a further potential push up to target the next resistance at 73.30/90 (the upper boundary of a major ascending channel from Feb 2016 low + Fibonacci projection cluster).  On the flipside, failure to hold at 70.27 opens up scope for a deeper pull-back towards the next intermediate support at 69.20/68.60 (recent reversal low area of 08 May 2018 + minor ascending trendline from 02 May 2018 low).
  • Gold – Trend bias: Down after bearish breakout from medium-term range.  Broke below the 1303/1300 medium-term range support in place since 01 Mar 2018. Flip to a bearish bias in any bounce below key short-term resistance now at 1303 (former range support + 38.2% Fibonacci retracement of the on-going decline from 11 May high to yesterday, 15 May U.S. session low of 1288) for a further potential push down to target the next intermediate support at 1284/81 (Fibonacci projection/retracement cluster + lower limit of the minor descending channel from 11 May 2018 high) before a minor consolidation sets in. However, a clearance above 1303 sees a failure bearish breakdown for another round of churning towards the next resistance at  1318 (the upper limit of the minor descending channel from 11 May 2018 high + minor congestion area of 03/14 May 2018).  

*Levels are obtained from City Index Advantage TraderPro platform


Join our live webinars for the latest analysis and trading ideas. Register now

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.

For further details see our full non-independent research disclaimer and quarterly summary.