Analyst Articles – Forex News 24

Will Lagarde Continue the Bank’s Dovish Approach?
How GBP/JPY Price Could End Current Sideways Movement
Crude Oil Prices Struggle on Brimming US Inventories, Rising Exports
EURUSD Struggles to Extend Bearish Price Action Ahead of NFP Report
Equities Mixed in Thin Trade Before US Independence Day, Jobs Data
Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs
AUDCAD Primed For Break with Fewer Thematic Restrictions
USDCAD Rate Searches for Support, RSI Flirts with Oversold Territory
Gold Prices Snap Back After Failed Breakout Attempt
Treasury Yields Fall As ISM Services Index Comes In Softer Than Expected

Will Lagarde Continue the Bank’s Dovish Approach?

Posted: 04 Jul 2019 05:36 AM PDT

ECB Talking Points:

Christine Lagarde lacks experience in monetary policy but her experience as head of the IMF can bring some fiscal insight during a time where monetary decisions seem to be insufficient
She believes that low inflation can hinder economic growth and that public spending can improve output without increasing debt
It is expected that she'll continue Draghi's QE programme in the near-future and could remain dovish if economic conditions remain tilted to the downside

Christine Lagarde's nomination to lead the European Central Bank came as a surprise as she was not in the top candidates expected to obtain the job, at least not within the general public's top candidates, but she is not a new face within the top job selection process. Her political background made her more likely to replace Jean-Claude Juncker to become the new leader of the European Commission and her lack of experience in financial markets has led to some scepticism about her appointment as the top economic official in the Eurozone.

But her role as head of the International Monetary Fund and how she came to occupy that role speak to her ability leading large organisations. She took the job as head of the IMF in a sudden turn of events where her predecessor Dominique Strauss-Khan was arrested on suspicion of sexual assault. She had no previous experience within the finance sector, but she managed to rebuild the confidence in the IMF after its reputation was greatly damaged in the aftermath of the Greek financial crisis. It didn't matter back then that her background was that of a politician and lawyer, nor will it matter now given her reputation within the economic institution.

Some will question her abilities and track record

Despite her successful career leading the fund she has faced criticism over certain actions undertaken in her career, like the controversial bailout of Argentina and her involvement in the "Tapie" scandal. The IMF's $57bn bailout of the Latin country threatened her reputation as the country's currency crisis continued and its yields shot up shortly after the cash injection, with many still fearing that the Argentinian economy could break if the general elections in October sees a victory for the populist opposition. A bigger black mark in her career is her involvement in the 2008 Tapie scandal, of which she was accused of diverting public funds to French businessman Bernard Tapie when she was France'sminister of Economics under Nicolas Sarkozy's presidency.

Nonetheless she was never convicted, and she continued her role as the head of the monetary fund, a post she will now vacate to possibly replace Mario Draghi as the new top economic official in the Eurozone.

Is she fit to fill the job?

She has no formal economics training, and although that is also true for other central bankers like Jerome Powell, she has no previous experience working in a central bank, which means she lacks experience with monetary policy, the backbone of the ECB's job. But as Mario Draghi has already pledge to continue monetary stimulus in the foreseeable future it is likely that when Ms Lagarde steps in at the beginning of November she will continue with the set policies until at least mid-2020, as Mr Draghi is likely to take advantage of her inexperience to push for another round of quantitative easing, knowing that she is unlikely to reverse his decision in the early stages of her new role. She may have the experience to handle the recovery and bailout process once a country has fallen deep into recession, but it is expected that she will need to rely on the Central Bank's economists to set the monetary policies to avoid summoning the Eurozone into a recession, as her job is no longer to rescue after the fact but to avoid it happening. But as the Eurozone faces increasing economic challenges her lack of central bank experience may play in the bloc's favour as it is likely to bring stability to monetary policy in the short-term and will likely allow the ECB's internal experts, who are the ones to have developed the current policies, to boost their roles within the bank.

And despite her lack of monetary setting experience she is considered to have certain attributes that other candidates lack, and the ability to stand her ground is one of them. In a time when central bankers have been implementing loose monetary policy and are thought to be influenced by leading politicians, Ms Lagarde's experience as a lawyer and politician is expected to have equipped her with the tools to be able to face and stand up to the world's leaders to ensure the central bank remains independent. She is also highly experienced in fiscal policy, which has become increasingly important in the ECB rate setting alongside monetary policy.

When looking for guidance as to what her stance may be once she has gotten comfortable with her new role we can note a remark she made in 2014 where she said that public investment has the potential to efficiently boost growth, and the increase in output from such investment could possibly offset the increase in debt, hinting to a more dovish monetary stimulus stance, which is in line with views from most southern European countries. Regarding inflation, she has previously mentioned that subdued inflation can undermine growth and increases the risks of deflation occurring, so we can expect her to focus on stimulating the economy (i.e. low rates and asset purchases) to bring inflation to its 2% target, leaving aside the "close to or below" approach.

There is no doubt then that Ms Lagarde will face pressure from Germany, considered to be the Eurozone's largest and strongest economy, which has condemned the continued use of low-to-negative interest rates which are seen to damage the savings of German consumers.

GBP/JPY – The Sellers indecision

On June 25, GBP/JPY corrected higher and created a higher low 135.81. Yesterday, the pair printed 135.17- its lowest level in six months, however; closed with a Doji pattern reflecting the seller's indecision to keep pressing the price lower.

At the start of this week the Relative Strength Index (RSI) fell from 43 to 34 then remained flat highlighting an exhausted bearish momentum and possibly more of a sideways movement.

Just getting started?See our Beginners' Guide for FX traders

GBP/JPY DAILY PRICE CHART (Oct 13, 2016 – JULY 4, 2019) Zoomed out

GBP/JPY DAILY PRICE CHART (Oct 13, 2016 – JULY 4, 2019) Zoomed IN

Looking at the daily chart we notice on Tuesday GBP/JPY entered the lower trading zone 135.55 – 136.40, however; it failed yesterday to close below the low end of the zone. Hence; if the sellers repeat their attempt then a close below the lower end could press the price lower towards 133.40, although; the weekly support levels marked on the chart (zoomed in) should be kept in focus.

In turn, we notice GBP/JPY is eying today the high end of the trading zone after closing yesterday above the lower end. Additionally, a close above this level may cause the price to rally towards 139.00, however; the weekly resistance levels underlined on the chart would be worth monitoring.

Having trouble with your trading strategy? Here's the #1 Mistake That Traders Make

GBP/JPY Four-HOUR PRICE CHART (JunE 18 – July 4, 2019)

Looking at the four-hour chart, we notice yesterday GBP/JPY broke below the low end of the trading range 135.78 – 137.17 then rebounded from 135.17, therefore; a break below this threshold may send the price even lower towards 134.38 contingent on clearing the weekly support underlined on the chart.

On the other hand, we notice the pair is eyeing today a return to the aforementioned trading range, hence; a break above 1340.40 may cause the price to rally to the high end of this range, nonetheless; the daily resistance levels highlighted on the chart need to be watched along the way. See the chart for more details if the rally continued above mentioned levels.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

2019-07-04 09:40:00

Crude Oil Prices Struggle on Brimming US Inventories, Rising Exports

Posted: 04 Jul 2019 01:17 AM PDT

CRUDE OIL & GOLD TALKING POINTS:

Crude oil prices struggle as US inventories fall less than expected, exports rise
Gold prices retreat but soft services ISM data caps losses as bond yields drop
US market closures to reduce liquidity, might amplify any kneejerk volatility

Crude oil prices managed a tepid corrective rise following yesterday following the prior session's potent downswing, echoing a broader risk-on tilt across financial markets. The move failed to gain substantive momentum however as EIA inventory flow data showed stockpiles shed a smaller-than-expected 1.085 million barrels last week. The Census Bureau also said US oil exports rose in May.

Gold prices were mired in consolidation mode in the meanwhile, digesting the previous day's explosive gains. An early corrective pullback found support after the US services ISM gauge undershot forecasts as expected, putting growth in the economy's largest sector at the weakest in two years. That nudged benchmark Treasury bond yields lower, putting a floor under the yellow metal but falling short of catalyzing gains.

US HOLIDAY TO DRAIN LIQUIDITY, BOOST KNEEJERK VOLATILITY RISK

Looking ahead, US exchanges will close for Independence Day holiday, draining liquidity levels. That might make for a quiet session ahead, putting the spotlight on Friday's US jobs report as the next major inflection point. Diminished participation levels might amplify knee-jerk volatility if an unexpected headline roils markets however, warning investors to proceed with caution.

Get the latest crude oil and gold forecasts to see what will drive prices in the third quarter!

GOLD TECHNICAL ANALYSIS

Gold prices are idling near resistance at 1433.85, the confluence of August 2013 high the underside of support-turned-resistance set from December 2016. A break above it confirmed on a daily closing basis opens the door for a test above the $1500/oz figure. Alternatively, a turn below rising trend support at 1392.81 targets a dense support bloc running through 1346.75.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are digesting losses after breaching support at 57.24. The next downside barrier lines up in the 54.55-55.37 area, with a further push below that paving the way for a challenge of the 50.31-51.33 region. Alternatively, a reversal above resistance at 57.88 exposes the 60.39-95 zone anew.

COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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2019-07-04 08:00:00

EURUSD Struggles to Extend Bearish Price Action Ahead of NFP Report

Posted: 03 Jul 2019 10:50 PM PDT

The near-term advance in EURUSD appears to be unraveling as the European Union nominates International Monetary Fund (IMF) Managing Director Christine Lagarde to replace European Central Bank (ECB) President Mario Draghi, but the broader outlook for the Euro Dollar exchange rate remains constructive as it breaks out of the downward trend from earlier this year.

It seems as though the upcoming transition at the ECB is spurring speculation for a more accommodative policy in Europe as Ms. Lagarde insists that "the global economy has hit a rough patch" while speaking at the Group of 20 (G20) summit.

The comments suggest the ECB will continue to support the monetary union under the new leadership, and the Governing Council may show a greater willingness to implement more non-standard measures over the coming months as the central bank struggles to achieve its mandate for price stability.

In turn, ECB officials may show a greater willingness to implement a negative interest rate policy (NIRP) for the Main Refinance Rate, its flagship benchmark for borrowing costs, with the Euro at risk of facing headwinds over the coming months as the Governing Council "stands ready to adjust all of its instruments, as appropriate, to ensure that inflation continues to move towards the Governing Council's inflation aim in a sustained manner."

However, the Governing Council may keep monetary policy on auto-pilot ahead of President Draghi's departure as the central bank prepares to launch another round of Targeted Long-Term Refinance Operations (TLTRO) in September, and the Federal Reserve interest rate decision on July 31 may largely influence the near-term outlook for EURUSD as Chairman Jerome Powell and Co. are widely expected deliver a 25bp rate cut.

Fed Fund futures continue to show a 100% probability for a reduction in the benchmark interest rate as the Federal Open Market Committee (FOMC) alters the forward guidance for monetary policy, and it remains to be seen if the central bank will reverse the four rate hikes from 2018 as President Donald Trump tweets "we need rates cuts, & easing."

With that said, the Non-Farm Payrolls (NFP) report may do little to impact the monetary policy outlook, and current market conditions may keep EURUSD afloat over the coming days as the exchange rate struggles to extend the series of lower highs and lows from earlier this week.

EUR/USD Rate Daily Chart

Keep in mind, the broader outlook for EURUSD is no longer tilted to the downside as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year.

As a result, EURUSD stands at risk for a larger correction as it breaks out of the range-bound price action from May following the failed attempt to test the 1.1000 (78.6% expansion) handle, with the exchange rate clearing the 200-Day SMA (1.1335) for the first time since in over a year.

The pullback from the June-high (1.1412) appears to be stalling ahead of the Fibonacci overlap around 1.1270 (50% expansion) to 1.1290 (61.8% expansion) as EURUSD struggles to extend the series of lower highs and lows from earlier this week, with a move back above 1.1340 (38.2% expansion) bringing the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region on the radar.

Next area of interest comes in around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), which lines up with the March-high (1.1448), followed by the 1.1510 (38.2% expansion) to 1.1520 (23.6% expansion) zone.

Additional Trading Resources

For more in-depth analysis, check out the 3Q 2019 Forecast for the Euro

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-07-04 05:22:00

Equities Mixed in Thin Trade Before US Independence Day, Jobs Data

Posted: 03 Jul 2019 10:14 PM PDT

Asia Pacific Markets Talking Points

Equities trade mixed in Asia Pacific markets
Thin liquidity ahead of US non-farm payrolls
S&P 500 futures pave way for further gains

Find out what retail traders' equities buy and sell decisions say about the coming price trend!

Equities traded mixed during Thursday's Asia Pacific trading session, with financial markets vulnerable to thinner liquidity ahead of the US holiday. Wall Street will be closed for trading due to Independence Day, but these conditions could persist into Friday on extended vacationing.

The Nikkei 225 traded about 0.3 percent to the upside heading into Tokyo's close, with all sectors in the green apart from consumer discretionary (-0.53%). Australia's benchmark ASX 200 rose over 0.4% while China's respective Shanghai Composite was down about 0.3%.

Cautious optimism in equities continues to follow the aftermath of this weekend's G20 Summit, where the world's largest economies agreed to a trade truce. That has helped to lift sentiment in the near-term without diminishing prospects of aggressive easing from the Fed for now.

Top event risk for the remainder of this week is the US jobs report. Another disappointing outcome relative to economists' expectations, which has been the case from the country for some time, could add fuel to Fed rate cut bets. But, this also risks placing a premium for liquidity.

S&P 500 Technical Analysis

S&P 500 futures, showing after-hours trade, continue making record-breaking progress to the upside. This follows a push through April highs where resistance was at 2961. Ahead lays the 50% Fibonacci extension at 3034 which could present itself as resistance.

S&P 500 Futures Daily Chart

Charts Created in TradingView

FX Trading Resources

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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2019-07-04 05:00:00

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

Posted: 03 Jul 2019 08:55 PM PDT

Currency Wars Talking Points:

Despite the expected drain in liquidity heading into the US Independence Day holiday, the major US indices would all record highs
Service sector PMIs have given an uneven testament to growth forecasts while Trump pounded the drum of currency wars via tweet
Top event risk through end of week is Friday NFPs, with USDCAD further data leveraged, but there are more systemic options to watch

What do the DailyFX Analysts expect from the Dollar, Euro, Equities, Oil and more through the 3Q 2019? Download forecasts for these assets and more with technical and fundamental insight from the DailyFX Trading Guides page.

Record Dow and S&P 500 Highs Just Before Liquidity Drains

With the markets fully prepared for the drawdown in liquidity for the holiday period – the restraint in intraday activity and reduction in volume reflected that well – there was a reasonable expectation that Wednesday would coast into a nondescript close. What we ended up was starkly different from the standard playbook. Instead of taking the path of least resistance as stretched speculative interests dialed back from over-exposure, we instead would find the US equity indexes push even higher. That would lead the S&P 500 to yet another bullish gap on the open which earned a new record high on both an intraday and record basis. Yet, unlike the similar development this past Monday, the past session’s strength held out for a positive close. Furthermore, the celebration was not reserved for this broad index with so much derivative interest behind it. The blue-chip Dow Jones Index and tech-heavy Nasdaq 100 would earn their own record high close.

Chart of S&P 500 and Gaps (Daily)

The charge before the US holiday is unusual. The fact, that the move pushed markets to fresh records even more remarkable. Yet, it is the contrast to the rest of the speculative environment that really stands out. While there was a sympathy advance across a few other risk-leaning assets – including global equity equivalents – the vast majority of such markets were spinning their tires. Emerging market benchmarks and carry trade assets are return-explicit benchmarks that struggled. Perhaps most noteworthy of all in my book however remains the incredible disparity between a pace setter like the S&P 500 and the course of global government bond yields which source both growth potential as well as sheer speculative appetite.

Chart of S&P 500 and Aggregate 10-Year Gov't Bond Yield (Daily)

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

Recession Fears and Currency Wars

For fundamental motivation this past session, I can’t say that the backdrop was particularly convincing to justify a sense of certainty behind the rally. For monetary policy, the expectation that central banks will go ‘all in’ to support investors remains well founded between Fed Fund futures showing debate over full 50 or 75 basis points worth of rate cuts this year and news that IMF Director Lagarde is ready to take the wheel from Draghi, most likely to a dovish continuation. Pit this against the very troubled outlook for global economic activity. The US 10-year to 3-month yield spread inversion is deepening the conviction that the world’s largest economy is heading for the rocks. Then again, the run of service sector activity reports from across the globe seemed to soften some of the assurance of impending recession set by the manufacturing activity data at the start of the wee.

If there was one particular thematic issue that earned more of my scrutiny than any other, it was trade wars. Yet, with the exception of there being some confusion as to the direction the US is heading with Huawei treatment, there really wasn’t much on this front in the mainstream sense. However one particularly severe threat of escalation was floated by the US President himself. In a spurious tweet, Donald Trump opined that the US should join the ‘big currency manipulation game’ run by Europe and China or be left behind. Rarely does a global leader speak so openly of distorting their local currency. This is tantamount to threaten a currency war. Unlike its economic trade equivalent, a competitive FX effort is far more messy and prone to rapid escalation to extremes. If we head in this direction, a financial crisis will likely precede a downturn in economic activity.

Event Risk for Friday Makes Dollar and Loonie Particularly Appealing

Looking ahead, the US markets will be extremely thin through Thursday with the exchanges offline. What’s more, investors who remain – whether local or in different countries – will assume through experience that the period will be quiet through sheer habit. That said, we should not be so comfortable in our default settings of over-indulgent risk taking. Beyond the in-flux systemic issues of trade and political instability, we are also facing a few scheduled events that can nudge volatility to life. Top event risk through week’s end is the June NFPs report. Clearly, there is heavy speculation around Fed policy intent and it will be read as an update for such. However, the greater potential is for the data to unsettle growth forecasts. This is not a scenario where a ‘bad reading leverages a favorable market response’ through stimulus hopes.

Chart of DYX Dollar Index and 3-Month Rolling Historical Range (Weekly)

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

If you are looking for a pair that can further exploit the Dollar’s anticipation, consider USDCAD. Due at the exact same time as the NFPs, Canada will report its own local employment report Friday. This is similar to the trade readings from both countries released Wednesday at 12:30 GMT. Yet, in the case of the jobs data, there is an unmistakable history of generating severe volatility with sufficient surprises in the updates. The Canadian manufacturing activity report from Ivey will be another important reading – particularly with the Bank of Canada (BOC) due to deliberate monetary policy next week, with swaps pricing in a 95 percent probability of no change.

More Systemic Trading Themes from Euro, Pound and Gold

Outside the most systemic themes and top profile of the Dollar with its monetary policy implications, there are a few other markets to keep tabs on. If you’re looking at EURUSD, the inability to clear its frustratingly persistent, narrow range is not just the result of the Greenback’s features. The Euro is dealing with an overtly dovish outlook that is only furthered by the Lagarde news, but reports that the European Commission would not pursue debt proceedings against Italy is a sliver of relief. That allows the Euro to play more of the alternative-liquidity-currency role rather than divert those funds to something that isn’t dealing with its own internal strife.

Chart of 10-Year Italian-German Yield Spread Overlaid with USD/EUR (Daily)

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

The Sterling is another currency that is facing its own fundamental issues – though to much less favorable results. The Brexit focus remains, but we are still multiple steps away from the negotiations to restart in earnest as we are still awaiting clarity on the Tory leadership race. The questions of the winner and their genuine policy intent will keep outright moves in the Pound under wraps. Yet, that doesn’t mean the currency won’t move at all. The Pound continues to stumble with remarkably pressured GBPUSD and EURGBP while the likes of the GBPCAD has handily cleared its support.

Chart of GBPCAD (Daily)

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

Outside of the convenient regional aspect of the currency war, my big picture assessment of our conditions remains a product of gold. The precious metal is still connected to its safe haven elements but it is far more reflective of its ‘alternative to traditional currency’ role. The commodity remains in reach of is multi-year high, but there was a notable failure to mark a fresh break through Wednesday’s session. A tentative effort to surpass the June high resulted in a sharp intraday reversal that instead left us with the largest upper wick for the market going back to November 2016. If there is anything we should have learned of late, though, it is that textbook technicals (and fundamentals) should not dictate trades on their own. We discuss all of this and more into the end of the week in this Trading Video.

Chart of Gold and Wicks (Daily)

Dow, S&P 500 and Nasdaq Hit Records Before Holiday, EURUSD Looks Out to NFPs

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-07-04 03:45:00

AUDCAD Primed For Break with Fewer Thematic Restrictions

Posted: 03 Jul 2019 07:42 PM PDT

AUDCAD Talking Points:

One of the most limiting factors for markets at present is the overbearing influence of unresolved systemic fundamental themes
AUDCAD is a far less popular among FX traders than the ‘majors’ but it sports far fewer systemic issues and faces some key event risk
High-potential event risk like the Canadian jobs report and more weighty themes like next week’s BOC can trigger high level technicals

See how retail traders are positioning in AUDUSD, USDCAD, USDCHF and USDJPY along with the other major Dollar-based majors usingthe DailyFX speculative positioning data on the sentiment page.

In the previous quick take video, we took a closer look at USDCAD – a pair that arguably faces some of the best potential among the major FX pairs to generate volatility despite the constraints in liquidity that we face with holiday conditions. The pair I wanted to look at in this brief review is a somewhat related cross with some similar fundamental inclinations but that enjoys substantial conditional changes that can present more medium-term opportunity should the proper technical and fundamental strings be pulled.

Chart of USDCAD Overlaid with USDAUD in Red (Daily)

AUDCAD is the kind of secondary cross that few traders keep in their regular rotation when looking for setups in the FX market. That said, there are some significant advantages to the less familiar pairing. When we look to the likes of EURUSD, GBPUSD or USDJPY, there is a notable lack of significant momentum to be found among these most liquid pairings. That is in large part due to the overwhelming influence of messy yet systemic themes. For the Dollar, it is hard to determine whether Fed cuts, economic restraint or trade wars will take a greater roll in directing the benchmark. The ECB’s dovish inclinations with a new President coming in and US President Trump’s regular complaints about the second largest currency keep the Euro unbalanced. And, the Japanese Yen seems to be a one-tracked mind for reflecting risk trends – though it is on a very different course from other such benchmarks like indices.

For AUDCAD, there are certainly higher-level fundamental issues for which we need to keep track, but many of those themes are deflated for importance or totally offset. For trade wars, Australia is more significantly exposed to China while Canada has a deep correlation to the United States, but they do not suffer the same anchor for sentiment as a USDCNH, USDCAD or AUDUSD. Far more substantial in tipping the scales for AUDCAD is the contrast in monetary policy between the RBA and BOC. Nearly all major central banks are in some phase of dovish, and these two are no exception. The RBA cut rates this week, but the Aussie Dollar was little moved. The BOC is due to weigh on rates next week, but there is almost certainty of no change and relatively little speculation of cuts this year. That can lead to a bias whereby a surprising dovish perspective can leverage a greater (bullish AUDCAD) response than the alternative.

There is a similar skew in potential when it comes to the technical side. The Aussie Dollar has struggled versus most pairs and the Loonie has enjoyed some moderate strength recently. AUDCAD has combined these influences to a tumble to very significant support. We have a range floor that is both a Fibonacci from a more-than decade-long range and the trajectory born out by very explicit reversals from previous years’ swing lows. Support is far more influential than resistance.

Chart of AUDCAD (Monthly)

AUDCAD Primed For Break with Fewer Thematic Restrictions

On a shorter time frame, the pair has held to an overt range these past two week of 1.9100 to 1.9200. The swing low from mid-June doesn’t do justice to the actual weight to the floor. The cap over this same period is far less substantial. There is a 20-day moving average in immediate proximity and the range of highs through the second half of June offered plenty of opportunity to draw the market’s attention. If I were being charitable, we could also consider 1.9200 a ‘pivot’ whereby previous reference to the level as support can add a little more influence. Ultimately, the break for this pair sets a ‘path of least resistance’ to a bullish resolution. That offers a technical bias that reinforces the fundamental. It doesn’t assure we ultimately realize that bullish break; but if we do, it seems as if it will offer the more meaningful conclusion.

Chart of AUDCAD and 20-Day Moving Average (Daily)

AUDCAD Primed For Break with Fewer Thematic Restrictions

If you want to download my Manic-Crisis calendar, you can find the updated file here.

2019-07-04 01:40:00

USDCAD Rate Searches for Support, RSI Flirts with Oversold Territory

Posted: 03 Jul 2019 05:46 PM PDT

Canadian Dollar Talking Points

USDCAD trades to a fresh yearly-low (1.3055) as the Canadian economy appears to be outperforming its US counterpart, and the exchange rate may continue to exhibit a bearish behavior over the remainder of the week as the Relative Strength Index (RSI) flirts with oversold territory.

USDCAD Rate Searches for Support, RSI Flirts with Oversold Territory

USDCAD continues to search for support following the Federal Reserve meeting as fresh data prints coming out of the US indicate a slowing economy, and it seems as though it will only be a matter of time before the Federal Open Market Committee (FOMC) switches gears as the central bank alters the forward guidance for monetary policy.

The fresh updates to the ADP Employment survey does not bode well for the highly anticipated Non-Farm Payrolls (NFP) report as the gauge shows a 102K expansion in private-sector employment versus forecasts for a 140K print in June.

The ISM Non-Manufacturing survey highlights a similar dynamic as the employment component narrows to 55.0 from 58.1 in May, and signs of slower job growth may push the Fed to insulate the economy as "many FOMC participants now see that the case for a somewhat more accommodative policy has strengthened."

In turn, Fed Fund futures continue to reflect a 100% probability for at least a 25bp reduction on July 31, and Chairman Jerome Powell and Co. may come under pressure to reverse the four rate hikes from 2018 as US President Donald Trump tweets "we need rates cuts, & easing."

Image of Bank of Canada interest rate

In contrast, the Bank of Canada (BoC) may continue to endorse a wait-and-see approach at the next meeting on July 10 as Canada unexpectedly posts a trade surplus of 0.76B in May, and it seems as though Governor Stephen Poloz and Co. may keep the benchmark interest rate on hold throughout 2019 as "recent data have reinforced Governing Council's view that the slowdown in late 2018 and early 2019 was temporary."

As a result, the diverging paths for monetary policy may continue to drag on USDCAD, with the exchange rate at risk of exhibiting a more bearish behavior over the near-term as it snaps the upward trend from earlier this year.

USD/CAD Rate Daily Chart

Broader outlook for USDCAD is no longer constructive as the advance from the April-low (1.3274) stalls ahead of the 2019-high (1.3665), with the break of trendline support raising the risk for a further decline in the exchange rate.
Downside targets are still on the radar as USDCAD clears the February-low (1.3068), with a break/close below 1.3020 (50% expansion) opening up the Fibonacci overlap around 1.2970 (78.6% retracement) to 1.2980 (61.8% retracement).
Will keep a close eye on the Relative Strength Index (RSI) as it flirts with oversold territory, with a break below 30 raises the risk for a further decline in USDCAD as the bearish momentum gathers pace, but failure to push into oversold territory raises the risk for a rebound in the exchange rate.

Additional Trading Resources

Are you looking to improve your trading approach? Review the 'Traits of a Successful Trader' series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

2019-07-04 00:30:00

Gold Prices Snap Back After Failed Breakout Attempt

Posted: 03 Jul 2019 09:52 AM PDT

Gold Price Talking Points:

Gold prices pressed the highs earlier this morning, with buyers pulling back before the 1439 swing-high from last week could be tested.
After gold's almost 13% gain in the month of June, buyers continue to show some element of responsiveness at support. But do gold bulls have the ability to continue pushing gold prices to fresh six-year-highs?

Gold Prices Set Lower-High After Failed Breakout Attempt

Gold prices put in an impressive final month of Q2, and this furthered a longer-term theme after strength began to show in Gold prices in Q3 of last year. Gold prices climbed from August of last year into February of this year, with digestion of that move showing up in mid-February. That ran through most of the month of May until buyers came alive later in the month. This led to a strong topside incline throughout June as prices broke-out to fresh six-year-highs.

Gold Price Daily Chart

Chart prepared by James Stanley

Gold Prices Caught at Resistance Around Prior Six-Year-Highs

Taking a step back and this area of resistance has a bit of historical relevance with Gold prices. The level at 1433.85 is the August 2013 swing-high, and this level is coupled with the 50% retracement of the 2012-2015 pullback. This longer-term zone of resistance in Gold looked at last week has continued to restrain the topside advance.

Gold Weekly Price Chart

Chart prepared by James Stanley

Gold Trading Strategy Moving Forward

At this point, traders are likely going to want to continue to expect heightened volatility around this theme. Tomorrow is a holiday in the United States and the day after brings Non-Farm Payrolls. This will likely take place amidst a backdrop of lower liquidity, which can lead to sharp and unpredictable moves in either direction. Combine that with the fact that the US Dollar is sitting at an area of lower-high resistance following the June sell-off, and there are a number of possible scenarios to entertain.

For those looking at longer-term bullish strategies, continuing to focus on support potential could be an attractive way of following this theme. The same zone around 1375 that hast yet to come back into play could be incorporated as an 's1' area for support potential, while the prior zone consisting of swing-highs from 2017 sits below that, running around the 1357.50 area on the chart. Each of those prices are confluent with Fibonacci levels from the recent topside breakout, with the 38.2% marker at 1376 while the 50% marker rests very near the 2017 swing-high, plotted at 1357.14.

Gold Four-Hour Price Chart

Chart prepared by James Stanley

Gold Price Reversal Strategies

This would be a bit more cut-and-dry given recent dynamics and the fact that buyers were unable to test that prior swing high. Key for this approach would be the trader's confidence in a resurgence of US Dollar strength; and given the NFP event sitting on the docket for Friday, that possibility certainly does exist. For traders looking to work with reversal themes, stops above the six-year-highs can keep the door open for as such. This would be approximately $25 of risk given current price, so the trader would likely want to look for initial targets at 1390 or lower in order to justify a minimum one-to-one risk-reward ratio. Secondary target potential could be investigated around the 's1' zone looked at above, with tertiary targets set around the 's2' zone, taken from around the 2017 swing-highs in Gold.

Gold Price Two-Hour Chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you're looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we're looking at what we're looking at.

If you're looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

2019-07-03 16:38:00

Treasury Yields Fall As ISM Services Index Comes In Softer Than Expected

Posted: 03 Jul 2019 09:16 AM PDT

US Treasury Yields Drop on ADP Employment & ISM Services Index

Although the economic data missed analyst expectations, the non-manufacturing sector and labor market continues to grow
Trade conflict and tariffs continue to be a noted concern among survey respondents
Treasury yields drop on the weak data with the 10-year slipping to its lowest level since November 2016

The latest report from the Institute of Supply Management (ISM) released their report on the Non-manufacturing industries Wednesday morning, which showed that the services sector continues to growdespite missing market expectations. The headline figure came in at 55.1, slightly under expectations of 56.0 and falling from last month's reading of 56.9, and points to slower growth in the largest portion of the US economy.

US Treasury Yields fell on the release as the disappointing figures contributed to weak economic data also released this morning, including ADP employment figures that came in soft. Market participants could be taking this as bolstering the Federal Reserve's case to cut interest rates, a theme that has been driving the market in recent months. The market is pricing in a 100 percent chance of a rate cut for July's meeting according to overnight swaps.

CBOE 30-Year Treasury Yield (TYX): 3 – Minute Time Frame (July 3 Intraday)

June's reading reflects continued softening in the sector but still expanding reflected by the reading coming in over 50.0. Contributing to weakness in the headline figure was a decrease in business activity, new orders, and employment compared to the month prior. Prices saw a rise for the 25th consecutive month which is likely due to tariffs and noted as a concern by ISM survey respondents. Although, one participant noted some suppliers are using the trade issue to "provide cover to increase margins."

–Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you're looking to improve your trading approach, check out Traits of Successful Traders. And if you're looking for an introductory primer to the Forex market, check out our New to FX Guide.

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2019-07-03 15:35:00