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RSI Offers Bearish Signal Following FOMC Minutes

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Gold Price Talking Points

The recent decline in the price of gold appears to have stalled following the Federal Reserve Minutes, but fresh developments in the Relative Strength Index (RSI) offer a bearish signal as the oscillator threatens the upward trend carried over from the previous month.

Gold Price Forecast: RSI Offers Bearish Signal Following FOMC Minutes

Image of daily change for gold prices

Gold holds above the monthly-low ($1266) as the Federal Open Market Committee (FOMC) Minutes spur a limited reaction, but the wait-and-see approach for monetary policy may continue to drag on the price for bullion as the central bank shows little to no interest in altering the forward-guidance for monetary policy.

It seems as though the FOMC will stick to the sidelines at the next interest rate decision on June 19 as the committee insists that ‘the first-quarter softness in household spending was likely to prove temporary,’ and the central bank appears to be in no rush to abandon the hiking-cycle as ‘a few participants noted that if the economy evolved as they expected, the Committee would likely need to firm the stance of monetary policy to sustain the economic expansion and keep inflation at levels consistent with the Committee’s objective.’

Moreover, the FOMC may do little to offset the ongoing shift in U.S. trade policy as the central bank notes that the ‘prospects for a sharp slowdown in global economic growth, particularly in China and Europe, had diminished,’ and Fed officials may continue to emphasize that ‘their monetary policy decisions would continue to depend on their assessments of the economic outlook and risks to the outlook, as informed by a wide range of data’ as the economy shows no signs of an imminent recession.

Image of fed fund futures

With that said, it remains to be seen if Chairman Jerome Powell & Co. will continue to project a longer-run interest rate of 2.50% to 2.75% as Fed Fund Futures still reflect a greater than 60% probability for a December rate-cut, and more of the same from the FOMC may produce headwinds for gold as it dampens bets for a change in regime.

Keep in mind, there appears to be a broader shift in market behavior as the price for bullion snaps the opening range for 2019, and the precious metal may continue to give back the advance from the 2018-low ($1160) as a head-and-shoulders formation remains in play.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss key themes and potential trade setups surrounding foreign exchange markets.

Gold Price Daily Chart

Image of gold daily chart

  • The broader outlook for gold remains mired by the head-and-shoulders formation amid the break of neckline support, with the Relative Strength Index (RSI) highlighting a similar dynamic as it tracks the bearish trends from earlier this year.
  • Downside targets are coming back on the radar following the failed attempt to break/close above the Fibonacci overlap around $1298 (23.6% retracement) to $1302 (50% retracement), with RSI also highlighting a bearish signal as the oscillator threatens the upward trend carried over from the previous month.
  • In turn, lack of momentum to push back above the $1279 (38.2% retracement) pivot keeps the $1260 (23.6% expansion) region on the radar, with the next area of interest coming in around $1249 (50% retracement) to $1250 (38.2% retracement).

For more in-depth analysis, check out the 2Q 2019 Forecast for Gold

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 markets 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.



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US Dollar Steadies as May FOMC Minutes Detail “Patient” Approach

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FOMC Minutes Talking Points

  • The May FOMC minutes detailed a reserved conversation among policymakers who believed that patience on rates would be appropriate for the foreseeable future.
  • Many FOMC members saw the early-2019 dip in inflation readings as “transitory.”
  • Rates markets show a small dip in 2019 rate cut odds relative to where they stood prior to the May FOMC minutes release.

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides.

Analysis to follow…

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail at cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

View our long-term forecasts with the DailyFX Trading Guides

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May Fed Meeting Minutes & DXY Index Price Forecast

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FOMC Minutes Talking Points:

  • The minutes from the May Fed meeting are due on Wednesday, May 22 at 18:00 GMT.
  • The May Fed minutes should reflect the neutral tone deployed by Fed Chair Jerome Powell and the FOMC, which was that interest rates would be on hold for the foreseeable future.
  • Retail traders are selling the US Dollar as it moves closer towards its 2019 highs.

Join me on Mondays at 7:30 EDT/11:30 GMT for the FX Week Ahead webinar, where we discuss top event risk over the coming days and strategies for trading FX markets around the events listed below.

05/22 WEDNESDAY | 18:00 GMT | USD Federal Reserve Meeting Minutes (MAY)

The tone at the May Fed meeting was rather conciliatory insofar as policymakers were no longer sounding the alarm on an imminent slowdown to the US economy after the surprisingly strong 3.2% annualized growth reading for Q1’19. While the interim period since the May Fed meeting has seen US-China trade war concerns realized, the minutes won’t reflect these events yet. As such, the May Fed minutes should reflect the neutral tone deployed by Fed Chair Jerome Powell and the FOMC, which was that interest rates would be on hold for the foreseeable future.

Fed Funds Futures Rate Expectations (May 22, 2019) (Table 1)

Ahead of the May FOMC minutes, Fed funds futures are pricing in a 42% chance of a 25-bps rate cut in September and a 70% chance of a cut by the end of 2019. But given that the May Fed meeting itself provoked markets to reduce expectations of a cut this year, we would expect the sentiment taken in the May FOMC minutes themselves to be more optimistic than what rates markets are currently pricing (which may serve to the US Dollar’s benefit).

Pairs to Watch: EURUSD, USDJPY, Gold, DXY Index

DXY Index Technical Analysis: Daily Price Chart (December 2017 to May 2019) (Chart 1)

dxy price forecast, dxy technical analysis, dxy price chart, dxy chart, dxy price, usd price forecast, usd technical analysis, usd price chart, usd chart, usd price

Topside resistance in the sideways range that the DXY Index carved out during May has been tested several times in the run up to the May Fed meeting minutes. The DXY Index established a fresh monthly high yesterday above 98.10, the bearish outside engulfing bar high from the April US NFP report release on May 3. Since the start of the month, we have not seen price close below 97.15 either, the low from May 1, keeping the sideways consolidation in check. A move through 98.10 increases the odds of a return back to the yearly high set on April 25 at 98.32 over the coming sessions.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

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EUR/USD Breakouts Await Ahead of Elections

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Euro, EUR/USD Talking Points:

  • EUR/USD has spent the early portion of this week in a tight range of approximately 50 pips, including yesterday’s flare of strength that fell flat at the 1.1187 Fibonacci level.
  • Tomorrow brings the start of European Parliamentary elections, and this range is vulnerable to give way. Also of interest around the Euro for tomorrow is the release of meeting minutes from the bank’s most recent rate decision. Our own Martin Essex has already produced a primer for upcoming European elections.
  • DailyFX Forecasts are published on a variety of currencies such as Gold, the US Dollar or the Euroand 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.

Do you want to see how retail traders are currently trading the Euro? Check out our IG Client Sentiment Indicator.

Euro Range Tightens, EUR/USD Builds into Box

The Euro has put in an impressive lack of momentum so far this week as traders await the start of European elections tomorrow. After prices in EUR/USD fell back-below the big area of support that had held the lows in the range for six months, the door appeared opened for bearish continuation coming into this week. But, after considerable grind around the 1.1150 level, prices have tilted-higher to leave yet another higher-low on the chart.

Given the drivers on the horizon, it can make sense as to why there’s so far been a lack of momentum. This round of European Parliamentary elections is being seen as a debate on populism in Euro politics, the ramifications of which will help to mold policy in the bloc for years to come. This sets the stage for breakout potential in the single currency, and this weekend will likely bring gap-potential in the Euro as elections run into Sunday.

EUR/USD Hourly Price Chart

Chart prepared by James Stanley

Taking a step back, this week’s indecision currently shows as two completed doji’s on the daily chart with today’s price action showing something similar. Notable, however, is the fact that sellers have thus far been unable to pose a break below the 1.1100 level, and this comes despite a number of bearish drivers that have availed themselves around the currency over the past seven months. This includes a populist theme in Italy that threatened a debt stand-off between Brussels and Rome, as well as the March announcement of fresh TLTRO’s from the ECB.

Will European Parliamentary Elections be the driver that bears have been looking for that may finally elicit a break down to the 1.1000 level or, perhaps even further? Or, is this setting up to be a massive bear trap as sellers have had ample opportunity to take-control of the matter but, to date, haven’t?

EUR/USD Daily Price Chart

eurusd eur/usd daily price chart

Chart prepared by James Stanley

EUR/USD Strategy: Levels to Know

Given the potential for a spike in volatility, and traders would likely want to try to adapt their approach as the coming days may lead to sharp moves in the single currency. This can make breakout themes more attractive than trends, at least in the near-term, as new drivers are getting priced-into the matter. And given the digestion seen around the current spot on the chart in the recent past, there are a plethora of possible levels to use for such a purpose.

Above current prices, the big zone of prior support lurks from 1.1187-1.1212, with the former price coming into play yesterday to help to set this week’s high. Above that, the prior resistance zone looked at earlier in the month runs from 1.1250-1.1262, and above that, the 1.1325 level remains as the two-month-high in the pair. If buyers can push a break-beyond that level, the area of prior range resistance comes into the equation, and that runs from 1.1448-1.1500.

EUR/USD Four-Hour Price Chart

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

For support potential underneath current prices, the weekly chart will be required as EUR/USD hasn’t traded below the 1.1100 handle in two years. Traders can incorporate each of the recent higher-lows for shorter-term support variables, and those show at 1.1134 and 1.1109. Below that – the 1.1075 level may offer a nearby point of interest, and the 1.1000 psychological level is below that. If sellers can pose a large push around these upcoming drivers, a longer-term zone of interest remains in the area from 1.0814-1.0863. Below that 1.0814 level exists some unfilled gap from April of 2017, and that extends all the way down to 1.0730, which could be incorporated into the approach in the event that Euro bears make an aggressive short-side push.

EUR/USD Weekly Price Chart

eurusd eur/usd weekly price 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

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SEK, NOK Brace for European Elections, Nordic Unemployment Rates

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NORDIC FX, NOK, SEK WEEKLY OUTLOOK

  • NOK and SEK may struggle to rise ahead of upcoming European elections
  • Nordic volatility expected ahead of Norwegian, Swedish unemployment rates
  • ECB and Fed meeting minutes may fuel violent price action in NOK and SEK

See our free guide to learn how to use economic news in your trading strategy!

Swedish Krona and Norwegian Krone traders prepare themselves for possibly the most volatile week for Nordic FX year-to-date. SEK and NOK are expected to be the most active G10 majors against the US Dollar with one-week implied volatility at 6.95 and 6.78, respectively. The top event risks this week will include Nordic unemployment rates, central bank meeting minutes and the upcoming European elections.

SWEDEN, NORWAY UNEMPLOYMENT RATE

Sweden’s unemployment rate is scheduled to be released this week with anticipations of a 6.9 percent reading, slightly less than the previous report that showed a 7.2 percent rate. Following the release on April 18, the Swedish Krona plunged against most of its major counterparts and arguably was the beginning of USDSEK’s atmosphere-puncturing rise. Unemployment in Sweden is now at its highest point since June 2018.

USDSEK Jumps on Sweden Unemployment Rate

If unemployment data disappoints, it could lead to greater expectations that the central bank will further postpone its intended rate hike. The Krona in this case would suffer and would likely reinforce USDSEK’s upward trajectory. Year-to-date, the Krona is the worst performing G10 currency. Overnight index swaps are already showing a 10 percent probability of a cut, up from around three percent last week.

Economic data in Sweden has been tending to underperform relative to economists’ expectations against the backdrop of fundamental headwinds. Riksbank policymakers have primarily expressed concern about Brexit and the US-China trade war in addition to slower European growth. As an export-driven economy, the Swedish Krona is sensitive to changes in risk appetite, particularly out of the EU – Sweden’s biggest client.

In Norway, the unemployment rate is expected to come in 3.7 percent, slightly lower than the previous 3.8 percent reading. Unlike Sweden, Norway’s economy has been outperforming relative to analysts’ expectations. This in large part has to do with the recovery in crude oil prices that have helped boost Norway’s petroleum-based economy. In fact, the Norges Bank remains one of the most hawkish central banks in the developed world.

However, if global risk-appetite sours, it will likely drag down crude oil prices and force policymakers to adopt a less-hawkish outlook. If unemployment data comes in worst than expected, it would almost certainly pressure NOK against the backdrop of uncertainty over US-China trade relations. Slower growth in Europe is also of concern to the Krone because of Norway’s strong reliance on healthy European demand.

EUROPEAN EVENT RISK: EU ELECTIONS, ECB MINUTES, ECON DATA

In the EU, the upcoming European parliamentary elections may shake the Euro and the EU to its core as Europeans show what they really think of the EU. Eurosceptic parties are projected to make unprecedented gains, leading to fears that European laws on key issues ranging from budgets to trade policy could be abruptly taken into a less market-friendly framework. Voting will take place May 23-26.

On Friday, the ECB will be announcing its meeting minutes with expectations of dovish undertones. While there has been a minor improvement, Eurozone data has been tending to underperform relative to economists’ forecast. Growing threats from Brexit, local elections and the US-China trade war will likely continue to negatively impact the outlook and could prompt ECB officials to delay their rate hike cycle.

US EVENT RISK: FED MEETING MINUTES, ECON DATA

Today’s release of the FOMC meeting minutes will reveal in greater detail policymakers’ outlook on monetary policy and the strength of the economy. Yesterday, St. Louis Fed President James Bullard said that the US-China trade war and tariff impositions would start impacting monetary policy if they lasted for another six months. This preceded his acknowledgment of the growing risk associated with rising corporate debt.

At the end of the week, preliminary US durable goods orders will be released with forecasts of -2.0 percent. If the reading comes in at expectations or worse, it may send the US Dollar lower amid fears of lower future output against expectations of a higher probability of a cut at the next meeting. Conversely, equities may get a boost from the expectation of comparatively cheaper credit. This explanation would fall in line with the market reaction from the most recent FOMC meeting.

SWEDISH KRONA, NORWEGIAN KRONE TRADING RESOURCES

— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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Oil Prices Cling to Bullish Trend as OPEC+ Alliance Remains in Effect

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Oil Price Talking Points

Oil prices appear to be stuck in a narrow range amid the ongoing trade dispute between the U.S. and China, the two largest consumers of crude, but the price of oil may continue to catch a bid in 2019 as the Organization of the Petroleum Exporting Countries (OPEC) pledge to keep ‘inventories under control.’

Oil Prices Cling to Bullish Trend as OPEC+ Alliance Remains in Effect

The ongoing threat of a U.S.-China trade war may continue to drag on oil prices as the Organisation for Economic Co-operation and Development (OECD) warns ‘trade tensions are not only hurting the short-term outlook but also medium-term prospects, calling for urgent government action to reinvigorate growth.

The OECD goes onto say that ‘the tariffs imposed by the United States and China in 2018, which are incorporated in the projections, have already started to slow growth and add to inflation,’ with the group highlighting the adverse effects from the trade dispute as ‘there is also a risk of additional tariffs being implemented in the future, covering the full spectrum of trade between the United States and China.

It remains to be seen if OPEC and its allies will respond to the weakening outlook for global growth as Saudi Arabia Minister of Energy, Industry and Mineral ResourcesKhalid A. Al-Falih insists that ‘the vigorous participation of select countries, and its visible results, have shown the full potential of OPEC+ if everyone plays a full role,’ and the ongoing alliance may keep crude prices afloat ahead of the next meeting on June 25 as the group remains in no rush to boost production.

With that said, oil prices may continue to track the upward trending channel from earlier this year as the OPEC + alliance remains in effect, and the current environment may bring the topside targets back on the radar as crude trades near the monthly-high ($63.93).

Oil Daily Chart

Image of oil daily chart

  • Keep in mind, a ‘golden cross’ formation appears to have taken shape as the 50-Day SMA ($61.18) crosses above the 200-Day SMA ($60.76), but the difference in slope undermines the potential for a bullish signal.
  • Nevertheless, the pullback in crude appears to have run its course following the failed attempt to test the Fibonacci overlap around $59.00 (61.8% retracement) to $59.70 (50% retracement), but need a break/close above the $62.70 (61.8% retracement) to $63.70 (38.2% retracement) to bring the $64.60 (100% expansion) region on the radar.
  • Next topside hurdle comes in around $65.70 (23.6% expansion) to $65.90 (78.6% retracement) followed by the overlap around $68.80 (23.6% retracement) to $69.20 (50% retracement).

For more in-depth analysis, check out the 2Q 2019 Forecast for Oil

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 markets 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.



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GBPUSD Drop in Focus, Brexit Optimism Keeps Fading. CAD Up on USMCA

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Asia Pacific Market Open Talking Points

  • British Pound recovery on Theresa May news fell apart on Brexit deal uncertainty
  • Canadian Dollar benefiting from latest USMCA updates, AUD and NZD weaken
  • GBP/USD downtrend may extend on net-long positioning offering bearish signals

Trade all the major global economic data live as it populates in the economic calendar and follow the live coverage for key events listed in the DailyFX Webinars. We’d love to have you along.

British Pound Recovery Fell Apart

Lately, the British Pound’s downtrend has been losing control over increasing uncertainty over the future of Brexit. The currency finds itself about 5% lower against the US Dollar since its peak in late February. Over the past 24 hours, the latest update from UK Prime Minister Theresa May on the status of negotiations at one point sent GBP/USD about 0.7% higher.

Initial reports crossed the wires that Ms May was about to set out a new proposal for a Brexit deal. She ended up offering MPs a vote on holding a second Brexit Referendum in what appeared to be an attempt at avoiding a “hard Brexit”. However, a few hours later Opposition Leader Jeremy Corbyn noted that the Labour Party would not support her new plan. Sterling quickly reversed its upside progress, ending lower.

British Pound Technical Analysis

On a daily chart below, GBP/USD made an attempt to clear near-term resistance which is a psychological barrier between 1.2773 and 1.2798. This area held and prices stopped right above immediate support at 1.2696 which is the former low in late October. If the dominant downtrend extends, we may be looking at a test of the August lows

GBP/USD Daily Chart

Chart Created in TradingView

Canadian Dollar Outperforms, AUD and NZD Fall Short

On the flip side of the spectrum, the Canadian Dollar was easily the best-performing major. The currency has been doing relatively well as the approval of USMCA, the replacement to NAFTA, has been looking more likely. On Tuesday it was reported that US congressional Democrats were working to resolve disputes related to the deal on topics such as pharmaceutical and environmental provisions.

Meanwhile, equities rallied across the board in Asia, Europe and the US as markets digested Huawei receiving a temporary extension before it gets blacklisted. The S&P 500 and Dow Jones rose 0.85% and 0.77% respectively. Curiously, the sentiment-linked Australian and New Zealand Dollars failed to find support against this backdrop. Rising bets of RBA and RBNZ rate cuts may be sapping their appeal.

Wednesday’s Asia Pacific Trading Session

Wednesday’s Asia Pacific trading session is a little light on key economic event risk, placing the focus on market mood impacting currencies. S&P 500 futures are little changed with a slight upside bias. Meaningful follow-through in equities after a rosy Wall Street session before the European one could be lacking absent updates relating to US-China trade wars.

Meanwhile, increasingly net-long positioning in GBP/USD is offering a bearish-contrarian trading bias. If you would like to learn more about using this to compliment both fundamental and technical analysis, join me each week on Wednesday’s at 00:00 GMT as I cover the prevailing trends in markets.

FX Trading Resources

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

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

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Australian Dollar in Search of Support

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The Australian Dollar is down more than 3.5% against the US Dollar year-to-date and more than 5.7% off the yearly highs with the decline now approaching the 2016 lows. These are the updated targets and invalidation levels that matter on the AUD/USD charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

New to Forex Trading? Get started with this Free Beginners Guide

AUD/USD Daily Price Chart

Technical Outlook: In my latest AUD/USD Weekly Price Outlook we noted that Aussie was approaching key support, “at 7020/42 – a region defined by the yearly open, the 50% retracement of the 2019 range and the yearly close-low. A break / close below is needed to mark resumption of the broader down trend exposing the 2016 low / low-week close at 6827/55.” Note that the 25% line of the broader 2017 / 2018 descending pitchfork also converges on this region and halted the decline last week. Price closed just one pip of the low on Friday at 6866 with Aussie testing this low again today.

Initial resistance stands at the median-line backed by the monthly opening-range low at 6963– a breach there would expose the yearly low-day close at 7005 with broader bearish invalidation set to the yearly / monthly open at 7042/47. Initial support objectives steady at 6855 and the 2016 low at 6827– look for a bigger reaction there IF reached.

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AUD/USD 120min Price Chart

Australian Dollar vs US Dollar Price Chart - AUD/USD 120min

Notes: A closer look at price action shows Aussie trading within the confines of anear-term descending pitchfork formation off the late-April high. Price has now filled the Sunday gap with the weekly opening-range set just above the yearly low at 6866. A downside break of this zone exposes 6855 backed by the lower parallel / 6827. Weekly open resistance stands at 6911 with a breach above the range high / upper parallel at ~6934 needed to suggest a larger correction is underway.

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Bottom line: AUD/USD is approaching a key longer-term slope / lateral support and leaves the immediate short-bias vulnerable heading into the 2016 lows. From a trading standpoint, look to reduce short-exposure / lower protective stops on a move lower. We’ll be on the lookout for possible downside exhaustion on a test of the lower parallels with a breach above the weekly opening-range high needed to shift the near-term focus higher in the Australian Dollar.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

AUD/USD Trader Sentiment

Aussie Trader Sentiment - AUD/USD Positioning vs Price Chart

  • A summary of IG Client Sentiment shows traders are net-long AUD/USD- the ratio stands at +3.31 (76.8% of traders are long) – bearishreading
  • Traders have remained net-long since April 18th; price has moved 4.2% lower since then
  • Long positions are0.4% lower than yesterday and 0.6% higher from last week
  • Short positions are2.6% lower than yesterday and 6.3% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Aussie prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUD/USD-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in AUD/USD retail positioning are impacting trend- Learn more about sentiment!

Relevant Australia / US Economic Data Releases

Australia / US Economic Calendar - Key Data Releases

Economic Calendarlatest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!

Active Trade Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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GBPUSD Rate Breaks Bearish Sequence Despite Cautious BoE Rhetoric

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British Pound Talking Points

GBP/USD remains under pressure ahead of the European Parliament elections as Prime Minister Theresa May struggles to make progress on the Brexit deal, but recent price action raises the risk for a rebound in the Pound Dollar exchange rate as it snaps the series of lower highs & low from earlier this month.

GBPUSD Rate Breaks Bearish Sequence Despite Cautious BoE Rhetoric

Image of daily change for gbpusd rate

It remains to be seen if the EU election will impact the Brexit negotiations as households select fresh representatives to the European Parliament, and the ongoing rift between U.K. lawmakers may produce headwinds for the British Pound as it puts pressure on the Bank of England (BoE) to abandon the hiking-cycle.

A recent speech by Deputy GovernorBen Broadbent suggests the BoE will remain on the sidelines as the Monetary Policy Committee (MPC) member points out that ‘business investment fell in every quarter last year and surveys suggest the underlying trend is still negative.’ In turn, the BoE may stick to the same script at the next meeting on June 20 as the committee ‘judges that there is currently a small margin of excess supply in the economy,’ and the wait-and-see approach for monetary policy may continue to drag on the British Pound as Governor Mark Carney and Co. reiterate that ‘the economic outlook will continue to depend significantly on the nature and timing of EU withdrawal.

Image of DailyFX economic calendar

However, fresh updates to the U.K. Consumer Price Index (CPI) may prop up the British Pound as both the headline and core reading for inflation are expected to pick up in April, and signs of sticky price growth may keep the BoE on track to further normalize monetary policy as ‘the Committee judges that, were the economy to develop broadly in line with its Inflation Report projections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.’

With that said, GBP/USD may face increased volatility over the coming days, but the near-term decline in the Pound Dollar exchange rate appears to have shaken up market participation as retail sentiment remains stretched.

Image of IG client sentiment for gpbusd

The IG Client Sentiment Report shows 81.7%of traders are net-long GBP/USD compared to 73.7% at the end of April, with the ratio of traders long to short at 4.47 to 1. Keep in mind, traders have remained net-long since March 26 when GBP/USD traded near 1.3210 region even though price has moved 3.3% lower since then.

Profit-taking behavior may explain the ongoing decline in net-short interest as GBP/USD sits near the monthly-low (1.2711), but the extreme reading in net-long position suggests the retail crowd is still attempting to fade the recent decline in the pound-dollar exchange rate as its sits near the highest reading for 2019.

The persistent tilted in retail interest offers a contrarian view to crowd sentiment especially as GBP/USD snaps the bullish trend from late-2018, with the Relative Strength Index (RSI) highlighting a similar dynamic, but recent price action raises the risk for a near-term rebound as the exchange rate fails to extend the series of lower highs & lows from the previous week.

Sign up and join DailyFX Currency Strategist David Song LIVE for an opportunity to discuss potential trade setups.

GBP/USD Rate Daily Chart

Image of gbpusd daily chart

  • Keep in mind, the broader outlook for GBP/USD is no longer bullish as the exchange rate snaps the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
  • In turn, the advance from the 2019-low (1.2373) may continue to unravel as the Relative Strength Index (RSI) highlights a similar dynamic, with the oscillator now tracking the bearish formation carried over from March.
  • The break/close below the Fibonacci overlap around 1.2760 (38.2% retracement) to 1.2800 (50% expansion) brings the 1.2610 (23.6% retracement) to 1.2640 (38.2% expansion) region on the radar, but will keep a close eye on the RSI as it struggles to push into oversold territory, with failure to hold below 30 raising the risk for a rebound in the exchange rate.

For more in-depth analysis, check out the 2Q 2019 Forecast for GBP

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.



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Gold Prices Probe Trend-Defining Chart Barrier, OECD Update Eyed

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GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices stalled at chart support after hitting two-week low
  • Crude oil prices unable to make hay of US-Iran spat, for now
  • OECD outlook update may stoke risk aversion, API data due

Gold prices paused to digest after five days of consecutive losses brought them to a two-week low. An updated OECD Economic Outlook seems likely to bring downgrades of growth and inflation bets, establishing a risk-off mood. That may boost haven demand for the US Dollar, weighing on the anti-fiat yellow metal. Traders may withhold conviction ahead of Wednesday’s FOMC minutes release however, limiting follow-through.

Meanwhile, crude oil prices found a bit of a lift as US President Donald Trump threatened Iran but the move higher struggled for follow-through, with the WTI ultimately unable to make headway beyond its near-term trading range. If sentiment unravels, weakness alongside stocks seems likely. API inventory flow data is also due. It will be sized up relative to bets on a 1.7-million-barrel drawdown.

Did we get it right with our crude oil and gold forecasts? Get them here to find out!

GOLD TECHNICAL ANALYSIS

Gold prices continue to hover at support marked by a rising trend line set from mid-August 2018. This is reinforced by the 1260.80-63.76 inflection zone, with a daily close below the latter barrier exposing the 1235.11-38.00 region next. Alternatively, a breach of resistance in the 1303.70-09.12 area eyes a minor hurdle in the 1323.40-26.30 price band, followed by February’s high at 1346.75.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices remain capped below a dense bloc of overlapping resistance levels in the 63.59-67.03 area. Near-term support is at 60.39, with a daily close below that exposing the 57.24-88 area. Alternatively, a push all the way through resistance targets the $70/bbl figure thereafter.

Crude oil price chart - daily

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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01. Espresso Machines review|
02. Gaming Keyboards review|
03. Gaming Headsets review|
04. Virtual Reality Headsets review|
05. Cordless Drills review|
06. Electric Keyboards review|
07. Gaming Mouse review|
08. Gaming Monitors review|
09. Gaming Laptops review|
10. WiFi Routers review|