Forex Blog

April 8, 2014

WTI Crude – 100.5 Support Holding Well Despite S/T Bearish Bias

Crude Oil ended up lower yesterday vs Friday’s close, but prices remain broadly supported when placed alongside US stocks where Nasdaq 100 has just seen the largest 3-day slide in 3 years while S&P 500 has completely erased daily gains. The decline in WTI compared to equities is definitely much milder, especially since Crude tended to be more volatile historically versus these indexes.

That being said, it is not surprising to see WTI prices staying more supported as we already suspected that bulls were more than capable to hold their own seeing as how pace of decline was relatively measured early yesterday despite strong bearish fundamental development (read: Libya). Hence, in our analysis yesterday we pointed out that prices will likely find support around 100.5, which played out to our expectations.

Hourly Chart

WTI_080414H1

However, what is not expected is the strong bullish rebound that followed, sending price all the way up to 101.5 which is then accompanied by a quick push back towards 100.5 once again only to see prices punching back above 100.5 leaving us above 101.0 round figure right now.

In some sense this price action still fits into the price action scenario postulated yesterday, as overall S/T trend remains bias towards the downside from a technical perspective. Furthermore, long-term fundamentals favor lower WTI prices while broad risk trend is bearish as well, as such the likelihood of strong bullish follow-through was always unlikely and it is not surprising to see 101.5 holding firmly.

The key question is what next?

Well, the situation hasn’t really changed much from Monday. All the factors mentioned earlier remains the same, and as such it is likely that prices will hit top wedge resistance and push lower once more. Expect 100.5 to provide significant support once more too, which will open up upper wedge as a possible target again.

For those who are doubting the strength of 100.5 may be justified, as a support level that is tested repeatedly has a higher likelihood of breaking eventually. But traders may need to rethink this scenario as there are reports of Hedge Funds buying up Crude Oil yesterday on speculative bets. Hence, should prices drop down to 100.5 once more it is possible that these hedge funds may want to load up more positions again, providing the support needed in the short-term.

 

Daily Chart

WTI_080414D1

Nothing much to be said from the Daily Chart though, as current price levels remain fairly similar to yesterday’s levels. As such, the same analysis applies – trend can be interpreted as either bullish or bearish depending on whether you are taking the perspective from Jan’s low or Mar high respectively. Given the ambiguity, traders should seek strong confirmations before committing, and considering that prices can indeed be highly volatile as seen from yesterday’s price action, it pays to be more careful as the chances of fakeouts and whipsaws are high.

More Links:
S&P 500 – Strong Bearish Momentum Developing
GBP/USD – Pound Moves Higher In Subdued Trading
USD/CAD – Steady After Strong Canadian Employment Data

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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March 21, 2014

Gold Technicals – Bearish Momentum Stalling While Bulls Enjoy Breather

Gold prices have stabilized significantly after the continuous side since the start of the week. Prices have been trading mostly between 1,325 – 1,335 for the past 36 hours, a welcomed change for bulls who saw prices tanked from a high of 1,392 to 1,330 within 3 days.

Why the change of pace? The most obvious answer would be the fact that a bullish pullback is long overdue. Nothing much has changed fundamentally – No bullets are fired in Crimea, while broad economic narrative remains the same, and hence the factors that caused prices to declined between Monday to Wednesday is essentially the same, and the only difference from now and then could simply be the fact that market players are already loaded up in short positions and unable to sell further.

Hourly Chart

XAUUSD_210314H1

If the above assertion is true, then the likelihood of prices pushing higher increases. This is not an unreasonable expectations as prices have seen broken away from the descending Channel, impairing the bearish momentum and opening the door for a slight rebound, provided 1,335 resistance is broken that is. Stochastic indicator tells us we are in the midst of a bearish cycle, but it is possible that Stoch curve may still reverse from here given that current Stoch level has seen numerous points of inflexions in the past week. Considering that we are at the end of the week now, the likelihood of traders who have been shorting Gold wishing to close out their positions becomes even higher, and a short-squeeze scenario may happen.

Daily Chart

XAUUSD_210314D1

Daily Chart agrees with this possibility as prices have tagged and rebounded off Channel Bottom, while Stochastic readings are also within the Oversold region – favoring a bullish push in the next few trading session. Also, seeing as how institutional speculators have been buying up Gold in huge quantities in the past, one wonders if these institutions may still want to buy Gold at “bargain prices”. If yes, then the likelihood of a bullish push towards Channel Top would be even higher. But this is a double edged sword, as the likelihood of aforementioned institutional traders clearing their long positions becomes higher if 1,315 or 1,300 support levels are broken.

More Links:
WTI Crude – Maintaining Bullish Bias Above 99.0 Despite Turbulent Thursday
Natural Gas – Bearish Breakout Seen On Both S/T and L/T Chart
S&P 500 – Yellen Back Of Mind As Bullish Sentiment Back

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post Gold Technicals – Bearish Momentum Stalling While Bulls Enjoy Breather appeared first on MarketPulse.

WTI Crude – Maintaining Bullish Bias Above 99.0 Despite Turbulent Thursday

Is the bullish momentum in WTI Crude over? Yesterday we were still fawning over the fact that prices of WTI managed to climb higher even though fundamentals and broad market sentiment should be pulling prices lower instead, giving us the conclusion that sentiment of WTI is extremely bullish. However, prices reversed sharply during European session, dipping below 99.0 briefly. Prices did reverted strongly back to 100.0 during early US session, but the decline was equally fast, with prices dropping down to 98.65 before bouncing back up immediately once more – wash, rinse, repeat and now we are currently trading slightly above 99.0 after prices climbed down yet again after the 2nd rebound off 99.0 support.

Hourly Chart

WTI_210314H1

This decline is shocking because risk appetite was actually bullish yesterday. US stocks indexes managed to claw back almost all of the losses suffered on Wednesday, while Brent Crude actually traded higher, and the same uptrend was also seen on Copper prices – all these telling us that the decline in WTI is actually out of line.

So does this mean that market is no longer bullish about WTI? Even though prices are trading lower, the fact that 99.0 support remains intact suggest that bullish momentum is still intact. Furthermore, the sharp bullish response every time 99.0 is breached suggest that there are still large number of bulls in the market. With Stochastic indicator showing Stoch curve heading towards Oversold region, a bullish rebound is also favoured which increases the likelihood of a push towards 99.5 if not 100.0.

Daily Chart

WTI_210314D1

The Channel Breakout scenario on the Daily Chart is still intact as well. Yesterday’s bearish candle continue to stay out of the descending Channel, while the Stochastic bullish cycle signal remains in play too, suggesting that a move towards 100.0 is still in the books. Considering that the rally faltered at the 100.0 round figure mark – something that we expected would happen, it is definitely still too early to say that bullish momentum is over. Nonetheless, yesterday’s development is a warning sign for traders who want to go long on WTI based on current bullish sentiment which is not fundamentally driven. Certainly it is risky to go against market sentiment/momentum, but that doesn’t mean we should participate in it either, as market is notoriously fickle minded.

More Links:
Natural Gas – Bearish Breakout Seen On Both S/T and L/T Chart
GBP/USD – Pound Slides Continues As US Unemployment Claims Drop
AUD/USD – US Dollar Surges After Fed Remarks

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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March 20, 2014

Gold Technicals – Stable For Now Amidst Strong Bearish Momentum

Bearish momentum in Gold continue to roar as bulls simply can’t get a break. Prices was already bearish due to the surprising lack of military conflict between Russia and Ukraine even though Russia has successfully claimed Crimea on Russia’s map. Even a reported confrontation that left one Ukraine serviceman dead failed to spark anything more serious, and it is clear that Ukraine themselves are trying to avoid any military conflict at all cost, erasing all the premium in Gold that has been priced in earlier when market was afraid a war may break out.

Unfortunately, Gold traders have a new problem that they have to content with – rising interest rates. Fed Chairman Janet Yellen provided surprising clarity when asked when the Fed will start raising rates and she mentioned that it would take “around 6 months” after the end of QE program, which is slightly earlier than what market has previously expected. Time will tell whether this was a gaffe or a sly calculated remark, but the implication is the same – inflation risk moving forward will be even lower and not only that, higher interest rates would make holding Treasuries much more attractive as a safe haven alternative rather than holding onto Gold which actually has a negative holding cost, and it is not surprising to see Gold tanked more than 15 dollars an ounce after the announcement.

Hourly Chart

XAUUSD_200314H1

Prices has recovered slightly during Asian hours, but that is not really surprising considering as the broad risk-off sentiment seen in stocks will continue to have a bullish influence on prices no matter how small. Also, prices have came a long way from around 1,360 to 1,325 within the same day, and a temporary pullback is always to be expected. On the balance of things, it is clear that bearish momentum is still in full force as Stochastic readings have flattened and is threatening to start reversing lower. This concurs with what we see in terms of price action where price is unable to break soft resistance of 1,333. As such, even though prices appears to have rebounded off Channel Bottom and should naturally seek Channel Top, it is possible that prices may simply revert lower from here out due to overwhelming bearish pressure or at the best stay flat for the rest of the day until Channel Top is tagged.

Daily Chart

XAUUSD_200314D1

Things are not as bad on the Daily Chart though, as prices have a few levels of support in the form of Channel Bottom, 1,325 and 1,315. Also, Stochastic readings are close to the Oversold region and we should be able to expect some form of bullish reply after such a sharp decline this week. At the very least, it is possible that traders who have shorted Gold earlier may wish to take profit before the end of the week which will provide bullish pressure in the short-run. Also, we need to watch out for institutional speculators that have been buying Gold heavily past couple of months. The decline in prices may spur these speculators to clear their positions (if they haven’t already done so) but there is also equal if not more likelihood that they may want to load up even more Gold at current “bargain prices”.

More Links:
WTI Crude – Pushing Higher Against Broad Negativity
S&P 500 – 1,850 Intact After Yellen’s Rate Hike Guidance
GBP/USD – Slight Gains As Employment Data Shines

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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February 26, 2014

WTI Crude – 1st Major Move Below 103.0 But Upside Risk Remain

Filed under: OANDA News — Tags: , , , , , , , , , — admin @ 9:45 am

Crude oil suffered an aggressive fall yesterday, and if we include the decline that was seen in the post NY noon trading session, the slide in prices from peak to trough within the 24 hour period would be greater than US$2 per barrel – a significant decline by any measure. This drop matches well with the bearish risk trend that was seen during early Asian session which was carried into European and American trading session which saw stocks falling (albeit not significantly) yesterday, suggesting that the decline may be inspired by the loss in market confidence.

However, this assertion does not seem to be correct as WTI continue to dip lower during early European session despite S&P 500 futures pushing above 1,850 during the same period. Similar rallies could be seen in AUD/USD and other traditional risk correlated assets, suggesting that WTI is actually moving against broad risk trend today. Confirmation for this assertion can also be seen from the small rally right now towards 102.5 despite risk appetite appearing to have come off slightly.

Hourly Chart

WTI_260214H1

Hence, the reason why WTI pushed lower may be due to bearish sentiment, with traders/speculators sending prices lower expecting a larger than previously estimated build up in inventories that will be reported later by the US Department of Energy. If this is indeed true, then it is likely that price may not drive further lower too much if DOE numbers does come in at around +1.3 million barrels, and upside risks become higher should the number matches the previous estimate or come in even lower than expected. Furthermore, given that S&P 500 Futures remained steady above 1,850 key resistance, the likelihood of risk appetite during US session later staying bullish is high. Even though WTI prices have been mostly ignoring risk trends since this morning, a bullish risk trend definitely will not help the bearish cause and will be neutral at best and may even pull WTI higher.

From a pure technical perspective, bias is still firmly on the bearish court as long as prices stay below 102.5. Stochastic readings are pointing higher for now but looking at how Stoch curve behaved in the past week, there hasn’t been a case where a rebound around 50.0 level resulted in a bullish trend reversal. The strongest bullish reaction that followed such a stoch rebound was seen on 20th Feb where prices eventually traded lower once again after pushing higher. Hence, even if the same thing happen right now 102.5 resistance will break but it is likely that 103.0 will hold, and bearish pressure will still remain though it may be weaker than before.

Daily Chart

WTI_260214D1

Daily Chart is more bullish though, as there is a case to be made for price to rebound from Channel Bottom and head towards Channel Top. However, Stochastic readings do not agree and is signalling the beginning of the bearish cycle. That being said, ideally Stoch curve should push below the 70.0 mark coinciding with price breaking below Channel Bottom and perhaps even below 101.0 to confirm a strong bearish breakout. Without which, the possibility of Stoch curve rebounding off 70.0 mark and pushing higher cannot be ignored and we could still see prices moving up in the short/mid term.

More Links:
GBP/USD – Pound Moves Higher As UK Retail Sales Sparkles
AUD/USD Technicals – S/T Bearish Pressure Remain Despite Failed Breakout Earlier
S&P 500 – Testing 1,850 Again After Tumultuous Day

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The post WTI Crude – 1st Major Move Below 103.0 But Upside Risk Remain appeared first on MarketPulse.

January 22, 2014

S&P 500 – Staying Positive Despite Sudden Slide

The S&P 500 Index rose for the first time in 3 days, gaining 0.28%. However, this gain wasn’t without its share of bearish scares, as the index fell to a low of  1,832 during the first few hours of trading after US session opened. This decline was surprisingly aggressive considering that Asian markets and European bourses were trading higher as risk appetite across board was bullish. Furthermore, IMF made an announcement saying that they’ve raised their estimate for world economic growth to 3.7% in 2014. Hence, the decline is a strong testament to the strength of bears as stock traders basically ignored the bullish news and continued trading lower.

Suggestions that the decline was led by lacklustre earning reports do not fly as the bearish damage wasn’t limited to US stocks alone. European stock indexes such as DAX and FTSE 100 traded lower sharply as well, with FTSE closing marginally lower at -0.04% (-2.47) despite gaining more than 0.40% before US session opened. Similarly, DAX was 0.81% higher before the sudden bearish slide and ended up closing a mere 0.15% higher. The implication is clear – this is a broad risk related move and unlikely to have been triggered by individual stock earnings disappointment.

If we were to be pedantic about it, we can also take a look at the individual companies that announced their earnings yesterday, and there doesn’t seem to be any major disappointments, with biggest losers yesterday such as Travelers and Verizon Communications actually posting better than expected Earnings Per Share. When we look at the totality of all the S&P 500 companies that have reported results so far, 67% have beaten earnings estimates. The number of companies exceeding projected revenue stands at 67% as well, which is actually slightly better than the historical performance of past earning seasons.

Perhaps, the reason for the unknown sell-off yesterday is similar to why prices fell on 13th – e.g. a slight sell-off that got out of control which highlights the inherent unease of the market. Right now there are talks on the street that the decline was simply due to New York traders wanting to leave early due to the cold weather and hence started clearing their positions when market was trading close to the recent swing high and this simply snowballed into a mild “panic”.

Hourly Chart

SPX_220114H1

If that is the reason for the sell-off, it is no wonder that we were not able to break the 1,836 soft support level as there is really nothing fundamental that could have driven price lower further. Also it should be noted that stock prices recovered quite significantly on 14th Jan after the same inexplicable decline, suggesting that the same may be seen once again today.

There is technical pressure as well as the prices during US opening session coincided with the test of the upward trendline. The failure to overcome the trendline affirmed that the bearish break of the trendline remains in play, and could have exacerbated the initial bearish sell-off during early US session. Right now, prices is sitting above 1,840 support after rebounding off the 1,836 support. This opens up the possibility of a move towards 1,850.

More Links:
GBP/USD – Breaks Through Resistance at 1.6450
AUD/USD – Surges to One Week High near 0.8870
EUR/USD – Crawls back above Key 1.3550 Level
 

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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December 18, 2013

Fed Taper Q&A: Action today is intended to keep level of accommodation the same and push economy forward

The post Fed Taper Q&A: Action today is intended to keep level of accommodation the same and push economy forward appeared first on MarketPulse.

Fed Taper Q&A: Rates will be low past 6.5% unemployment rate

Filed under: OANDA News — Tags: , , , , , , , , — admin @ 8:05 pm

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December 4, 2013

December 3, 2013

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