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AUD/USD Exhaustion Trade- Shorts at Risk Above 8064

Talking Points

AUD/USD Weekly

AUD/USD Exhaustion Trade- Shorts at Risk Above 8064

Chart Created Using FXCM Marketscope 2.0

Technical Outlook

  • AUDUSD coming into key support threshold / inflection range 8065-8118
  • Region defined by the 1.618% ext off the 2011 high & the 2010 low
  • Shorts at risk into this region- bullish invalidation

AUD/USD Daily

AUD/USD Exhaustion Trade- Shorts at Risk Above 8064

  • Note that a median line off the 2013 October high also converges on the 8067-8118 region
  • Aussie trading within an operative descending pitchfork off the 2014 October high
  • Interim resistance 8195- converges on upper MLP early next week
  • Breach targets 8411/24, 8540
  • Support break targets 80-handle & 7645 (61.8% retracement of 2008 rally)

AUD/USD 30min

AUD/USD Exhaustion Trade- Shorts at Risk Above 8064

Notes:The aussie sell-off has come into a key region of support with the range extending from 8067 into 8120. Shorts are at risk here and we’ll look for reversal signals heading into next week. The pair has been holding within the confines of a descending Andrew’s Pitchfork formation off the November highs with a breach above the upper median-line parallel is needed to confirm a near-term rebound.

Bottom line: Looking for an exhaustion low in this region over the next week with a breach above this formation shifting our near-term bias higher in the aussie. Ultimately we would be looking to sell this rally with the medium-term outlook remaining weighted to the short-side.

* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.

Relevant Data Releases

AUD/USD Exhaustion Trade- Shorts at Risk Above 8064

Other Setups in Play:

—Written by Michael Boutros, Currency Strategist with DailyFX

For updates on this scalp and more setups follow him on Twitter @MBForex

To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list

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Interested in learning about Fibonacci? Watch this Video

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USD/CHF Threatens Long-Term Bearish Trend on Negative SNB Rate

Talking Points:

- USD/CHF Threatens Long-Term Bearish Trend as SNB Pushes Deposit Rate Into Negative Territory.

- USD/JPY Struggles to Hold Above 119.00 Handle Ahead of BoJ Interest Rate Decision.

- USDOLLAR Monthly Range in Focus Post-FOMC; Dollar to Act as Carry Currency?

For more updates, sign up for David’s e-mail distribution list.

USD/CHF

USD/CHF Daily Chart

Chart – Created Using FXCM Marketscope 2.0

USD/JPY

USD/JPY Daily Chart

  • Despite the bullish break, lack of momentum to hold & close above the 119.00 handle may generate range-bound prices in USD/JPY ahead of the Bank of Japan (BoJ) interest rate decision.
  • May see BoJ Governor Haruhiko Kuroda highlight a dovish outlook for monetary policy as falling energy prices undermine the central bank’s scope to achieve the 2% inflation target.
  • As USD/JPY carves a near-term base around 115.10 (61.8% retracement) to 115.20 (161.8% expansion), will keep a close eye on the monthly high (121.83) especially as risk appetite picks up.

Join DailyFX on Demand for Real-Time SSI Updates Across the Majors!

Read More:

Price & Time: Important Timing Relationship Beckons USD/JPY

US Dollar Once Again Looks like a Buy versus Euro, Major Currencies

USDOLLAR(Ticker: USDollar):

USD/CHF Threatens Long-Term Bearish Trend on Negative SNB RateUSDOLLAR Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Despite the bullish reaction to the Federal Open Market Committee (FOMC) meeting, Dow Jones-FXCM U.S. Dollar may track sideways over the near-term as it holds the monthly high (11,522).
  • As the FOMC shows a greater willingness to normalize monetary policy in 2015, may see market participants treat the greenback as a carry currency amid the deviation in the policy outlook.
  • Looks as though the former resistance zones around 11,312 (78.6% retracement) to 11,351 (78.6% expansion) will act as suppose, with 11,539 (78.6% expansion) still standing as the topside target.

Join DailyFX on Demand for Real-Time SSI Updates!

Click Here for the DailyFX Calendar

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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Dollar Rally Post-FOMC Bolstered by Surprise SNB Action

Talking Points:

- USDCHF bursts to fresh yearly highs after SNB goes negative.

- USDJPY back in uptrend, but yet to clear recent swing highs.

- December forex seasonality foresaw a modestly weaker Euro.

Central banks have been quite active over the past 24-hours. Yesterday the FOMC stirred speculation over the timing of its policy normalization, as it clearly struggles with transitioning from time-based guidance to responding to incoming economic data.

While the phrase “considerable time” was left in the statement, the FOMC’s choice to include the word “patient” to describe its attitude towards raising rates is an interesting one. In fact, the last time the FOMC statement included the word “patient” in this context was back in January 2004 and March 2004, which preceded the June 2004 rate hike. The phrase “considerable period” was used in the four prior statements in 2003, for comparison.

These are different FOMCs run by different Fed chairs, but the specific language here can’t be overlooked. Nor is the coincidence that, as the European Central Bank grapples with introducing a major QE program at its January 22 meeting and fears of a Russian currency crisis rise, that the Swiss National Bank has taken steps to deter investors and speculators from fleeing to the Swiss Franc. In a sense, the SNB’s introduction of negative interest serves as a measure to front run a massive balance sheet expansion by the ECB.

The SNB’s introduction of negative interest rates today, for the first time since the 1970s, throws a wrench into some of the EUR-crosses, given the Euro’s near-perfect positive correlation with the Swiss Franc since September 6, 2011, when the SNB raised the Sf1.2000 floor (EURUSD and CHFUSD daily correlation over this time period is +0.96). If anything, the central banks’ actions over the past 24-hours may be helping the US Dollar realign with its December seasonality tendencies.

See the above video for technical considerations in EURUSD, USDCHF, and USDJPY.

Read more: FOMC Preview and Trade Setups in EUR/USD, USD/JPY, AUD/USD

— Written by Christopher Vecchio, Currency Strategist

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

Follow him on Twitter at @CVecchioFX

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Swiss Franc Sinks as SNB Surprises with Negative Interest Rates

Talking Points:

  • Swiss Franc Sank After SNB Unexpectedly Unveiled Negative Interest Rates
  • US Dollar May Turn Lower as Markets Rethink FOMC Outcome Implications
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The Swiss Franc slumped after the Swiss National Bank unexpectedly dropped interest rates into negative territory at -0.25 percent. The central bank warned it is ready to take further measures if needed and reaffirmed its commitment to the EURCHF floor at 1.20. The Australian and New Zealand Dollars edged higher as Asian stocks followed Wall Street higher, boosting demand for the sentiment-geared currencies. The Kiwi slightly outpaced its Oceanic counterpart, finding added support in an upbeat set of third-quarter New Zealand GDP figures. Output expanded 1 percent in the three months through September, topping consensus forecasts for a 0.7 percent increase.

The US Dollar may come under pressure following yesterday’s sharp advance as traders rethink the implications of the FOMC monetary policy announcement. The greenback’s rally was seemingly inspired by the Fed’s decision to back away from language pledging to keep rates low for a “considerable time following the end of its [QE3] asset purchase program”. Instead, policymakers adopted new verbiage arguing that the central bank can be “patient in beginning to normalize the stance of monetary policy”. The currency’s reaction seems to suggest this was interpreted as a hawkish guidance shift.

In fact, traders may have over-estimated the implications of the Fed’s language adjustment. The previous narrative was conditioned on the end of QE as a reference point. With that program already over for two months, an update was probably appropriate on purely contextual grounds and need not have signaled a policy change. Indeed, Yellen and company explicitly said that the new guidance is “consistent” with the old. Meanwhile, the FOMC trimmed the expected scope of rate hikes in 2015. The average view now envisions the outer band of the baseline rate range at 1.25 percent by the end of next year compared with 1.4 percent in September’s outlook.

Germany’s IFO Survey of business confidence headlines the economic calendar in European trading hours. Expectations call for the headline Business Climate index to rise to 105.5 in December, marking the second consecutive advance and the highest reading in four months. A pickup may offer a bit of a lift to the Euro but the move probably won’t find lasting follow-through considering improving sentiment could largely reflect expectations of on-coming ECB stimulus expansion. Needless to say, that seems hardly supportive for the single currency.

UK Retail Sales figures are set to reflect a slowdown in November, with the year-on-year growth rate down to 4.5 percent from the 4.6 percent reading posted in the prior month. Leading survey data paints a more optimistic picture however: an analogous private-sector measure from the BRC revealed the fastest receipts growth in three months over the same period while employment and household finance surveys from Markit Economics pointed to a fertile landscape for increased consumption. If these clues prove telling, an upside surprise may materialize. That has scope to offer a lift to the British Pound amid bets on the sooner arrival of BOE tightening.

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Asia Session

European Session

Critical Levels

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

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Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Talking Points

Gold slumped on Wednesday as its pricing currency the USD gained on the back of the December FOMCdecision. The removal of the ‘considerable time’ phrase from the policy statement, and an upgrade to the US growth outlook offered positive cues for the greenback.

Looking ahead medium-tier economic data including US Initial Jobless Claims likely have a high-threshold to impress traders in the aftermath of the Fed meeting. At the same time it would likely take a material negative surprise to the US data to dent the USD and lead a recovery for gold.

Meanwhile, the crude benchmarks recovered some ground in recent trade. This was despite another generally negative Inventories Report from the DOE. Crude stockpiles declined less than anticipated, refinery utilization dropped and the rate of US production climbed to another fresh multi-decade high. This suggests crude’s rebound is more reflective of a corrective bounce / profit taking. Rather than a shift in the supply glut story, which may in turn limit the extent of a recovery.

Finally, natural gas may be in store for further volatility on the back of upcoming storage data. The winter drawdown has begun as chilly weather sweeps across the US. Yet prices for the energy commodity may remain under pressure if the pace of stockpile declines is moderate compared to prior years.

ECONOMIC EVENTS

Please refer to the DailyFX Economic Calendar for the events over the session ahead.

Market Movements (Wed 17 Dec, 2014, Close 5PM EST)

CRUDE OIL TECHNICAL ANALYSIS

Crude remains locked in a downtrend as signaled by the 20 SMA and ROC indicators. A Doji has emerged on the daily, yet an absence of more definitive reversal signals suggests a sustained recovery may be unlikely at this stage. At the same time a small corrective bounce should not be precluded given the extent of recent declines. Sellers may look to keep the commodity capped below the 60.74 mark. Meanwhile, the next downside target is offered by the April ’09 Low at 46.70.

Crude Oil: Eyes April ’09 Low Amid Persistent Downtrend

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold is keeping traders in suspense near the 1,187 floor. Signs of a short-term downtrend appear to be re-emerging (ROC dipping into negative territory, prices below 20 SMA). This suggests a break lower would potentially open a retest of the recent lows near 1,137.

The DailyFX SpeculativeSentimentIndex suggests a mixed bias for gold based on trader positioning.

Gold: Awaits Break Below Nearby Floor To Recast Risks Lower

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

Silver’s intraday rebound is producing a Morning Star formation which awaits confirmation from the close of the current candle and a successive up-session. Yet trend indicators remain in negative territory (including the ROC and 20 SMA). This suggests risks are skewed to the downside for the time-being. Further; the breach of the psychologically-significant 16.00 handle has put the spotlight back on the 15.00 floor.

Silver: Eyes 15.00 Handle As Trend Indicators Turn Lower

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

Signs of a downtrend from the 20 SMA and ROC have resurfaced for copper, suggestingthe risks are likely skewed lower. This in turn keeps the June ’10 low in sight with sellers sitting nearby at the 2.96 ceiling. However, caution is still suggested when adopting fresh positioning – given the commodity’s tendency towards whipsaws over recent months.

Copper: Sights Set On June 2010 Low

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

The 50% Fib. has kept palladium capped as signs of a shift towards a downtrend re-emerge. The slide under buying interest at 792 may be the precursor to a greater descent towards the recent lows near 727. However, the 23.6% Fib now appears to be offering some support, which has prompted the appearance of an Inverted Hammer formation. If confirmed by a successive up-period it could herald a small corrective bounce.

Palladium: Inverted Hammer Awaits Confirmation Near Key Fib Level

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum continues to keep us in suspense near the 1,185 barrier, which has kept the commodity supported over recent months. Trend indicators have again turned lower. This suggests a breach of the nearby barrier could open the door to a descent on the July ’09 low near 1,101. However, an Inverted Hammer should be monitored for confirmation from an ensuing up-day, which in turn would warn of a small base.

Platinum: Awaits Breach Of Nearby Support Barrier

Crude Recovery May Be Limited, Natural Gas Braces For Storage Data

Daily Chart – Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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Contact and follow David on Twitter: @DaviddeFe

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EUR/USD: Trading the Federal Open Market Committee (FOMC) Meeting

- Federal Open Market Committee (FOMC) Expected to Drop ‘Considerable Time’ Phrase

- Will There Be a Larger Dissent as the Fed Looks to Normalize Policy Mid-2015?

Trading the News: Federal Open Market Committee (FOMC) Interest Rate Decision

The Federal Open Market Committee (FOMC) interest rate decision may heighten the bearish outlook surrounding EUR/USD as the central bank is widely expected to implement a more hawkish twist to the forward-guidance for monetary policy.

What’s Expected:

EUR/USD FOMC

Click Here for the DailyFX Calendar

Why Is This Event Important:Indeed, the FOMC may remove the ‘considerable time’ phrase as the central bank shows a greater willingness to normalize monetary policy in mid-2015, but we may see Chair Janet Yellen strike a more balanced tone this time around as the central bank head appears to be in no rush to remove the zero-interest rate policy (ZIRP).

Expectations: Bullish Argument/Scenario

The resilience in private sector consumption along with the ongoing improvement in the labor market may spur a material shift in Fed rhetoric, and the bullish sentiment surrounding the greenback may gather pace in 2015 should we see a growing number of central bank officials show a greater willingness to implement higher borrowing-costs next year.

Risk: Bearish Argument/Scenario

However, the Fed may try to anchor interest rate expectations as falling commodity prices paired with subdued wage growth undermines the outlook for inflation, and the dollar may face a larger correction over the near-term should we get more of the same from the central bank.

Join DailyFX on Demand to Cover the Entire FOMC Rate Decision!

How To Trade This Event Risk(Video)

Bullish USD Trade: FOMC Implements Hawkish Twist to Forward-Guidance

  • Need red, five-minute candle following the policy statement to consider a short EUR/USD position
  • If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position
  • Set stop at the near-by swing low/reasonable distance from cost; at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is met, set reasonable limit

Bearish USD Trade: Committee Shows Greater Willingness to Retain ZIRP

  • Need green, five-minute candle to favor a long EUR/USD trade
  • Implement same strategy as the bullish dollar trade, just in the opposite direction

Read More:

Price & Time: Key Levels to Watch Ahead of the FOMC

COT: US Dollar Index Small Speculators Hold Record Net Long Position

Potential Price Targets For The Release

EUR/USD Daily Chart

EUR/USD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Failure to retain the bearish momentum in price & RSI raises the risk for a larger rebound in EUR/USD.
  • Interim Resistance: 1.2600 pivot to 1.2610 (61.8% expansion)
  • Interim Support: 1.2280 (100% expansion) to 1.2290 (38.2% expansion)

Impact that the FOMC rate decision has had on EUR/USD during the last meeting

October 2014 Federal Open Market Committee (FOMC) Interest Rate Decision

EUR/USD Chart

As expected, the Federal Open Market Committee (FOMC) concluded the quantitative easing (QE) program in October, but retained a dovish tone for monetary policy as the central bank looks to retain the highly accommodative policy stance for a ‘considerable time.’ Nevertheless, it seems as though the Fed remains well on its way to normalize monetary policy next year as the central bank further discusses the exit strategy. The dollar strengthened following the end of QE , withEUR/USD dipping below 1.2650 and ending the day at 1.2617.

— Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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New to FX? Watch this Video

Join us to discuss the outlook for the major currencies on the DailyFXForums