descending channel

EUR/USD On Tuesday, the euro went through a correction, defined by the convergence with the Marlin oscillator. The price once again tested the target level of 1.0738 and the embedded line of the descending channel. The signal line of the oscillator has entered its own descending channel.     According to the main scenario, the price can now consolidate below the support level of 1.0692 and continue moving towards 1.0620, which is the lower embedded line of the price channel. The alternative scenario is simple - after settling above 1.0738, a test of the target resistance at 1.0804 is possible. This would extend the correction.     On the four-hour chart, the price has returned below the MACD indicator line after a false breakout above it. The Marlin oscillator has moved into the negative territory after briefly staying in the positive area. The trend is bearish.  

The XAU/USD chart shows a bearish momentum within a descending channel, indicating a predominant downward trend.       here is potential for a bearish reaction at the first resistance level of 1966.26, leading to a price reversal towards the first support level at 1933.95. Additional support is observed at 1914.16, offering significant buying opportunities. The resistance levels at 1966.26 and 1980.08 present obstacles for upward movement. Monitoring these levels can provide valuable insights for trading opportunities in the XAU/USD market.  

AUD/USD rallied by 97 pips from last Thursday, 29 June low of 0.6593. Staged a minor bullish breakout ahead of RBA’s monetary policy decision today. Watch 0.6630 key short-term support to maintain the current bullish tone. Since its 0.6593 minor low printed last Thursday, 29 June, the AUD/USD has managed to stage a rebound of 97 pips to print an intraday high of 0.6692 yesterday, 3 July ahead of Australia central bank, RBA’s monetary policy decision out later today at 0430 GMT. The interest rates futures market has implied a reduction in the odds of a 25 basis points (bps) hike due to the recent softer-than-expected annualized monthly CPI data for May; 5.6% from 6.8% in April and below expectations of 6.1%. As of 3 July 2023, the ASX 30-day interbank cash rate futures has priced in a 16% chance of a 25 bps hike on the cash rate, down from a 53% chance that was priced two weeks ago on 16 June.     Fig 1: AUD/USD short-term trend as of 4 Jul 2023 (Source: TradingView, click to enlarge chart) Minor bullish breakout The AUD/USD has managed to exit from the upper limit of a minor descending channel that was in place since its 16 June 2023 high of 0.6900 now acting as a pull-back support at 0.6630. This latest set of price actions has indicated that the minor downtrend phase from the 16 June 2023 high of 0.6900 to the 29 June 2023 low of 0.6593 is likely to have ended.     Short-term positive momentum has resurfaced The hourly RSI oscillator has just broken above a corresponding resistance at the 47 level after it exited from its oversold region last Thursday 29 June. Watch the 0.6690 short-term pivotal support (the pull-back of the former minor descending channel resistance & former minor swing high area of 29/30 June 2023) and clearance above 0.6790 (20-day moving average) sees the next resistance coming in at 0.6790. However, failure to hold above 0.6630 negates the bullish tone to expose the 0.6580/6550 key medium-term pivotal support zone.    

  US inflation data takes Brent above $80 Chinese trade data disappoints again Momentum appearing to wane Oil prices are a little higher again in early trade, seemingly still buoyed by yesterday’s US inflation report, and are continuing to push for a convincing break above $80 in Brent crude. It is trading a little above $80 this morning and did at times yesterday, but rather than generating fresh momentum, it seems to instead be running into some difficulty. That would be understandable. After all, it’s rallied around 12% in two weeks, primarily on the back of the extension to the Saudi one million barrel cut to the end of August, alongside Russia’s 500,000 barrel export reduction. Some profit-taking at these levels wouldn’t be hugely surprising and may have come sooner if not for the US CPI data. What’s more, trade data from China overnight wasn’t exactly inspiring which may have dampened the rally a little. Chinese imports and exports slumped at a faster pace than expected in June in another sign of weakening global trade. We’ve seen this trend all year and clearly, conditions are not improving, quite the opposite. This will maintain pressure on the economy with domestic demand also disappointing, as seen by the weaker import numbers. Targeted stimulus may be needed sooner rather than later or the country’s once seemingly modest 5% growth target may be at risk of being missed. The breakout in Brent crude above the descending channel and above the 55/89-day simple moving average band was quite strong and it appeared to be building some momentum but there are signs that this is slipping today. The daily candle itself isn’t complete so I’m hesitant to comment on it but a close around where it currently lies is in theory bearish, being a shooting star candle.   Brent Crude Daily     The stochastic and MACD look ok at the moment on the daily chart, there aren’t any real red flags as far as they’re concerned. That’s less the case on the 4-hour and even the 1-hour charts which may point to a potentially corrective move in the short-term.   Brent Crude 4-Hour   Brent Crude 1-Hour   Either way, longer term this looks like a very bullish move. Breaking out of a two-month range on the back of supply cuts, weaker inflation readings, and the potential for softer landings for the economy. The China data is a concern but some stimulus could change people’s views on that front.        

Output cuts and inflation data continue to boost crude prices Temporary disruptions could add to the bullishness Potential resistance around $83-$84   Oil is trading relatively flat today but has made tremendous gains over the last couple of weeks and could still add to that over the coming sessions. The price has risen more than 13% from the lows on 28 June and, despite appearing to struggle at times yesterday, still has plenty of momentum. The break above $80 was very significant after multiple efforts by Saudi Arabia and its allies to manipulate the price to more sustainable levels, from their perspective. Temporary output disruptions, like those currently in Libya and Nigeria, could further lift prices in the short term as potential tightness in the market on the back of cuts and economic resilience boost demand.   Key Resistance Lies Ahead Brent could face an interesting test around $83-$84 if it keeps rallying, with the boost from US inflation data and Saudi/Russian cuts potentially giving it an additional boost, as well as the psychological lift from this week’s breakout.     The 200/233-day simple moving average has been a key zone of support and resistance previously and could prove to be so again. It hasn’t traded above here in more than a year so a break above would be significant. A move lower could draw attention back to $80 and whether we’ll get that confirmation of the initial breakout. A move below here wouldn’t necessarily be a particularly bearish move, with the 55/89-day SMA band around $76-$78 arguably more important, falling around the upper end of the descending channel. It could also fall around a key fib level depending where the price peaks first.       

The Kiwi is the worst-performing currency among the majors where it depreciated by -7.1% against the USD on a rolling one-month basis. RBNZ Is expected to maintain its OCR at 5.50% since the last interest hike in May. Watch the key medium-term support of 0.5900/5860 where the downside momentum of NZD/USD may start to pause after declining for six months. New Zealand central bank, RBNZ will announce its latest monetary policy decision today at 0200 GMT followed by a press conference one hour later. The consensus is calling for another round of pause to its interest rate hiking cycle to maintain the official cash rate (OCR) at 5.50% since its last 25 basis points (bps) hike that was implemented in May. So far, the RNBZ has raised borrowing costs by a total of 525 bps since October 2021. Also, the RBNZ will release their latest OCR track today which likely shows they will remain on hold into 2024 and the in the previous May meeting, the forecasted path of the OCR was to remain at 5.50% until August 2024 when the first interest rate cut would be enacted. So far, the Kiwi has come under downside pressure in the past month where it depreciated by -7.10% against the USD, making it the worst-performing currency among the majors based on a rolling one-month basis. The current bout of weakness seen in the NZD/USD has been primarily driven by weak external demand and jitters over China’s ongoing deflationary risk.   Approaching the lower boundary of medium-term “Expanding Wedge”       Fig 1:  NZD/USD medium-term trend as of 16 Aug 2023 (Source: TradingView, click to enlarge chart) Since its 2 February 2023 high of 0.6538, the price actions of NZD/USD have been oscillating within a medium-term “Expanding Wedge” configuration. Its recent 4-week of impulsive minor down move sequence has it towards key medium-term support of 0.5900/5860 (the lower boundary of the “Expanding Wedge”, 61.8% Fibonacci retracement of the prior medium-term up move from 13 October 2022 low to 2 February 2023 high & 1.00 Fibonacci extension from of the on-going medium-term down move from 2 February 2023 high).   Short-term downside momentum remains intact Fig 2:  NZD/USD minor short-term trend as of 16 Aug 2023 (Source: TradingView, click to enlarge chart) Short-term price actions of the NZD/USD have drifted lower within a minor descending channel in place since the 14 July 2023 high. Watch the 0.5995 key short-term pivotal resistance to maintain the bearish bias for the next supports to come in at 0.5900 and 0.5860 before price actions start to shape a potential consolidation after six months of down move. However, a clearance above 0.5995 negates the bearish tone to expose the next intermediate resistance at 0.6050 (also the upper boundary of the minor descending channel).  

Weak medium-term momentum may kickstart a medium-term downtrend phase for AUD/JPY. Key short-term resistance stands at 93.70 with a potential downside trigger at 92.80. This is a follow-up analysis of our prior report, “AUD/JPY: Minor downtrend remains intact” published on 28 June 2023. Click here for a recap. Since its 19 June 2023 high of 97.67, the price actions of the AUD/JPY have continued to shape lower highs despite a retest and rebound on its key 200-day moving average after it printed an intraday low of 91.79 on 28 July 2023 ex-post Bank of Japan (BoJ)’s flexible yield curve control announcement on the 10-year Japanese Government Bond. Technical analysis suggests that the AUD/JPY is now at heightened risk to evolve into a medium-term downtrend phase.   Fig 1:  AUD/JPY medium-term trend as of 21 Aug 2023 (Source: TradingView, click to enlarge chart) Last Friday, 18 August, AUD/JPY managed to stall its prior three days of decline at a key support/inflection level of 92.80 which is being defined by a confluence of elements; the former swing high areas of 26 January/14 February/21 February 2023, and medium-term ascending trendline from 24 March 2023 low of 86.06. However, elements are not showing signs of any bullish reversal at this juncture with bearish momentum reading seen in the daily RSI oscillator as it inched lower from the 50 level and has not reached oversold condition.     Fig 2:  AUD/JPY minor short-term trend as of 21 Aug 2023 (Source: TradingView, click to enlarge chart) The price actions of AUD/JPY have oscillated within a minor descending channel in place since 15 August 2023 minor swing high of 94.87 which suggested that further potential downside may materialize at least in the short-term horizon. Watch the 93.70 key short-term pivotal resistance and a break below 92.80 near-term support exposes the next support at 92.00 (also the 200-day moving average) in the first step. On the other hand, a clearance above 93.70 invalidates the bearish bias to see the next intermediate resistance at 94.90 (also the 50-day moving average).

The CHF is the second-best performing major currency against the USD based on a one-month rolling basis. The recent four weeks of up move of USD/CHF has flashed out bullish exhaustion conditions that advocate the potential continuation of its medium-term impulsive down move. 0.8800/8830 is the key resistance zone to watch on the USD/CHF. In the past four weeks, the Swiss Franc (CHF) is the second best-performing major currency against the USD where the CHF just depreciated by -1.40% with the GBP that has come in the first place (-0.67% against the USD) based on a one-month rolling calculation as of 22 August 2023 at this time of the writing.         Fig 1:  Rolling 1-month performance of USD against major currencies as of 22 August 2023 (Source: TradingView, click to enlarge chart) In the lens of technical analysis, the rally of +269 pips that was seen on the USD/CHF from its 27 July 2023 low of 0.8553 to the recent 21 August 2023 high of 0.8828 is likely to be a corrective rebound within a medium-term downtrend that is still intact since its 8 March 2023 due to the emergence of several bullish exhaustion elements.     Daily bearish candlestick emerged right at descending channel resistance     Fig 2:  USD/CHF medium-term trend as of 22 Aug 2023 (Source: TradingView, click to enlarge chart) Yesterday’s price action of USD/CHF has staged a bearish reaction right at the upper boundary of the medium-term descending channel that coincides with the downward-sloping 50-day moving average with both acting as a confluence of resistance at 0.8830.     Started to evolve into a minor downtrend     Fig 3:  USD/CHF minor short-term trend as of 22 Aug 2023 (Source: TradingView, click to enlarge chart) Since its 21 August 2023 high of 0.8828, the price actions of USD/CHF have started to oscillate into a minor downtrend in a series of “lower highs and lower lows”. Watch the 0.8800 key short-term pivotal resistance a break below 0.8755 near-term support (also the 20-day moving average) exposing the next support at 0.8700 (minor swing lows of 4/10 August 2023) in the first step. On the flip side, a clearance above 0.8800 negates the bearish tone to set sight again on the 0.8830 medium-term resistance.      

EC downgrades eurozone growth for this year and next Will the ECB be deterred if their forecasts have similar downgrades? EURUSD slips below key support ahead of US inflation data and ECB   The European Commission downgraded its forecasts for the EU this year and next, weighed down by much weaker growth in Germany. The new forecasts won’t come as a major surprise and may even prove overly optimistic over time but they do come days ahead of the next ECB meeting and could tempt some policymakers into voting to pause the tightening cycle. ECB policymakers will obviously be armed with their own forecasts when it comes to the vote but it’s likely their growth expectations will be revised lower on the basis of recent releases. While markets are currently pricing in a pause this week, around 60/40 at the time of writing, I’m probably leaning more toward a final hike before pausing in October. It’s probably easier to justify a hike this week than it may be at the end of next month and I’m not sure there’s enough desire at the ECB to stop at the current rates. Weaker economic readings will probably drive a lively debate and they obviously won’t suggest, if they do hike, that it’s job done, rather more finely balanced. But they can’t ignore the progress in recent months, other economic indicators, and the lag effect of past moves.   A cautious breakout but perhaps still a significant one Recent strength in the US dollar has prompted a breakout against the euro in the last week which may prove to be very significant.   EURUSD Daily Source – OANDA on Trading View   While it continues to trade in a descending channel, the pair has broken below the 200/233-day simple moving average band for the first time since November. It then ran into support around 1.07 which has been a notable level of support in the past and the May low isn’t far below here. The interesting thing is that while the breakout hasn’t been the catalyst for a sharper move lower, yet, the decline isn’t lacking momentum. The MACD and stochastic are continuing to make new lows alongside price. Perhaps the MACD histogram is an exception but even this isn’t particularly clear. A break of the May low could confirm the move and see the sell-off accelerate. But with the US CPI to come on Wednesday and the ECB meeting on Thursday, there may be some apprehension among traders. That may even explain why it’s been more of a cautious breakout until this point.    

Key elements remain positive that support the ongoing short-term uptrend phase. Watch the key short-term support at 15,930. Next intermediate resistance stands at 16,200. Fig 1: Germany 30 minor short-term trend as of 24 Nov 2023 (Source: TradingView, click to enlarge chart) Since its bullish breakout from its former medium-term descending channel resistance last Tuesday, 14 November, the price actions of the Germany 30 Index (a proxy for the DAX futures) have continued to exhibit positive elements. Oscillating within a short-term uptrend phase since end of October 2023 Firstly, it has continued to oscillate within the upper half of a minor ascending channel in place since the 27 October 2023 low of 14,586.   Secondly, the hourly RSI momentum indicator managed to stage a rebound from key parrel support at the 45 level without any prior bearish divergence condition at its overbought condition which suggests that short-term bullish momentum remains intact. Watch the 15,930 key short-term pivotal support (the median line of the minor ascending channel & minor congestion area of 21/23 November 2023 and a clearance above 16,050 near-term resistance sees the next intermediate resistance coming in at 16,200 (upper boundary of the minor ascending channel & Fibonacci extension cluster. On the flip side, failure to hold at 15,930 negates the bullish tone for a minor corrective decline towards the next intermediate support zone of 15,660/560 (also the 200 and 20-day moving averages).