RSI oscillator

Dow Jones Industrial Average has underperformed against the S&P 500 and Nasdaq 100 in the past 2 sessions. Broke minor support yesterday now turns into key short-term resistance at 34,310. Sill sandwiched within a complex sideways range configuration in the medium-term horizon with its range resistance at 34,630.   The Dow Jones Industrial Average (DJIA) has continued to be one of the underperformers among the major US benchmark stock indices ex-post Q2 “Triple Witching” options expiration since last Friday, 16 June. In the past two sessions, the DJIA has declined by -1.03% versus the S&P 500 (-0.84%), Nasdaq 100 (-0.76%), and small-cap concentrated Russell 2000 (-1.2%).   Sandwiched within a medium-term complex sideways range in the past 6 months   Fig 1:  US Wall St 30 medium-term trend as of 21 Jun 2023 (Source: TradingView, click to enlarge chart) The price actions of the US Wall St 30 Index (proxy of the Dow Jones Industrial Average futures) have continued to churn within a medium-term complex sideways range configuration in place since 13 December 2022. The recent minor up move from the 25 May 2023 low of 32,561 has managed to stage a retreat right below the upper boundary of the range configuration now acting as resistance at 34,630 (see daily chart).   Minor support broke but still above the 200-day moving average     Fig 2:  US Wall St 30 minor short-term trend as of 21 Jun 2023 (Source: TradingView, click to enlarge chart)   Yesterday, the Index has broken below its minor ascending trendline support from the 1 June 2023 low now acting as a pull-back resistance at around 34,310 which also confluences with the 61.8% Fibonacci retracement of the current minor decline from the 16 June 2023 high to yesterday, 20 June 2023 low (see 1-hour chart) Short-term momentum is still showing no clear signs of a bullish reversal as indicated by the 1-hour RSI oscillator that is still below a corresponding resistance at the 49% level. A break below the 33,830 near-term support exposes the next support at 33,470 (minor swing low area of 7 June 2023 & close to the 50% Fibonacci retracement of the prior up move from 25 May 2023 low to 16 June 2023 high). On the flip side, a clearance above 34,310 key short-term pivotal resistance negates the bearish tone for the next resistance to come in at 34,630 (medium-term range top as illustrated on the daily chart).

Russia’s weekend mutiny cast doubts on Putin’s grip on power. No major impact on markets but keep a lookout on Gold, which bounced off the key support zone of US$1,913/1,896 per ounce. Stern FX verbal intervention from Japan’s top currency official. Watch USD/JPY key near-term support at 142.50/25. US banking stocks tumbled ahead of annual key Fed’s banks’ stress test results Before the start of this new trading week, market participants were being jolted from their weekend leisure activities to shift their focus to the internal coup in Russia that may put President Putin’s power grip in jeopardy. Yevgeny Prigozhin, leader of the Wagner Group, a Russian key independent military contractor that has played a significant role in the ongoing Russia-Ukraine territorial conflict voiced displeasure with Russia’s top leadership in handling the Russia-Ukraine situation, took over two Russian cities and order his mercenaries to march towards Moscow on Saturday.   Russia’s weekend mutiny started fast and ended fast Upon reaching 200 km within Moscow, Prigozhin’s troops halted and made a U-turn back to their field camps. In addition, Putin dropped earlier treason charges on the Wagner Group and allowed Prigozhin to head to Belarus, Russia’s western neighbour for exile. In less than 48 hours, the mutiny in Russia is over without any clear details on what has transpired that led to Prigozhin’s retreat as Putin has not made any official speech or press conference yet. US Secretary of State Blinken commented that the weekend’s uprising by Prigozhin, a former Putin royalist has posed a direct challenge to Putin’s grip on power in Russia and provided a battlefield advantage to Ukraine. On the other hand, several geopolitical commenters have analyzed the situation to be in favour of Putin in which Wagner Group’s mutiny may be used as a cover for Putin to remove the top brass in Russia’s Ministry of Defence; Shoigu, the defence minister and Gerasimov, chief of the general staff as they posed a threat to Putin’s rule. Thus, the change of Russia’s military leadership may be part of the “deal” package that the Kremlin and Prigozhin agreed on.   No significant movements in markets but watch gold In today’s Asian session, both the S&P 500 and Nasdaq 100 e-mini futures were up slightly by around +0.20% after posting their worst weekly losses last week in three months. Major Asian stock indices were mixed at this time of the writing, Nikkei 225 (-0.24%), Kospi 200 (+0.60%), Hang Seng Index (-0.14%), Hang Seng China Enterprises Index (+0.13%), and CSI 300 (-0.70%). The US dollar is almost unchanged on average with the US Dollar Index inching down by a meagre -0.1%. Gold, a traditional safe haven asset that tends to benefit in light of major geopolitical risks upheaval in the past has exhibited some interesting price actions movement from a technical analysis perspective.     Gold’s decline has managed to bounce off from a key support zone of US$1,913/1,896 per ounce   Fig 1: Gold (XAU/USD) medium-term trend as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) Last week’s decline seen in Gold (XAU/USD) has led its price actions to hit a crucial medium-term pivotal support zone of US$1,913/US$ 1,896 per ounce (printed an intraday low of US$1,910 last Friday, 23 June) which is being defined by a confluence of elements; the lower boundary of the medium-term ascending channel in place since 3 November 2022 low, 38.2% Fibonacci retracement of the prior medium-term up move from 3 November 2022 low to 4 May 2023 high, and approximately the downside price objective of recent “Descending Triangle” bearish breakdown. Momentum has also improved as the daily RSI oscillator has managed to stage a bounce off the key corresponding support at the 36 level. Watch the US$1,896 key medium-term pivotal support and a clearance above US1,940 intermediate resistance sees the next resistance coming in at US$1,990 (also the 50-day moving average).   FX verbal intervention from Japan After a strong upside movement seen in the USD/JPY that recorded a weekly gain of +1.3% last week which outperformed other major USD crosses, the US Dollar Index only rose by +0.56% over the same period, Japan’s Vice Finance Minister Masato Kanda, a top currency official that has oversight over foreign exchange market matters has sounded the alarm in today’s morning Asian session. Based on a Reuters report, Kanda said that the authorities will respond to any excessive moves in the foreign exchange market, warned that the recent yen moves were rapid and will not rule out any chance of an FX intervention. He said, “Regardless of the direction, it’s generally not good for the economy if exchange rates move excessively in a way that deviates from economic fundamentals.” Today’s verbal intervention was the most pronounced made by any of Japan’s finance ministry officials in the past month when USD/JPY sailed past the prior 141.00 and 142.00 psychological levels “effortlessly”. USD/JPY has shed -0.2% intraday and broke key near-term support at 143.45 at this time of the writing, the next support to watch will be at 142.50/25 (former swing highs of 11/21/22 November 2022).     Fed’s annual banks stress test results out on Wednesday The US Federal Reserve will unveil the results of its annual stress tests on the 23 biggest US banks on Wednesday, 28 June. The key focus will be on a section of the test, labelled as “exploratory market shock”, this is the first time such a test is being conducted on the trading books of the largest US banks. The urgency and significance of the “exploratory market shock” stress test come after the US regional banks’ turmoil. Hence, monitoring of fixed income duration risk is paramount now given that the latest Fed’s hawkish monetary policy guidance is to keep interest rates higher for a longer period. Last week, the US banking stocks shed by -6.80% as indicated by the SPDR S&P Bank exchange-traded fund, its worse weekly performance in seven weeks and underperformed the S&P 500.     Fig 2: S&P 500 major trend with VIX as of 26 Jun 2023 (Source: TradingView, click to enlarge chart) If the “exploratory market shock” stress test results come in unfavourable, it may put more downside pressure on US banking stocks which in turn may trigger a volatility upside breakout in the VIX, a measurement of implied volatility on the S&P 500 as it has compressed to a low level of 13.44 not seen since early February 2020 before the pandemic. A sudden spike in VIX may dampen the current bullish mood for US stock indices.  

Yesterday’s price action of Nasdaq 100 has reintegrated back below the upper limit of the “Ascending Wedge” with a bearish breakdown below its daily RSI momentum indicator. Short-term momentum is still bearish as the Index has broken below the 20-day moving average which has also turned flat. 14,980 is the key short-term resistance to watch. This is a follow-up on our prior analysis “Nasdaq 100 Technical: Squeezed up ahead of CPI and FOMC” published on 13 June 2023. It rallied and hit the key 15,100/270 resistance zone as expected (click here for a recap). Interestingly, after the Nasdaq 100, the top performer among the benchmark US stock indices (recorded a year-to-date return of +36.12% as of 23 June 2023) hit the 15,270 key medium-term pivotal resistance (printed on intraday high of 15,285 on 16 June 2023), it shed a weekly loss of -1.28% for the week of 20 June 2023 which was its worst weekly loss in around three months.   At the risk of forming a medium-term blow-off top   Fig 1: US Nas 100 medium-term trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The recent price actions of the US Nas 100 (a proxy for the Nasdaq 100 futures) has reintegrated back below the upper limit of the bearish “Ascending Wedge” configuration yesterday, 26 June, and had a daily below it which indicates that the prior break above this upper limit on 12 June is considered as a failure bullish breakout (see daily chart). In addition, the daily RSI oscillator has broken below its key corresponding ascending trendline support at the 58 level which suggests that medium-term momentum may have turned bearish that in turn reinforces the potential medium-term blow-off view. The key medium-term support to watch will be at 13,660 (lower limit of the “Ascending Wedge”, 50-day moving average, former swing high area of 15 August 2022 & close to the 38.2% Fibonacci retracement of the up move from 28 December 2022 low to 16 June 2023).     Short-term momentum remains bearish   Fig 2: US Nas 100 short-term minor trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) Price actions of the Index have broken below the 20-day moving average that has started to turn flat (see 1-hour chart). The hourly RSI oscillator has continued to inch downwards towards the oversold level of below 30 but no bullish divergence signal yet. Watch the 14,980 key short-term pivotal resistance and a break below 14,580 support exposes the next support at 14,255/220. On the flip side, a clearance above 14,980 negates the bullish tone to see a retest on the 15,260/270 key medium-term resistance.      

Historical tightly inverse correlation between gold (XAU/USD) and US Treasury 10-year real yield (TIPS) has started to wane in the past four weeks. An uptick in geopolitical risk may be the factor that is supporting a resilient movement in gold despite higher 10-year TIPS. Watch the US$1,940 key intermediate resistance on gold (XAU/USD) for a potential bullish breakout. In the past week, a higher momentum movement is seen in longer-term sovereign yields over their shorter-term durations where the US Treasury 10-year yield recorded a weekly gain of 23 basis points (bps) over a meager return of + 5 bps seen on the US Treasury 2-year yield. If we stripped out inflation expectations, the US Treasury 10-year real yield, derived from the 10-year Treasury Inflation Protected Securities (TIPS) yield has a higher momentum intensity over the US Treasury 10-year nominal yield.     US Treasury 10-year real yield has broken above its Oct 2022 major swing high     Fig 1: US Treasury 10-year real & nominal yields major trends of 11 Jul 2023 (Source: TradingView, click to enlarge chart) Based on last Friday, 7 July closing prices, the US Treasury 10-year real yield increased to 1.79% and broke above its prior October 2022 key major swing high of 1.69% while the 10-year nominal yield rose to 4.07% but still below its October 2022 key major swing high of 4.22%. Thus, given the higher positive momentum factor seen in the longer-term real risk-free interest rate; US Treasury 10-year real yield, the opportunity costs of holding other long-duration riskier assets in fixed income and equities have increased which reinforced their weak performances seen last week; iShares Investment Grade Corporate Bond ETF (-2.40%), iShares High Yield Corporate Bond ETF (-1.63%), and iShares PHLX Semiconductor ETF (-2.54%). Interestingly, another “competing” asset, gold priced in US dollars (XAU/USD) did not record a similar magnitude of loss last week. In contrast, spot gold (XAU/USD) recorded a gain of +0.31% for the week ending 7 July.   The prior high degree of inverse correlation between gold and 10-year TIPS has waned   Fig 2: US Treasury 10-year real yield correlation trend with Gold (XAU/USD) as of 11 Jul 2023 (Source: TradingView, click to enlarge chart) The correlation between gold (XAU/USD) and US Treasury 10-yield real yield (TIPS) tends to be tightly inversely correlated in the past ten years; when 10-year TIPS rose, the price of gold (XAU/USD) staged a decline and vice versus due to zero interest income earned from holding gold and as a hedge on US government bonds, as gold has no counterparty risk. The 20-period rolling correlation coefficient between gold and the 10-year TIPS has been reduced to -0.60 from a recent high level of -0.84 recorded in early May 2023. What causes the current breakdown in the historical long-term tightly inverse correlation between gold and 10-year TIPS? It is likely due to the geopolitical risk factor where the price of gold, acting as a safe haven asset tends to increase when geopolitical risk increases. Before the Russian invasion of Ukraine that occurred on 24 February 2022, in the prior two months, the high degree of indirect correlation between gold and 10-year TIPS have dissipated as both started to move in direct correlation.   Geopolitical risk has ticked up to an eight-month high     Fig 3: Geopolitical Risk Index as of 30 Jun 2023 (Source: MacroMicro, click to enlarge chart) Based on quantified measures of geopolitical risk, the latest reading of the Geopolitical Risk Index (GPR) for the month of June 2023 compiled by US Federal Reserve economists Dario Caldara and Matteo lacoviello has started to tick up above the 100 level to 103.10, its highest level in eight months. The GPR measures the social mood of impactful geopolitical events, threats, and conflicts since 1985 by counting the keywords used in the press.     Watch the US$1,940 key intermediate resistance on gold (XAU/USD) for potential bullish breakout   Fig 4: Gold (XAU/USD) medium-term trend of 11 Jul 2023 (Source: TradingView, click to enlarge chart) Thus, the recent resilient price movement of gold (XAU/USD) that has managed to hold at the US$1,913/1,896 key medium-term support despite the steep up move seen in the 10-year TIPS is likely attributed to an uptick in geopolitical risk. Based on technical analysis, clearance above the US$1,940 key intermediate resistance sees the next resistance coming in at US$1,990 in the first step supported by a positive momentum reading seen in the daily RSI oscillator. On the flip side, a break below the US$1,896 key medium-term pivotal support invalidates the bullish tone to expose the next support at US$1,856 (also the 200-day moving average).

Oversold condition with bullish Japanese candlestick The four weeks decline in the price actions has led the 4-hour RSI oscillator into an extremely oversold level of 23.3 level on 6 July 2023 which was the lowest oversold reading since the 15 March 2023 level of 20.9 that coincided with the start of the current medium-term uptrend phase of the Index. Secondly, the current intraday price actions have also formed an hourly bullish “Hammer” Japanese candlestick pattern which suggests a potential change in sentiment from negative to positive on the short-term horizon. These two elements (oversold reading in the 4-hour RSI coupled with hourly bullish “Hammer” Japanese candlestick) have taken shape right above the medium-term ascending channel support of 31,530 and the upward-sloping 50-day moving average. Watch the 31,530 key medium-term pivotal support to maintain a potential bullish reversal with the next resistances coming in at 32,730 and 33,200 (also the 20-day moving average). However, a break below 31,530 invalidates the bullish tone to expose the next support at 30,720.  

USD/JPY has shed -5.4% from its 30 June 2023 high of 145.07, on sight to record its worst weekly loss since 7 November 2022. Today’s intraday sell-off has managed to hold at the 200-day moving average acting as support at 137.65. Short-term momentum has turned positive which increases the odds of a corrective rebound.   This is a follow-up on our prior analysis “USD/JPY Technical: “At risk of a minor bounce before bearish tone resumes” published earlier this week on 11 July 2023. The USD/JPY has tumbled in an almost straight-line fashion on broke below the 138.70 short-term support as highlighted (click here for a recap). The USD/JPY has torpedoed downwards by -5.40% from its recent high of 145.07 printed on 30 June 2023 to today, 14 July Asian session intraday low of 137.24 at this time of the writing. It has challenged the key 200-day moving average and recorded its worse weekly loss since the week of 7 November 2022. Talks of an imminent ultra-dovish monetary policy shift from the Bank of Japan (BoJ) in the upcoming monetary policy decision meeting on 28 July have started to make their rounds again. In today, 13 July Asian session, there are two news flows that advocate a tilt away from negative interest rates in Japan. Firstly, local Japanese media, Yomiuri reported that BoJ is likely to raise its FY 2023 annual inflation forecast to above 2% for its latest quarterly outlook report which is released on the same day as the upcoming 28 July monetary policy decision outcome. Secondly, former BoJ official, Hideo Hayakawa commented that he is expecting another tweak to the yield curve control programme on 28 July with a more aggressive bias of 50 basis points (bps) widening on the band of around 0% on the 10-year Japanese Government Bonds (JGB) yield to 1% from the current level of 0.5%. Previously, BoJ caught markets by surprise by widening the 10-year JGB yield band by 25 bps on 20 December 2022.   Holding at key 200-day moving average   Fig 1:  US/JPY medium-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The current decline in place since 30 June 2023 has reached its 200-day moving average which confluences with a graphical support of 137.65 (former swing high areas of 15 December 2022, 8 March 2023, and 2 May 2023). In addition, today’s price action at this time of the writing has formed an impending bullish daily “Hammer” candlestick pattern which indicates that odds have risen for a potential minor rebound in price actions to retrace the prior five days of steep descent.   Positive short-term momentum has emerged   Fig 2:  US/JPY minor short-term trend as of 14 Jul 2023 (Source: TradingView, click to enlarge chart) The hourly RSI oscillator has flashed out another bullish divergence signal at its oversold region and just staged a bullish breakout above a key parallel descending resistance at the 43 level. These observations suggest the recent downside momentum has abated. Watch the 137.65/40 key medium-term pivotal support for a potential corrective rebound scenario with the next intermediate resistances coming in at 139.00 and 139.70/140.10 (also the 38.2% Fibonacci retracement of the current decline from the 30 June 2023 high to today’s 14 July intraday low of 137.24). On the flip side, a break below 137.40 invalidates the corrective rebound to expose the next support at 135.70/50 (the 61.8% Fibonacci retracement of the prior up move from 24 March 2023 low to 30 June 2023 high).    

Short-term downside momentum has waned       Fig 2: Gold (XAU/USD) minor short-term uptrend of 25 Jul 2023 (Source: TradingView, click to enlarge chart) As seen on the 1-hour chart of Gold (XAU/USD), its recent slide from its 20 July 2023 high of US$ US$1,987.53 has reached the lower boundary of a minor ascending channel from 6 July 2023 low now acting as near-term support at US$1,952.50. In addition, the hourly RSI oscillator has flashed a bullish divergence signal at its oversold region. These observations suggest that the downside momentum of the 5-day slide from the 20 July 2023 high has started to wane where a potential short-term bullish reversal may take shape. Watch the US$1,939 key short-term pivotal support (also close to the 50-day moving average) with the intermediate resistance at US$1,990, and clearance above it sees US$2,010 next (the upper boundary of the minor ascending channel). However, a break below US$1,939 invalidates the bullish reversal scenario to expose the medium-term support zone of US$1,913/1,896.  

The 20-day moving average has capped further upside in the USD/JPY so far since last Friday, 21 July. BoJ will release its monetary policy decision and latest quarterly outlook report tomorrow, 28 July. The consensus is an upgrade for its FY2023 consumer inflation forecast to be above 2% while maintaining the upper limit of the YCC at 0.50%. Recent minor downtrend phase from 21 July 2023 high of 141.95 to today, current intraday low of 139.38 may see a retracement. Key resistance zone at 140.70/142.50. The recent rebound of 456 pips seen in the USD/JPY from the 14 July 2023 minor swing low of 137.24 retested the downward-sloping 20-day moving average last Friday, 21 July that is acting as resistance around 142.10/142.50. Thereafter, the price actions of USD/JPY retreated twice so far this week at/near the 20-day moving average, declined by 254 pips to print a 5-day intraday low of 139.38 as of today, 27 July Asian session at this time of the writing. The current short-term weakness of the USD/JPY has materialized ahead of the Bank of Japan (BoJ)’s monetary policy decision tomorrow where the consensus is an upgrade of its consumer inflation forecast to be above 2% (above BoJ’s target) for FY 2023 for its latest economic quarter outlook, and no change on the upper limit of the Yield Curve Control (YCC) programme on the yield of the 10-year Japanese Government Bond (JGB) to capped at 0.50%. Interestingly, this upper limit of the YCC is a wild card for tomorrow as several ex-BoJ officials have advocated an upward revision to the 0.50% limit as the current economic conditions warrant it such as elevated sticky inflation conditions in Japan where the national-wide core (excluding fresh food), and core-core (excluding fresh food & energy) stood at 3.3% y/y, and 4.2% y/y for June; at a 31-year and 41-year high respectively. Before BoJ releases its monetary policy decision and updated quarterly projections, BoJ officials will have a chance to access the leading Tokyo area’s consumer inflation data for July which is being released three hours earlier tomorrow as a key input to debate and assess the suitability of a change to the limits of the YCC programme.       Price actions have traced out a potential medium-term bearish reversal “Head & Shoulders”     Fig 1:  USD/JPY medium-term trend as of 27 Jul 2023 (Source: TradingView, click to enlarge chart) The price actions of USD/JPY have evolved into a potential bearish reversal “Head & Shoulders” configuration since the high of 29 May 2023. The appearance of this potential “Head & Shoulders” suggests that the medium-term uptrend phase from the 16 January 2023 low of 127.22 to the 21 July 2023 high of 141.95 may have reached its terminal condition where a potential medium-term downtrend phase may materialize next, and a break below the 136.90 neckline support of the “Head & Shoulders” increases the odds.      Minor short-term downtrend from 21 July high reached an oversold condition     Fig 2:  USD/JPY minor short-term trend as of 27 Jul 2023 (Source: TradingView, click to enlarge chart)  The recent minor downtrend phase from the 21 July 2023 high of 141.95 to today, 27 July’s current intraday low of 139.38 has reached an oversold condition as indicated by the hourly RSI oscillator. This observation suggests the risk of a minor bounce to retrace a portion of the minor downtrend with the key resistance zone coming in at 140.70/142.50. Watch the 142.50 key medium-term pivotal resistance to maintain the short-term bearish bias and a break below the 139.15 near-term support exposes the next support at 137.65/136.90 (also the neckline of the “Head & Shoulders” & 200-day moving average). On the other hand, a clearance above 142.50 invalidates the bearish bias to see the next resistance coming in at 143.60.

Recent bullish breakout from “Descending Wedge” has led to a 10% rally to reach a medium-term resistance zone of US$83.80/84.90. Technical elements are now advocating a potential corrective pull-back with supports coming in at US$79.80 and US$77.20. Today’s surprise three interest rate cuts by China’s central bank, PBoC has triggered a risk-off behaviour in cross-assets (FX, stock indices, commodities) via a negative reflexivity feedback loop.   This is a follow-up analysis of our prior report, “WTI Oil Technical: Potential bullish reversal Descending Wedge in play” published on 21 July 2023. Click here for a recap. The price actions of West Texas Oil (a proxy of WTI crude oil futures) have indeed shaped the bullish breakout from its “Descending Wedge” configuration on 24 July and rallied by +10% to print an intraday high of US$84.92 per barrel on last Thursday, 10 August which coincided with a medium-term resistance zone of US$83.80/84.90 (see daily chart). Today, West Texas Oil has shed almost -1% intraday at this time of the writing to print an intraday low of $81.60 that recorded an accumulated loss of -3.7% in the past two sessions since Thursday, 10 August high of US$84.92. The current weakness of oil has been in line with a broad-based risk-off behaviour seen in cross-assets today (FX, major stock indices & industrial metals commodities) attributed to the contagion fear in China’s financial system after a major trust fund failed to make timely payments to holders of its wealth management products that are backed by unsold properties of indebted property developers. Today’s unexpected interest rate cut by China’s central bank, PBoC on its 1-year medium-term lending facility (MLF) interest rate by 15 basis points (bps), more than the previous 10 bps cut implemented in June to bring it down to 2.50%, its lowest level since late 2009. The 1-year MLF rate is a benchmark interest rate in China where PBoC provides a credit line to major commercial banks which in turn acts as a guide for another two benchmark interest rates that commercial banks charged to customers: the 1-year and 5-year loan prime rates. Interestingly, PBoC enacted two more interest rate cuts today on the overnight standing lending facility (SLF) which was cut by 10 bps to 2.65% while the 7-day and 1-month SLF rates were cut by 10 bps each to 2.80% and 3.15% respectively. Three interest rate cuts in a single day are considered a “rare” event in China given that the current guidance from China’s top policymakers is in favour of targeted stimulus policies to address the current economic growth slowdown rather than enacting “opening the liquidity floodgate” measures. Hence, today’s surprise move on China’s more accommodative monetary policy stance is perceived as a heightened red alert on its financial system where trust firms’ default risks have risen that may trigger a systemic contagion which in turn created the negative reflexivity feedback loop seen today.     Daily RSI oscillator conditions suggest an imminent short-term pull-back   Fig 1:  West Texas Oil medium-term trend as of 15 Aug 2023 (Source: TradingView, click to enlarge chart) The daily RSI oscillator flashed a bearish divergence condition at its overbought region on 9 August 2023 which suggests that the medium-term upside momentum of West Texas Oil is overstretched, and its price actions face the risk of a corrective pull-back to retrace certain portions of the current 26% rally of its medium-term uptrend phase from 28 June 2023 low of US$66.95. A bearish breakdown below minor ascending channel support   Fig 2:  West Texas Oil minor short-term trend as of 15 Aug 2023 (Source: TradingView, click to enlarge chart) Today’s price actions of West Texas Oil have staged a bearish breakdown below its minor ascending channel support from the 28 June 2023 low. Watch the US$83.80 key short-term pivotal resistance to maintain the short-term bearish tone to see the next support coming in at US$79.80 and a break below it exposes US$77.20 next (also the key 200-day moving average). On the flip side, a clearance above US$83.80 invalidates the corrective pull-back scenario for a retest of the 10 August 2023 swing high area of US$84.90 and a clearance above it sees the next resistance coming in at US$87.00 (psychology level & Fibonacci extension).  

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 recent decline of -6.8% from its 10 August 2023 high has not damaged the medium-term uptrend phase of WTI oil. Today’s price actions have indicated a revival of a short-term uptrend phase. Watch the key short-term support at US$80.90. This is a follow-up analysis of our prior report, “WTI Oil Technical: Time for a potential short-term pullback” published on 15 August 2023. Click here for a recap. The price actions of West Texas Oil (a proxy of WTI crude oil futures) have indeed shaped the expected minor short-term pull-back and broke below US$79.80 per barrel minor support as it printed an intraday low of US$79.11 last Thursday, 17 August. All in all, it has recorded an accumulated decline of -6.8% from its 10 August 2023 high of US$84.92 but from a technical analysis perspective, the medium-term uptrend phase in place since 28 June 2023 low of US$66.95 remains intact.       Fig 1:  West Texas Oil medium-term trend as of 21 Aug 2023 (Source: TradingView, click to enlarge chart) Recent price actions of West Texas Oil have led to the emergence of an imminent “golden crossover” bullish condition seen in the 50-day and 200-day moving averages. In addition, the daily RSI oscillator has also just staged a rebound right at a key parallel support at the 50 level. These observations suggest that medium-term bullish momentum may have resurfaced which in turn increases the odds of the continuation of a potential impulsive up move sequence within its medium-term uptrend phase in place since the 28 June 2023 low.   Evolving into a minor short-term uptrend     Fig 2:  West Texas Oil minor short-term trend as of 21 Aug 2023 (Source: TradingView, click to enlarge chart)  Today’s price action has just surpassed the 20-day moving average which suggests the potential start of a minor short-term uptrend phase for West Texas Oil. Watch the US$80.90 key short-term pivotal support to see the next intermediate resistance coming in at US$83.00 before a retest on the 10 August 2023 swing high of US$84.90. However, a break below US$80.90 negates the bearish tone to expose the US$79.55/79.10 support.  

Medium-term downtrend phase of AUD/USD has reached an oversold condition with downside momentum easing. Key short-term support to watch will be at 0.6385. Intermediate resistance at 0.6490. The price actions of AUD/USD have been oscillating in a medium-term downtrend phase in place since the 17 July 2023 high which has been reinforced by the bearish breakdown of its former medium-term ascending trendline support from 13 October 2022 low on 9 August 2023. So far, the AUD/USD has plummeted by -530 pips from its 17 July 2023 high to its 17 August 2023 low of 0.6365, and the recent four weeks of decline have led to an oversold condition in terms of price actions     Fig 1:  AUD/USD medium-term trend as of 28 Aug 2023 (Source: TradingView, click to enlarge chart) The daily RSI oscillator of the AUD/USD, a gauge that measures momentum, oversold, and overbought conditions on price actions reached an oversold condition recently on 17 August 2023 and shaped a bullish divergence condition (a higher low) thereafter on last Friday, 25 August. These observations suggest that the downside momentum of the ongoing medium-term downtrend of AUD/USD may have eased which supports a potential imminent minor countertrend/consolidation phase. These positive elements have also occurred at a key support of 0.6385 that coincided with the 10 November 2022 low and the 76.4% Fibonacci retracement of the prior medium-term up move from 13 October 2022 low to 2 February 2023 high.     Fig 2:  AUD/USD minor short-term trend as of 28 Aug 2023 (Source: TradingView, click to enlarge chart) Since its 17 August 2023 low, the price actions of AUD/USD have started to evolve into a minor range configuration with its key short-term pivotal support at 0.6385 and respective minor range resistance at 0.6490 (also the 20-day moving average). A clearance above 0.6490 sees the next resistances coming in at 0.6510 and 0.6600 (5 August/10 August 2023 minor swing highs areas, pull-back resistance of the former medium-term ascending trendline support from 13 October 2022 low & the 50-day moving average). However, failure to hold the 0.6385 key short-term support invalidates the minor countertrend rebound scenario for a continuation of the impulsive down move sequence of the medium-term downtrend phase towards the next supports at 0.6310 and 0.6270 in the first step.

The recent four months of bullish acceleration may have reached a major climax condition at 166.60 resistance. The short-term minor trend of CHF/JPY has turned bearish as it traded below the prior upward-sloping 20-day moving average. Watch the key short-term resistance at 165.60 on CHF/JPY. This is a follow-up analysis of our prior report, “CHF/JPY Technical: Relentless uptrend movement” published on 31 August 2023. Click here for a recap. After recording an accumulated gain of +2,378 pips since January 2023, the cross pair CHF/JPY seems to have lost its bullish mojo as it failed to make any headway above the 166.60 key major resistance and broke below its medium-term support at 164.50 (defined by the lower boundary of an ascending channel from 20 March 2023 low) yesterday, 11 September.   A major bullish climax may have been reached   Fig 1:  CHF/JPY long-term term secular trend as of 12 Sep 2023 (Source: TradingView, click to enlarge chart) The recent bullish acceleration move in the past four months may have reached a climax where price actions at the end of August 2023 formed a monthly bearish “Spinning Top” candlestick pattern coupled with the 3-month RSI oscillator hitting an extreme all-time high overbought level of 80.79 at this time of the writing based on data available since April 1972.   Short-term momentum has turned bearish     Fig 2:  CHF/JPY minor short-term trend as of 12 Sep 2023 (Source: TradingView, click to enlarge chart) Since 7 September 2022, the CHF/JPY has pierced below its 20-day moving average and started to form a series of “lower highs” and “lower lows”. In conjunction with the 1-hour RSI oscillator that has also traced out similar “lower highs” below a parallel descending resistance at the 57-level which suggests short-term bearish momentum of price actions remains intact. Watch the 165.60 key short-term pivotal resistance (also the 20-day moving average) and a break below the intermediate support at 163.80 (former minor range resistance of 21 July to 8 August 2023 & the 50-day moving average) may trigger a further impulsive slide to see the next support coming in at 162.10 in the first step. However, a clearance above 165.60 negates the bearish tone for a push-up to retest the 166.60 key major resistance.

GBP/USD has been trading downside into the gap area (single prints) and the price action around this zone will be the the key to observe.   In case of the rejection of the support, I see potetnial for the further upside movement towards upside reference at 1.2500. In case of the downside hold below the 1.2423, there is the chance for the further downside movement towards 1.2330 RSI oscillator is showing reading below 50, which is sign that sellers are in control.