Market Overview
Weak European economic data drove European markets lower, whilst positive US economic data was able to push Wall Street to a 44th record closing high of the year. However the moves continue to be unconvincing on the S&P 500 which posted a gain of just 0.2%. Asian markets followed a similar pattern overnight, with the Nikkei 225 up 0.3% (despite a rebound for the yen in Asian trading) as Japanese Prime Minister Shinzo Abe dissolve Parliament for the run up to the general election. With little newsflow overnight to drive them, European markets are very slightly higher in early trading.
Forex trading shows an uncertain outlook once more. This continues a trend of consolidation in the dollar over the past couple of weeks, a consolidation that has allowed several major pairs to unwind oversold positions against the dollar. Several of these pairs are now approaching key crossroads, however with little economic data today to drive markets the battle may not be won today.
There is little to drive markets this morning. ECB president Mario Draghi is speaking at 08:00GMT and any hints at further monetary easing could have a negative impact on the euro. Other than that the calendar is free until Canadian CPI which is due at 13:30GMT and is expected to come in at 2.1% for the year.
Chart of the Day – Silver
The big question is whether we have seen all this before. The silver price has just rallied back towards the resistance of the falling 4 month downtrend and is stalling. Trading over the past week has seen the price barely move with a series of neutral candlesticks. The price is also stuck trading around the resistance of the falling 21 day moving average which has been an excellent gauge for silver through the past few months. There is also resistance just overhead with the old key October low at $16.66.With the RSI unwound towards 50, this suggests that it is an important crossroads in the medium term outlook. A break higher through the $16.66 resistance and a move free of the recent consolidation band $15.87/$16.50 and would suggest that the bulls want more than just another bear market rally. However a failure of the $15.87 support would suggest yet another bear market rally has failed at the downtrend and further weakness will be seen. The intraday hourly chart indicators are neutral, but the trend is your friend.
EUR/USD
The euro has been broadly in a state of consolidation for the past few days as traders try to figure out the next move. This seems to be coming to an important crossroads technically as the next move would either confirm the continuation of the downtrend or begin to signal the potential for a more considered euro rally. That junction is at $1.2600 which has capped the upside moves in the past few weeks and remains the neckline resistance of the head and shoulders continuation. The recent drift higher in the euro has enabled the Stochastics to unwind back towards the level they reached in mid-October before they rolled over, whilst the RSI has plateaued just under 50. The next move could therefore be key for the medium term outlook. The intraday hourly chart shows pressure continues on the $1.2577/$1.2600 resistance band. A break above $1.2600 opens $1.2632 but then there is little real resistance until $1.2770 which marks a key reaction high on the daily chart. The intraday chart would have you believe the euro bulls are gaining confidence for a break. Support at $1.2440.
GBP/USD
After the unconvincing bullish key one day reversal has come an unconvincing “spinning top” candle (a near doji like neutral candle that shows equal higher and lower tails and a small body). The daily chart subsequently remains fairly negative. However on the intraday hourly chart the bulls are seemingly showing more confidence. An attempt to break through the resistance at $1.5736 yesterday failed to the pip. This would have completed a small base pattern that would imply further recovery gains (and would imply $1.5880). However the move failed and the bulls have just lost a bit of the impetus again. The higher low at $1.5630 becomes important for the recovery near term now. There is a slight bout of consolidation underway and if the rate were to move below $1.5630 then the bulls would have lost control of a potential recovery and a move back towards $1.5588 would ensue. Once again this is a chart at a key near term crossroads.
USD/JPY
Despite the posting of a 6th consecutive bullish candlestick it was hardly one of conviction. It is hard to criticise the bulls on the Dollar/Yen chart but some upside momentum looks to have been lost in the past 24 hours. The question is whether this move is the beginning of something more sustainable. The daily chart shows the momentum indicators have slightly ticked lower but nothing that has driven any big sell-signals yet. Currently the move just looks to be corrective within the uptrend. So far, the previous breakout at 117.00 remains intact as support. I believe that this would be seen by the bulls as a near term buying opportunity. Hourly momentum indicators have unwound with this minor correction and look ready to resume the upside shift.
Gold
We find the gold price once more in consolidation mode. A couple of attempts to break through the psychological resistance around $1200 have failed but the support around $1180.70 is holding the price up. This consolidation is just resulting in the recovering momentum indicators just tailing off slightly. The concern for the bulls is that the RSI is failing around the 50 mark, the MACD lines are under neutral and the Stochastics are running out of steam too. The bulls need to regain control fairly quickly otherwise the move could lose impetus and begin to come under threat of profit takers. The intraday hourly chart shows the gold price consolidation with technical indicators increasingly neutral. A breach of the $1175.50 low would signal that the bulls are losing control. Range resistance is at $1204.70.
WTI Oil
I remain bearish on WTI oil and view rallies as a chance to sell. However, in the last couple of days the selling pressure has just abated slightly. However, there is little reason to suggest that a bottom in the oil price has been reached yet. The daily momentum indicators remain extremely bearish, if perhaps a little flat. I would still view any rallies towards a 60 pip resistance band $75.84/$76.44 as a chance to sell. The consolidation is just allowing the upper band of the downtrend channel to catch up, currently around $76.80. The outlook on the intraday chart is also still bearish and it is likely that once the rebound runs out of steam there will be a retest of the $73.88 low prior to testing $73.25. The caveat to all of this is that with the crucial OPEC meeting on 27th November approaching, traders could be sitting on their hands until the outcome of the meeting is known.