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Silver Price Forecast: XAG/USD Breakout Stalls at Key Resistance

Key Talking Points:

Rising infection rates and possible monetary policy divergences see Silver spike higher

XAG/USD rejected at key resistance

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Silver prices are battling a key resistance after rising more than 2.5% in yesterday’s session. This was following the move in gold prices as the resurgence of Covid-19 cases in some parts of the world is dampening prospects of economic recovery, boosting demand for safe-haven assets. That said, there is still a broad demand for risk sentiment so the bullish push in silver may be short-lived.

The greatest risks to markets right now are the strong surge in virus cases in places like India and the possible shift in Central Bank monetary policy. Despite vaccination rates increasing at a promising level in many developed countries, there is still a shortage of doses in many emerging countries where infection rates are still out of control, posing a risk to broader economic recovery.

In the meantime, Central Banks are starting to show some divergence in their monetary policy views with the Bank of Canada saying yesterday that they may start tapering their current policies, with a rate hike being brought forward to 2022. And whilst the Fed continues to deny any policy changes until 2024, there will be big expectations at next week’s meeting to see if any new emphasis is given on a change of policy sooner than expected.

But the focus today will be on the ECB. Despite not expecting any policy changes, we have seen some members of the monetary policy committee diverge slightly from the widespread dovish stance. Council members Klaas Knot and Robert Holzmann have both called for bond-buying to be tapered later this year, suggesting a split at the ECB and a reason for investors to be extra vigilant at the post-meeting press conference held at 13.30 BST.

XAG/USD KEY LEVELS:

These risks to the broader market could be supportive for silver in the medium-term. The daily chart is showing the importance of Fibonacci levels in its price behavior over the last few months, so I would expect the 2664 – 2673 (61.8% Fibonacci retracement from 2987 to 2165) to offer increase resistance in the next few sessions. This area was also responsible for halting the attempted recovery back in March.

The good news is that yesterday’s push higher has put current price above the 100-day moving average, whilst the 50-day average is sitting on top of the 50% Fibonacci (2576), which is likely to offer a good area of support in the short term. We could see some sideways consolidation in the next few days between these two key Fibonacci levels, although momentum indicators are signaling that further buying pressure could likely arise.

SPOT SILVER Daily chart

Source: Refinitiv

Fibonacci Confluence on FX Pairs

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British Pound (GBP) Outlook: Failing to Benefit From Global 'Risk On' Sentiment

GBP price, news and analysis:

A rebound in global equities in New York Wednesday, followed by gains in Asia and early in Europe Thursday, suggests that investors are broadly positive about the markets.

Continuing weakness in the safe-haven US Dollar also suggests confidence, yet the British Pound is failing to benefit and still shows no sign of breaking above the psychological resistance at 1.40 on a consistent basis.

GBP/USD challenged by 1.40 resistance

GBP/USD still seems unable to break through the psychologically-important 1.40 level on a consistent basis even though a rebound in stock markets worldwide and ongoing weakness in the safe-haven US Dollar suggest that investors are broadly positive about the global economic outlook and the markets.

The problem for Sterling is that record coronavirus infections in India and more restrictions in Japan are pointing to a note of caution that can be seen in particular in the crude oil market, where concerns remain about weakening demand for fuel, and it may be that this caution is also holding back GBP/USD.

GBP/USD Price Chart, One-Hour Timeframe (April 12 – 22, 2021)

Source: IG (You can click on it for a larger image)

Similar caution can be seen in EUR/GBP, where for now at least there has been little sign of a downward reaction after the strength seen earlier this month.

EUR/GBP Price Chart, One-Hour Timeframe (April 1 – 22, 2021)

Source: IG

That said, the next move in EUR/GBP will likely depend on the tone taken by European Central Bank President Christine Lagarde in her press conference later this session. The ECB won’t be announcing any changes to its monetary policy but traders will be listening carefully for any hints that the Eurozone central bank is starting to debate withdrawing some of its monetary stimulus.

Click here to find out what to expect from the ECB meeting

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex

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Crude Oil Prices Suppressed by Rising Stockpiles and Demand Concerns

CRUDE OIL PRICE OUTLOOK:

Both API and EIA reported unexpected build in crude inventories for the week ending April 16th

Viral resurgence in India, Japan and other parts of the world weighed on the energy demand outlook

The OPEC+ group is expected to maintain current production level unchanged for the next 3 months

Crude oil prices extended lower during Thursday’s APAC trading session after the Energy Information Administration (EIA) reported an unexpected rise in inventories. Stockpiles increased by 0.6 million barrels for the week ending April 16th, compared to a baseline forecast of a 2.86-million-barrel drop. Prior to this, the American Petroleum Institute (API) also released a small build in crude inventory. This marked the first climb seen in four weeks, suggesting that demand is probably not as strong as people have thought (chart below).

Viral resurgence in some of the world’s major oil importing countries, such as India and Japan, dented the prospect for energy demand. A worsening pandemic situation in those countries underscored the fragility of a global recovery as uneven distribution and adoption of the Covid-19 vaccines posed a threat to reopening.

While stocks have rebounded overnight, the market remains jittery about the unwinding of “reflation trades”. Risk sentiment is tilted to the cautious side as haven-linked Treasuries were bid for a third day, sending the 10-year rate to a five-week low.

Source: Bloomberg, DailyFX

The OPEC+ will hold a Joint Ministerial Monitoring Committee (JMMC) meeting on April 28th. The oil cartel and its allies are expected to maintain the current pace of production unchanged, according to Russia’s Deputy Prime Minister Alexander Novak. “Currently, the market is balanced”, he said, adding that the OPEC+ can pump more if a deficit occurs. A balanced view of the current supply and demand relationship may help to stabilize prices.

In the previous OPEC meeting held on April 1st, the group surprised the market by introducing a total 2.25-million-barrel production hike from May to July to meet rising global demand.

Technically, WTI appears to haveformed a “Double Top” chart pattern after hitting a strong resistance level at US$ 63.83 on the four-hour chart. A “Double Top” pattern usually occurs at the end of a bull trend and signals a trend reversal. Prices have breached below the 38.2% Fibonacci retracement (61.31) and may be looking for support at the 100-period SMA line (60.90).

The MACD indicator has formed a bearish crossover and trended lower since, suggesting that further consolidation may be underway.

WTI Crude Oil Price – 4 Hour Chart

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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Gold Prices Extend Higher as Yields Fall, ECB Meeting in Focus

GOLD PRICE OUTLOOK:

Gold prices extended higher during APAC trading hours as yields and the US Dollar fell

Demand for safety remains elevated as traders are jittery about the unwinding of the “reflation trade”

Gold prices are challenging the 100-Day SMA line. Breaking it may hint at further upside potential

Gold prices rallied to an eight-week high as viral resurgence in some parts of the world dampened the growth outlook, boosting the demand for safety. While stocks have rebounded overnight, the market remains jittery about the unwinding of “reflation trades”. This encouraged investors to reassess recovery prospects and reshuffle their portfolios towards a more balanced setting.

Haven-linked Treasuries were bid during early in the APAC trading session, sending the 10-year rate to a six-week low of 1.538%. The real yield, as represented by the 10-year inflation-indexed security, also declined by 2 bps to -0.80%. Falling real yields boosted the appeal of precious metals as the opportunity cost of holding them decreased.

Traders will also keep an eye on the upcoming ECB interest rate decision for clues about the central bank’s monetary policy guidance. The ECB is widely expected to keep its policy unchanged and maintain an accommodative stance amid a third viral wave in the region. A relatively slower pace of vaccination compared to the UK and US suggests that the Eurozone is likely to suffer greater economic hardship in the months to come. Against this backdrop, the chance for the ECB to stay dovish is higher.

The risk is when the central bank decides to pull back the Pandemic Emergency Purchase Programme (PEPP) after front-loading payments in March. ECB President Christine Lagarde will hold a press conference after the meeting, and her speech will be closely scrutinized by currency and gold traders.

Share of People Who Received at Least One Dose of Covid-19 Vaccine – US, UK and EU

Source: Our World in Data

Technically, gold has likely formed a “Double Bottom” chart pattern after hitting US$ 1,677 twice. The “Double Bottom” pattern usually appears at the end of a downtrend and may be viewed as a strong bullish signal. Prices breached above an immediate resistance level at US$ 1,785 – the 38.2% Fibonacci retracement- and thus opened the door for further upside potential.

The next resistance level can be found at the 100-day SMA line (1,794). A daily close above this level would likely intensify near-term buying pressure and expose the next resistance level of US$ 1,818 – the 50% Fibonacci retracement. A swing lower however, may bring the immediate support level of US$ 1,785 (previous resistance) into focus.

Gold Price – Daily Chart

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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Euro Technical Analysis: EUR/USD, EUR/AUD, EUR/NZD, EUR/JPY Chart Setups

Euro Technical Forecast – Talking Points

EUR/USD maintains bullish posture as 1.2000 psychological level offers support

EUR/AUD supported by moving average within a recently formed Rising Wedge

EUR/JPY rangebound trading may continue but downside path appears more likely

EUR/NZD’s Ascending Wedge pattern may lead to a reversal following downtrend

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EUR/USD Technical Breakdown

Since breaking out of a Falling Wedge pattern earlier this month, EUR/USD has made significant progress, breaching above the psychologically imposing 1.200 level earlier this week. Now, the 1.2 handle appears to be providing a degree of support. The highly liquid currency pair is trending over 2.5% higher on the month following three consecutive monthly losses.

A move lower would likely see the 1.200 psychological level step back in as support once again. Even so, a break lower may sap bullish sentiment and extend prices lower. Should that occur, the 50-day Simple Moving Average (SMA) may underpin prices. To the upside, bulls most likely see the March high at 1.2113 as a key price target.

EUR/USD 8-Hour Chart

Chart created with TradingView

EUR/AUD Technical Breakdown

The Euro is on track to break a 5-month losing streak against the Australian Dollar, with EUR/AUD tracking a gain of just over 0.50% on the month. April began with a retest of trendline resistance, which was breached in late March. Since then, the currency pair has gone on to make modest gains, clearing the 20- and 50-day Simple Moving Averages.

A bullish cross between the two SMAs (20- and 50-day) last week has been followed up with a slight move higher. Now, EUR/AUD appears to have found support between the 20-day SMA and 38.2% Fibonacci retracement level from the March – April move. Price action looks to have formed a Rising Wedge pattern, which may ultimately end with a break lower, but for now, EUR/AUD may appreciate further.

EUR/AUD 8-Hour Chart

Chart created with TradingView

EUR/JPY Technical Breakdown

Rangebound is one word you could use to describe EUR/JPY price action so far in April. The upper and lower bounds that have contained the currency pair’s movement appear to be 130.66 and 129.54. The consolidation was preceded by a rather significant dip following a multi-month rally from the October swing low.

While more consolidation would maintain the status quo, a breakout or breakdown is likely once price pierces through the aforementioned levels. A concerning factor for a bullish thesis, however, is a weakening in the Relative Strength Index over the past several weeks, indicated by the green line on the RSI chart below. Moreover, MACD has broken below its center line earlier this week. Overall, the path lower may be the most likely scenario to consider.

EUR/JPY 8-Hour Chart

Chart created with TradingView

EUR/NZD Technical Breakdown

The Euro is tracking a loss of over 0.50% against the New Zealand Dollar so far this month. The bulk of EUR/NZD’s monthly loss occurred last week when the currency pair sold off following a pivot lower from resistance just under the 1.70 handle. The resistance area gave shape to an Ascending Triangle’s horizontal upper bound.

While most often a continuation pattern, the triangle’s formation follows a long-term downtrend and may lead to a reversal higher. With EUR/NZD currently testing the lower bound, however, price remains fragile and could breach below support, invalidating the pattern, and with it, the bullish bias. A bounce higher would inspire confidence for an ultimate breakout, but caution is likely the most prudent approach.

EUR/NZD 8-Hour Chart

Chart created with TradingView

EUR/USD, EUR/AUD, EUR/NZD, EUR/JPY TRADING RESOURCES

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— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwateron Twitter

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Australian Dollar Outlook: Sentiment Buoys AUD/USD but Tensions With China Mount

Australian Dollar, AUD/USD, Wall Street, Market Sentiment -Talking Points

Asia-Pacific stocks may see bullish session following upbeat Wall Street performance

Bank of Canada first major central bank to make tangible move to tighten policy

AUD/USD rises overnight but struggles against lingering level of resistance

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Thursday’s Asia-Pacific Outlook

Asia-Pacific markets may see spillover from the strength seen on Wall Street. US equity markets bounced back on Wednesday, following two days of losses, with small-cap stocks leading the charge higher. The Russell 2000 index gained an impressive 2.35% on the close, while volatility pulled back, evidenced by a 6.32% drop in the VIX volatility index. Investors have been focusing their attention on earnings amid a rather light week on the economic calendar.

Earnings have been primarily positive, helping to buoy market sentiment as stocks trade around all-time highs. Bank earnings have been positive, bolstered by strong trading revenues and a better-than-expected economic reopening. Investors are now anxious for technology stocks to report next week, with several Wall Street darlings slated to report quarterly figures. Netflix, one of the first mega-cap tech stocks to report earnings, fell over 7% on Wednesday following a subscriber miss.

The Bank of Canada’s (BoC) interest rate decision saw the Loonie strengthen as the central bank announced a pullback in the amount of government debt it will purchase. The QE taper was expected by some but was far from a certainty, especially considering Canada’s recent spike in Covid cases. The decision marks a major step in easing the extremely supportive monetary policy in response to the global pandemic.

Today’s session will be void of any high-impact economic events, but Hong Kong and Taiwan will release unemployment data. Thailand is also slated to release trade data for March. The Australian Dollar was a winner against its major peers overnight, following a better-than-expected retail sales print. Upbeat sentiment on Wall Street appeared to play a bigger factor on the Aussie-Dollar’s rise, however.

The Australian Dollar faces fresh fundamental headwinds after an early Thursday decision by Foreign Minister Marise Payne nixed two Belt and Road Initiative related deals with China, according to a report from Reuters. The move will likely worsen Australia’s already strained relationship with China and may even bring a formal retaliatory action.

AUD/USD Technical Outlook

Despite the overnight move higher, AUD/USD bulls continue to struggle to decisively overcome the 0.7750 level, indicated by the red horizontal line on the chart below. The 50-day Simple Moving Average (SMA) appears to be providing firm support to the downside, however. Price may continue to range between these two levels. A break on either side could see follow-through given the pair’s multi-day consolidation.

AUD/USD Daily Chart

Chart created with TradingView

AUD/USD TRADING RESOURCES

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— Written by Thomas Westwater, Analyst for DailyFX.com

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Gold Forecast: Has XAU/USD Price Action Officially Bottomed?

GOLD PRICE OUTLOOK: XAU/USD PERKING UP AS REAL YIELDS WILT

Gold bulls push the precious metal to its highest level in eight-weeks

Gold outlook has improved largely thanks to a pullback in real yields

XAU/USD price action now challenges a key technical resistance zone

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Gold prices have been ripping higher recently since putting in a potential double-bottom pattern around $1,680/oz. In fact, the precious metal now trades at an eight-week high following a 7% climb off its 30 March swing low. A pullback in the US Dollar and real yields seem to be benefiting gold outlook and motivating the rebound being staged by XAU/USD price action.

GOLD PRICE CHART WITH US TEN-YEAR REAL YIELD OVERLAID: DAILY TIME FRAME (02 JUNE 2020 TO 21 APRIL 2021)

As shown on the chart above, the price of gold tends to mirror (i.e. move in the opposite direction) of real yields. Due to this strong inverse relationship, the broader direction of real yields continues to stand out as one of the dominant fundamental catalysts weighing on gold prices. Correspondingly, if real yields struggle to regain upward momentum, there could be potential for XAU/USD to extend its rebound.

GOLD PRICE CHART: WEEKLY TIME FRAME (01 JULY 2019 TO 21 APRIL 2021)

Chart by @RichDvorakFX created using TradingView

Shifting focus to a technical perspective, how the precious metal finishes the week could prove quite telling of where gold prices trend next. A close above the 20-week simple moving average, which just so happens to underpin a big area of technical confluence around the $1,790-price level, might be followed by continuation higher and a bullish MACD crossover. The 38.2% Fibonacci retracement of its August 2020 to March 2021 trading range likely comes into focus under this scenario.

Surmounting this technical barrier has potential to motivate a larger rebound toward the upper descending trendline of gold’s eight-month long bull flag pattern. On the other hand, if gold bulls fail to maintain their upper hand and this technical barrier near the psychologically-significant $1,800-handle is rejected, the precious metal might recoil back toward its bottom Bollinger Band and year-to-date lows.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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Silver Price Forecast: XAG/USD Ponders Breakout Alongside Gold Gains

Silver Price Outlook:

Silver surged beyond resistance at the $26.20 mark to tag its highest level in more than a month

Treasury yields remain key to silver price gains but the technical outlook reveals bullish potential

Gold Price Breakout on Hold as Yields Rise, GLD ETF Clocks Outflows

Silver Price Forecast: XAG/USD Ponders Breakout Alongside Gold Gains

Silver surged to its highest price in more than a month Wednesday on the back of a 3% daily gain. Recent price action has seen the metal climb more than 8.5% in the month of April as slipping Treasury yields open the door to gains for commodities like gold and silver. As a result, XAG/USD may look to continue higher should the fundamental forces at play remain intact.

Silver Price Chart: 4 – Hour Time Frame (February 2021 – April 2021)

To that end, early resistance resides dangerously close to the metal’s Wednesday close, around $26.63. The barrier is derived from a prior swing high in March and could look to stall progress to the topside. Nevertheless, Wednesday’s price action saw silver establish a convincing break above another area that had proven troublesome – a Fibonacci level around $26.20. The line had resisted attempts higher throughout April and in March, but the recent breakout should see the level take on a more supportive role going forward.

With that in mind, silver could be trapped by resistance overhead at $26.63 and support beneath at $26.20. A lack of continuation at this stage might allow bulls to consolidate recent gains, however, and prove constructive in pursuit of a longer-term breakout rally. Fluctuating between support and resistance could open the door to range trading strategies.

Should a continuation beyond $26.63 occur, silver bulls could set their sights on $26.95 as an area of secondary resistance. The zone has served as both support and resistance in the past, most recently evidenced by price action in February and early March. While the technical landscape looks to be improving, the key to silver price gains remains US Treasury yields for the time being and a resumption higher in that market could hamper commodity price gains. As XAG/USD looks to continue its recent rally, follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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S&P 500, Financials, Bond ETF Flows After Strong Q1 Bank Earnings

S&P 500, Financials, Bond Fund Flows Talking Points:

S&P 500 pulled back from all-time-highs but is rising again Wednesday.

XLF Financials ETF shows little reaction to strong bank earnings.

Treasury ETFs have seen increased inflows in recent days.

S&P 500, Financials, Bond ETF Flows After Strong Q1 Bank Earnings

The S&P 500 Index rose to a fresh all-time-high in mid-April around the 4,180 level. As the week of April 19th began, the index dropped lower, falling back down to the 4,120 level before moving back higher on Wednesday. Q1 earnings reports continue to mostly be strong, and the brief bout of risk aversion seen earlier in the week may be nothing more than some profit taking at record levels.

S&P 500 Index – 45 Minute Time Frame (March – April 2021)

Chart created by Izaac Brook: Source: TradingView

Earnings season kicked off with strong Q1 earnings beats from JP Morgan, Goldman Sachs, and Wells Fargo. Bank earnings have been boosted by strong trading revenues, reductions in loan-loss reserves, and better-than-expected US economic performance. Further strength looks to be on the near horizon as the economy continues to reopen.

The XLF Financial Sector ETF rose to a fresh all time high alongside these strong earnings reports but since dropped slightly lower alongside the dip in the broader S&P 500 index. Meanwhile, flows into the ETF continue to remain subdued and mixed. The ETF saw large amounts of inflows in January, February, and March as US yields moved higher, but since peaking around 1.77% in late March, yields have fallen back lower.

With yields being a major driver of financial sector profit, a continued pause in moves higher or a retreat lower will threaten the financial sector’s ability to post similarly impressive numbers in Q2.

The pause in yield increases since late March has had a similar impact on Treasury ETFs. The aggregate fund flow for the ETFs TLT, BIL, and GOVT has remained mixed in 2021. After larger outflows in late February coinciding with the spike in yields, flows have remained relatively calm. The past few days have seen a concentration of inflows as yields have held mostly steady.

Since the end of Q1, negative sentiment on Treasuries has been falling, with market participations closing their short positions and going long instead. Future moves in Treasury yields will likely to tied to the path of the economic reopening and policy decisions from the Federal Reserve.

The Bank of Canada announced tapering of their QE purchases on Wednesday, and many suspect that the Fed will also embark on this path before year end. While the upcoming April FOMC meeting is likely too soon for language on tapering, June or July’s meetings may see such a discussion begin.

— Written by Izaac Brook, DailyFX Research Intern

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British Pound Technical Analysis: GBP/USD, GBP/JPY

British Pound, GBP/USD, GBP/JPY Talking Points:

It was a big start to the week for the British Pound, with both GBP/USD and GBP/JPY finding resistance at interesting technical areas on their respective charts.

GBP/USD put in yet another resistance inflection off of the 1.4000 psychological level.

The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

We’re only halfway through the week and already, it’s been a big outing for the British Pound. GBP/USD put in a strong jump on Monday as the pair pushed up to the same 1.4000 level that’s rebuked multiple advances over the past couple of months. GBP/JPY put in a strong bullish reaction off of a key support area, but a large portion of that has already been priced-out. And in EUR/GBP, the pair put in a trend-side move as GBP-strength showed through to help push the pair to a fresh weekly low.

GBP/USD Tries to Get Back into Bullish Trend

Coming into the month of March, GBP/USD was one of the cleaner major pairs, sticking inside of a bullish trend channel for much of the prior five months. That channel broke in late March, however, as US Dollar strength ran aggressively into the end of Q1.

But support showed up just a little lower, from the confluent Fibonacci levels around 1.3644-1.3678. This zone was tested a couple of weeks later, and that second inflection brought out the bulls with each day last week seeing gains. That continued through this week’s open with price action jumping up to the confluent area around the 1.4000 handle.

The underside of the bullish channel projected to right around that 1.4000 spot, and that came in to hold the highs on Monday and Tuesday.

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GBP/USD Daily Price Chart

Chart prepared by James Stanley; GBPUSD on Tradingview

On a shorter-term basis, the search for higher-low support continues. I had looked at this in yesterday’s webinar, plotting for such potential around the 1.3873 Fibonacci level. From the four-hour chart below, it’s not yet evident that the low is in; but if 3873 can’t hold the lows, there’s a deeper area of support potential around the 1.3800 level.

GBP/USD Four-Hour Price Chart

Chart prepared by James Stanley; GBPUSD on Tradingview

GBP/JPY Sticking to the Channel

That early-week flare of strength in Sterling helped GBP/JPY come back to life, as well. The formerly high-flying trend began to shake in mid-March, but the pair set a fresh two-year-high around the start of Q2. Prices quickly pulled back to the 150.00 psychological level, where a bit of grind developed until price action began to bump-higher earlier this week.

That bullish bump caught resistance on the mid-line, after which prices pulled back to support around the 150.00 handle.

GBP/JPY Four-Hour Price Chart

Chart prepared by James Stanley; GBPJPY on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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Oil Price Forecast: Move Below 50-Day SMA to Keep March Range Intact

Oil Price Talking Points

The price of oil attempts to retrace the decline from earlier this week despite an unexpected rise in US crude inventories, but crude may continue to track the March range as the Organization of the Petroleum Exporting Countries (OPEC) plan to gradually restore production over the coming months.

Oil Price Forecast: Move Below 50-Day SMA to Keep March Range Intact

The price of oil struggles to hold above the 50-Day SMA ($61.54) as it pulls back from a fresh monthly high ($64.38), and crude may face range bound prices ahead of the OPEC Joint Ministerial Monitoring Committee (JMMC) meeting on April 28 as US stockpiles recover after contracting for three consecutive weeks.

The update from the Energy Information Administration (EIA) showed crude inventories increasing 594K in the week ending April 16 versus forecasts for a 2.975M contraction, and it remains to be seen of OPEC+ will respond to the recent rise in US stockpiles as the group plans to “assess market conditions and decide on production level adjustments for the following month, with every adjustment being no more than 0.5 mb/d.”

However, separate figures from the EIA showed weekly field production holding steady at 11,000K for the second week, and the weakness in US output may keep oil prices afloat as OPEC’s most recent Monthly Oil Market Report (MOMR)emphasizes that “oil demand in the 2H21 is projected to be positively impacted by a stronger economic rebound than assumed last month.”

With that said, the decline from the March high ($67.98) may turn out to be a correction in the broader trend rather than a change in market behavior as US crude production remains below pre-pandemic levels, and recent developments in the Relative Strength Index (RSI) instill a constructive outlook for the price of oil as the indicator breaks out of the downward trend from earlier this year.

Oil Price Daily Chart

Source: Trading View

Keep in mind, crude broke out of the range bound price action from the third quarter of 2020 following the failed attempt to close below the Fibonacci overlap around $34.80 (61.8% expansion) to $35.90 (50% retracement), with the price of oil taking out the 2019 high ($66.60)as both the 50-Day SMA ($61.54) and 200-Day SMA($48.18)still reflect a positive slope.

At the same time, recent developments in the Relative Strength Index (RSI) suggest the decline from the March high ($67.98) may turn out to be a correction in the broader trend rather than a change in market behavior as the indicator breaks out of the downward trend from this year.

However, the price of oil bounces along the 50-Day SMA ($61.55) as it fails to retain the upward trend from November, and crude may continue to track the March range as it struggles to push back above the $64.20 (61.8% expansion) region.

In turn, a close below $61.80 (50% expansion) may push the price of oil towards the $59.40 (38.2% expansion) region, with the next area of interest coming in around $58.00 (50% expansion) to $58.40 (23.6% expansion).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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USD Q2 2021 Technical Forecast

Technical Analysis: US Dollar Begins with a Bounce but the Big Bear Still Lurks

It was a bizarre beginning to a New Year for the US Dollar, but given 2020 I’m not sure how surprising it should be. The US Dollar came into 2021 after a very clear and strong one-sided trend enveloped the currency for the final 8 months of last year. Around the 2021 open, the US Dollar was flashing oversold conditions while also working on a falling wedge formation, which is often approached with the aim of bullish reversals.

As I had written in the Q1 Tech Forecast for the US Dollar, I did expect a counter-trend move to show up on the basis of that context. But where I went wrong was my expectation that a prolonged bout of USD-strength would likely emanate from risk aversion. Instead, the continued bullish push in the US Dollar in Q1 was more related to the rates theme as US Treasury Yields jumped by as much as 90% during the period.

In a bizarre twist, it is that same driver highlighting optimism around a faster return-to-normal that may become a bearish driver in and of itself. We’ve started to see hues of risk aversion as rates on the 10-year note have topped above 1.6%. Throughout the quarter the Fed has remained as dovish as can be, even telling market participants that they’re planning on shrugging off above-target inflation prints. So, at this point, a similar root cause that I’d noted in Q1 appears to remain at play, as longer-term shorts in USD have continued to be squeezed as the sell-off has stalled, helped along by the rates picture that’s helped to keep buyers on the bid behind the USD.

On the below monthly chart of the US Dollar, we can see the three consecutive months of strength after price action tested a confluent area of support – plotted around the 90.00-level which is very close to the 38.2% Fibonacci retracement of the 2001-2008 major move.

US Dollar Index (DXY) – Monthly Timeframe (2001 to Present)

Source: TradingView; Prepared by James Stanley

US Dollar Pullback Pushes Towards Resistance Barriers

At this point, the US Dollar is testing above the 23.6% retracement of last year’s bearish move. But, this also highlights the relative size of this bullish theme in comparison to last year’s sell-off.

And, as noted above, the fact that higher rates being driven by optimism may create a risk-off scenario is somewhat of a highlight of where we are: In a market that may have difficulty holding up without the support of Central Banks, especially the Fed.

At this point, the bullish push does appear to be a corrective move in the bigger-picture theme of weakness in the US Dollar. On the weekly chart below, resistance potential around the 94-94.47 area is noted, and a bit-higher is another confluent zone around the 96.00 handle. As for support – the visible area around the two-year-lows, right around the 90.00 psychological level looms ominously below current price action.

Dollar Index (DXY) – Weekly Timeframe (Late 2017- March 2021)

Source: TradingView; Prepared by James Stanley

Q2 2021 Forecast for the US Dollar: Bearish

The quarterly technical forecast will remain bearish for the US Dollar, driven by the assumption that the Q1 bullish push was a counter-trend pullback in a longer-term bearish theme for the Greenback.

On a larger scale, the level at 95.89, mentioned above, is key for long-term trend diagnostics. This is the 50% marker of the 2001-2007 major move. This price also set a quick spot of support in June and July during the USD’s momentous sell-off last year, but hasn’t returned to the picture since. If buyers are able to pose a sustainable break above this price, then the sell-off can be seen as nullified and, likely, we’ll be dealing with some very different scenarios of higher rates and/or risk aversion across global markets.

Dollar Index (DXY) – Monthly Timeframe (Late 1999 – March 2021)

Source: TradingView; Prepared by James Stanley

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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Bitcoin Forecast: BTC/USD Bearish Below 50-Day Moving Average

BTC/USD PRICE OUTLOOK: BITCOIN STRUGGLING BELOW ITS 50-DAY SIMPLE MOVING AVERAGE

Bitcoin has stayed subdued since invalidating its year-to-date ascending trendline

BTC/USD price action looks likely to remain under pressure below its 50-day SMA

The cryptocurrency could search for technical support near the $50,000-price level

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Bitcoin (BTC/USD) has faced headwinds over recent trading sessions. The largest cryptocurrency by market cap plunged roughly -10% this past weekend and has been struggling to regain altitude ever since. This selloff led to a breakdown of the bullish trend that guided Bitcoin higher throughout most of the year. The latest stretch of downside also pushed Bitcoin below its 50-day simple moving average, and this could leave BTC/USD price action vulnerable to further weakness.

BTC/USD – BITCOIN PRICE CHART: DAILY TIME FRAME (27 DEC 2020 TO 21 APR 2021)

Chart by @RichDvorakFX created using TradingView

In our last Bitcoin forecast, we highlighted potential for another breakout that would likely face pushback from bearish divergence on the relative strength index, which came to fruition. Now, it looks like Bitcoin bears have wrestled back control of direction, but the bottom Bollinger Band has provided buoyancy to BTC/USD price action so far. Reclaiming the 50-day simple moving average could increase the odds of a rebound higher, but the negatively sloped 20-day simple moving average still lurks overhead. This brings to focus the $50,000-price level into focus as a more formidable area of technical support for Bitcoin, which is roughly underpinned by its 38.2% Fibonacci retracement and 100-day simple moving average.

To that end, though the Bank of Canada may be one of the relatively smaller fish in the pond of major central banks, their latest decision to taper weekly asset purchases by C$1-billion seems noteworthy. This rollback of ‘extraordinary monetary support’ reduces the amount of liquidity being injected into the financial system, and arguably, paves the way for other central banks to follow suit down the road. As such, anti-fiat assets like Bitcoin could face headwinds from this less-dovish shift in monetary policy – particularly once the Federal Reserve signals appetite for hopping aboard the taper train. This fundamental driver will likely remain on the backburner for now, however, as more dominant forces, like increasing private sector adoption and threat of regulatory oversight, strongarm the direction of cryptocurrencies.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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EUR/USD Fails to Test March High as ECB Boosts PEPP for Second Week

EUR/USD Rate Talking Points

EUR/USD pulls back from a fresh monthly high (1.2080) as the European Central Bank (ECB) boosts the pace of the pandemic emergency purchase programme (PEPP) for the second consecutive week, and the April interest rate decision may keep the exchange rate under pressure if the Governing Council shows a greater willingness to further support the monetary union.

EUR/USD Fails to Test March High as ECB Boosts PEPP for Second Week

The recent rebound in EUR/USD appears to have stalled as it fails to test the March high (1.2113), and the exchange rate may trade back within the descending channel from earlier this year as the ECB “expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.”

It seems as though the ECB is on a preset course as the central bank plans to “review the purchase pace on a quarterly basis at its monetary policy meetings,” and more of the same from the Governing Council may produce headwinds for the Euro as updated consolidated financial statement shows the PEPP expanding EUR 28.4 billion in the week ending April 16 after rising EUR 21.3 billion the week prior.

In turn, the ECB may keep the door open to further support the monetary union as Christine Lagarde and Co. “stand ready to adjust all of our instruments, as appropriate, to ensure that inflation moves towards our aim in a sustained manner,” but EUR/USD may make further attempts to break out of the downward trending channel from earlier this year as the crowding behavior from 2020 resurfaces.

The IG Client Sentiment report shows only 34.43% of traders are currently net-long EUR/USD, with the ratio of traders short to long standing at 1.90 to 1.

The number of traders net-long is 1.25% lower than yesterday and 8.94% lower from last week, while the number of traders net-short is 2.74% higher than yesterday and 5.20% higher from last week. The decline in net-long position comes as EUR/USD pulls back from a fresh monthly high (1.2080), while the rise in net-short interest has upheld the renewed tilt in retail sentiment as 34.74% of traders were net-long the pair during the previous week.

With that said, it remains to be seen the failed attempt to test the March high (1.2113) will keep EUR/USD within the descending channel from earlier this year as the crowding behavior from 2020 resurfaces, but the ECB rate decision may drag on the exchange rate as the central bank plans to boost the pace of the PEPP in the second quarter of 2021.

EUR/USD Rate Daily Chart

Source: Trading View

EUR/USD established a descending channel following the failed attempt to test the April 2018 high (1.2414), and the decline from the January high (1.2350) may turn out to be change in trend as the 50-Day SMA (1.1957) reflects a negative slope.

EUR/USD came up against channel resistance as the Relative Strength Index (RSI) broke out of the downward trend from earlier this year, but the failed attempt to test the March high (1.2113) may push EUR/USD back within the bearish formation as it struggles to hold above the 1.2010 (100% expansion) region,

In turn, the Fibonacci overlap around 1.1960 (61.8% expansion) to 1.1970 (23.6% expansion) is back on the radar as the exchange rate initiates a series of lower highs and lows, with the next area of interest coming in around 1.1860 (61.8% expansion) followed by the 1.1810 (61.8% retracement) region.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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CHF/JPY Struggles to Break Resistance Around 118.60, What’s Next?

CHF/JPY Talking Points:

CHF/JPY hit a multi-year high around 118.80 in mid-February.

The pair has been struggling to reclaim this level and has continually met support around 118.60 recently.

The 118.60 level marked a high in both 2017 and 2018.

CHF/JPY Struggles to Break Resistance Around 118.60, What’s Next?

CHF/JPY hit its highest level since early 2016 in February, rising to briefly trade around the 118.80 level. The pair met resistance around this multi-year high and grinded back lower, falling to support around the 116.00 level.

Another attempt on 118.00 in mid-March met a similar fate, sliding back to the 116.00 level. From this March 23rd low, the pair steadily strengthened through mid-April, rising as high as 118.70 before meeting resistance and turning slightly lower. Over the following week, price action whipsawed between 118.60 and 117.70, with attempts higher quickly rejected.

The pair slipped to a fresh two week low on April 21st, falling to 117.60. While further attempts at 118.60 may be in store for the near future, the longer-term outlook for the pair is looking mixed which lends itself to range trading strategies.

Swiss Franc/Japanese Yen – 2 Hour Time Frame (February – April 2021)

Chart created by Izaac Brook, Source: TradingView

Swiss Franc/Japanese Yen – 1 Day Time Frame (2016 – 2021)

Chart created by Izaac Brook, Source: TradingView

In a longer-term perspective, the 118.50 level has marked a key high point in the range for the pair established in 2016. The yearly highs in 2017 and 2018 both occurred around the 118.50 level, and were both followed by, on average, a 400 pip drop over the following month.

While CHF/JPY has trended higher since the March 2020 lows around 109.00, there may not be much remaining in the way of further strength. In 2021, the pair has mainly consolidated between the 116.00 and the 118.00 level, with a failed attempt at breaking to new multi-year highs in February. With another attempt at the 118.50 level rejected in mid-April, further downside may be lurking.

— written by Izaac Brook, DailyFX Research Intern

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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Canadian Dollar (CAD) Spikes as Bank of Canada (BoC) Tapers QE

CAD Price Analysis & News

Canadian Dollar Spikes on Hawkish BoC

QE Tapered

Inflation Seen at Target in H2 2022

QE TAPER: The Bank of Canada left the overnight rate unchanged as expected. However, more importantly, the BoC tapered its QE purchases to C$ 3bln/week from the prior of C$ 4bln. Now while this would have been a near certainty a few weeks ago, the recent rise in Covid cases had cast doubt on this action taking place and hence the Canadian Dollar has jumped on the move. As a reminder, I highlighted earlier that risks to CAD had been asymmetrically tilted to the upside, given that fast money accounts were bearish CAD (long USD/CAD) heading into the meeting.

OUTLOOK: The BoC’s outlook was also notably hawkish with the central bank expecting economic slack to be absorbed in 2022 and as a result sees inflation returning sustainably to its target H2 2022, having previously expected to reach this in 2023.

ECONOMIC FORECASTS

Source: BoC

MPR APRIL ASSUMPTIONS

Brent close to $65 (Prior $50)WTI close to $60 (Prior $50)WCS close to $50 (Prior $35)

MARKET REACTION

Source: Refinitiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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Euro Technical Analysis: EUR/CHF, EUR/NOK, EUR/SEK Rates Outlook

Euro Outlook:

With EUR/USD rising again, several of the EUR-crosses have seen price action turn higher over the course of the week.

EUR/CHF rates may be suggesting a better environment for risk appetite, while EUR/NOK and EUR/SEK rates’ price action still suggests deeper setbacks are possible.

According to the IG Client Sentiment Index, EUR/CHF has a mixed bias in the near-term.

EUR-crosses Give Greenlight to Risk

FX markets have quieted down in recent weeks, thanks largely due to the fact that stability in global bond yields has deprived interest rate-sensitive assets a catalyst for volatility. But lower volatility environments tend to translate into more risk seeking behavior by market participants, and with EUR/USD rising again, several of the EUR-crosses have seen price action turn higher over the course of the week. EUR/CHF rates may be suggesting a better environment for risk appetite, while EUR/NOK and EUR/SEK rates’ price action still suggests deeper setbacks are possible.

EUR/NOK RATE TECHNICAL ANALYSIS: DAILY CHART (December 2019 to April 2021) (CHART 1)

Through April, EUR/NOK rates have not made much progress, remaining within the descending parallel channel that’s developed in 2021; momentum is listless. But trading is a function of price and time, and the passage of time has now seen the pair return to the descending trendline from the March 2020 and February 2021 highs, leaving open the potential for a short-term reversal. Nevertheless, even if there is a break higher, EUR/NOK rates are still below the rising trendline from the January 2013 and July 2019 lows, evidence that, on a longer-term basis, we remain in bearish breakout territory. Per the prior update, it still holds that “a more decisive break below the yearly low established at 10.0032 would be the necessary trigger before a bearish directional move is likely to succeed.”

EUR/SEK RATE TECHNICAL ANALYSIS: DAILY CHART (March 2020 to April 2021) (CHART 2)

Although EUR/SEK rates started the month by trading through range resistance dating back to late-December 2020, it appears that a broader range has been carved out dating back to mid-November 2020, where a daily bearish key reversal high has remained untested. The decline in EUR/SEK rates prior to achieving 10.2169, marked by a daily bearish piercing candle, actually saw the pair produce a ‘lower low’ in April relative to March.

The context of the sideways consolidation since mid-November suggests that it may be a multi-month bear flag in the making, given that EUR/SEK rates have been in a steady holding pattern below the rising trendline from the January 2013/July 2019 lows. It may be the case that, for the past few months, EUR/SEK rates have been simply digesting crowded positioning that built up after the immediate onset of the pandemic. A deeper setback may soon emerge.

EUR/CHF RATE TECHNICAL ANALYSIS: DAILY CHART (April 2020 to April 2021) (CHART 3)

In the prior update for EUR/CHF rates it was noted that the passage of time “yielded the clarity of a symmetrical triangle having formed in recent weeks around the aforementioned Fibonacci retracements. While more patience is required, in context of the preceding move, traders may want to keep an eye on potential bullish resolution in EUR/CHF rates.” More patience is required as the symmetrical triangle has morphed to take on a more encompassing formation; it retains the context of a bullish continuation effort nevertheless.

IG Client Sentiment Index: EUR/CHF Rate Forecast (April 21, 2021) (Chart 4)

EUR/CHF: Retail trader data shows 58.70% of traders are net-long with the ratio of traders long to short at 1.42 to 1. The number of traders net-long is 4.88% higher than yesterday and 11.34% lower from last week, while the number of traders net-short is 0.83% higher than yesterday and 5.47% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/CHF prices may continue to fall.

Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/CHF trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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