Daily Global Macro Technicals Trend Bias Key Levels Fri 18 May

FX –  Mix bag with JPY remains the weakest

• EUR/USD – Trend bias: Sideways with risk of a mean reversion rebound. The pair traded sideways with a tight range of around 60 pips yesterday, 17 May and ended the U.S. session with a daily “Doji” candlestick pattern coupled with the prior bullish divergence signal seen in the daily RSI oscillator at its oversold region. These observations continue to indicate a slowdown in downside momentum of price action as the pair continues to hover right above the 1.1730/1700 short-term support  (the swing lows area of 21 Nov/12 Dec 2017 + 38.2% Fibonacci retracement of the 1 year of up move from 03 Jan 2017 low to 16 Feb 2018 high). No change, maintain neutrality stance between 1.1730/1700 and 1.1830 (former minor swing low areas of  09/15 May 2018 + close to 23.6% Fibonacci retracement of the recent decline from 14 May high to yesterday, 16 May low of 1.1763). A break above 1.1830 (an hourly close above it) is likely to open up scope for a short-term rebound to retest the next intermediate resistance at 1.1935/1970  (minor swing high area of 15 May 2018 + pull-back resistance of former minor ascending trendline from 09 May 2018 low). On the other hand, failure to hold at 1.1700 sees an extension of the down move to target the key medium-term support zone at 1.1570/1480 (former medium-term range resistance from 15 May 2015/02 May 2016 + medium-term ascending channel support from 03 Jan 2017 low + close to 50% Fibonacci retracement of the 1 year of up move from 03 Jan 2017 low to 16 Feb 2018 high).

• GBP/USD – Trend bias: Sideways. The pair continued its trade sideways since 08 May 2018 (2 weeks) and ended yesterday, 17 May U.S. session with a daily “Doji” candlestick pattern. No change, maintain neutrality stance between 1.3430 and 1.3607 (minor range resistance in place since 08 May 2018). A clearance above 1.3607 (an hourly close above it) shall validate a potential mean reversion rebound towards the next intermediate resistance at 1.3700/3770 (pull-back resistance of the former medium-term ascending channel support from 14 Mar 2017 low + former swing low areas of 09 Feb/01 Mar 2018). On the flipside, a break below 1.3430 ( an hourly close below its) opens up scope for a fresh impulsive downleg to target the next supports at 1.3280 follow by 1.3200 (former congestion area of 13 Oct/01 Nov 2017 + 50% Fibonacci retracement of the 1 year of up move from 16 Jan 2017 low to 17 Apr 2018 high).

• AUD/USD - Trend bias: Sideways with risk of a further mean reversion rebound. Maintain neutrality stance between 0.7560 (minor range resistance in place sine 04 May 2018) and 0.7410 (minor swing low of 09 May 2018). A clearance above 0.7560 (an hourly close above it) opens up scope for a potential rebound to retest the  0.7625/7655 resistance (pull-back resistance of the former major “Ascending Wedge” support from Jan 2016 low + 50%/61.8% Fibonacci retracement of the down move from 19 Apr high to 09 May 2018 low). On the flipside, a break below 0.7410 reinstates the bearish tone for an extension of the down move to target the next intermediate support at 0.7330 (minor swing low of 09 May 2017).
• NZD/USD - Trend bias: Sideways. In yesterday, 17 May Asian session, the pair had probed the upper limit of the short-term neutrality range at 0.6925 but it did not have a clear break above it (printed an intraday high of 0.6938 before it staged a retreat towards 0.6873 in the U.S. session). Tolerate the excess and maintain neutrality stance between 0.6938 and 0.6850 (minor swing low of 16 May 2018). A clearance above 0.6938 (an hourly close above it) opens up scope for a potential mean reversion rebound to target the next intermediate resistance at 0.7050/7060 (minor swing high area of 04 May 2018 + 38.2% Fibonacci retracement of the recent steep decline from 13 Apr high to 16 May 2018 low). On the flipside, a break below 0.6850 reinstates the bearish tone for a further downside extension to target 0.6800 support next (the medium-term swing low areas of 11 May/17 Nov 2017 + psychological).

• USD/JPY - Trend bias: Uptrend remains intact. Continued to surge upwards as expected and met the intermediate resistance/target of 110.85/111.00 (the former medium-term swing low area of 27 Nov 2017 & the 61.8% Fibonacci retracement of the multi-month decline from 06 Nov 2017 high to 26 Mar 2018 low) as it printed a current intraday high of 110.99 in today, 18 May Asian session.  No clear signs of medium-term bullish exhaustion except for the risk of a minor pull-back at this juncture due to is shorter-term hourly Stochastic oscillator that is coming close to an extreme overbought level of 97%. Maintain bullish bias in any dips above adjusted key short-term support now at  110.40 (former minor range resistance from 16/17 May 2018 + minor ascending trendline from 11 May 2018 low) for a further potential push up to target the next intermediate resistance at 111.40 (Fibonacci projection cluster) follow by the lower limit of a major resistance at 112.00 (the major descending trendline from Jun 2015 high + former swing low). However, a break below 110.55 negates the bullish tone for a deeper pull-back towards the 110.00/109.90 support (former range resistance from 03/10 May 2018 + medium-term ascending channel support from 26 Mar 2018 low.  

Stock Indices (CFD) – Mix bag while Japan and Germany continue to evolve in bullish configurations

• US SP 500 – Trend bias: Sideways. The Index had continued to trade within the 2741/2700 neutrality range. The Index seemed to be evolving into either a minor “Symmetrical Triangle” or “Flat/Sideways” range configuration in place since its recent minor swing high of 14 May 2018 as it grappled with the risk of a further tightening liquidity/credit conditions that can erode profit margins of firms triggered by the U.S. 10-year Treasury yield that had broken above the major resistance of 3%, surged higher and recorded a close of 3.095% in yesterday, 17 May U.S. session (7-year high).  Interestingly, the smaller caps equities that tends to have lower credit ratings had shrugged the rising yield phenomenon as the benchmark Russell 2000 to surge to another all-time record high closing to end yesterday, 17 May U.S. session at 1627. This outperformance of small caps stocks over the larger caps (S&P 500) indicates a more aggressive mood towards taking risk and a risk off scenario is likely still on hold. In the short-term,  maintain neutrality stance on the SP 500  between 2741 (minor swing high of 14 May) and 2700. A clearance above 2741 (an hourly close above it) opens up scope for another round of potential impulsive upleg to target the next intermediate resistance at  2760/65 next in the first step (minor swing high area of 15/16 Mar 2018 + 1.236 Fibonacci projection from 03 May 2018 low).

• Japan 225 – Trend bias: Up move remains intact.  Incher higher as expected to print a current intraday high of 22955 in today, 18 May Asian session. No change, maintain bullish bias with key short-term support remains at 22770 for a further potential push up to target 23000  (psychological) follow by the next intermediate resistance at 23100/280 (Fibonacci projection/retracement cluster + upper boundary of minor ascending channel from 03 May 2018 low).
• Hong Kong 50 – Trend bias: Sideways. No change, maintain neutrality stance between 30800 and 31320. Only a clear break above 31320 (an hourly close above it) reinstates the push up scenario towards 31800. On the flipside, failure to hold at 30800 sees a deeper pull-back towards the next intermediate support at 30500/400 (61.8% Fibonacci retracement of the up move from 04 May low to 14 May 2018 high).

• Australia 200 – Trend bias: Sideways. Another weak opening in today, 18 May Asian session as it staged another slide to challenge the 6087/78 (excess) key short-term support before it staged a minor bounce. No change, maintain neutrality stance between 6087/78 & 6150.  A clear break below 6078 (an hourly close below it) sees a deeper pull-back towards the 6054/40 key medium-term support zone (ascending trendline from 04 Apr 2018 low + 23.6% Fibonacci retracement of the on-going 6-weeks of up move from 04 Apr low to 10 May 2018 high).

• Germany 30 – Trend bias: Up move resumes. Bullish breakout from the upper limit of the short-term neutrality range at 13050 and surged towards the intermediate resistance/target zone of 13140/150 as expected. No clear signs of bullish exhaustion, thus flip back to a bullish bias with key short-term support now at 13020 (the former minor range resistance from 11/17 May 2018) for a further potential push up to target the next intermediate resistance at 13245/75 (Fibonacci projection cluster + minor swing high area of 01 Feb 2018 before the previous steep decline of 12% occurred). On the other hand, a reintegration back below 13020 negates the bullish tone for a deeper pull-back to retest the 12900/830 support (lower boundary of the medium-term ascending channel from  04 Apr 2018 low + minor range support from 10/15 May 2018).

*Levels are obtained from City Index Advantage TraderPro platform

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