The EUR/USD currency pair has moved down after the ECB meeting. During yesterday’s and today’s trades the drop in quotations exceeded 60 points. As expected, the regulator kept the main parameters of monetary policy at the same level. The central bank is concerned about weak inflation prospects, as well as growing risks in international trade. The ECB plans to further stimulate the economy for a long period of time. At the moment, the trading instrument is consolidating in the range of 1.10300-1.10600. EUR/USD quotes have potential for further decline. Open positions from key levels.
Mixed data on business activity in Germany and the euro zone was published today.
The indicators signal the sellers’ strength: the price has fixed below 50 MA and 100 MA.
The MACD histogram is in the negative zone, which indicates a bearish mood.
The Stochastic Oscillator is located near the oversold area, the %K line is below the %D line, which gives a weak sell signal for EUR/USD.
Trading recommendations
Support levels: 1.10300, 1.10000
Resistance levels: 1.10600, 1.10800, 1.11000
If the price fixes below 1.10300, expect further decline of EUR/USD quotes to 1.1000-1.09800.
Alternatively, the quotes could recover toward 1.10800-1.11000.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.31387
Open: 1.31236
% chg. over the last day: -0.18
Day’s range: 1.30800 – 1.31729
52 wk range: 1.1959 – 1.3516
The GBP/USD currency pair has stabilized. Sterling is currently trading in a flat. There is no defined trend. Financial market participants are waiting for additional drivers. The key range is 1.30800-1.31200. Elizabeth II signed a bill on the country’s exit from the European Union (EU), which was prepared by Prime Minister Boris Johnson. Now the document has received the status of a law and gained legal force. Open positions from key levels.
The Economic News Feed for 24.01.2020 is calm.
Indicators do not give accurate signals: the price has fixed between 50 MA and 100 MA.
MACD histogram is near the 0 mark.
The Stochastic Oscillator is located in the neutral zone, the %K line is below the %D line, which indicates a bearish mood.
Trading recommendations
Support levels: 1.30800, 1.30350, 1.30000
Resistance levels: 1.31200, 1.31500, 1.31700
If the price fixes below 1.30800, GBP/USD quotes are expected to fall toward 1.30400-1.30200.
Alternatively, the quotes could grow toward 1.31500-1.31800.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.31347
Open: 1.31268
% chg. over the last day: -0.06
Day’s range: 1.31211 – 1.31424
52 wk range: 1.2949 – 1.3566
USD/CAD quotes have stabilized after a sharp rise at the beginning of this week. At the moment the Mooney is consolidating. The local support and resistance levels are: 1.31200 and 1.31500, respectively. The Canadian dollar continues to be under pressure from the negative dynamics of oil quotations. We do not rule out further growth of the USD/CAD currency pair. Today, investors will evaluate important economic releases from Canada. We recommend opening positions from these marks.
At 15:30 (GMT+2:00) Canada will release a report on retail sales.
Indicators do not give accurate signals: the price has crossed 50 MA.
MACD histogram is near the 0 mark.
The Stochastic Oscillator is located in the neutral zone, the %K line is above the %D line, which indicates a bullish mood.
Trading recommendations
Support levels: 1.31200, 1.30900, 1.30750
Resistance levels: 1.31500, 1.31700
If the price fixes above 1.31500, expect further growth of USD/CAD toward 1.31800-1.32200.
Alternatively, the quotes could descend toward 1.30900-1.30700.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 109.832
Open: 109.487
% chg. over the last day: -0.25
Day’s range: 109.439 – 109.652
52 wk range: 104.45 – 113.53
Bearish sentiment prevails on USD/JPY currency pair. The trading instrument has set new local lows. At the moment USD/JPY is consolidating in the range 109.450-109.650. The demand for “quiet harbor” currencies remains at a fairly high level. We do not rule out further growth of the yen against the US dollar. We recommend you to pay attention to the dynamics of US government bond yields. Positions should be opened from key levels.
The news background on the Japanese economy is quite calm.
Indicators do not give accurate signals: the price is testing 50 MA.
MACD histogram is near the 0 mark.
The Stochastic Oscillator is located in the neutral zone, the %K line is below the %D line, which indicates a bearish mood..
Trading recommendations
Support levels: 109.450, 109.300, 109.000
Resistance levels: 109.650, 109.850
If the price fixes below 109.450, expect a descend toward 109.200-109.000.
Alternatively, the quots could grow toward 109.800-110.000.
During yesterday’s trading session, the US dollar strengthened slightly against a basket of major currencies. The dollar index (#DX) closed in the green zone (+0.19%). The ECB meeting was the key event. The regulator, as expected, kept the key marks of monetary policy at the same level. The central bank is worried about weak inflation prospects, as well as rising risks in international trade. The ECB plans to further stimulate the economy over a long period of time.
Investors continue to monitor the coronavirus from China. Thus, the World Health Organization (WHO) reported that so far, the virus was a local crisis, and had not assigned it the status of a global emergency. For now, 25 fatal cases and more than 800 cases of infection have been recorded
Queen of the United Kingdom Elizabeth II signed a bill on the country’s exit from the European Union (EU), which was prepared by Prime Minister Boris Johnson. Now the document has received the status of law and gained legal force. At the next stage, the deal should be ratified by the European Parliament, which is scheduled for January 29.
The “black gold” prices are rising after fall the day before. Currently, futures for the WTI crude oil are testing the $55.65 mark per barrel. At 20:00 (GMT+2:00), U.S. Baker Hughes Total Rig Count will be published.
Market Indicators
Yesterday, there was a variety of trends in the US stock market: #SPY (+0.11%), #DIA (-0.09%), #QQQ (+0.32%).
The 10-year US government bonds yield has not changed. At the moment, the indicator is at the level of 1.74-1.75%.
The Economic News Feed for 24.01.2020:
– German manufacturing PMI at 10:30 (GMT+2:00);
– Manufacturing PMI and Services PMI in the UK at 11:30 (GMT+2:00);
– Composite PMI in the UK at 11:30 (GMT+2:00);
– Core retail sales in Canada at 15:30 (GMT+2:00).
While the Bank of Canada rate decision on Wednesday left rates unchanged at 1.75%, the Canadian Dollar sold off sharply on a broad front.
The reason for that can be found in the dovish rhetoric in the BoC statement and the comments from BoC Governor Poloz stating that a rate cut was on the table, even though financial vulnerability concerns weighed against a cut.
As a result, swap markets started to price in a rate cut. Here expectation for the BoC March meeting went up from 6% to 27.5% and for the BoC meeting in April these speculations rose from 22% to 51%.
What was certainly also interesting was that BoC Governor Poloz had a quite big emphasis on data, particularly on consumer data. And with the Canadian Retail Sales number being due today at 1330 GMT, elevated volatility seems warranted.
Any disappointment similar to last month when Retails Sales data for October came in at -1.2% (MoM), compared to the expected 0.0%, could trigger an acceleration of the current bullish move in the USDCAD on the upside and bringing the overall target around 1.3300/50 into our focus in the weeks to come.
On the other hand: any positive news is capable of resulting in a short-term bounce. But given the increasing likelihood of a rate cut from the BoC, we consider buying a dip against the region around 1.3050/3080 with the picture darkening only if we drop below 1.2950 to be interesting from a risk-reward perspective.
Source: Admiral Markets MT5 with MT5SE Add-on USDCAD Daily chart (between 07 November 2018 to 24 January 2020). Accessed: 24 January 2020 at 10:00 PM GMT
In 2015, the value of the USDCAD increased by 19.1%, in 2016 it fell by 2.9%, in 2017 it fell by 6.4%, in 2018 it increased by 8.4%, in 2019 it fell by 4.7% meaning that after five years, it was up by 11.7%.
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On Thursday, January 23, the euro was down at the close of trading. Bulls lost ground during the speeches at the ECB meeting, including one from ECB President Christine Lagarde. The EURUSD pair fell by 50 points, to 1.1036.
The ECB has left its key interest rates and incentive programs unchanged, with Lagarde commenting that the bank’s monetary policy will remain stimulating for an extended period of timre.
Today’s events (GMT+3):
From 11:15-12:30 PMI indexes in the manufacturing sector and services sectors in France, Germany, the Eurozone, and the UK are set to be published.
The price fall stopped at the 112th degree. The fall was sharp, and the rebound was weak. In this regard, today we may consider the continuation of the weakening of the euro against the US dollar to the 1.1014 mark.
Most euro cross pairs are trading in the red, so the fall could be sharp. The zone between the 112th and 135th degrees is a reversal, therefore, we think any decrease will be limited to 1.1014. Since the Stochastic Oscillator indicates oversold conditions, we are waiting for the downward wave to come in the American session. Additional pressure on risky assets comes from the latest news out of China concerning the mystery virus. Investors fear the rapid spread of the virus around the world.
Since the turn of the year, energy stocks have become a put owner’s dream–what with the energy sector virtually generating the worst returns of all US sectors.
And the harder you look, the worse it gets, making it nearly impossible to find value in this gridlocked mess.
One of the industry’s popular benchmarks, the SPDR S&P Oil & Gas Exploration ETF (XOP) has tanked 30% over the past year, badly underperforming the broader market all thanks to a perfect storm of supply and demand shocks coupled with slowing economies.
This comes to nobody’s surprise, considering that small-cap oil and gas stocks have higher leverage than large-caps. XOP invests in a lot of highly leveraged small-and mid-cap oil and gas companies in the exploration sector that tend to decline significantly on concerns about liquidity and debt repayments, but also bounce back quickly due to supply shocks like the Saudi Aramco drone attacks or, better still, a significant discovery.
Nothing quite tickles the fancy of energy investors like a giant oil or gas find.
But here’s the secret sauce: stocks of small-cap companies tend to enjoy serious leverage whenever they strike oil, whereas the heavyweights, well, not so much.
You don’t have to look very far for an example: shares of ExxonMobil Corp. (NYSE:XOM) are down more than 20% since the company announced a 14-strong string of good discoveries off the coast of Guyana in 2015, one of its best finds ever.
That’s because companies like Exxon have their fingers in too many pies, and their share prices depend on many variables. Junior explorers, however, tend to have a singular focus. You can buy them up for pennies, and when and if they strike oil, it’s a shareholder bonanza of big returns.
Granted, state-owned behemoths and giant energy companies tend to have more than their fair share of discoveries. But that does not in any way mean smaller companies have been missing out on the action–on the contrary, they have time and again showed up the big boys and earned their bragging rights in the arena, too.
Here are some of the biggest discoveries made or potential for discoveries that might be made by smaller oil and gas exploration companies:
#1 Biggest Oil Discovery in the Australian North West Shelf
For more than 15 years, oil exploration companies had been coming up empty in the once-fecund Australian North West Shelf. Nearly everybody had given up searching for liquids in the offshore block.
Quadrant and Carnarvon have emerged as some of the top wildcatters to watch in the region after uncovering a find containing some 171 million barrels of oil. You would have to go back to 1996 to find an oil discovery in the region above 100 million barrels.
Shares of Carnarvon ($555 million market cap) have jumped more than 150% since the discovery was announced, while Quadrant was acquired by Australian natural gas giant Santos Ltd (STOSF) in 2018.
Actually, these guys got lucky. The companies were prospecting for 545 bcf of gas but ended up with something far more valuable. After all, oil has a significantly lower risk profile than gas and does not require expensive infrastructure or gas contracts.
In other words, oil is both easier and faster to monetize than gas.
So, what are the expected pickings here?
Before the latest appraisal was carried out, Quadrant executive Fred Wehr had gushed:
“…the low case is solidly commercial, the mid-case is awesome and the upside is staggering.”
After the appraisal, Santos chief executive Kevin Gallagher revealed that the find was actually “bigger than expected”.
So, we can surmise that Quadrant thinks the find is awesome-to-staggering since it’s well above the base case estimate of 150 million barrels of oil.
#2 Namibia’s Eagle Ford
Reconnaissance Energy Africa (TSX-V: RECO, OTCMKTS:LGDOF) is the smallest of the three small-cap discoveries, with a market cap of only $39 million, with shares selling for under $0.80. Yet, it’s sitting on a shale basin that’s 25,000 square kilometers, similar in size to the Eagle Ford basin. Yes, that’s right: This tiny explorer just acquired a 90% exploration permit interest to the entire, 6.3-million-acre Kavango Basin in Namibia—Africa’s area which includes shale geology.
It’s quite unique for a company this small to have a basin this big, but while few have heard of the company, everyone in the business has heard of the geologist who examined the data on this basin. They’ve also heard of Recon’s CEO, Jay Park QC—the former director of Caracal Energy, which was acquired by giant Glencore in 2014 for $1.3 billion.
Bill Cathey is the geoscientist who looked at initial data. When the Company brought the magnetic survey data from Namibia’s Kavango Basin to Cathey, Cathey said the basis is a 30,000-foot sedimentary basin. He also said that all basins of this depth, anywhere else in the world, produce commercial hydrocarbons. Recon management dropped everything, so the story goes, got on a plane, and finalized the rights to the giant Kavango Basin.
So, now, tiny Reconnaissance is sitting on a basin similar in size to the Eagle Ford.
Reconnaissance has a 90% interest in a 4-year exploration license leading to a 25-year production license starting on commercial discovery.
The Kavango Basin is filled by the Karoo Supergroup of rocks, and it’s also been shown to have the same depositional environment as Shell’s Whitehill Permian shale play, part of the Karoo Supergroup to the south in South Africa.
Sproule–a tier 1 resource assessment company–estimated that Kavango has a potential 12 billion barrels of oil or 119 trillion cubic feet of natural gas. That’s just for the shale, not counting any conventional potential.
The first wells are slated to be drilled in Q2 2020.
Namibia is one of the most oil and gas production friendly governments in Africa. Ask Shell, or Exxon, both of whom are acquiring assets here, making Recon (TSX-V: RECO, OTCMKTS:LGDOF) a natural acquisition target if a commercial discovery is made.
#3 Mid-Tier Mania
Eco Atlantic Oil and Gas Company Ltd (CVE:EOG) is a $104-million Canadian explorer whose shares popped 160% in August following the announcement of back-to-back oil discoveries in the fabled Guyana-Suriname Basin, where Exxon has made 14 discoveries in a short time span.
Shares of Eco’s partner in Guyana, Tullow Oil Plc (LON:TLW) with a $1.03-billion market cap, have been less impressive after rallying 20% in the same period. Tullow is bigger and there’s less leverage from one new discovery.
Eco has reported that Tullow Oil-operated Joe-1 has struck high-quality oil in the sandstone reservoir in offshore Guyana in an area believed to extend from Exxon’s Stabroek acreage. The Joe-1 discovery came just a month after the two successfully drilled Jethro-1 giving encouraging hints that they are right on the money.
Although the companies are yet to conduct a detailed evaluation of the Orinduik, it’s estimated to hold some 3.98 billion barrels of prospective resources, thus giving Eco ~600mln barrels for its 15% stake in the project.
This, however, might be just the beginning of good tidings for Eco shareholders as the company has announced that it has ample resources to drill even more wells.
#4 – Oil Majors Are Choosing Investments More Carefully
Africa has long been a hotspot for oil and gas majors, but things have gotten rocky in recent years, especially in Nigeria.
Nigeria is home to about 37 billion barrels in oil reserves. And while it’s got some 32 active oil rigs out there, only 81 wells were completed last year – down from 141 in 2014.
Since oil prices started tumbling in 2014, the government has been shaking down oil companies, with back taxes and new legislation. Now, it wants majors Chevron, Shell and French Total SA to fork out around $62 billion. It claims in was short-changed under a revenue-sharing agreement dating back to the 1990s.
Chevron (NYSE:CVX) is seeking to sell several Nigerian oilfields, and it isn’t the first: Exxon (NYSE:XOM) and Shell (NYSE:RDS.A) have both been reducing their footprint in the country.
Now, Nigeria is proposing new legislation that would increase taxation on the oil industry. The bill would add another 3-10 percent in royalty rates at oil prices between $50 and $80 per barrel. Nigeria’s current system gives Nigeria between 60 percent and 70 percent of all deepwater revenues, which includes taxes, royalties, along with state-run NNPC’s share of production.
While Nigeria has given majors some pushback, other countries have been a bit more accommodating. Take Suriname, for instance. It is quickly becoming a hotspot for ambitious majors looking to leverage its massive reserves.
Total (NYSE:TOT) recently announced a major oil discovery offshore Suriname with its partner, Apache (NYSE:APA). John J. Christmann, Apache CEO and President noted, “The well proves a working hydrocarbon system in the first two play types within Block 58 and confirms our geologic model with oil and condensate in shallower zones and oil in deeper zones. Preliminary formation evaluation data indicates the potential for prolific oil wells.”
British Petroleum (NYSE:BP) is another major eyeing “off-the-beaten-path” opportunities in Africa. While BP has some oil assets in the region, it is focusing heavily on renewable power generation and natural gas production. Recently, it began work on a project in Mauritania and Senegal. The company noted, “We see this as the start of a new chapter for Africa’s energy story.”
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Forward-Looking Statements. Statements contained in this document that are not historical facts are forward-looking statements that involve various risks and uncertainty affecting the business of Recon. All estimates and statements with respect to Recon’s operations, its plans and projections, oil prices, recoverable oil, production targets, production and other operating costs and likelihood of oil recoverability are forward-looking statements under applicable securities laws and necessarily involve risks and uncertainties including, without limitation: risks associated with oil and gas exploration, development, exploitation and production, geological risks, marketing and transportation, availability of adequate funding, volatility of commodity prices, imprecision of reserve and resource estimates, environmental risks, competition from other producers, government regulation, dates of commencement of production and changes in the regulatory and taxation environment. Actual results may vary materially from the information provided in this document, and there is no representation that the actual results realized in the future will be the same in whole or in part as those presented herein. Other factors that could cause actual results to differ from those contained in the forward-looking statements are also set forth in filings that Recon and its technical analysts have made, We undertake no obligation, except as otherwise required by law, to update these forward-looking statements except as required by law.
Exploration for hydrocarbons is a speculative venture necessarily involving substantial risk. Recon’s future success will depend on its ability to develop its current properties and on its ability to discover resources that are capable of commercial production. However, there is no assurance that Recon’s future exploration and development efforts will result in the discovery or development of commercial accumulations of oil and natural gas. In addition, even if hydrocarbons are discovered, the costs of extracting and delivering the hydrocarbons to market and variations in the market price may render uneconomic any discovered deposit. Geological conditions are variable and unpredictable. Even if production is commenced from a well, the quantity of hydrocarbons produced inevitably will decline over time, and production may be adversely affected or may have to be terminated altogether if Recon encounters unforeseen geological conditions. Adverse climatic conditions at such properties may also hinder Recon’s ability to carry on exploration or production activities continuously throughout any given year.
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By TheTechnicalTraders– Our research team caught a very interesting price pattern that correlates with the Put/Call ratio. We are alerting our friends and followers with this research post of this exciting, yet unconfirmed, set up today.
In late 2017, the US stock market rallied from July through December with moderately low volatility throughout this span of time. Near the end of 2017, the US stock market price activity stalled, then began a renewed price rally in early 2018 (see the first BLUE & YELLOW BOX on the chart below). Then, in January 2018, a very broad market reversion event took place which ultimately resulted in a very broad market correction in October through December 2018 of just over 20%.
The current price rally ending 2019 and starting 2020 is strangely similar to the price setup that occurred in 2017 and 2018. We’ve seen a broad “melt-up” price pattern over the last 5+ months of 2019 with moderately low volatility. We experienced a moderate price “stall” near the end of 2019 and experienced a broader renewed upside price rally in early 2020 (see the second BLUE and YELLOW BOX on the chart below). We believe this could be a setup for a potential price reversion event in the near future – all we need is confirmation of the downside price rotation to take place.
A deeper price reversion event at this price level that equals the previous reversion event would push the SPY price towards the $265 price level – a 68 point price drop. If such an event took place, we would be looking at a -15% to -25% potential price correction from current levels.
Let’s take a look at other charts and data that may confirm our research…
Weekly SPY (S&P 500) Index Chart – Jan 2018 and Jan 2020
Weekly VIX Chart
This Weekly VIX chart highlights the consolidation of volatility that set up in late 2017 and late 2019. Pay special attention to how broadly the VIX spiked in early 2018. This spike happened because of the consolidation of volatility near lower extremes over the past 16+ months. Given the recent volatility throughout 2018 and 2018, a downside price move of a similar range would likely propel the VIX to levels above 40~45. Price would need to collapse below our expected range in order for VIX to spike above 50. A move of this nature would suggest a downside price move beyond 25% to 30% – pushing the SPY below $240.
Again, our research team believes this is an unconfirmed price pattern setup. We want you to be aware of what we are seeing in the chart and be prepared if it confirms in the future.
Daily Put/Call Ratio Chart
Another interesting aspect of this setup is the correlation to the PUT/CALL ratio on the chart below. Every instance of the Put/Call ratio that fell below 0.80 for an extended period of time (2014, 2018 and now), prompted a downside price reversion of -10% to -15%. Additionally, each instance of this setup (2014 and 2018) prompted an extended period of price volatility and rotation.
In 2014, the initial downside price reversion prompted a -13% to -15% price correction followed by nearly 8 to 10 months of extended price rotation before finally entering a new bullish price trend in late 2016. Additionally, in 2018, the initial downside price reversion event wiped out nearly 12% of the value on the initial downside price move from this event. Subsequently, over the next 12+ months, a second downside price move wiped out over 20% of the value from the SPY.
The current setup suggests any potential downside price reversion resulting from this setup we are alerting you to could easily target -12% to -15% on an initial reversion event. Ultimately, the rest of 2020 could result in a very volatile year of price rotation if history teaches us anything.
Remember, this is not a confirmed trading trigger. This is a warning that a price and technical setup is occurring in the markets that may become of real value to you in the immediate future. The combination of these three charts, the SPY, the VIX and the PUT/CALL ratio, should be enough for you to understand there are real risks of a price reversion event setting up in the markets right now. All we need to confirm this setup would be for a broader market breakdown event to begin to take place. Then, we would watch what happens to the SPY near the $295 to $300 level.
Please pay attention to this setup as our researchers believe this could be a much bigger event than many people believe. Our research team believes a price reversion event is essential for the US stock market to continue to climb higher in 2020. Thus, some type of downside price move MUST happen before we can attempt any further upside price advancement.
As a technical analysis and trader since 1997 I have been through a few bull/bear market cycles, I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.
Join my Wealth Building Newsletter if you like what you read here and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own.
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed. Visit our web site (www.thetechnicaltraders.com) to learn how to take advantage of our members-only research and trading signals.
AUDUSD is trading at 0.6860; the instrument is moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 0.6875 and then resume moving downwards to reach 0.6765. Another signal to confirm further descending movement is the price’s rebounding from the descending channel’s upside border. However, the scenario that implies further decline may be canceled if the price breaks the cloud’s upside border and fixes above 0.6925. In this case, the pair may continue growing towards 0.7005.
NZDUSD, “New Zealand Dollar vs US Dollar”
NZDUSD is trading at 0.6588; the instrument is moving below Ichimoku Cloud, thus indicating a descending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 0.6615 and then resume moving downwards to reach 0.6485. Another signal to confirm further descending movement is the price’s rebounding from the resistance level. However, the scenario that implies further decline may be canceled if the price breaks the cloud’s upside border and fixes above 0.6645. In this case, the pair may continue growing towards 0.6735.
USDCAD, “US Dollar vs Canadian Dollar”
USDCAD is trading at 1.3167; the instrument is moving above Ichimoku Cloud, thus indicating an ascending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 1.3115 and then resume moving upwards to reach 1.3245. Another signal to confirm further ascending movement is the price’s rebounding from the support level. However, the scenario that implies further growth may be canceled if the price breaks the cloud’s downside border and fixes below 1.3010. In this case, the pair may continue falling towards 1.2935.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
In the H4 chart, USDCHF has rebounded from 3/8. In this case, the price is expected to resume falling to reach the support at 0/8. However, this scenario may no longer be valid if the price breaks 3/8 to the upside. After that, the instrument may continue growing towards the resistance at 5/8.
As we can see in the M15 chart, the pair has broken the downside line of the VoltyChannel indicator and, as a result, may continue trading downwards to reach 0/8 from the H4 chart.
XAUUSD, “Gold vs US Dollar”
As we can see in the H4 chart, XAUUSD is still moving below 3/8. In this case, the price is expected to continue trading downwards to reach the support at 0/8. However, this scenario may no longer be valid if the price breaks 2/8 to the upside. After that, the instrument may continue growing towards the resistance at 3/8.
In the M15 chart, the pair may break the downside line of the VoltyChannel indicator and, as a result, continue the descending tendency.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
During yesterday’s trading session, the US dollar did not change a lot against a basket of major currencies. The dollar index (#DX) closed without changes (+0.00%). Investors are still focused on coronavirus in China. The death toll from pneumonia rose to 17 on Thursday with nearly 600 confirmed cases. Investors again drew attention to “safe haven” currencies amid this news.
The Bank of Canada decided on the key interest rate yesterday. As experts forecasted, the indicator remained unchanged at 1.75% per annum. At the same time, the regulator signaled a possible reduction in rates in the future. Today, we expect the ECB interest rate decision. We recommend paying attention to the comments by representatives of the Central Bank.
The demand for the Australian dollar has grown. During the Asian trading session, optimistic economic data have been published in Australia. Thus, the level of employment rose to 28.9K in December instead of 15.0K. The unemployment rate counted to only 5.1% and was below the forecasted value of 5.2%.
The “black gold” prices are declining. Currently, futures for the WTI crude oil are testing the $55.80 mark per barrel. At 18:00 (GMT+2:00), US crude oil inventories will be published.
Market Indicators
Yesterday, there was a variety of trends in the US stock market: #SPY (+0.01%), #DIA (-0.01%), #QQQ (+0.26%).
The 10-year US government bonds yield show negative dynamics. At the moment, the indicator is at the level of 1.74-1.75%.
The Economic News Feed for 23.01.2020:
– ECB interest rate decision at 14:45 (GMT+2:00);
– Initial jobless claims in the US at 15:30 (GMT+2:00).
The Transportation Index, a common measure of economic optimism or pessimism, collapsed very early in trading after the Martin Luther King holiday (January 20, 22020). We found this very informative because a rotation like this suggests optimism may be waning by global investors and future expectations of growing economic activity may be reverting to more realistic expectations headed into a US election year on top of the US political circus.
When we take a look at these TRAN charts, below, pay very special attention to the historical upper range of price activity over the past 20+ months and you’ll see why we believe a top formation/setup near these current levels in the TRAN could be a very strong topping pattern for the US and Global markets.
Daily Transportation Chart
This Daily Transportation chart highlights the immediate rotation that is setting up a sideways price channel. The range between 11,250 and 10,450 has established a moderately strong sideways price channel going back well over 3+ months in the Transportation Index. The broader price channel, between 11,250 and 9,700, extends well over 8+ months. Beyond that, we have a rotation going all the way back into 2018, between 11,600 and 8,650, that establishes a very broad sideways price channel.
The Transportation Index has been trading within this sideways price channel over the past 20+ months as global investors attempt to determine the future expectations for the US and global economies. If global investors believe the economy will accelerate as consumers become more active, then the Transportation Index will rise above the 11,800 level on an upside breakout move. If global investors believe the US and global economies will contract before experiencing any further advance, then the Transportation Index will likely fall to levels below 10,400 – possibly lower.
The recent downside rotation in the TRAN suggests global investors and skilled traders are not expecting the economy to continue as it has over the past 6 to 12+ months – as the US stock market. The melt-up in the US stock market was a result of global capital attempting to take advantage of a stronger US Dollar and continued price appreciation in the NASDAQ and various US stock sectors. Even though the underlying economic data and fundamentals may not have changed, it was still advantageous for global investors/traders to play the “melt-up” because it provided the opportunity to gain on two fronts – US Dollar gains and US share price gains.
If this massive “capital shift” trade is unwinding, in part or in full, then we will start to see weakness in the Transportation Index and likely the Mid-Caps as global investors try to pull away from risks in the US stock market. If the Transportation Index falls below 10,450, then we need to get ready for a potentially bigger downside price move across the global markets.
Weekly Transportation Chart
This Weekly TRAN chart highlights our Adaptive Fibonacci price modeling system which has drawn the GREEN and RED “trigger levels” above and below the current price action. It is doing this because the TRAN price action has not defined any real price trends recently – staying within the sideways price channel. The price must either rally above 11,450 to begin a new bullish price trend or fall below 8,990 to initiate a new bearish price trend. That means a downside price rotation may support a -2000 point decline from current levels before initiating a continued downside Bearish global market trend.
It is time to really start paying attention to what happens with the Transportation Index. First, we have to watch the 10,400 level. Then we have to watch the 9,700 level. If both of those fail, then we have to watch the 8,990 level as the final “trigger level” for a new global market bearish trend. We are a long way away from that moment right now, but it appears the Transportation Index has started to revert back to the downside and we are alerting our friends and followers to be aware this rotation may be a very timely warning of a new global market top in the making.
Utility Sector Warns of Big Money Is Exiting The Market
Utility stocks have been on fire ripping to the upside and they tend to lead precious metals and then bonds so I am starting to get excited for our portfolio.
We locked in 10% the 3rd quarter of our SSO position today, we still have 25% of that initial position left but our exposure to equities is now very small. All the other asset classes like high yield bonds, gold, and utilities are pointing to a correction in the stock market.
You can see which markets do well at various stages of risk in the market using our custom market gauge we have been developing. This is one of the new trading tools have been working on.
This gauge will automatically update live with the markets using all of our analyses. Its a really exciting new tool we plan to make available in the next 30 days for our subscribers.
BIG MONEY FLOW GAUGE 20-40 Day Market Price Cycle
TheTechnicalTraders.com Market Gauge
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