Mercury

My short term alternative scenario has triggered with a higher high BUT price still remains within the Daily chart Triangle consolidation. I am still tracking a turn and break out to the downs side on this pair to set up a much longer term rally. There is very strong NMD on the Daily chart and a good price action set up for a bearish move. This matches my current views that USD (DX) will go through a medium term Bearish phase and also that Oil may go through a short term rally. I am full Bearish Oil long term and Bullish USD long term, which is why I believe any Bearish move on this pair is counter trend. However, IF USD breakout to the upside in the coming days then this pair will rally hard as Oil drops. That is my alternative scenario. I remain open to trade either eventuality.

Excellent Retrace allowed me to get in with additional Short positions yesterday but I have cashed in the lower ones because I am anticipating a short term retrace (gotta fund the account! And manage exposure risk!). The market has entered a zone of significant long term support/resistance (see Weekly chart), which could provide the impetus for some relief rally action. Obviously a breakthrough of this is significantly Bearish. Also there is a price gap above, which I would expect to be closed. There are therefore 2 retrace rally top targets: 1, the top of the Gap; 2, the next resistance zone. At this stage I would not expect a carry back all the way to the Daily channel line but it is possible). Looking at the Daily chart I believe I have resolved my channel conundrum (there were several strong candidates for positioning of lower channel lines as price moved down). It looks to me like a classic parallel (equidistant) pair of channel lines (or 2 parallel channels if you prefer). The first breakout was the critical one where we saw 3 failed lower channel line retests. The second saw a capitulation of the Bulls with a breakout and retest. Given this price action, and my related indicators, I now firmly believe Oil has entered the Bear market phase I was tracking since the wave 4 (or Flag) top back on 25 April. I wasn't able to catch that top but I was ok with that because I knew there would be a significant retrace rally, which carried to about where I expected (circa Fib 62% and more importantly an exact hit and rejection retest of the Weekly chart lower channel line). Now that I have confirmation of the turn my strategy is to pyramid my existing Shorts to the bottom. So sell the rallies but don't get sucked into selling at the bottom of long drops is my mind set. Patience to wait for rally tops is the key to not getting burned by FOMO.

EURUSD dropped to the Fib 88% retrace level and a potential channel breakout failed retest and has since rallied quite hard up through short term resistance. Strong PMD at both the wave 1 (blue) turn (on a spike pin bar) and the recent possible retrace turn.

Rally progressed on to a Fib 88% turn but at a lower high so far. Now looking to break back below my Monthly chart Flag resistance line. If this does break and close back below this line today (end of the Month) then the line is still valid and that potential USD bearish retrace is still on. I wonder how a period of USD weakness would impact the markets?

apologies appended the wrong chart.

Bit of a relief rally in play just now. Nest stop prior resistance and then let the price action tel the tale. I think we will see another rejection and fast move back down to break nest support but another test of the longer term resistance trend lines remains plausible so care is required.

The trend is indeed your friend, "Until the bend in the end" Amazing how many trends end short of the lower (or upper lines) when they turn. If you wait for a final touch oyu are sure to be left behind. The safe bet is to wait for the upper line breakout. Following a trend does not help with finding the turn, you need other techniques. Following a trend is only really useful when you know (yes know) the trend as turned for the long term. USD may have but I am not yet convinced and until I am I will seek the retrace turn. If it drops through key support, on all major pairs then I will swing the other way but we are not there yet. Current price has stalled and not yet broken key support. GBPUSD and other pairs are further from key support and also at key turning points. Next few days will tell the tale I feel. When you consider where the lower low is on EURUSD, it is not that big a bet in terms of exposure...

The Bear continues, for now, but wait, is that an end of market rally I see? Often it seems that the final hours are indicative, especially as we close on the end of the week. Whether valid or not I can't help feeling we are due a bounce before any major drop. Last few hours may be signaling a bottoming out, early days but let's see. USDJPY, of late in lock step with stocks, has also put in a bounce. A weakening Yen may drive some buoyancy overnight in the Nikkei and then who knows what tomorrow will bring... With most people assuming he Bear is upon us and trade negotiations with China are the negative catalyst I am minded to expect the opposite. Funny how often the markets so this...

Silver is providing a better set of indicators than Gold for me at present, and is a more lucrative market to trade (more risky too therefore). The precious metals are still conforming to my road map, and all 3 of my scenarios remain in play (2 Bullish, 1 Bearish). For me the Bearish one is not a strong scenario, unless you believe in a continuation of the Bull market in stocks for the next few years, which I do not. With Oil looking Bearish, and stocks too, I think it is only a matter of time before the precious metals Bull triggers big time. Maybe the trigger will be a USD bear move short/medium term? Precious metals do seem to be acting more in concert with currency just now than as a safe haven. I think the latter will be what drives the Bull out of the larger time horizon consolidation but short term it could be USD weakness that kicks things off. That also means I am not yet convinced we have seen stock indices capitulate but if they do then Precious metals should explode up.

No sure what you are getting at @PandaFace, can you clarify?

As with all the relevant pairs the DX is also at a critical juncture with another test of the long term resistance flag line and currently (unconfirmed) a drop away on NMD.

GBPUSD also at a critical turn point, last chance really save for a double bottom. PMD is good for a turn.

EURUSD currently testing the Fib 62% support zone with a good EWT 1-2 retrace pattern and PMD.

USDCAD continues it tortuous consolidation with lots of whipsaw action. The price action still looks like a complex retrace trapped in a range to me but this market has arrived at a critical juncture this morning with a short term double top just posted. If the market rejects a breakout to a higher high then the retrace move remains intact and a sharp drop should ensue. However a breakout would indicate that the wave B bigger picture retrace/consolidation is not yet done and more upside is on the cards for a while. This price action is not surprising given the current dithering of USD (DX) and Oil weakness. This morning we have seen a bit of a short term rally on DX and significant drop on Oil, bullish for USDCAD. With Oil looking set to drop further and in a sustained fashion a Bearish move on DX is needed for USDCAD to drop from here. Interestingly DX, EURUSD, GBPUSD are also are critical junctures for a potential trend change for me. Should resolve soon enough.

Looks like we got a further retrace all the way to my alternative channel line for a failed retest. Once the resistance zone was cleared this morning we got a fairly swift move away from the retest zone. A break of the next level of support, and prior short term low, will be indicative of a longer term Bearish move for me. Given the nature of Oil price action this one might never look back.

On a brief break from bank holiday family fun and just thought I would stir the pot with an updated Bitcoin post to punctuate the gowning hysteria (or I should say regrowing). From a purely technical perspective, with no skin in the game and only 1 bias, that cryptos are a mania and will end as all mania's do, I see a significant inflection point coming up that may end the current bout of euphoria, just as pundits are making cases for bitcoin to regain old heights and go beyond. I see a classic retrace move with NMD building and the Fib 38% resistance lies ahead. Might even make 50% who knows? All to risky for my blood, more stable markets with great pointage about for me.

Updated 1 hour chart. DX is putting in a rally to near term resistance. If we see the market enter, get rejected and exit this resistance zone there is a good change that USD bear move will occur.

EURUSD is currently following my short term road map as part of my longer term assessment in favour of a significant retrace rally, driven chiefly by USD weakness. Shouldn't have to wait to long for this to resolved one way or the other.

GBPUSD is at a pivotal point on the hour chart for me, a retest of the channel line, previously broken. Might get a small bounce and retest to mirror expected price action on the larger EURUSD. @dmedin, as regards your question, or assertion really, I do not agree that GBP is chiefly moved by Brexit shenanigans in the bigger picture, which seems to be the premise underpinning your position on this. I have 3 main reasons as follows: Currency pairs are driven chiefly, in Fundamentals terms, by the relative strengths of the economies in the cross within the wider geo-economic backdrop (i.e. recession tends to drive strength in certain currencies like the USD). Not withstanding recession, this stength or weakness is most accurately reflected in balance of payments or trade deficit, which is bad for GBP right now and has been for a long time. FWIW this is one of the main arguments the pro Brexit people field (and the most convincing one for me) couched in limitation to the UK's ability to forge independent trade relationships outwith the EU's undoubted bureaucracy and divergent self interest (of the Eurocrat elites that is, not the people). The argument goes that free of this bureaucracy the UK can address it's balance of payments issues head on and more swiftly and that should trade with the EU come to a full stop the UK economy would technically be better off as we spend more with the EU than we get back, hence this would improve the UK's balance of payments. There are plenty of counter arguments, some are even convincing, but there is a lot of hot air and emotion as well. The point being no one really know what the long term impact of Brexit will be so why assume it will be bad? That is just fear of the unknown talking. If I can't figure out what the impact is actually going to be from a Fundamentals perspective I tend to ignore it and let the technicals, based on price action, tell the tale. GBPUSD was going down before and after the Brexit referendum so no change there. That said I do believe, for more Fundamentals reasons that political claptrap, that GBPUSD is heading down. EURUSD is too and more drastically than GBP, hence my view on EURGBP, see separate thread. But markets do not move in straight lines and I am anticipating a significant retrace (AKA relief) rally to "prime the pump" on a long term bear market. Naturally these markets could indeed drop off a cliff from here with a previous shallow retrace having been sufficient from a technical perspective. If that happens then I would seek to swing my bias and go Short on key support breaks. Until then I will follow my current strategy and seek a turn further up to get Short. Perhaps the most important factor in my assessment is that I am anticipating a USD weakness led retrace move across major USD pairs. Note that means it has little to do with the other currencies. The USD is the biggest influence on the GBPUSD cross so why look at GBP much at all? Check out my "what is the USD doing?" post if you are interested in this aspect. So to summarise, within my trading methodology: I do not bother much with short term media news headlines and political twists and turns - you can't predict what the market will choose to react to nor which way it will go as a result (how many times have you heard people say how the market moved in the opposite direction because the news was priced in? Which of course they have no way of knowing either way... This is classic Post Hoc Ergo Propter Hoc thinking, or as Daniel Kahneman has it, thinking fast rather than thinking slow - i.e. lazy analysis, received wisdom and confirmation bias.). I believe markets move in waves that are, to some extent, predictable (or at least may be anticipated and prepared for with key indicators and triggers upon which trading them as a swing trader can be lucrative I am a contrarian at key turning points, so when everyone is saying Brexit, or EU elections, or PM changes will hurt GBP AND it is at a key potential turning point AND my system indicators are showing me a turn is on, I will be at odds with the majority.

Quick update. Looks like a small 1-2 retrace is in, followed by a breakout through the channel. Might get a quick retest next week before the rally takes off, assuming there isn't a push back down into the channel with a fakeout.

So much for the targets, what about the chances of the retrace rally actually sticking? My technical case for a turn is as follows: The channel, which may now be classified as an ending diagonal, has been broken through and with some force. Prior to that there was a spike drop to the lower channel line and rally away in a pin bar, which is visible on the Daily chart (this is crucial as candle indicators are more reliable on the bigger picture chart). This spike and rally also brought price back inside the lower monthly/weekly flag lower line, which if it holds to the end of next week will be telling. And there is Positive Momentum Divergence at the spike turn Need to see a breakout from the Weekly upper Triangle line to be confident of a rally. Short term we haven't yet seen a small scale EWT1-2 bearish retrace that would set up a stronger rally phase so I am looking for that to add to my turn position. The most likely retrace level would be around where the previous channel was broken, depending on where the current rally actually tops out, if it hasn't already.

@nash3 If you have seen my EURUSD post it will probably answer your question but in any case see below for the DX view. I assume your view on a 9500 is based on the parallel lines you have drawn. You will see from my charts below that my equivalent upper line is drawn differently and I don't see a credible parallel so for me this is a narrowing channel, which will resolve with a breakout one way or the other, not withstanding a fakeout, all to common these days. Similarly to EURUSD there are a number of credible retrace support zones, the first one being a very long term level, albeit one that has been broken through significantly twice relatively recently. My monthly chart is perhaps more interesting, to me at least, as it describes the case for the USD Bull. I don't see a scenario where DX falls back down through 8000, I'd say 8500 is the floor of any bearish move and this is unlikely at present. Nevertheless another test of the lower flag trend line cannot be ruled out until there is a breakout of the upper one so it stays in my scenario list to be tracked. More likely then is a retrace to one of those levels on my Weekly chart to set up a rally through the Flag and on up. The next likely scenario, still a high probability given current price action and market uncertainty, is a breakout to the upside from here.

@nash3 If you look further back into the thread you will see the build up over time but to summarise: I don't know, of course, how far any retrace would go, if indeed it even happens. There is a perfectly reasonable scenario supporting a breakout of upper resistance into a long term rally, indeed I am biased to exactly this long term USD rally for a variety of reasons but chiefly it is a scenario of flight to safety while simultaneously the Eurozone meltdown (that Draghi has been desperately trying to stave off) materialises. See my Monthly Chart below for long term perspective (note the saying, "the flag flies at half mast"), hence a projection to the 5000 level but there is a long way to go before I get truly interested in that target. Elliot Wave Theory holds that markets move in wave patterns [1-5 or A-B-C]. If you believe, as I do, in the USD long term rally (see my thread on DX - "what is the USD doing?") then we are, perhaps, due a retrace, although as I said the market could breakout out through resistance from here so this is only 1 scenario. Assuming that the retrace scenario is correct then, after we see a confirmed break to the downside on USD (rally on EURUSD), the questions becomes not if but how far will it carry. I use a number of analytical techniques and indicators to determine the end of waves and the retrace waves are easier to spot as you are looking for a turn in a key resistance zone. So what are these zones for EURUSD, on my Weekly chart below you can see some of them as follows: The first target, once there is a breakout, is the Fib 38% (circa 11650). For me this is a minimum expectation but price action will reveal all as it progresses so this is just a projection not a prediction [some people get hot under the collar about what I post, for reasons passing understanding, so I find myself having to repeat that I don't make predictions]. However just above the Fib 38% is a large long term resistance zone that stretches beyond the Fib 50%. The top of this range (crica 11850) represents the second target. Then there is the Fib 62% at 12,000 (nice round number), my personal favourite. Had the market turned earlier, when I was previously tracking it, I favoured the Fib 76/78%, which coincided with the upper monthly chart resistance channel line and the breakout of the previous rising and narrowing channel. Although depending on how long the retrace takes and how fast the final wave runs we could see a hit on the upper trend line yet. My plan is simple, though never easy to execute as with all things trading: Identify the wave 1 turn, have had a few attempts at this so far, and get in early Pyramid on a breakout of key resistance Move stops to break even so I get into a no loss position Manage the trades through my expected road map to the pre identified potential rally end zones and then, Exit for profit and use this to fuel a long term Short campaign. I also watch the GBPUSD and EURGBP pairs in a Triad to assess relative movements. Overall On this I expect GBP to rally harder than EUR, which, if correct, would suggest one of the earlier targets on EURUSD. As ever it is all about watching the price action unfold.

That retrace didn't hold so now I am looking at a deeper A-B-C form retrace and a slightly amended alternative channel line plus a zone of support now turned resistance for the next line of defence against a bullish backlash. I think I am right in saying that Brent Crude is open on Monday but as it is a bank holiday in both the UK and US volumes might be lighter than usual and strange things can happen when volume is light...

1 hour chart showing a bit of a nod to the downside. Not conclusive yet but indicative.