Dow, Nasdaq 100, EUR / USD, GBP / USD, USD / CHF Price analysis
- This is a webinar archived on many macroeconomic markets looking for strategy parameters for the days or weeks to come.
- US stocks continue to recover, but are we out of the woods yet? The trader’s position on US stocks will likely depend on the index being tracked or analyzed.
- The US dollar softened after a further jump, starting in April and the second quarter.
Recovery in April as hope spreads around coronavirus data
The April recovery continues in US stocks, with Q2 having started in a much more optimistic tone compared to what had happened last month. Hope reigns right now, as there has been an initial slowdown in the growth of new coronavirus cases in hotspots such as New York, alongside similar slowdowns in the most affected regions of Europe such as the Spain or Italy. This easing in new cases indicates that social distancing at least helps to slow the spread and, at the other end of the spectrum, a number of virus and antibody testing initiatives have progressed, going hand in hand with at least ten potential vaccines in preparation. The human race collectively tackles this problem around the world at the same time.
(5:04 p.m. GMT)
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Action on the trading price
It is far too early to say that we have reached a milestone – but the markets are forward looking and the fact that buyers have continued to support supply in a number of risk markets underscores the hope that has permeated the backdrop over the past week following a series of disturbing events in March. This could nonetheless be a bear market rebound, so traders will likely want to keep the potential of either scenario in the cards for the days and weeks to come.
Four-hour price chart for the S&P 500
Graph prepared by James Stanley; SPX500 on Tradingview
In the S&P 500, the price climbed to a new three-week high today, finding some resistance to a longer-term Fibonacci level around 2753. This is the 23.6% marker for major movement of 2009-2020, and this follows The break of yesterday beyond another zone of previous resistance, drawn from zone 2645, which is the marker of 38.2% of the decline of February-March.
S&P 500 Monthly Price Table
Graphic prepared by James Stanley; SPX500 on Tradingview
As we saw in the webinar, for those looking to do bullish stocks on U.S. stocks, the Nasdaq 100 might be more attractive. The February-March sale was relatively moderate, as price action was supported around the 50% marker of the major movement of 2016-2020 in the NDX while the S&P 500 fell to 76.4% of retracement compared to the same major movement. The recent bullish reaction has also been more aggressive, with the 50% marker of the February-March sale in the S&P in a confluent area around the 2800 level. The Nasdaq 100 has already offset the 50% retracement of the liquidation of February-March; highlighting the extra strength that is shown in the techno-heavy index.
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Nasdaq 100 Monthly Price Table
Graph prepared by James Stanley; Nasdaq 100 on Tradingview
At the other end of the spectrum, bearish stocks from US stocks may be more attractive in the benchmark Dow Jones Industrial Average. The Dow Jones appeared to be the hardest hit by this recent sale, pushing all the way back to the 78.6% retracement of the major movement 2015-2020; and the rebound that followed has been lighter than what has been shown in the Nasdaq 100 so far.
Dow Jones Daily Price Table
Graph prepared by James Stanley; Dow Jones on Tradingview
US dollar gains support following entry of extreme volatility
It was one of the major roller coasters for the dollar last month, with a bearish reversal hard in mid-March, pushing the DXY from a new annual low to a new three-year high in less than two weeks. Since then, however, directional strategies have been difficult, as the currency has continued to deform. At this point, the bullish side of the pair may look more attractive, given the continued support in the 99.80-100.00 area of the chart.
Four-hour US dollar price table
Graph prepared by James Stanley; USD on Tradingview
EUR / USD breakdown scenarios
For long USD strategies, the EUR / USD can also remain attractive, especially given the proximity of the new two-year lows that were set last month. In the webinar, I looked at some possible ways to approach the pair; and the more attractive backdrop is probably longer term, as last month printed a long-legged doji in the pair. A similar scenario was played out in Gold and I talked about it last week, just before the closure of the monthly bar with this training of long-legged doji. As stated in this article, a long-legged doji highlights extreme indecision which could soon resolve into extreme volatility with an escape in one direction or the other.
EUR / USD monthly price chart
Graph prepared by James Stanley; EURUSD on Tradingview
GBP / USD resilient after fear of leadership
In the foreground of the world coronavirus title is a saga still in progress around the British Prime Minister, Boris Johnson. After announcing that he had the virus recently and that he will isolate himself at 10 Downing; news circulated this weekend that his condition had worsened to the point of being hospitalized. It took a different turn for the worse yesterday when he was transferred to the intensive care unit.
The initial response in the pound was a weakness as the guiding force through the Brexit scenario was forced to cede, at least temporarily, power to Dominic Raab. So far, GBP / USD has recovered some of these losses, and there may be opportunities for further gains. Sitting at the top of the price action is a resistance zone that has maintained the peaks through a few different tests, ranging from around 1.2461, which is the 50% marker of the major movement from December-March.
Four-hour GBP / USD price chart
Graph prepared by James Stanley; GBPUSD on Tradingview
USD / CHF sets the evening star
This could be of interest for the EUR / USD scenarios discussed above; especially for long USD scenarios focusing on the short side of EUR / USD.
To balance or hedge this USD risk, the short-term USD / CHF scenarios could be interesting, especially given the formation of evening stars which is built on the daily chart after a test failure above the level of .9766. This can keep the door open for a continuous mean reversion after the V-shaped recovery shown in March, with buyers finally throwing in the towel around the Fibonacci .9902 level.
Daily price graph USD / CHF
Graph prepared by James Stanley; USDCHF on Tradingview
— Written by James Stanley, strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX