Technical Analysis 5/5/2017
By Antonis Vasloos
The euro is making strong headways toward 1.10 US, a major psychological milestone that has eluded traded for the past six months. The EUR/USD is embarking on a third round of higher highs this year, with each successive rally enjoying a higher low. The market is clearly in an uptrend, with measures of short-term momentum and price action confirming the bullish scenario. However, this outlook is largely dependent on the continued weak performance of the dollar, which has failed to rally despite normally favourable market conditions.
Cable remains in a bullish configuration, but has struggled to break out of the 1.30 figure. The GBP/USD has meandered within a 50-pip range of the 1.29 level all week, as the market lacked a technical catalyst to drive prices higher. Momentum has softened over the past 24 hours, a period marked by lower trading volumes. The long-term bullish outlook is contingent upon new areas of support emerging, preferably within the 1.2750 region.
The oil-price collapse continued this week, as we predicted in our previous Fibonacci analysis. WTI oil prices have plunged more than 15% since mid-April, fully erasing all the gains since November. The futures contract was down another 0.3% in overnight trade.
The average directional indicator has spiked above 50 amid the latest collapse, signaling a very strong downtrend. With respect to the daily outlook, immediate support is located at the November 14 settlement low of $43.32 a barrel.
The outlook on precious metals soured this week, with gold continuing its descent from a failed attempt at $1,300. Bullion has dropped more than 3% this week, sending prices below the 23.6% and 38.2% Fibonacci levels. A settlement below the 38.2% level could lead to a further breakdown toward the 50% retracement, which is equivalent to two-month lows.
The yellow metal is severely overbought after a series of highly volatile moves. The outlook remains strongly bearish over the short term.