US 30 stock index strongly bullish; looking overbought
The US 30 stock index (Dow Jones) reached another all-time high of 23485.10 yesterday as the index extended its second-longest bull run in its history. Prices broke above the 23000 level for the first time on October 17 and are trading above their moving averages. The bullish picture in the medium term is further supported by the MACD, which is rising and above its red signal line.
Short-term momentum indicators are also pointing to a continuation of the bullish bias. However, the RSI is well above the 70-overbought level at 85, suggesting that the latest upswing may be running out of steam and that the risk of a near-term correction is high.
Should prices reverse lower, immediate support should come at 23120, which is the 261.8% Fibonacci retracement level of the down leg from 22180.10 to 21598.10. Below that, the 161.8% Fibonacci is another major support around 22540. A drop below this area would take the index closer to the 50-day moving average (currently 22377) and significantly weaken the bullish medium-term structure. Further losses would open the way towards the 100-day moving average near the 61.8% Fibonacci level at 21960. A breach of this level would shift the outlook from positive to neutral.
EUR/JPY near-term bias shifts to the upside; bullish short-term signals
EUR/JPY holds a neutral intraday bias as prices consolidate in the upper 133 handle after a rebound from 131.65 (October 16 low). More upside is possible since a bullish signal was given by the crossover of the Tenkan-Sen line above the Kijun-Sen line on the 4-hour chart last week and prices are currently trading above these lines.
In the bigger picture, EUR/JPY was consolidating after peaking at 134.40 on September 22. The Ichimoku cloud on the 4-hour chart was moving sideways since early October but is starting to point up, shifting near-term risk to the upside.
Immediate resistance lies at 134.40 (September 22 high). A sustained break above this would confirm a resumption of the recent uptrend that started from 129.36. EURJPY seems to be well supported above 133.64, which is the Tenkan-sen line. If this support level holds, it will increase the odds for another leg higher in the coming days.
A dip below 133.64 would find further support at 133.32 (Kijun-Sen) ahead of the key 133.00 level. Breaking this support would shift the focus to the downside with scope to reach the lower end of the range at 131.65, and then from here confirming a reversal of the recent uptrend from 129.36.
AUD/USD under pressure; bearish short-term outlook while the market trades below 0.80
AUD/USD is under pressure and fell for a fourth consecutive day today. The pair has approached a critical area and could close below the 50% Fibonacci retracement level of the uptrend from 0.7328 to 0.8124.
The bias is now clear to the downside and a daily close below 0.7724 (50% Fibonacci) could trigger a deeper decline towards the 200-day moving average at 0.7691 and then to the 61.8% Fibonacci at 0.7632. Additional support is expected at an area of congestion at 0.7515 (which acted as both support and resistance in the past) before reaching the 0.7328 low touched on May 9.
The market would have to rise back above the 0.7900 level (50-day MA) to weaken immediate downside pressure but only a move above the psychological level at 0.8000 would indicate that the short-term bearish phase has ended. Clearing this key level would see a re-test of the 0.81241 peak and from here prices would likely resume the uptrend that started from the May low of 0.7328.
AUDUSD is expected to remain bearish in the short-term since the RSI indicator is showing downside momentum. Looking at the bigger picture, the upward trajectory from May stalled in September, setting up the market for a potential reversal of that bull run.
All trading involves risk. It is possible to lose all your capital