USD/CHF Price Forecast – USD/CHF Further Confirms Bullish Reversal off Bottom and Next Heads Towards 0.9865

A stronger U.S. dollar helped the USD/CHF pair advance by 0.0024 or 0.24% Tuesday, to close at 0.9832.

Uptrend Resumes Following Shallow Pullback

Yesterday’s weakness in the USD/CHF pair didn’t last long as support was found just above the 38.2% Fibonacci retracement at 0.9797, as seen on the enclosed 4-hour chart, before buyers stepped in more aggressively to propel the pair to new trend highs. That’s a relatively shallow retracement and indicates underlying strength in the pair.

USD/CHF Daily Chart

Bullish Reversal from Bottom has Higher Targets

The current advance is a continuation of an inverse head and shoulders breakout from last week with a minimum target at around 0.9923. Together with the 78.6% Fibonacci retracement at 0.9934, the two prices can be considered as a target zone.

Moreover, depending on when price reaches the target zone, if it is to do so, the downtrend line will be merging with the zone. The line can then be used as another indicator to watch for possible resistance. At the same time, a decisive advance above the 0.9934 price level, will be bullish.

Given the shallow breakout and relatively rapid continuation into new trend highs, indications are that the target could eventually be reached.

Dollar Strength Relentless

Strength in the dollar helps the USD/CHF. The U.S. dollar index reached a new trend high today as it accelerated to test prior monthly highs. It ended strong and is now testing the tops of the long-term uptrend from September/October of last year. There is no end in sight to upward momentum, indicating the prior highs could be exceeded in the near-term, which should help the USD/CHF pair.

Coronavirus Fears

The death toll from the virus outbreak rises to 2,000, with more than 72,000 people infected globally. Along with the rise in the death toll and infections, Apple reported that they will miss their revenue estimate for the first quarter ending in March due to the impact from the virus. Investors now fear the outbreak will hurt earnings of other major companies and are looking for safety.

USD/CHF 4-Hour Chart

USD/CHF Breaks above 50% Retracement

Next, watch the reaction to price around the 61.8% Fibonacci retracement at 0.9869. Today, the 50% retracement was breached thereby increasing the likelihood the 61.8% level will be touched, at a minimum.

Also, notice the 21-period exponential moving average (ema) purple line on the enclosed 4-hour chart, and how it acted as support, roughly, during the most recent pullback. Therefore, it can be watched going forward to indicate dynamic support of the trend or for signs of more significant weakening during retracements, if price breaks below it.

Oil Price Forecast – Oil Having a Hard Time Getting off the Bottom

Crude oil weakened on Tuesday to $51.57, down 0.73 or 1.33%, currently. Global economic growth concerns from the spread of the coronavirus along with a strengthening U.S. dollar weigh on oil as it moves further towards defining a bottom that could lead to a tradeable bounce, if not a more significant bullish reversal.

Crude Oil Daily Chart

Apple Raises Fears 

Leading global technology giant Apple, Inc. announced that it would not meet its sales forecasts due to the impact from the virus. That raised uncertainty among investors and fears that the global economic impact from the virus will be greater than anticipated, thereby pushing investors towards safer assets.

A slowdown in growth will impact the demand for oil, but it’s not clear to what degree.

Meanwhile, the U.S. dollar index was up again today, rising to a new trend high. The dollar has been up 10 of the past 12 days and has risen as much as 3.25% in seven weeks.

Bullish Reversal Still Possible

Regardless of today’s weakness, the technical evidence still favors oil finding a bottom, at least short-term, and electing a bullish reversal in the relatively near future.

Over the past couple of weeks, a potential double bottom bullish reversal has been forming in the chart of oil. Potential, because price hasn’t yet broken out of the pattern and confirmed strength. Therefore, the bottom pattern could still evolve into a different pattern altogether, or it could fail.

Crude Oil 4-Hour Chart

Watch for Decisive Breakout

A bullish breakout occurs on a decisive rally above last week’s high of $52.32, followed by a daily close above that price level. At that point the double bottom will have confirmed, and we will have a higher weekly high, which is bullish by itself. It would also be the second week in a row where there was a higher weekly high.

Be Prepared for Alternative Scenario

Nevertheless, anything can happen, and the longer it takes for buyers to again dominate, the more uncertainty exists. Key support is clear and at the recent low of $49.30. If oil falls below there selling pressure is likely to increase. It could be significant as market participants can easily identify that price level. Or, there we could see a fake out, clearing stops and then quickly reversing higher.

Some possible targets are marked on the enclosed chart as prior swing highs or Fibonacci price zones.

Silver Price Forecast – Silver Confirms Strength that Points to Higher Prices

Silver showed new strength on Tuesday as it advanced above a minor swing high of $17.87. That was the next price point to watch where silver could see some resistance. It did not, and therefore the move gives a new sign that silver is getting stronger following the breakout of a descending wedge pattern last Friday.

Currently, silver is up 0.16 or 0.91% to $17.92.

Silver Daily Chart

Apple Miss Adds Uncertainty

Uncertainty raised by a report that Apple Inc. would miss quarterly sales forecasts worried investors as it shows a direct impact on fundamentals of a leading global technology company due to the coronavirus outbreak.

This leads to questions as to how other leaders are going to be negatively impacted and to what degree. Even though gold many times benefits from increased uncertainty in the global economy and markets, silver can also benefit.

Meanwhile, the U.S. dollar index once again reached a new trend high, even as silver rose. This is another sign of strength for silver as a higher dollar will frequently put downward pressure on precious metals and other commodities.

Meanwhile, the Euro, which has been falling against the dollar for the past 12 days dropped again.

Silver Daily Chart

Significance of Channel Breakout

Given the breakout of a relatively well constructed descending trend channel silver has the potential to rise above $18 and keep going. The breakout of the channel is the first sign that the larger uptrend may be kicking in.

Back in late December silver broke out of a large bullish descending wedge trend continuation pattern and took off from there before hitting a high of $18.84. That high is now the top of the descending trend channel.

The high to low swing ($16.51 to $18.84) of the wedge breakout rally saw silver advance by 14.12%.

It is not unusual to see a degree of symmetry in price swings in markets. If the current advance in price ends up matching the prior advance, then silver would reach $19.481. That target is derived by starting with the low of the channel at $17.07.

Price Levels to Watch on the Way Up

Other price levels to watch on the way up include the prior swing highs of $18.08 and $18.33. Silver could see resistance or breakthrough, providing a new sign of strength.

USD/CHF Price Forecast – Swiss Franc Advances Following Last Week’s Poor Performance

Following last week’s weak poor performance against the U.S. dollar, the franc recovered some on Monday. However, it remains vulnerable to additional depreciation given the recent price structure of the USD/CHF pair.

USD/CHF Daily Chart

The USD/CHF pair fell by 0.0011 or 0.11% to close at 0.9818 on Monday as it pulled back following last week’s bullish breakout of an inverse head and shoulders reversal pattern. Resistance was seen around the 50% retracement level following the breakout and a deeper pullback is certainly possible before we see a continuation of the bullish move.

U.S. Bank and Stock Market Holiday

Overall market liquidity was low given that U.S. banks were closed for the President’s Day holiday, as well as stock and bond markets. China’s central bank loosened capital as it will now allow banks to increase the number of non-performing loans on their books.

Higher Targets

Assuming the inverse head and shoulders trend reversal pattern holds up, and there is no evidence so far to indicate that it won’t, short-term weakness can be used to enter a new position or add to an existing position. As long as price stays above the right shoulder at 0.9629, the pattern remains valid.

Minimum potential target calculated from the size of the pattern is approximately 0.9923. That would put the pair close to the downtrend line coming off the April 2019 peak and shows that there is still upside potential for the USD/CHF.

Other targets include the 61.8% Fibonacci retracement at 0.9869, and the 78.6% Fibonacci retracement level at 0.9929. Further, we can combine the pattern target with the 78.6% Fibonacci price to get a relatively tight range from around 0.9923 to 0.9929.

USD/CHF 4-Hour Chart

Using Intraday Price Patterns

Given higher potential targets, an intraday price pattern can be used to stalk the USD/CHF for new entries or to add to a long position. It looks like price could soon test support of the neckline or other price levels, such as the Fibonacci retracement levels shown on the enclosed 4-hour chart.

Key support is at the right shoulder of the pattern at 0.9629, but it is quite a ways down to use for a protective stop. A tighter stop to provide better reward to risk can be looked at on the 4-hour chart around the higher swing low at 0.9741.

Oil Price Forecast – Oil Remains on Track for Higher Prices

Last Friday crude oil began a potential breakout of a daily double bottom reversal pattern as it moved above the top of the pattern at $52.16 and closed above it on a weekly basis. Also, the week ended above the prior week’s high. Nevertheless, the close was only 0.01 above the breakout level. To be more reliable the breakout should be decisive and so far, it is not.

At this point in the day, crude oil is little changed at $52.17, down only 0.01 or 0.01%.

Oil Daily Chart

Global Growth Concerns Addressed

Looking to offset the potential economic slowdown from the coronavirus outbreak, China, Hong Kong and Singapore each announced new fiscal stimulus measures. Meanwhile, China’s central bank decided to loosen the number of non-performing loans that banks can accrue on their books and cut interest rates for borrowing.

Nonetheless, oil demand forecasts are down with the International Energy Agency last week lowering its demand forecast for this quarter. That’s the first time in over 10 years that the agency is forecasting lower demand.

Bullish Evidence

Regardless of the lack a decisive breakout thus far and lower oil demand forecasts, there are additional bullish technical indications that support the likelihood that the recent low of $49.30 from two weeks ago holds as support and that oil moves higher.

Certainly, a minimum retracement of the recent decline to the 38.2% Fibonacci retracement of $55.55 seems likely. After that, the next more significant resistance zone is around $57.40 to $57.48.

On a weekly basis oil shows a higher high and higher low. It’s been seven weeks since that has occurred. Also, oil is coming off a potential significant support zone, identified as the lower line of a broadening formation.

Moreover, there is a bullish divergence with the 14-day Relative Strength Index (RSI) momentum oscillator, where the oscillator is trending up off the lows and oil has not quite confirmed strength just yet.

Crude Oil 4-Hour Chart

Intraday Chart Bullish

Finally, on the 4-hour intraday chart, the short term 21-period exponential moving average (ema) is starting to cross above the longer 55-period ema, reflecting a change in trend to bull from bear. The 21-period ema has been below the 55-period line early-January.

Silver Price Forecast – Silver Slowly Moves Higher and Remains Prepped to Strengthen

Silver strengthened on Monday as it reached a 10-day intraday high following a bullish breakout last Friday. In addition, last week’s high was exceeded providing an initial bullish signal on a weekly time frame.

Silver Daily Chart

Bullish Breakout in Silver

A breakout of a descending trend channel occurred last week with silver closing the week above the top trend line of the channel, and on a weekly basis closing at a three-week high. Currently, silver is at $17.80, up 0.071 or 0.40%.

Ideally, for the bulls, we would subsequently see an increase of momentum and buyer enthusiasm in price. So far, that’s not the case, but given that banks, stock and bond markets are closed in the U.S. due to the President’s Day holiday, activity levels can be expected to be muted.

China Liquidity

Fear of slowing global growth persists due to the impact on the economy from the spread of the coronavirus outbreak in China and elsewhere. Expectations are that central banks will continue to pump liquidity into the system to counter the negative impact of the virus.

In this regard, China’s central bank said today it would allow banks to increase their number of non-performing loans thereby freeing up capital and releasing liquidity into the economy.

On Wednesday, the U.S. Federal Open Market Committee releases meeting minutes, which will provide additional details as to how the Federal Reserve is thinking about the dynamic economic situation.

Meanwhile, the U.S. dollar index advanced to a new trend high. This is the tenth day in a row where the dollar exceeded the prior days high.

Silver 4-Hour Chart

Bullish Moving Average Crossover Confirmation

The 4-hour intraday chart provides a close-up view of recent price action. Today, there was one new piece of evidence on the intraday chart supportive of a continuation of the bullish move. The 21-period exponential moving average (ema) crossed above the 55-period ema.

Now, although this has happened before since silver started to correct off the $18.84 high from six weeks ago, it still provides another piece of evidence for higher prices.

Also keep an eye on the daily chart for a moving average crossover as that will give a stronger bullish confirmation signal. Of course, other moving average time frames can be used if there is a short and longer time frame period combined.

USD/CHF Price Forecast – USD/CHF Reaches 50% Retracement Following Bottom Breakout

U.S. dollar continues to strengthen against the Swiss franc with the USD/CHF pair advancing 0.0024 or 0.25% today to close at 0.9818. Investors looked to lower risk by moving into the dollar, as new cases of the coronavirus outbreak in China grows.

Week Ends Strong

The pair ended the week at an 8-week high, closed near the high of the week’s range, and ended above the 21-week exponential moving average (ema), purple line, for the first time in 11 weeks. These are all bullish indications.

USD/CHF Daily Chart

Coronavirus Outbreak Takes a Toll

It was reported today that at least 1,700 health care workers in China have been infected with the coronavirus, and six have died so far. Authorities reported 5,000 new cases on Friday. To date, there are 64,000 confirmed cases of the virus worldwide.

Inverse Head and Shoulders Bottom Breakout

The main technical driver for the USD/CHF pair is the breakout of an inverse head and shoulders reversal pattern that finalized on Thursday. Confirmation of strength was also seen in the 55-day ema as it began to turn up after being down and then flat for more than two months.

The formation of the bottom pattern was accompanied by a bullish divergence with the Relative Strength Index (RSI) momentum indicator.

Watch for further signs of strength when the 21-day ema (purple line) crosses above the longer term 55-day ema. The 21-day has been below the 55-day since early December.

USD/CHF Weekly Chart

Friday’s advance stopped around the 50% retracement of the prior downtrend. There were no signs of rejection at that price level as the pair closed strong and near the high of the day, which is also the high of the week. Therefore, watch for price to continue to advance towards higher targets.

Higher Price Targets

Once this week’s high at 0.9822 is exceeded with conviction the USD/CNY moves towards the 61.8% Fibonacci retracement zone at 0.9869. That level matches with resistance from a previous support area, and now resistance.

After that, watch the 0.9923 to 0.9939 price zone, consisting of a target derived from measuring the head and shoulders pattern along with the 78.6% Fibonacci retracement, respectively.

Accumulate on Weakness

Given higher targets in the pair, weakness can be used to accumulate. A pullback to test prior resistance as support, around the neckline of the inverse head and should pattern and 55-day ema, now at 0.9765, would not be unusual.

Oil Price Forecast – Oil on Track for First Weekly Advance in Seven Weeks

As the coronavirus outbreak continues to spread the risk to global oil demand rises. To what degree and when it might happen, is where there is confusion and uncertainty. Forecasters do not agree, and the target keeps changing as the virus spreads.

Crude Oil Daily Chart

Price is Telling

Nevertheless, price does tell us something as it reflects the perception of millions of investors as to how the price of oil will be impacted. Although recent price action is still unclear, there are important levels that have been identified by the market over the past couple of weeks.

When a price level is broken, either up or down, it will tell us something about where oil is likely to head next.

Presently, crude oil is up 0.35 or 0.68% to $51.85.

Rising from Very Oversold Conditions

Regardless of the fundamental threat to global oil demand, there are several indications that the next direction may be higher in the near-term. At the same time, keep in mind that the trend remains down and a break below key support is bearish.

Oil became very oversold near the recent low of $49.30, based on the 14-day Relative Strength Index (RSI), which measures momentum. It was the most oversold since June 2019. The RSI has since been trending higher reflecting an underlying shift from sellers being in control to buyers starting to dominate.

Crude Oil Weekly Chart

First Weekly Gain in Six Weeks

If oil ends this week higher, that would be a change in the pattern of five weeks of lower prices, and therefore evidence for the bulls.

Next, watch for an added piece of bullish evidence if oil closes above last week’s high of $52.16, as it would change the recent bear trend pattern.

Double Bottom Trend Reversal

A possible double bottom pattern has formed over the past couple of weeks. This is a classic bullish trend reversal pattern, but only once it breaks out decisively. Until then it is more likely to fail, at least initially.

Watch for a move above the two-week high of $52.16 and then a daily close above that price level. So far today price moved above the high but quickly failed and pulled back into the range of the pattern. Therefore, a decisive move is needed and a daily close to confirm.

A daily close above $52.16 will also trigger a bullish reversal on the weekly chart, providing additional evidence for higher prices in oil.

Silver Price Forecast – Silver Moving Higher as it Breaks Above Trend Line

Silver has exceeded the top of yesterday’s range, has been moving higher all day, and has now broken above the downtrend line following the release of U.S. retail sales numbers for January. Today’s advance provides a new bullish signal that could see silver continue to advance in the near-term. Currently, silver is at $17.77, up 0.148 or 0.84% for the day.

Silver 4-Hour Chart

Close-Up on Recent Price Action

Looking at the 4-hour intraday chart we can see more details of the recent price structure. Silver has broken above the downtrend line at the top of a descending parallel trend channel. Look at how the 21-period exponential moving average (ema), orange line, has identified essentially the same price resistance area as the trendline thereby giving a little more significance to the breakout.

We must keep in mind though that the trend line is approximate and not reliable by itself to signal a decisive price breakout that may keep going. Nevertheless, when considered along with the 21-period ema, that price resistance area takes on greater significance as it indicates that the trend line is probably in the right place.

Silver Daily Chart

Watch for New Evidence of Strength

To further confirm strength of the breakout silver needs to move above the most recent swing high of $17.866, and then close above it on a daily basis. At that point a bullish reversal is confirmed. This doesn’t ensure that price will keep rising but the chance that it will improves.

Trend Reversal

After that, a daily close above each successive swing high will provide new evidence for a bullish reversal. As shown on the enclosed chart, the subsequent swing highs are $18.082 and $18.334. A swing high has significance as that’s where resistance was clearly seen in the past as it is where an advance was reversed.

Given that a downtrend is defined by a series of lower (swing) highs and lower (swing) lows, that price structure starts to change once a prior swing high is exceeded.

Downside Levels

For support, first watch today’s low of $17.575, followed by the most recent swing low at $17.345. Further down is the critical support level of $17.073 as it is the bottom of the parallel channel correction.

USD/CHF Price Forecast – Bullish Inverse Head and Shoulders Breakout in USD/CHF

 

Investors looked for safety today in the U.S. dollar and Treasuries as the number of people infected by the coronavirus in China skyrockets by almost 15,000 after authorities adjust their methodologies for recording those infected with the virus. Given the continued uncertainty as to the impact of the virus on the economy of China as well as globally, investors chose to play defensive.

USD/CNY Daily Chart

Today’s Performance

The USD/CHF pair advanced by 0.0012 or 0.12% to 0.9793 on the day, reaching a seven-week high. This move saw the pair rise away from support of the 55-day exponential moving average (ema) orange line where it has been hovering for the past several days.

Bullish Breakout of Inverse Head and Shoulders Pattern

Today’s advance also confirms a breakout of a bullish inverse head and shoulders pattern that formed near the recent lows (0.9613). It follows a 4.09% decline off the 1.0023 swing high from late-November.

The neckline shows resistance of the pattern right around the same price represented by the 55-day ema. Therefore, today’s move further confirms a breakout of each, and each on its own is evidence for price strengthening. In addition, the Relative Strength Index (RSI) momentum oscillator is showing a bullish divergence as the head and shoulders consolidation forms, which is also a bullish sign.

USD/CHF Daily Chart

Although the pattern is not perfect, as the right shoulder bottom is higher than the left shoulder, it is valid, nonetheless.

Upside Targets

We can measure the inverse head and shoulders to identify a minimum possible target just based on the pattern. When taking the price difference from the bottom of the head (0.9613) to the neckline (0.9765) of 152 pips, and then adding that to the breakout level of approximately. That gives us an eventual possible target of around 0.9923.

It is interesting to note that the target looks to be roughly around the top downtrend trend line, where resistance could be anticipated separately. The price represented by the line however will depend on when the pair gets there, and if it does.

Validity of Pattern

The inverse head and shoulders pattern is valid as long as price stays above the bottom of the right shoulder, which is at 0.9629. A failure is indicated if price gets below therefore before rallying higher to some degree.

Oil Price Forecast – Downward Pressure Remains for Oil as Risk from Demand Slowdown Persists

Downward pressure on crude oil remains as the U.S. dollar index moves to new trend highs, and the threat from the coronavirus spreads. A higher dollar puts pressure on commodity prices in general, including oil.

Daily Chart

Risk of Economic Slowdown Keeps Pressure on Oil

Today, Chinese authorities in the Hubei province released new statistics on the numbers infected with the virus following a revision to their methodologies. The number infected soared by 15,000 from what they had previously counted. This increases uncertainty as to the economic impact from the virus and therefore demand for oil.

Meanwhile, the International Energy Agency reports a decline in their quarterly forecast for oil demand for the first time in 10 years. They site risk to economic growth due to the impact of the coronavirus outbreak as a key factor in their forecast.

Trading Around Key Support

Crude oil continues to trade just above the lower support zone of $49.30, as it has for the past nine days. Today, it is down slightly to $51.48, falling 0.17 or 0.33%.

The 9-day range takes the form of a potential double bottom trend reversal pattern, where a rally above the top of the range at $52.16 signals a breakout. Once a breakout occurs price needs to stay above the low of the second bottom at $49.46 to remain valid. The 14-day Relative Strength Index (RSI) momentum oscillator is supportive of the possibility of an upside breakout as it is currently showing a bullish divergence.

Crude Oil Daily Chart

Upside Targets

Upside targets following a breakout start with the measuring objective or price target derived from the double bottom pattern. That target is $55.02. Keep in mind though that it is a minimum target.

Higher targets include a combination of Fibonacci retracement levels of the prior downtrend, plus price levels where resistance was seen in the past. More emphasis should be given to price areas defined by more than one method or measure.

There are several price areas that stand out. First, is the $55.55 to $55.67 price zone, consisting of two Fibonacci retracement levels, along with the 55-day exponential moving average.

Oil Remains in a Clear Downtrend

Regardless of the potential for an upside move the trend remains down and oil could go lower from here. A drop below the recent low of $49.33 triggers a bearish continuation of the trend. Nevertheless, since oil has been dropping for six weeks the possibility exists that support may be found not too much below. Potential support levels are shown on the enclosed daily chart.

Silver Price Forecast – Silver May Have a Chance as Global Economic Concerns Worsen Due to Virus

Silver is up 0.2175 or 1.26% today to $17.70, as investors become more risk-averse on growing concerns that the economic impact of the coronavirus outbreak will get worse.

Silver Daily Chart

Impact from Coronavirus Outbreak

Concerns over the economic impact on China and worldwide had eased somewhat yesterday as China reported the lowest number of new coronavirus cases since January. This helped improve investor sentiment globally as it provided optimism that the outbreak would not last long.

Optimism diminished quickly though as Chinese officials reported close to 15,000 new cases on Thursday, after they instituted a new methodology to count cases. The death toll rose to 1,367, from 1,100 reported earlier.

Risk Aversion May Help Metals

Growing concerns about the economic impact from the virus might be giving investors an impetus to become more risk averse. Although gold tends to get more attention from investors, silver can also benefit. It is up today along with gold but remains mired inside a consolidation range. It needs to break out of the range before prices can really move again.

Silver Daily Chart

Trend Channel Breakout Needed for the Bulls

Silver has been pressing up against resistance at the top of a declining trend channel the past several weeks and today’s high hit it once again. A breakout of a trend line does provide a bullish signal but by itself not so reliable without additional confirmation of strength.

That sign of strength would first come on a move above the most recent minor swing high of $17.87, with new signs of strength on a subsequent advance above $18.08 and then $18.33. Once the $18.08 swing high is exceeded on the upside the declining trend channel structure of lower swing highs and lower swing lows is broken.

The Big Picture

At some point following a breakout of the channel the larger bull trend can kick in once again. Back in December silver broke out of a bullish falling wedge and price has not yet hit the minimum anticipated price objective from the wedge formation. Once the channel breakout occurs the potential for the wedge target being reached increases. The minimum target from the wedge is approximately $19.63.

Downside Support

Despite the above bullish slant to the analysis, we don’t know what will happen with silver as uncertainty remains if price continues to progress within the channel. The long-term uptrend line is there on the enclosed chart and should be watch as a possible support zone, followed by the recent low of $17.07, and then a Fibonacci zone from approximately $17.01 to $16.80.

USD/CNY Price Forecast – Lowest Volatility Day for the USD/CNY in Two Weeks

 

The USD/CNY saw low volatility today with the narrowest trading range since activity levels picked up seven days ago, following Chinese New Year holiday. Support for the day was seen at 6.9590, right at the top of the 21-day exponential moving average line (ema). Currently, the USD/CNY is at 6.970, up 0.0058 or 0.08% for the day.

USD/CNY Daily Chart

China Impacted by Virus

Although the number of people believed to be infected coronavirus in China has skyrocketed

to more than 44,000 confirmed cases, China reported the lowest number of new cases since January today. There have been over 1,100 deaths reported from the virus.

On Thursday this week, China will release Foreign Direct Investment (year to date) numbers. This is the first time the data will be updated since the coronavirus outbreak began and may help investors get a better handle on growth expectations for the Chinese economy.

Then, on Friday, China and the U.S. are scheduled to lower tariffs on billions of dollars of imports, as part of the first phase of the trade deal signed last month.

Key Price Levels

Key price levels to watch in the near-term are support at 6.9559, 5-day low, and resistance at 7.0024. A move through the bottom will trigger a continuation of a measured move correction off the 7.0248 swing high.

The USD/CNY will then head towards the 50% retracement zone around 6.9308. Also, at that point, a measured move will have completed where the second leg down from the 7.0248 high will match the price decline of the first leg down.

The first leg down starts at 7.0248. A measured move is a classic pattern in technical analysis that appears frequently in financial markets.

If price continues below the 50% retracement, then support might next be seen around the 61.8% Fibonacci retracement at 6.9096.

USD/CNY Daily Chart

Dominant Bull Trend

It’s important to keep in mind the larger dominant price structure for the USD/CNY pair. A long-term bull trend remains and once the currently shallow correction completes, the dominant pattern should again kick in.

As of February 3, the USD/CNY has broken out of a descending trend channel as it went above the top channel trend line and closed above it on a daily basis. Yet, to date there has been no follow-through. At this point a failure of the breakout could occur.

Signs of strength will be needed to indicate that upward momentum from the breakout may be returning to help propel price higher. The first sign of strength is on a rally above 7.0024 and then above 7.0248, with a move beyond the higher price needed to trigger a continuation of the channel breakout.

 

 

 

Oil Price Forecast – Oil Looks to be Getting Closer to Establishing a Bottom

Crude oil advanced by $1.41 or 2.82% today to $51.33, as it attempts to put in a bottom following a 24.7% decline off the January peak at $65.62. A low of $49.30 was reached last week, and this week a second possible low was seen at $49.40. Together, these two lows show that a potential double bottom bullish reversal pattern may be forming.

Crude Oil Daily Chart

Oil – Fundamentals

The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand growth as China fuel use takes a hit due to the coronavirus outbreak. This was on top of prior cuts in production by the world’s largest oil producers. China is the world’s largest importer of crude. So far, given today’s advance, the market doesn’t seem to be too concerned. Further, reported U.S. inventories were higher than prior estimates.

Meanwhile, uncertainty over the economic impact from the coronavirus diminishes to some degree as China’s Hubei province reports the lowest number of new virus cases so far this month. Also, the number of expected infections in mainland China fell.

Signs for a Bullish Reversal

A potential bullish double bottom reversal pattern has formed in oil. The pattern is not confirmed until there is a decisive breakout above the 8-day high of $52.16. At that point it is best to see momentum pick up in the direction of the breakout. There is a minimum possible target from the pattern of approximately $55.02.

Oil Daily Chart - Large View

That’s where the high to low price range, when added to the breakout level, is matched. In other words, take the distance from the $52.16 high of the pattern less the $49.30 low, and then add that to the high, in order to project a target. Keep in mind though that targets are not always reached, and it is best used as a guide.

Higher Price Targets

The target from the double bottom though is relatively lower than some other price targets, once momentum turns up with conviction. In addition, there is a bullish divergence showing in the Relative Strength Index (RSI) momentum oscillator.

Several other areas should be watched for either temporary or significant resistance. Areas to watch are marked on the enclosed chart and include $55.60, $57.40, and then the $59.40 to $59.60 price zone.

As with most retracements of trend, a minimum 50% retracement can be anticipated to eventually be reached. For oil, that would be around the $57.40 price zone.

Silver Price Forecast – Low Volatility Environment for Silver Persists

Federal Reserve Chairman Jerome Powell has one more day of testimony in front of the U.S. Congress. Today at 10am EST, Powell begins his second day of semi-annual testimony. He will be speaking to the Committee on Banking, Housing, and Urban Affairs.

Silver Daily Chart

Fed Anticipated to Hold Rates Steady

So far, Powell has mentioned he still sees a strong economy even with the China virus and there is no need yet to lower rates due to the impact from the virus. The Fed is widely expected to hold rates steady for now. Powell’s comments regarding the impact on the economy from the growing coronavirus outbreak will be watched closely on Wednesday for signs of potential changes to interest rates by the Fed.

The U.S. dollar index holds steady around recent trend highs. This follows a six-week advance for the dollar index.

Silver Remains in Low Volatility Environment

Currently, silver is trading down $0.13 or -0.73% to $17.49. It remains stuck within consolidation and a low volatility environment. Until silver trades out of the falling parallel trend channel, where it has been trading since the correction off the $18.84 swing high hit in early January, the low volatility period is likely to persist.

Critical Support Zone

At the low of the channel, $17.07, there is critical support for silver from that low down to approximately $16.80. A drop to $16.80 will break the long-term uptrend line, which is short-term bearish.

Nonetheless, we’ll have to watch how price behaves around the lower price levels to see if weakness will continue following a breakdown of the uptrend line, if it is to occur. There could be a false breakdown with price turning back up. The lower price level of $16.80 is the bottom of a Fibonacci confluence zone, where several measurements identify possible support.

Upside Price Levels to Watch

On the upside, first watch for a rally and then a daily close above $17.87 for the first bullish signal that triggers the beginning of a breakout of the falling channel. After that, the next swing highs of $18.08 and $18.33 need to be broken to confirm further strengthening. Thereafter, given the long-term bullish pattern in silver, an eventual rally to above $18.84, the top of the channel, is likely.

USD/CNY Price Forecast – China Outlook Stabilizes as Yuan Rises for Second Day

 

Chinese yuan strengthens slightly on Tuesday following the reopening of factories on Monday and workers returning to work. The threat of an accelerated spread of the coronavirus remains real however, and the impact on the Chinese economy is still very uncertain.

USD/CNY Daily Chart

At the same time the perception is that Chinese authorities have had a serious response to the outbreak. Although economic growth will slow to some degree it’s still too early to assess an impact, especially given that the threat remains high.

Today’s Performance

The USD/CNY currency pair declined today by 0.017 or -0.24% to 6.9649, currently. This increases the chance for a deeper pullback in the pair than what we’ve seen over the past week.

So far, the USD/CNY has retraced a little more than a third of its prior advance, finding support at 6.9559 (now a swing low) last Thursday and bouncing. That bounce on Friday didn’t last long though as today’s closing price is going to be the lowest daily close in six-days. Nonetheless, price remains above the prior swing low and above the purple 21-day exponential moving average (ema) support line.

USD/CNY Daily Chart

Price Levels for Deeper Pullback

If the USD/CNY falls further to below the 6.9559 swing low, then it is probably heading to at least the 50% retracement (green line) around 6.9308. That price level can be combined with the 6.9321 to create a support zone, as that’s where a measured move will have completed.

Measured Move – Downside Targets

A measured move is where the second leg down in a retracement matches the depreciation of the first leg down. In this case, the first leg down starts at the 7.0248 swing high, and the second leg down begins off the 7.0024 high.

In the case where price falls to below the 50% retracement zone, next watch for the 61.8% Fibonacci retracement level at 6.9096 (red line) to be reached.

Long-term Bull Trend Dominates

Given the longer term bullish price structure for the USD/CNY pair of higher swing highs and higher swing lows, the outlook remains bullish, once the current retracement is complete. However, if the pair falls to below the recent 6.8409 swing low, the bullish case is suspect and would have to be reassessed.

Signs of strength return if the pair can get above 7.0024, and then above 7.0248, with the higher level being more significant.

Oil Price Forecast – Oil Stops Falling, Providing Barely a Glimmer of Hope for the Bulls

Crude oil tested critical support of $49.30 yesterday and held, reaching a low of $49.46 before turning up. Today, price reversed higher off the low and exceeded yesterday’s high. Currently, oil is up $0.53 or 1.07% to $50.14.

Crude Oil Daily Chart

Federal Reserve Testimony

Earlier in the day the U.S. dollar index firmed to a new trend high before reversing and pulling back once Federal Reserve Chairman Jerome Powell began to deliver his semiannual testimony to the U.S. Congress. A higher dollar tends to put downward pressure on oil and other commodities.

Powell says that the U.S. Fed is closely monitoring the impact from the coronavirus outbreak on the U.S., as well as the global economy. So far, it has not caused the Fed to change their outlook on monetary policy, he says. Powell testifies again on Wednesday, starting at 10:00am EST.

Will Support Hold?

It remains to be seen whether the $49.30 swing low will remain as support. Today’s price action (move above yesterday’s high) so far indicates that it might. Nevertheless, a decisive rally above the most recent swing high of $52.16 (7-day high) is needed to provide some confidence that oil might continue to strengthen. At this point, the trend remains down on the weekly, daily, and 1-hour time frames.

Crude Oil 2-Hour Chart

Potential Double Bottom Reversal

Yesterday’s low creates a second possible bottom for oil, with the first being five days ago at $49.30. Therefore, a break above the $52.16 swing high will also give a bullish trigger for a breakout of a double bottom trend reversal pattern. This would provide greater confidence that the reversal would hold for a tradeable bounce, if not more than that.

If the double bottom breakout does occur, then a variety of potential targets and resistance zones can be looked at. These are marked in the enclosed 2-hour chart. Specifically, we should give a little more attention to price zones identified by more than one method or measure. Those price levels would be around $55.60, $57.40, and then $59.40.

Bottom Reversal Target

In addition, we could also include the measuring objective from the double bottom. The target from the pattern would be approximately $55.02, slightly lower than the price levels mentioned above.

Silver Price Forecast – Further Consolidation in Silver as Investors Watch for Clarity on Rates

Silver is essentially flat, down $0.07 or -0.38% to $17.73, as markets wait for Federal Reserve Chairman Jerome Powell to begin his semiannual testimony in front of the U.S. Congress at 10am EST.

Among other things, investors will be watching to see how the Fed assesses the impact of the coronavirus outbreak on economic growth in both China and globally. This information will help inform their decision on whether to cut interest rates at some point this year. Meanwhile, the U.S. dollar index keeps rising, hitting a new trend high again today.

Silver Daily Chart - close up

Silver Trades Within Range

Earlier today, silver fell to an eight-day low of $17.35 before bouncing back into a three-day range consisting of two inside days. Overall, silver remains in consolidation within a developing descending trend channel.

So far, this pattern is potentially bullish as it is contained within a long-term uptrend and price has stayed above the uptrend line. The line was tested as support once at the $17.07 swing low from three weeks ago and it held. In addition, the channel follows the breakout of a larger bullish falling wedge in December, which has not yet reached its minimum potential price target of approximately $19.50.

Bullish Wedge Breakout

It is significant to consider the bullish wedge within the recent price action of silver as the descending channel is the first price correction following the breakout. As with all upside breakouts of consolidation, once the initial thrust starts running out of steam, a retracement ensues back towards the breakout area or prior resistance. The degree of retracement varies significantly among patterns, however.

Silver Daily

Prices to Watch

A move above the six-day high of $17.87 will signal a breakout of the top trend line at the top of the channel and may give an early signal for a breakout of the channel. Caution is indicated as a breakout of a line by itself is not always reliable.

Further confirmation of strength should be seen shortly thereafter. Following a breakout of the line, first watch for a move above the $18.08 swing high, followed by an advance above and subsequent daily close above the $18.33 swing high.

Protect the Downside

Regardless of whether the overall pattern in silver looks bullish or not, the assessment could be wrong, or it could change quickly. Therefore, also keep in mind potential support areas. They include the long-term uptrend line, currently at around $17.21, followed by several Fibonacci price levels from $17.01 to $16.80.

USD/CNY Price Forecast – Yuan Strengthens Following Higher than Expected China Inflation

The Chinese yuan moved higher Monday following the release of January inflation data that was stronger than expected. Consumer inflation grew at a 5.4% rate year-over-year versus an anticipated 4.9% advance. That’s higher than December’s 4.5% increase. Producer prices were up 0.1% year-over-year, the first time they’ve been up since May 2019.

Later in the week, on Friday, China and the U.S. are set to lower tariffs on billions of dollars of imports as part of the first phase of the trade deal signed last month.

USD/CNY Daily Chart

USD/CNY Pair Pulls Back Within Developing Uptrend

The USD/CNY currency pair is currently trading at 6.9820, down $0.26% from Friday’s close. Even with Monday’s down day, the pair remains poised to continue higher following a mild pullback to the 38.2% Fibonacci retracement level last week. Note that 6.9820 is right at support of the downtrend line at the top of a descending parallel trend channel.

Bullish Channel Breakout

A breakout of the channel occurred last week on a daily close above the trend line. Although not assured, the breakout increases the likelihood that the USD/CNY will eventually exceed the trend high and top of the channel at 7.1842. The next bullish trigger is on a decisive move above 7.0248.

A bottom for the USD/CNY pair was hit on January 20 at 6.8409 as Chinese authorities reported over 200 infections from the coronavirus and the third death. The USD/CNY previously had been trending down (yuan moving higher) as we approached the signing of a trade deal between the U.S. and China.

Heightened Uncertainty Due to Coronavirus

It is not yet clear how big an impact the coronavirus epidemic will have on the Chinese economy. Authorities reported 97 new deaths on Monday and the worst may be yet to come. Many factories and offices remain closed after a mandatory holiday, while numerous global and domestic supply chains have been disrupted.

Upcoming economic reports will be watched closely for signs of how the epidemic is impacting China’s economy. On Tuesday, China reports year-over-year foreign direct investment, and the following week the Housing Price Index is report year-over-year for the month of January.

Oil Price Forecast – Negative Economic Sentiment Weighs on Oil Prices

Crude oil is down $0.60 or 1.23% to $49.79 currently, as it tests support of $49.31, the most recent trend low. Oil is now starting the sixth week of lower prices – at least so far.

Concerns Over Slower Economic Growth

Investors continue to watch the U.S. dollar index as it moves to a new trend high today and puts further downward pressure on oil and other commodities. At the same time, negative sentiment prevails due to concerns over the damage to the Chinese economy from the coronavirus outbreak.

China has the world’s second largest economy, behind the U.S. A slowdown in China’s economy will have some degree of negative impact on global growth and therefore demand for oil.

Crude Oil - 2-hour Chart

Potential for Short-term Bullish Reversal

An ABCD pattern, sometimes referred to as a zig zag pattern, in the intraday 2-hour chart completed earlier today as oil hit a low of $49.56. That’s just $0.04 shy of an exact target completion price of $49.52, and close enough.

The completion of an ABCD pattern marks a potential bullish reversal zone. It is where the price decline seen in the CD leg matches the drop in the AB leg. Yet, a reversal signal is needed to confirm strength, and so far, we don’t see that.

Oil Daily

Signs for Reversal

When using the 2-hour chart, the first minor bullish signal is given on a move above the recent swing high of $51.03. Nevertheless, a more important bullish confirmation is given on a rally above the swing high at point C of $51.46, as it is also a daily high.

Low Risk Entry

The recent $49.30 trend low or a little lower, is a possible low in oil as price stopped going down right at the falling trendline across the bottom of the past year’s consolidation range. By itself, this is not enough to get bullish, but it does indicate it is time to watch for a possible reversal.

Since the lower trend line is falling, the price represented by the line will decline over time. So, even if oil breaks the $49.30 low by a little, if it stays roughly above the line, it is showing support. If not, then oil should keep falling.