While waiting for release of GDP data from the US later today, European trading is showing a quite pronounced negative tone with respect to EUR/USD as the failure to make progress up to the 1.3150 level (a 38% retrace of key levels) is causing a fair amount of selling.
As the 240-minute chart suggests, the key level to watch as the day unfolds will be the 1.2880 area which is where a key upward trend-line and the top of the cloud intersect.
The chart below captures the current level in a daily format for the S&P 500 futures.
The level on the chart is quite significant as it represents the base of the cloud and the intersection with the ascending dotted line tracking the lows since early July.
If this fails today then the July low would be a feasible target. If the level holds and we remain in the cloud I still feel that the bulls will have the opportunity during the thin trading levels of August to eventually test the 1130 level. It is what happens after that which will be really worth watching.
However if we drop below 1085 today then we may get the fireworks sooner.
Yesterday I discussed how the 2220 level probably needed to be tested on the Nasdaq Composite and in yesterday’s session there was a move down toward this level but I sense that a more robust test needs to be made.
In a similar fashion to the discussion above, from a technical perspective, if one is still moderately positive about the near term for US equities, this index needs to re-enter the cloud pattern sooner rather than later.
Earlier this week I looked at GBP/JPY and discussed the key breakdown level which enabled me to make back the loss I saw in trading this pair on Tuesday.
The downtrend has proven to be more persistent than I thought as the yen continues to seek out higher levels against the US dollar and all other major currencies. But, after such a move, even though there is a temptation, I would not chase this down at present.
Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.
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