Chart Signals: Breakouts underway but overextended RSIs indicate increased correction risk

A number of markets continue to break out today including copper, plus USD, EUR and GBP all against JPY. At the same time extreme overbought and oversold readings suggest at some point some of these advances could come tumbling down in a big correction. The question is what could spark a correction since we didn’t see much profit-taking ahead of the US holiday?

A number of markets continue to break out today including copper, plus USD, EUR and GBP all against JPY. At the same time extreme overbought and oversold readings suggest at some point some of these advances could come tumbling down in a big correction. The question is what could spark a correction since we didn’t see much profit-taking ahead of the US holiday?

Asia Pacific Indices

Australia 200 keeps on climbing after breaking out of a downtrend, clearing 5,500 while support rises toward 5,410. RSI confirms upward momentum increasing. Next potential resistance near 5,560 then 5,610 on trend. 

Japan 225 continues to put 18,000 farther into the rear view mirror clearing 18,400 with next resistance near 18,455 then 18,500 while support rises toward 18,380. Overbought RSI suggests potential for a pause or correction at some point. 

Hong Kong 50 remains in a downtrend with a lower high near 22,855 and RSI failing to retake 50 indicating ongoing distribution. The pair has dropped back toward 22,610 with next potential support near 22,325 then 22,155 a Fibonacci level. 


North American and European Indices

US 30 has cleared 19,000 and continues to climb, advancing from near 19,090 toward 19,150 with next potential measured resistance near 19.350. RSI overbought suggests a correction or pause possible at some point. 

US NDAQ 100 is bouncing around between 4,840 and 4,880 below 4,900 channel resistance where a breakout would signal the start of a new upleg that could challenge 5,000. Lower highs in the RSI however indicate upward momentum weakening. 

US SPX 500 remains above its 2,190 breakout point, trading near 2,200 with next potential measured resistance near 2,270. Rising RSI indicates upward momentum still increasing. 

UK 100 is still trading sideways in a 6,700 to 6,925 channel, recently trading near 6,825 as it bounces around between 6,770 and 6,880. 

Germany 30 remains in a sideways trend, currently bouncing around between 10,590 and 10,750 recently trading near 10,690. 


Commodities 

Gold has stabilized in the $1,180 to $1,190 area, licking its wounds after being pounded down through $1,211 and $1,200 on Wednesday. 

Crude Oil WTI has paused near $47.50 and its 50-day average trading between $46.80 and $47.80 while consolidating a recent upswing. 

Copper is accelerating to the upside again, retaking $2.60 and rallying toward $2.66 with next resistance possible between the $2.70 round number and the recent peak near $2.73. RSI really overbought and a possible negative divergence suggest potential for a correction at some point.  


FX 

US Dollar Index peeked up above 102.00 briefly and has settled back toward 101.75 with more support near 101.60 then 101.00. RSI extremely overbought and a double top suggest potential for a trading correction at some point. 


EURUSD continues to hold above the $1.0500 round number, trading in the $1.0520 to $1.5080 area consolidating recent losses and trying to work off an oversold RSI. Next potential resistance on a bounce near $1.0645. 

GBPUSD is climbing within a $1.2380 to $1.2500 trading range recently near $1.2450. Initial support near $1.2400 with initial resistance near $1.2470. 


NZDUSD is sitting on the $0.7000 round number where a breakdown would take out its 200-day average and completing a head and shoulders top.  Initial support appears near $0.6970 followed by $0.6955 and $0.6900 initially. Falling RSI confirms downward pressure increasing. 

AUDUSD has a nice rebound underway up off of $0.7300 support with the pair trading near $0.7400 and next resistance possible near $0.7450 and $0.7500. RSI climbing toward 50 indicates downward pressure easing.  

USDSGD traded up toward $1.43670 before meeting resistance and dropping back into the #$1.4290 to $1.4330 area. A probe toward the $1.440 to $1.4420 area remains possible but a really overbought RSI indicates potential for a correction as well with next support near $1.4200. 

USDJPY keeps on climbing, blasting off from 112.45 a Fibonacci level through 113.00 and on toward 113.50 before settling back toward 113.20. RSI indicates upward momentum still increasing but is really overbought raising the risk of a snap downward correction at some point. 

GBPJPY is really overbought but continues to climb, building on its breakout over 140.00 advancing on the 140.90 to 141.30 area with next potential resistance near 142.30 a 50% Fibonacci retracement of its previous uptrend. 

EURJPY is breaking out today clearing 118.35 a Fibonacci level and its 200-day average near 118.50 to confirm the start of a new uptrend. The pair has rallied to test the 120.00 round number with next resistance after that near 121.10. Overbought RSI indicates potential for a retest. 

USDCAD remains in an uptrend advancing from $1.3430 higher support into the $1.3490 to $1.3530 area around the $1.3500 round number and below $1.3565 Fibonacci resistance. RSI holding 50 confirms underlying accumulation intact. 

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