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Welcome to Technical Tuesday, a weekly report where we highlight some of the most interesting markets that will hopefully appease technical analysts and traders alike.

In this week’s report, we are getting technical on the EUR/USD, FTSE, Nasdaq, and Copper.

• EUR/USD bulls eye 1.10
• FTSE reclaims 200-day average
• Nasdaq stuck inside handle of cup
• Copper on the verge of breakout?

The mood in the markets has been noticeably brighter at the start of this week. Investors’ assessment of the risks to European lenders has improved. They are hoping that authorities and regulators would be able to ring-fence stresses within the banking sector. This has supported the European stock markets, crude oil, and risk-sensitive currency pairs like the EUR/USD.
 

EUR/USD bulls eye 1.10

Assuming the calm in Europe continues, then investors’ focus will return to monetary policy. The divergence in monetary policy between the Fed (becoming dovish) and the ECB (remaining hawkish) points to appreciation in the EUR/USD exchange rate.

The EUR/USD has been trending higher in recent days. After bouncing multiple times around key support circa the 1.0500 area, the market decided to break higher and move above interim resistance at around 1.0750 on Tuesday of last week. It then went on to climb above the 1.09 handle, before coming back down sharply from there.

However, the retest of the 1.0750 level from above has been held so far on a daily closing basis. Thus, the bulls are still in control of price action. What they need to see now is for the price to break above the high of Friday’s range at 1.0840 to potentially trigger a short-squeeze rally. If this condition is met, then the next stop could be above last week’s high at 1.0930, followed by a 1.1000 handle, and possibly a new high for the year above 1.10333.

This bullish idea will remain valid for as long as the price holds above the shaded grey area around that 1.0750 level.

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FTSE reclaims 200-day average

The FTSE 100 managed to rise sharply from its low on Friday. Although it has come off the earlier highs, the underlying strength remains with commodity stocks finding support along with banks. Should the calm in the banking sector continue, then we may well see further recovery – especially given the bullish signal the UK index has just formed.

The index looked quite bleak last week when it fell below the 200-day average. But that sharp recovery from the lows on Friday and the subsequent follow-through on Monday has raised bullish hopes over a recovery. Today’s slight weakness may be faded now that the index is testing the breakout level around 7475ish. 

This bullish idea will become weak if the bulls fail or refuse to defend the 200-day average now. A daily close below the 200-day sMA is what the bears would be looking for.

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Nasdaq stuck inside handle of a cup

The Nasdaq has been stuck in a sideways trading range in recent days. Will it be able to stage a more decisive rally, given that it continues to find support on the dips?

Well, that’s how things are looking given that we have not seen any downside follow-through despite the formation of several bearish patterns lately – including that large inverted hammer candle around the former resistance area of 12880.

Therefore, the larger “cup and handle” formation observed in the larger time frame still remains valid. The cup & handle formation is a bullish continuation pattern. The fact the handle has a shallower dip than the cup part of price action means the pressure is building for a bullish breakout.

The fact that the Nasdaq has managed to reclaim its 21-day exponential average and held above the 200-day average earlier this month is another sign of bullish strength.

So, a bullish breakout may still be on the cards above the 12880ish resistance area, for as long key support around 12465ish is defended by the bulls. If that happens, look out for follow-up technical buying above that zone.

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Is copper on the verge of a breakout?

The price of copper has been stuck in a consolidation pattern for a while now. But the recent recovery has lifted the metal above the 21-day exponential average and is now on the verge of a bullish breakout from the long-term bull flag pattern. A clean break above the 4.1000 area could see copper rise above the bull flag at 4.3515 in the days or weeks ahead. However, if support in the range between 4.000 to 4.0400 breaks first, then this would raise doubts over the validity of the abovementioned bullish pattern.

(Click on image to enlarge)

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