Key risk events today:
RBA Rate Statement and Cash Rate; UK
Services PMI; Canada Trade Balance; US ISM Non-Manufacturing PMI.
EUR/USD:
Europe’s shared currency bowed south against
its US counterpart Monday, as the dollar index recorded healthy gains.
Shrugging off final EUR Markit manufacturing PMI data which ticked up to 45.9
from 45.7, the EUR/USD tunnelled through Friday’s low 1.1128 and produced a
daily bearish engulfing candle.
1.11 is seen as the next support on the
H4 scale, closely shadowed by support at 1.1073. Inside this region, traders
may also wish to note daily support plotted at 1.1084, located a few points
north of the 50-day SMA (blue – 1.1039). Despite Monday’s downside move,
traders are urged to keep Quasimodo resistance at 1.1187 noted. Not only is
this level reasonably strong in its own right, additional resistance is visible
in the form of a 200-day SMA (orange – 1.1193) and a Fibonacci cluster
between 1.1121/1.1203.
Long-standing resistance drawn from
1.1119-1.1295 remains at the forefront of this market on the weekly timeframe,
with buyers and sellers squaring off at the underside of the said zone. Increased
bidding has the upper boundary of a descending channel (1.1169/1.1569) to
target, whereas a decisive rotation lower could make a run for the lower limit
of the current descending channel/the 2016 yearly opening level at 1.0873.
Areas of
consideration:
Follow-through selling based off
yesterday’s daily bearish engulfing candle has the H4 support area between
1.1073/1.11 in sight – includes daily support at 1.1084. As such, risk/reward
is unfavourable should protective stop-loss orders be positioned according to the
daily candlestick formation.
Buying from within 1.1073/1.11 is an
option today. An ideal entry here is for H4 price to drive through sell stops
at 1.11 and decisively close back above the figure. Entry on the close of this
candle is then a possibility, with protective stop-loss orders plotted either
beneath the candlestick’s lower shadow or 1.1073. The initial upside target
from here would likely be set at 1.1163.
Although unlikely to hit today, 1.12
also remains a level worthy of the watchlist for possible shorting
opportunities. Knowing this barrier merges with 1.1121/1.1187 on the daily
scale as well as weekly price trading within a resistance area at 1.1119-1.1295,
1.12 represents a high-probability sell zone.
GBP/USD:
Sterling kicked off the week on the
backfoot, driven mostly by dollar gains. Leaving the key figure 1.30
unchallenged, H4 price concluded the session driving through sell stops at the
1.29 handle. To the left of current price, limited demand is visible – note
1.2845 and 1.2806 (black arrows) resemble possible consumption tails – until
reaching potential support off the 1.28 region.
With respect to the bigger picture this
morning weekly structure remains unchanged from Monday’s technical briefing:
Following the break of the 2019 yearly
opening level at 1.2739, price action on the weekly timeframe has entered a
somewhat indecisive phase over the past two weeks. A retest at 1.2739 or
additional upside towards supply at 1.3472-1.3204/long-term trend line
resistance etched from the high 1.5930 is certainly a possibility on this scale
going forward.
The immediate trend faces a downward
trajectory from 1.4376, with a break of the 1.1904 low (labelled potential
support) confirming the larger downtrend from 1.7191.
In terms of daily price, however, the
small area of resistance at 1.3019-1.2975, which aligns with the 161.8%
Fibonacci ext. point at 1.2978, forced a retest of channel resistance-turned
support (extended from the high 1.2582) yesterday. Quasimodo resistance plotted
at 1.3102 is considered the next port of call beyond 1.3019-1.2975, whereas below
the said channel support, support resides close by at 1.2769, closely shadowed
by the 200-day SMA (orange – 1.2706).
Areas of consideration:
The break of 1.29 has potentially set
the technical stage for a bearish theme, according to H4 structure, targeting
1.28. A retest at the underside of 1.29 this morning, preferably in the shape
of a H4 bearish candlestick formation (entry and risk can be set based on this structure),
could, therefore, be something to keep an eye out for. Ideally, though, before
shorts are considered, a daily close beneath the daily timeframe’s channel
resistance-turned support (extended from the high 1.2582) is needed.
Beneath 1.28, shaded in grey, the
1.2739/1.2769 area is also likely of interest as potential support this week,
made up of weekly and daily supports highlighted above. This area marks an
ideal location to bounce from in the event of a fakeout beyond 1.28.
AUD/USD:
Despite a miss on Australia retail sales
data (0.2% vs. expected 0.4%), which initially weighed on the commodity-linked
currency, the AUD/USD gathered momentum in Asia on Monday, though topped at
highs of 0.6224, in the form of a H4 bearish outside candlestick signal going into
London. US trade saw a break of 0.69 form, largely driven by USD strength, and
a test of support at 0.6883, which aligns with trend line support taken from
the low 0.6723, enter the mix.
On a wider perspective, weekly price is seen toying with the upper edge of its consolidation zone between 0.6894/0.6677 (light grey). Buying could see the 2019 yearly opening level at 0.7042 enter the fray, though do remain cognizant of the primary downtrend which has essentially been in play since early 2018.
Before pressing for higher ground on the weekly timeframe, daily traders must contend with a swing resistance plotted at 0.6910, a trend line resistance (extended from the high 0.7393) and a 200-day SMA (orange – 0.6951). The 50-day SMA (blue – 0.6803) currently faces northbound, while the said 200-day SMA still points south. It may also interest some traders that a violation of the 200-day SMA potentially clears the runway for an advance towards Quasimodo resistance at 0.7047, closely followed by another layer of resistance priced in at 0.7062 (set nearby the 2019 yearly opening level on the weekly timeframe at 0.7042).
Areas of consideration:
The H4 trend line support taken from the
low 0.6723 and support at 0.6883, along with an ABCD correction (black arrows)
could provide enough impetus to press higher. Traders are urged to wait and see
if the H4 candles can decisively reclaim +0.69 status before committing funds,
however, since entering long here goes against daily resistance mentioned above
at 0.6910/trend line resistance.
Failing a push higher, a H4 close
beneath H4 trend line support mentioned above at 0.6723 is likely to be viewed
as a bearish indicator, targeting H4 support coming in at 0.6809. As such,
shorts beyond the said trend line support are also a consideration today.
USD/JPY:
Safe-haven assets largely traded lower
Monday amid positive trade updates from both China and the EU. USD/JPY flow
added more than 40 points, or 0.38%, consequently extending Friday’s recovery
off the 108 handle, which happened to unite with a notable trend line support
extended from the low 104.44 and October’s opening level at 108.07.
The next upside target on the H4 scale
forms at the 109 neighbourhood. Note this level also benefits from daily
resistances between 109.17/108.99 (comprised of a resistance level at 109.17,
the 200-day SMA [orange/109.03 – seen flattening] and Quasimodo resistance at
108.99).
With reference to the weekly timeframe,
last week’s bearish engulfing candlestick pattern has yielded zero interest to
the downside so far. Further buying from this point could see the unit rally as
far north as the 2019 yearly opening level at 109.68 and a 127.2% Fibonacci
ext. point at 109.56 (taken from the low 104.44).
Areas of consideration:
109 on the H4 is potentially eyed as
possible resistance this morning, having noted it aligns with daily resistance.
The threat of further upside on the weekly timeframe, however, is likely of
concern to some traders, therefore, waiting for additional H4 candlestick
confirmation – think bearish engulfing formations and shooting star patterns –
to develop may be an option. Although not guaranteeing a successful trade, it
does help identify seller intent and provides entry and risk levels to work
with.
USD/CAD:
USD/CAD prices enter Tuesday mostly
unchanged, as a healthy advance in WTI bolstered the Canadian dollar against US
dollar upside. Considering yesterday’s lacklustre performance, much of the
following report will echo thoughts aired from Monday’s technical briefing.
From the weekly timeframe:
Snapping a three-week losing streak and
reclaiming all the prior week’s losses, weekly flow rebounded from trend line
support (extended from the low 1.2061) in reasonably strong fashion last week.
Additional upside from this point has tops around 1.3342 in sight, closely
followed by the 2017 yearly opening level at 1.3434 and trend line resistance
taken from the peak at 1.3661.
A violation of the aforementioned trend
line support exposes Quasimodo support at 1.2887.
Daily timeframe:
Supply at 1.3239-1.3199 entered the fold
Wednesday and held into the close, with Friday producing an impressive downside
rotation. Intersecting with this area is the 50-day SMA (blue – 1.3215), with
the 200-day SMA (orange – 1.3273) positioned a few points above.
With both SMAs pointing south, last Tuesday’s
low at 1.3042 could be targeted this week, set a few points north of support at
1.3018.
H4 timeframe:
USD/CAD movement remains capped beneath
a familiar resistance area between 1.32/1.3187 (comprised of a 50.0%
retracement ratio at 1.3194, August’s opening level at 1.3187 and a trend line
support-turned resistance etched from the low 1.3134. Note this area also unites
with the underside of daily supply mentioned above at 1.3239-1.3199.
Traders who read Friday’s technical
briefing may recall the following piece:
In light of the technical confluence
supporting 1.32 as resistance on the H4 scale, this could promote further
selling. However, entering at current price places the trader at a slight
disadvantage in regards to risk/reward. Waiting and seeing if price action
retests 1.32 a second time may be the alternative, entering on the back of the
rejection candle’s structure and targeting a move to 1.31.
Areas of consideration:
Outlook unchanged.
Well done to any readers who managed to
short 1.32/1.3187 on the H4 scale. Reducing risk to breakeven and liquidating a
portion of the position is certainly an option now. This helps protect against
the possibility of buying on the weekly scale off trend line support.
Continued selling on the H4 timeframe,
nevertheless, highlights 1.31 as the next downside target, which despite weekly
price suggesting higher prices, is backed by daily price exhibiting scope to
press lower from supply mentioned above at 1.3239-1.3199.
USD/CHF:
USD/CHF activity snapped a four-week
losing streak Monday amid upbeat sentiment, adding more than 20 points, or
0.23%.
The H4 support area at 0.9852-0.9873,
although recently suffered a mild breach, remains in the fight with trade
approaching September’s opening level at 0.9896, closely trailed by the 0.99
handle. A violation of 0.99 has trend line resistance etched from the high
1.0027 to target, whereas a move beneath 0.9852-0.9873 could lead to price
tackling the 0.98 handle.
The story on the bigger picture,
nonetheless, has weekly price shaking hands with the underside of familiar
supply at 1.0014-0.9892. An upside move out of the said supply may draw in
Quasimodo resistance at 1.0124, while downside has the 2018 yearly opening
level at 0.9744 in view. According to the primary trend, price also reflects a
slightly bullish tone; however, do remain aware we have been rangebound since the
later part of 2015 (0.9444/1.0240).
Supporting a bearish theme out of the
current weekly supply is daily action currently in the process of completing a
bearish head and shoulder’s formation out of a resistance area at 1.0010-0.9986.
The break of the neckline taken from the 0.9843 September 24 low (blue
line) needs to be engulfed before this pattern is tradeable, with an optimal
downside target present at Quasimodo support fixed from 0.9692.
Areas of consideration:
Based on the three timeframes analysed
above, a reasonably strong bearish tone remains present, despite recent upside.
Ideally, the 0.99 handle should hold as resistance and force a move lower.
Therefore, this could be a location to search for shorting opportunities.
Ultimately, though, traders are likely
watching for a daily close below the head and shoulders neckline (0.9843)
before committing funds to a short position. A decisive H4 close below the
support area at 0.9852-0.9873 will potentially be viewed as an early cue,
however. Therefore, aggressive traders may look to begin loading up on shorts
at this point, and pyramiding positions on a break of the head and shoulder’s
neckline.
The first downside target for shorts
falls in at 0.98, though according to weekly price, 0.9744 is a possibility,
followed by daily Quasimodo support at 0.9692.
Dow Jones Industrial Average:
The Dow Jones industrial average joined
major US stock indexes at record highs Monday, rising on positive trade-deal
hopes. The
Dow Jones industrial average added 114.75 points, or 0.42%; the S&P 500 advanced
11.36 points, or 0.37% and the tech-heavy Nasdaq 100 closed higher by 49.50
points, or 0.61%.
Technically,
we’re in unchartered territory right now, with little stopping a run higher. With
weekly resistance at 27335, along with the previous all-time high 27388, both
likely to serve as support going forward, further buying is a strong
possibility.
Areas of consideration:
Weekly support at 27335 is central to
today’s outlook. A retest of this level, preferably by way of a H4 bullish
candlestick formation (entry and risk can then be set according to this
structure), is likely enough to entice buyers into the market. Once/if the
trade moves in favour, trailing the position behind swing lows is an option.
XAU/USD (GOLD):
As highlighted in Monday’s technical
briefing, the H4 candles have been busy carving out a consolidation
between a support area coming in at 1481.1-1490.2 and a resistance zone at 1519.9-1512.1
since early October. Note last week concluded at the top edge of the said
range. Outside of this consolidation, nearby resistance resides in the form of
September’s opening level at 1526.2, whereas below we have October’s opening
level pencilled in from 1472.8.
Technically
speaking, a breakout higher is the more likely route on the H4, considering the
higher-timeframe’s picture.
Weekly price recorded its third
successive week in positive terrain, bolstered by a familiar support area at
1487.9-1470.2. Resistance is seen at 1536.9, whereas two layers of support are
visible at 1392.0 and 1417.8, in the event we eventually push for lower ground.
With respect to the longer-term primary trend, gold has been trading northbound
since the later part of 2015 (1046.5).
Daily
price brushed aside the upper edge of a bullish flag (taken from the high
1557.1) and the 50-day SMA (blue – 1504.3) last Thursday, supporting longs off
the weekly support area mentioned above at 1487.9-1470.2. The next upside
target from this region falls in at the 1535.6 September 24 high, closely
shadowed by resistance at 1550.4, as price retests the said 50-day SMA as
support.
Areas
of consideration:
Having
noted higher-timeframe action is poised to move higher, selling the top edge of
the current H4 range at 1519.9-1512.1, despite the area holding a number of
times in the past, is considered chancy.
An
alternative is to simply enter long at current price, basing the setup on a H4
bullish candlestick signal off the 50-day SMA, in anticipation of further
upside. In that case, keep eyes on September’s opening level at 1526.2 as
possible resistance.
More
conservative traders, on the other hand, may wait for a breakout north above
1526.2 to occur. While a break higher may be appealing, this leaves little room
for manoeuvre to weekly resistance mentioned above at 1536.9.
The accuracy, completeness and
timeliness of the information contained on this site cannot be guaranteed. IC
Markets does not warranty, guarantee or make any representations, or assume any
liability regarding financial results based on the use of the information in
the site.
News, views, opinions, recommendations
and other information obtained from sources outside of www.icmarkets.com.au,
used in this site are believed to be reliable, but we cannot guarantee their
accuracy or completeness. All such information is subject to change at any time
without notice. IC Markets assumes no responsibility for the content of any
linked site.
The fact that such links may exist does
not indicate approval or endorsement of any material contained on any linked
site. IC Markets is not liable for any harm caused by the transmission, through
accessing the services or information on this site, of a computer virus, or
other computer code or programming device that might be used to access, delete,
damage, disable, disrupt or otherwise impede in any manner, the operation of
the site or of any user’s software, hardware, data or property.
