Key risk events today:
Table of Contents
Crude Oil Inventories.
In recent sessions, the euro, shaped by way of a near-full-bodied daily bearish candle, fell to a three-week low vs. the buck. The dollar reigned supreme, bolstered by a promising ISM non-manufacturing PMI print and the continuation of positive trade rhetoric between the US and China. According to Institute for Supply Management, the non-manufacturing PMI registered 54.7%, which is 2.1 percentage points above the September reading of 52.6%. This represents continued growth in the non-manufacturing sector, at a faster rate.
speaking, sellers show promise at the underside of the current weekly
resistance area drawn from 1.1119-1.1295, with a run for the lower limit of the
current descending channel/the 2016 yearly opening level at 1.0873 certainly a
support at 1.1084 was mildly engulfed Tuesday, exposing the 50-day SMA (blue –
1.1038) which appears to have begun flattening. Beyond this line, limited
support is visible until the unit crosses paths with familiar demand at 1.0851-1.0950,
which houses the 2016 yearly opening level mentioned at 1.0873, mentioned above
on the weekly timeframe.
the page on the H4 timeframe, a clear double-top formation has taken shape after
breaking the 1.1073 October 24 low (the confirmation point). The next downside
target on this scale can be seen at the 1.10 handle, sited close by September’s
opening level at 1.0989 and a 61.8% Fibonacci retracement ratio at 1.0994.
All three timeframes reflect a somewhat
bearish vibe this morning. The confirmation of the H4 double-top pattern, reinforced
by a weekly resistance area at 1.1119-1.1295 as well as daily support recently
giving way at 1.1084, is likely enough to entice sellers towards the 1.10
Traders considering a short based on the
H4 double top pattern may already be in the market; others, however, may wait and
see if a retest at 1.11 forms before pulling the trigger. The latter offers a
better price, and therefore more favourable risk/reward.
The British pound concluded unmoved
against the US dollar Tuesday, ranging no more than 50 points on the day. GBP/USD
movement, however, did clock a session high at 1.2917 shortly after the release
of UK Services PMI. According to Markit, the seasonally adjusted IHS
Markit/CIPS UK Services PMI Business Activity Index ticked up to 50.0 in
October, from September’s 49.5, signalling no change in service sector output.
The latest figure was among the lowest registered in the past ten-and-a-half
years, and below each of the trend levels for the first, second and third
quarters of 2019 (50.1, 50.5 and 50.5 respectively).
The technical landscape on GBP/USD is
interesting. Recall in Tuesday’s technical briefing the piece highlighted the
following on the H4 timeframe:
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.
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.
As evident from the H4 timeframe, price
retested the underside of 1.29 Tuesday and produced a notable shooting star candlestick
signal (considered a bearish signal) and is so far holding ground.
The only grumble, nonetheless, is higher-timeframe
structure, specifically the daily timeframe trading at channel support:
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, 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). 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
Areas of consideration:
Whether the H4 shooting star candlestick
configuration was enough evidence to sell is, of course, trader dependent. Some
likely feel it was sufficient, given weekly price showing room to press lower;
others may feel it may be better to wait for a daily close beneath the daily
channel support to form before committing funds.
Irrespective of the entry measure, 1.28
represents an initial take-profit target.
Beneath 1.28, shaded in grey, the
1.2739/1.2769 area is also likely of interest as potential support, 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.
Early Asia Tuesday witnessed the Reserve Bank of Australia (RBA) stand pat on policy at 75bps, as expected. The statement was largely unchanged and maintained its easing bias. An advance ensued, nonetheless, drawing the market to highs of 0.6928 into London hours.
into London’s afternoon session, nevertheless, sellers strengthened their grip,
reinforced on the back of healthy USD buying. The day wrapped up a shade
higher, with AUD/USD stationed a touch beneath its 0.69 handle, though remains bolstered
by H4 trend line support extended from the low 0.6723. Note we also have
familiar support sited nearby at 0.6883.
respect to the bigger picture, structure remains unchanged from Tuesday’s
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 – 0.6950). The 50-day SMA (blue – 0.6806) 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 could, once again, provide enough impetus to
press higher today. However, failure to push to fresh highs yesterday likely casts
Failing a push higher, a H4 close
beneath H4 trend line support mentioned above at 0.6723/support at 0.6883 will possibly
be viewed as a bearish indicator, targeting H4 support coming in at 0.6809/trend
line support etched from the low 0.6670. As such, shorts beyond the said H4
support at 0.6883 are a consideration today. Conservative traders may opt to
wait and see if a retest forms prior to pulling the trigger, though, as this
helps identify seller intent as well as providing additional entry and risk
levels to work with.
A further unwind out of safe-haven
assets took form Tuesday, extending the USD/JPY’s three-day ascent to highs of
109.25. The move saw orders at 109 give way, though recent hours has seen the
pair recede and retest 109 as support. Indicator-based traders may also wish to
note the relative strength index (RSI) recently exited overbought territory.
On more of a broader perspective,
technicians likely have their crosshairs fixed on daily resistance priced in at
109.17, which aligns closely with the 200-day SMA (orange – 109.02). 109.17, by
and of itself is a key level, boasting significant history. Higher up on the
curve, nonetheless, we have weekly price threatening a move to 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 a key barrier this
A decisive rejection off 109 suggests weakness
around daily resistance mentioned above at 109.17 and a potential run to the 2019
yearly opening level at 109.68 on the weekly scale. A close above 109.17 on a
H4 closing basis is likely sufficient to consider a bullish theme.
A violation of 109, on the other hand, helps
validate a downside bias from daily resistance at 109.17 and perhaps clears the
runway south to H4 trend line support pencilled in from the low 104.44,
followed by October’s opening level at 108.07/the 1.08 handle. A H4 close
beneath 109 followed up with a retest that holds is likely enough to attract
sellers into the market.
On the one hand, the greenback received
a boost on the back of a promising ISM non-manufacturing PMI print, though on
the other hand, crude oil prices rallied and bolstered the Canadian dollar. USD/CAD
action ended the day mostly unmoved, despite ranging from a high of 1.3178 and
a low of 1.3115.
Considering yesterday’s lacklustre
performance, technical structure remains unchanged. As a result, much of the
following analysis will represent thoughts aired in recent writing.
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 supply at 1.3239-1.3199 entered
the fold last week, with Friday producing an impressive downside rotation.
Intersecting with this area is the 50-day SMA (blue – 1.3212), 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, set a few points north
of support at 1.3018.
USD/CAD movement remains capped beneath
a familiar resistance area between 1.32/1.3187 on the H4 scale (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.
Areas of consideration:
Well done to any readers who managed to
short 1.32/1.3187 on the H4 scale (a noted setup to watch in previous reports).
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.
The US dollar accelerated its recovery
against the Swiss franc Tuesday, boosted by upbeat US ISM non-manufacturing and
trade deal optimism.
The technical setting on USD/CHF this
morning has the H4 candles firm above the 0.99 handle and challenging trend
line resistance extended from the high 1.0027. A violation of this structure
implies a possible move to the 0.9970 October 28 high, closely trailed by
October’s opening level at 0.9977. It may also interest some traders to note
the relative strength index (RSI) is seen nearing overbought terrain.
With reference to the higher timeframes,
supply at 1.0014-0.9892 on the weekly timeframe has remained at the forefront
of this market since early September. 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 reflects
a slightly bullish tone; however, do remain aware we have been rangebound since
the later part of 2015 (0.9444/1.0240).
Daily flow recently crossed back above
the 50-day SMA (blue – 0.9915), consequently exposing the 200-day SMA (orange –
0.9953), followed by a nearby area of familiar resistance at 1.0010/0.9986.
Areas of consideration:
With the 200-day SMA lurking at 0.9953,
a move higher to this line is highly likely, therefore engulfing the current H4
trend line resistance. For that reason, tread carefully shorting this barrier
The green area on the H4 scale between
1.0000 (parity), Quasimodo resistance at 0.9989 and October’s opening level at
0.9977 is likely of interest for shorts. Not only is it positioned within the walls
of the current weekly supply, the H4 zone is also glued to the underside of the
noted daily resistance area.
Dow Jones Industrial Average:
Major US equity benchmarks hovered near
record highs Tuesday before closing mostly lower, as investors digested the
latest earnings and economic data. The Dow Jones industrial average added 30.52
points, or 0.11%; the S&P 500 lost 3.65 points, or 0.12% and the tech-heavy
Nasdaq 100 closed unchanged.
Dow registered an all-time high of 27498 Tuesday, though closed in the shape of
a daily shooting star candlestick formation (considered a bearish signal). With
little stopping the index from exploring higher ground, the bearish candlestick
motion might just be enough to force a retest at weekly support coming in at
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.
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. 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.
recent movement, the yellow metal experienced its largest single-day decline
since late September amid an unwind of safe-haven assets. H4 price remains
contained within the aforementioned range, though is seen testing the lower
boundary, as we write. Additionally, the relative strength index (RSI) is seen
testing oversold territory.
Weekly price trades back at the top edge
of a familiar support area at 1487.9-1470.2, thanks to yesterday’s descent.
Resistance is seen at 1536.9, whereas two layers of support are visible at
1392.0 and 1417.8, in the event we navigate lower ground. With respect to the
longer-term primary trend, gold has been trading northbound since the later
part of 2015 (1046.5).
price forced its way back within the walls of a bullish flag (1557.1/1484.6)
yesterday and tunnelled through the 50-day SMA (blue – 1501.6). Increased
selling has a support area priced in at 1448.9-1419.9 in view, which happens to
align closely with a 38.2% Fibonacci retracement ratio at 1448.5.
the expectation on the H4 timeframe is a recovery from the lower edge of its
range, though a whipsaw to October’s opening level at 1472.8 is not out of the
question. Although buying is bolstered by the fact we’re also coming off a
weekly support area, daily price must, once again, contend with the upper edge
of the daily bullish flag and 50-day SMA. As such, buying may be problematic.
the absence of clearer price action, opting to remain on the side lines may be
the better path to explore.
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