Key risk events today:
UK Manufacturing PMI; US Average Hourly Earnings m/m; US Non-Farm Employment Change; US Unemployment Rate; US ISM Manufacturing PMI; FOMC Members Clarida and Williams Speak.
EUR/USD:
Europe’s common currency finished unmoved against the buck Thursday, unresponsive to European growth and unemployment indicators.
Technically, this drove an indecisive close, shaped in the form of a daily doji candlestick pattern sited a few points south of last Monday’s high at 1.1179, the 200-day SMA (orange – 1.1196) and a 61.8% Fibonacci retracement ratio at 1.1211.
Heading into the final day of the week where participants eye the US jobs report, Fed speak and national ISM manufacturing data, H4 action trades just beneath the base of resistance coming in at 1.1163 after a failed attempt at a breach. Continued bidding may lead to an approach towards the 1.12 handle, which, according to daily structure, aligns closely with both the 200-day SMA and the 61.8% Fibonacci ratio. In addition to this, indicator-based traders may wish to acknowledge the relative strength index (RSI) on the H4 trades a touch below its overbought value.
Chart studies on the weekly timeframe reveal price remains engaging with the underside of a long-standing resistance area drawn from 1.1119-1.1295. A break of this zone has the 2019 yearly opening level to target at 1.1445, while a push lower has the 2016 yearly opening level at 1.0873 in sight. Regarding trend direction, the primary downtrend has been in motion since topping in early 2018 at 1.2555.
Areas of consideration:
Unchanged from Thursday’s outlook.
Though H4 resistance at 1.1163 held yesterday, most traders still likely have their crosshairs fixed on the 1.12 handle for shorts. Knowing this barrier merges with the 200-day SMA at 1.1196 and a 61.8% daily Fibonacci resistance at 1.1211, as well as weekly price trading within a resistance area at 1.1119-1.1295, this represents a high-probability sell zone.
Conservative traders, however, may opt to wait and see if a H4 bearish candlestick formation emerges before pulling the trigger, in an attempt to avoid any whipsaw through 1.12, which is common viewing around psychological numbers (entry/risk can then be set according to this structure).
GBP/USD:
Sterling chalked up its fourth successive close vs. the dollar Thursday, clocking highs of 1.2975. With month-end flows likely a factor alongside a fading dollar index, GBP/USD trades firm north of the 1.29 handle this morning, poised to approach the key figure 1.30, based on H4 structure. Note 1.30 held price lower on two occasions during October, strengthened by a daily resistance area plotted at 1.3019-1.2975 and a 161.8% Fibonacci ext. ratio at 1.2978. Traders may also wish to note the relative strength index (RSI) rotated lower from overbought status in recent movement.
With respect to weekly price – following an engulf of the 2019 yearly opening level at 1.2739 – action remains stable, with the possibility of a retest forming at 1.2739 or additional upside towards supply at 1.3472-1.3204 and long-term trend line resistance etched from the high 1.5930.
Areas of consideration:
The break of 1.29 has potentially set the technical stage for a bullish theme, targeting the underside of the daily resistance area at 1.3019-1.2975, followed by 1.30 on the H4. To take advantage of any upside above 1.29, traders, as of current price, may be watching for a retest at 1.29 to emerge before committing funds to a position. Should this unfold prior to the US job’s numbers, taking a position before a big event is chancy. Generally, it’s best to let the event take its course and then re-evaluate the situation, rather than be whipsawed on a news spike.
AUD/USD:
Action kicked off on a strong footing Thursday, strengthened on the back of upbeat Australian building approvals in September. The move, however, was reasonably short lived, topping at 0.6929 and consequently reclaiming the 0.69 handle on the H4 timeframe to the downside in early London. As is evident from the chart, price concluded the day a touch north of support coming in at 0.6883, with a break lower likely portending a run towards August’s opening level at 0.6848. Technicians who watch the relative strength index (RSI) may also wish to note bearish divergence out of overbought terrain recently completed and forced an exit lower.
In terms of weekly price, the unit is challenging the upper edge of its range between 0.6894/0.6677 (light grey). A pivotal move higher here exposes the 2019 yearly opening level at 0.7042, which has served well as support/resistance on several occasions in the past.
Before pressing for higher ground on the weekly timeframe, though, daily traders must contend with a swing resistance plotted at 0.6910 – held price lower yesterday by way of a half-hearted shooting star pattern (considered a bearish signal). A break above this level has nearby resistance in the shape of a 200-day SMA (orange – 0.6955). The 50-day SMA (blue – 0.6795) currently faces northbound, while the said 200-day SMA still points south.
Areas of consideration:
Outlook similar to Thursday’s technical briefing.
AUD/USD’s technical framework, according to our chart studies, remains at a crossroads. While H4 price recently brushed aside 0.69 and likely tripped a truckload of buy stops, the fact we’re trading at the top edge of a weekly range at 0.6894 and at daily resistance drawn from 0.6910, buying may be hampered.
Should we tunnel through 0.6883 today, selling higher-timeframe structure is an option, targeting at least August’s opening level at 0.6848, perhaps followed by a move to H4 support at 0.6809/daily support at 0.6808.
USD/JPY:
Trade concerns regarding the US and China resurfaced Thursday after China voiced doubt about the possibility of a long term-trade pact with US President Trump. This weighed on market sentiment, consequently ramping up demand for the safe-haven Japanese yen.
Down 80 points, or 0.74%, USD/JPY action wrapped up the day closing just north of 108 in the shape of a near-full-bodied daily bearish candle. Additional layers of H4 support can be seen here at 108.07, October’s opening level, and trend line support extended from the low 104.44. Despite this, early movement this morning nudged beneath 108 and is challenging the said trend line support, with a break suggesting a move to 107.
With reference to higher-timeframe structure, daily price sold off following Wednesday’s shooting star candlestick pattern (considered a bearish signal) out of daily resistance between 109.17/108.99 (comprised of a resistance level at 109.17, the 200-day SMA [orange/109.05 – seen flattening] and Quasimodo resistance at 108.99). The next downside target on this scale falls in close by at the 50-day SMA (blue – 107.67), followed by support at 106.80.
Areas of consideration:
Traders who read Thursday’s technical briefing may recall the following piece:
Although most traders short the 109 handle were likely taken out on the back of yesterday’s move, the opportunity to re-enter the market short is certainly there.
Entry at current price is an option today, with protective stop-loss orders plotted above yesterday’s high at 109.28. The fact we have robust daily resistance in motion alongside a daily shooting star candlestick pattern (considered a bearish signal) is likely enough to draw in sellers to at least H4 support at 108.41, with a move to 108 also a possibility.
Well done to any readers who managed to take advantage of this move.
Going forward, a break of the current H4 trend line support is eyed, which if followed up with a retest (entry/risk can be set according to the rejection candle’s structure), a bearish play towards the 50-day SMA as the initial target, could be an option.
USD/CAD:
USD/CAD action observed limited change Thursday, ranging no more than 45 points. In terms of Canadian growth figures, Statistics Canada announced real gross domestic product (GDP) edged up 0.1% in August, following no change in July. On a three-month rolling average basis, real gross domestic product rose 0.5% in August, compared with a 0.8% increase in July.
Following Wednesday’s test of the 1.32 handle on the H4 scale, which happens to align with a 50.0% retracement ratio at 1.3194, August’s opening level at 1.3187, a trend line support-turned resistance etched from the low 1.3134 and the relative strength index (RSI) producing a hidden bearish divergence signal within overbought territory (which recently forced an exit lower), downside appears relatively free until reaching 1.31.
With respect to the higher-timeframe landscape, resistance is not expected to develop until reaching the 50-day SMA (blue – 1.3223) and 200-day SMA (orange – 1.3724). Interestingly, though, both moving averages face a southerly position at the moment.
Areas of consideration:
Unchanged from Thursday’s outlook.
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.
USD/CHF:
Broad-based risk-off flows kept USD/CHF on the backfoot Thursday, consequently recording its third consecutive daily loss.
Supply on the weekly timeframe, as underscored in Thursday’s technical briefing, at 1.0014-0.9892 remains in play, and despite recent selling, still resembles somewhat of a fragile tone. The beginning of October witnessed a penetration to the outer edge of the supply area’s limit, possibly tripping a portion of buy stops and weakening sellers. 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).
Concerning daily movement, recently closed action extended losses beneath the 50-day SMA (blue – 0.9909) and ended within striking distance of support surfacing around the 0.9850ish range.
After crossing beneath 0.99 on the H4 scale Wednesday, the candles ran into an interesting area of support at 0.9852-0.9873. Confirmed by the relative strength index (RSI) testing oversold territory, the pair, despite a lacklustre attempt thus far, is likely to bounce from here and retest the underside of 0.99. Whether the unit has enough oomph to dethrone 0.99 and push for higher ground remains to be seen in light of daily price driving through its 50-day SMA.
Areas of consideration:
Unchanged from Thursday’s outlook.
Searching for lower-timeframe buying opportunities out of the H4 support area at 0.9852-0.9873, with an upside target set at the 0.99 handle, remains an idea worthy of interest. Given recent selling, therefore driving deeper into the said H4 support zone, traders can enter using lower-timeframe action but position stop-loss orders beneath the H4 zone. Lower-timeframe confirmation could simply be a bullish candlestick configuration, a trend line break/retest or even a break of resistance. Traders are, however, urged to ensure risk/reward offers more than a 1:2 ratio to 0.99.
Dow Jones Industrial Average:
Major US equity indexes turned lower Thursday, as trade concerns regarding the US and China resurfaced after China voiced doubt about the possibility of a long term-trade pact with US President Trump. The Dow Jones Industrial Average lost 140.46 points, or 0.52%; the S&P 500 declined 9.20 points, or 0.30% and the tech-heavy Nasdaq 100 closed flat.
Technically, the Dow’s H4 chart reveals support recently entered the mix at October’s opening level fixed from 26947, which aligns closely with two trend line supports (25710/27321). Further upside from this point is likely to challenge Wednesday’s high at 27230, perhaps followed by a bump towards weekly resistance at 27335, sited only a few points south of the all-time high 27388.
Areas of consideration:
Although some traders may have effectively ‘missed the boat’ on a long from the two trend line supports on the H4 timeframe, a retest at October’s opening level 26947 may offer a second opportunity to enter long. Preferably formed by way of a H4 bullish candlestick signal, a long on the close of this candle, with a protective stop-loss order plotted either beneath the rejecting candle’s lower shadow or the aforementioned trend line supports, is certainly worthy of consideration.
XAU/USD (Gold):
Since early October, 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. Thursday saw the price of bullion, in $ terms, advance higher amid an increased demand for safe-haven assets on the back of resurfacing trade concerns between the US and China.
Outside of the current H4 range, 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. Gold remains bolstered by a weekly support area coming in at 1487.9-1470.2. Weekly resistance is seen at 1536.9, whereas two layers of weekly 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). In conjunction with weekly action, daily price recently brushed aside the upper edge of a bullish flag (taken from the high 1557.1) and the 50-day SMA (blue – 1504.3). The next upside target from this region falls in at the 1535.6 September 24 high, closely shadowed by resistance at 1550.4.
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 in the times in the past, is considered chancy.
Trading opportunities in this market, therefore, reside at the lower edge of the H4 range at 1481.1-1490.2; others, however, may be waiting for a breakout north to occur. While a break higher may be appealing to some traders, nearby H4 resistance does reside at 1526.2, with a break of this level also leaving little room for manoeuvre to weekly resistance mentioned above at 1536.9.
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