Key risk events today:
Canada Employment Change and Unemployment Rate; US Prelim UoM Consumer Sentiment; FOMC Member Williams and Brainard Speak.
EUR/USD:
The European shared currency traded lower against the buck Thursday, erasing more than 0.15% and recording its fourth successive losing session. The dollar index firmed yesterday, breaching 98.00 to the upside as US Treasury yields rose sharply – 10-year note trades at 1.919% – amid positive US/China trade headlines that triggered safe-haven outflows.
EUR/USD price action on the H4 scale extended losses south of the 1.11 handle, clocking lows at 1.1036 – levels not seen since mid-October.
As underscored in Wednesday’s technical research, a distinct double-top pattern has formed (peaks plotted at 1.1179/1.1175) after breaking the 1.1073 October 24 low (the confirmation point). Some technicians would label the peaks as an ‘eve and eve’ formation, considered to be a higher-probability pattern. 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.
On more of a broader outlook, sellers show promise at the underside of the current weekly resistance area drawn from 1.1119-1.1295. Further downside from this point could make a run for the lower limit of the descending channel taken from the low 1.1109/the 2016 yearly opening level at 1.0873.
Upside attempts on the daily timeframe remain capped by resistance at 1.1084. Yesterday’s move, however, drew in the 50-day SMA (blue – 1.1039) which appears to have begun turning to the upside. Beyond this line, limited support is visible until crossing paths with familiar demand at 1.0851-1.0950 – houses the 2016 yearly opening level mentioned above on the weekly timeframe at 1.0873.
Areas of consideration:
Traders short the H4 double top pattern likely have their crosshairs firmly fixed on the 50-day SMA today. A break of this line, according to our technical studies, confirms the downside bias. The initial take-profit target, as underscored above, is set around the key figure 1.10. Considering its local confluence (sited close by September’s opening level at 1.0989 and a 61.8% Fibonacci retracement ratio at 1.0994), active buying is expected. However, with higher-timeframe structure suggesting a move to as low as the top edge of daily demand plotted at 1.0950, an intraday bounce is the expectation.
GBP/USD:
The British pound navigated lower ground versus the US dollar Thursday, shedding more than 40 points, or 0.33%. The Bank of England (BoE) left interest rates unchanged at 0.75%, as expected, though policy makers voted 7-2 to keep borrowing costs on hold this month, with the surprise dissent prompting a slide in the pound.
Tuesday’s retest at the underside of 1.29 on the H4 timeframe, shaped by way of a shooting star candlestick formation (considered a bearish signal), shook hands with its initial take-profit target yesterday: the 1.28 handle. Well done to any readers who managed to take advantage of this move.
Downside found additional support Wednesday after the daily channel resistance-turned support (extended from the high 1.2582) gave way, consequently exposing daily support pencilled in at 1.2769, closely shadowed by the 200-day SMA (orange – 1.2702).
With respect to the weekly timeframe, price action has entered a somewhat indecisive phase over the past three weeks. A retest at 1.2739 – the 2019 yearly opening level – or additional upside towards supply at 1.3472-1.3204/long-term trend line resistance etched from the high 1.5930 is certainly something to keep an eye out for, however. 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.
Areas of consideration:
With 1.28 recently entering the mix, short sellers have likely liquidated a large portion of their positions.
Beneath 1.28, shaded in grey, the 1.2739/1.2769 area is possibly of interest today as support (and a final take-profit target for shorts), made up of weekly and daily supports highlighted above.
A bounce from 1.2739/1.2769 followed up with a break back above 1.28 on a H4 closing basis could entice buyers into the market. Entry on the close of the candle is then an option, with protective stop-loss orders either plotted beneath 1.2739 or the lower shadow of the breakout candle.
AUD/USD:
Upbeat trade headlines suggesting the US and China agreed to roll back tariffs at an equally gradual pace as part of the phase-one trade deal witnessed antipodeans gather strength Thursday.
AUD/USD price action settled a touch beneath the 0.69 handle, capped by a trend line support-turned resistance extended from the low 0.6723. Pressing higher from here has tops set around the 0.6928 neighbourhood, followed by H4 resistance priced in at 0.6957.
More broadly, however, as highlighted in previous reports, 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 cognisant 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 – 0.6946). The 50-day SMA (blue – 0.6813) 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:
With buyers and sellers squaring off around the 0.69 region this morning, technical studies suggest sellers have the upper hand, in terms of resistance structure on all three timeframes analysed above. Should a notable H4 bearish candlestick signal form from 0.69 today, this may encourage a run lower, targeting yesterday’s session low at 0.6861, followed by H4 support coming in at 0.6809/trend line support etched from the low 0.6670.
USD/JPY:
In recent sessions, the market witnessed the US dollar index, or DXY, take to higher ground and puncture its 98.00 band. Additionally, US Treasury yields bumped higher with the 10-year note trading at 1.919%. In terms of trade headlines, the US and China have reportedly agreed to roll back tariffs at an equally gradual pace as part of the phase-one trade deal.
Trade optimism dented demand for safe-haven assets Thursday, consequently guiding the USD/JPY northbound and breaking the 109 handle to highs of 109.48. The next upside hurdle on the H4 timeframe falls in around Quasimodo resistance at 109.74 (not visible on the screen).
With the break of 109 to the upside, along with daily price recently engulfing its 200-day SMA (orange – 109.02), USD/JPY buyers remain on strong footing. However, considering the weekly timeframe has yet to conquer the 2019 yearly opening level nearing at 109.68 and a 127.2% Fibonacci ext. point at 109.56 (taken from the low 104.44), the uptrend may yet face a potential ceiling.
Areas of consideration:
While a number of traders will have eyes on 109 as a point of potential support today, the fact we came within 8 points of connecting with weekly structure is concerning. Therefore, a cautious stance in regards to longs is recommended today.
In the event we continue to punch higher from current price and cross swords with H4 Quasimodo resistance at 109.74, selling this market countertrend is an option. Knowing the Quasimodo resistance boasts additional backing from weekly structure is certainly appealing. Given this is a countertrend trade, though, traders may find comfort in waiting for additional H4 bearish candlestick confirmation to form before pulling the trigger (entry/risk levels can then be set according to this pattern).
USD/CAD:
USD/CAD movement remains languishing sub 1.32 on the H4 scale, bolstered by 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 (green). A break above here could see a run to October’s opening level at 1.3239 materialise. With WTI prices gaining traction following Wednesday’s modest retreat, the commodity-sensitive Canadian dollar remained resilient against the greenback Thursday.
With respect to higher-timeframe action, as underlined in previous reports, weekly price exhibits a bullish presence at the moment as buyers extend last week’s recovery off trend line support (extended from the low 1.2061) in reasonably strong fashion. 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. The key observation on the daily timeframe is supply at 1.3239-1.3199. Intersecting with this area is the 50-day SMA (blue – 1.3208), with the 200-day SMA (orange – 1.3274) positioned a few points above.
Areas of consideration:
The H4 resistance area at 1.32/1.3187 is still likely eyed by a number of traders for possible shorting opportunities, as its bolstered by daily supply at 1.3239-1.3199. Downside targets from this point has the 1.3115 November 5 low in sight, shadowed closely by the 1.31 handle.
USD/CHF:
The safe-haven Swiss franc was a clear underperformer Thursday amid positive trade headlines between the US and China.
USD/CHF activity added more than 20 points, or 0.23%, drawing the market to highs at 0.9975. H4 structure reveals recent upside topped just south of an interesting area of resistance (green) between 1.0000 (parity), a Quasimodo resistance at 0.9989 and October’s opening level at 0.9977. What’s more, the approach is close to completing an ABCD correction (red arrows) which terminates at 0.9982.
The technical setting on the bigger picture, nevertheless, has weekly flow trading within the parapets of 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 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, on the other hand, recently crossed paths with the 200-day SMA (orange – 0.9953), sited just south of a resistance area coming in at 1.0010/0.9986. Note the 50-day SMA (blue – 0.9918) remains supportive.
Areas of consideration:
The green area on the H4 scale between 1.0000/0.9977 is still 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 and comes complete with an H4 ABCD correction. A sell from here has the 200-day SMA set as the initial target.
Dow Jones Industrial Average:
Wall Street’s main equity indexes, the Dow Jones industrial average and the S&P 500, closed at fresh records Thursday, as investors digested latest headlines surrounding trade between the US and China over a new agreement to cancel tariffs in stages. The Dow Jones industrial average added 182.24 points, or 0.66%; the S&P 500 added 8.40 points, or 0.27% and the tech-heavy Nasdaq 100 advanced 23.62 points, or 0.29%.
From A technical standpoint, the Dow’s H4 candles trade within an ascending channel formation taken from a low of 25710 and a high at 26620. A retest of the channel’s support is certainly an option today, with a break of this barrier portending an approach towards weekly support coming in at 27335.
Areas of consideration:
Technically, the market likely has eyes on H4 channel support highlighted above. A retest of this line – coupled with a H4 bullish candlestick configuration – is likely sufficient to prompt another run higher. Entry and risk can be calculated according to the H4 candlestick’s parameters, targeting the previous day’s high as the initial take-profit target.
XAU/USD (GOLD):
Safe-haven markets tumbled Thursday in response to the latest headlines surrounding trade between the US and China. Down 1.48%, the price of gold fell from a high of 1492.1 to a low at 1460.8, placing the yellow metal at a weekly loss of nearly 3.00%.
Technically speaking, H4 price shattered the lower edge of a month-long range between a support area coming in at 1481.1-1490.2 and a resistance zone at 1519.9-1512.1. Selling also overthrew nearby support in the form of October’s opening level at 1472.8 and finished the day mildly paring losses off Quasimodo support pencilled in at 1464.2.
The story on the higher timeframes, however, reveals daily price respected channel resistance (extended from the high 1557.1) yesterday and is now poised to challenge a nearby support area coming in at 1448.9-1419.9 (aligns closely with a 38.2% Fibonacci retracement ratio at 1448.5). In terms of the weekly timeframe, buyers struggle to hold the support area at 1487.9-1470.2, with a decisive push beneath here potentially setting the long-term stage for a move towards two layers of support at 1392.0 and 1417.8.
Areas of consideration:
Seeing weekly price have a hard time at its current support area and daily price exhibit scope to press lower, buying the reaction off the H4 Quasimodo support at 1464.2 is chancy and unlikely to breach October’s opening level at 1472.8. A bearish theme, therefore, would be open should a H4 close form beneath 1464.2, targeting 1448.9 (the top edge of the daily support area) as the initial take-profit zone.
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