Key risk events today:
BoJ Outlook Report, Monetary Policy Statement and Press Conference; Spanish Flash GDP q/q; Canada GDP m/m; Canada RMPI m/m; US Core PCE Price Index m/m; US Employment Cost Index q/q; US Personal Spending m/m; US Personal Income m/m; US Unemployment Claims; Chicago PMI; SNB Chairman Thomas Jordan Speaks.
EUR/USD:
The Federal Open Market Committee (FOMC) cut its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75% on Wednesday, as expected, but specified the moves to ease policy could be approaching a pause.
Initially, the dollar index advanced following the Fed rate decision. However, through the course of Powell’s press conference, the USD was offered, travelling from a high of 98.00 to 97.45, after Chair Powell signalled rate hikes were not on the table, leaving the bias for monetary policy to be on hold.
EUR/USD action concluded Wednesday on strong footing, adding more than 38 points, or 0.35%.
Chart studies reveal weekly movement trades back within the parapets 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, whereas a push lower has the 2016 yearly opening level at 1.0873 in sight. Concerning trend direction, the primary downtrend has been in motion since topping in early 2018 at 1.2555.
Daily price trades within touching distance of last Monday’s high at 1.1179, closely shadowed by the 200-day SMA (orange – 1.1197) and 61.8% Fibonacci retracement ratio at 1.1211. In terms of the H4 timeframe, resistance at 1.1163 is next in the firing line after establishing support off the 1.11 handle. 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) is seen approaching overbought status (yellow).
Areas of consideration:
Though a reaction may develop from H4 resistance at 1.1163 today, most traders likely have their crosshairs fixed on the 1.12 handle for shorts today. Knowing this barrier merges with the 200-day SMA at 1.1197 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, sellers likely consider this 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:
The British pound modestly extended its advance against the dollar Wednesday, largely on the back of the Federal Reserve cutting its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%. UK lawmakers also approved a bill for setting the next election date to December 12th, with the vote winning 438 to 20. With an election now booked, Brexit news flow may slow as campaigning gets underway.
From a technical standpoint, price action remains pretty much unchanged in terms of structure. H4 flow engages with the 1.29 handle, with a break perhaps cheering a run to the key figure 1.30. As highlighted in Wednesday’s technical briefing, though, a retest at 1.28 is also still in sight. Traders considering longs off this boundary, nevertheless, may want to acknowledge the grey zone sited just beneath, comprised of a weekly support at 1.2739, daily support at 1.2769 and a 161.8% H4 Fibonacci ext. point at 1.2738. Additionally, a potential H4 three-drive formation also terminates within the zone (black arrows) at 1.2755. 1.2738/1.2769 is likely an area price will test should we run stops beneath 1.28.
Areas of consideration:
A decisive H4 close north of 1.29 today could set the technical stage for a bullish theme, targeting the underside of a 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 either typically enter on the breakout candle and position stops beneath the lower shadow or, more conservatively, wait and see if a retest at 1.29 forms before making a decision.
A conservative long from 1.2738/1.2769 is also still a possibility: H4 price to test the zone and close back above 1.28. Entry at the close of the breakout candle with a protective stop-loss order sited beneath its lower shadow is, therefore, an option to consider, targeting a move to 1.29 and possibly higher.
AUD/USD:
AUD/USD bulls entered an offensive phase Wednesday, bolstered by the Fed recently cutting interest rates to a range of 1.5% to 1.75%, and markets continuing to soak up trade-deal optimism.
Technically, though, weekly price is seen 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, as you can see, has served well as support/resistance on several occasions in the past.
Before pressing for higher ground on the weekly timeframe, daily traders must contend with a swing resistance plotted at 0.6910. A break of this level, although helping to confirm a bullish bias, 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.
A closer reading of price action on the H4 timeframe reveals the unit trading north of 0.69, which is typically considered a bullish indicator. Indicator-based traders may also note the relative strength index (RSI) displays bearish divergence out of overbought territory (red line).
Areas of consideration:
AUD/USD’s technical framework, according to our chart studies, is at a critical crossroads. While H4 price recently brushed aside 0.69, the fact we’re trading at the top edge of a weekly range at 0.6894 and daily resistance is in sight at 0.6910, buying may be hampered. Though until H4 price reclaims 0.69 to the downside and possibly even H4 support at 0.6883, selling the higher-timeframe structure is chancy. Sub 0.6883, it appears the pair has room to press to at least August’s opening level at 0.6848 as the initial downside target.
USD/JPY:
Thanks largely to the Fed cutting interest rates and specifying moves to ease policy could be approaching a pause, USD/JPY flow on the H4 timeframe witnessed a horrid stop run take shape through 109, testing highs of 109.28 before ending the day unmoved.
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. As highlighted in Wednesday’s technical briefing, the reasons behind favouring a move lower from 109 stems from higher-timeframe structure 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).
In the event sellers make a stand from the said daily resistances, the 50-day SMA (blue – 107.63) is in view, followed by support at 106.80. The only grumble to a downside move is weekly price exhibiting scope for a pop higher to the 2019 yearly opening level at 109.68, which happens to merge closely with a 127.2% Fibonacci ext. point at 109.56.
Areas of consideration:
Entry at current price is certainly 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.
USD/CAD:
The Canadian dollar fell sharply against its US counterpart Wednesday, with USD/CAD adding more than 70 points, or 0.55%. The Bank of Canada (BoC) kept interest rates unchanged, as expected, though tweaked the conclusion of its statement, noting heightened concerns about the outlook for growth. The day concluded with H4 price testing, albeit marginally surpassing, the 1.32 handle and settling at 1.3158. In addition to the BoC, the US Federal Reserve cut its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%, as expected, but specified the moves to ease policy could be approaching a pause.
Supporting a technical selloff from the 1.32 handle, chart studies also display 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.
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 are facing a southerly position at the moment.
Areas of consideration:
In light of the technical confluence supporting 1.32 as resistance on the H4 scale this morning, this could promote further selling today. 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 dollar selling on the back of recent Fed action weighed on the USD/CHF Wednesday, consequently forming a near-full-bodied daily bearish candle that closed beneath the 50-day SMA (blue – 0.9906). While considered a bearish signal, traders are urged to pencil in nearby support surfacing around the 0.9850ish range.
Supply on the weekly timeframe 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).
After crossing beneath 0.99 on the H4 scale yesterday, the candles ran into an interesting area of support at 0.9852-0.9873 this morning. Confirmed by the relative strength index (RSI) testing oversold territory, the pair 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:
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, is certainly an idea worthy of interest this morning. This could simply be a lower-timeframe 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:
US equities firmed Wednesday following the Federal Reserve cutting interest rates, as expected, and signalling it was unlikely to move in either direction any time soon as inflation remains muted. The Dow Jones Industrial Average added 115.27 points, or 0.43%; the S&P 500 advanced 9.88 points, or 0.33% and the tech-heavy Nasdaq 100 also added 35.60 points, or 0.44%.
For those who read Wednesday’s technical briefing you may recall the following points:
Technically, the Dowholds beneath H4 resistance at 27086, after tunnelling through October’s opening level fixed at 26947 and trend line resistance pencilled in from the high at 27321.
Resistance at 27335 remains a focal point on the weekly chart, sited only a few points south of the all-time high 27388. And, despite a minor setback to 21452, the primary trend in this market remains facing northbound. Research on the daily timeframe shows price holding firmly north of the 50-day SMA (blue – 26676). Both the 50-day SMA and the 200-day SMA (orange – 26202) face north, with the next upside target set at the weekly resistance presented above at 27335.
Clearance of 27086 on the H4 scale potentially offers an early cue to a move towards the said weekly resistance level.
Areas of consideration:
Outlook unchanged.
The area between H4 resistance at 27086 and weekly resistance at 27335 remains of interest this morning. A decisive close beyond 27086 on a H4 basis likely unlocks the door to 27335, offering traders potential long opportunities, either on a retest motion at 27086 or simply entering on the breakout candle’s close.
Given the mild pullback seen in recent H4 candles and the range of the breakout candle, entering on any retest seen at 27086 may be the better path to explore today (entry/risk levels can be set according to the rejection candlestick’s structure).
XAU/USD (Gold):
The yellow metal erased Tuesday’s losses in reasonably robust fashion Wednesday as traders ditched the greenback in favour of bullion. The FOMC cut its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75% on Wednesday, as expected, though specified the moves to ease policy could be approaching a pause.
Technically, 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).
Contrary to the weekly timeframe, daily price, after forming a bullish outside day candlestick formation, is seen testing the upper edge of a bullish flag (taken from the high 1557.1). Note a few points north of this angle we also have a 50-day SMA (blue – 1504.3). The next downside target from this region falls in at a support area drawn from 1448.9-1419.9 (also has a 38.2% Fibonacci retracement ratio aligning with its top edge at 1448.5 – green).
The support area at 1481.1-1490.2 stationed on the H4 timeframe held ground yesterday, pressuring the H4 candles to trend line support-turned resistance (taken from the low 1458.9).
Areas of consideration:
In essence, we have weekly price portending a move higher, daily price suggesting we may be heading lower and H4 action undecided between a trend line resistance and support area. Until a break of either of the said H4 areas is seen, trading this market is challenging. Even then, though, space to move is limited with a H4 resistance area lurking nearby at 1519.9-1512.1 and October’s opening level offering possible support at 1472.8.
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