Key risk events today:
EU Economic Forecasts; BoE Monetary Policy Report, MPC Official Bank Rate Votes; BoE Monetary Policy Summary and Official Bank Rate; BoE Gov. Mark Carney Speaks.
EUR/USD:
Europe’s shared currency shifts into Thursday a shade lower against the buck, retreating from Wednesday’s high at 1.1092. Tier-1 macroeconomic data was limited Wednesday, though better-than-expected Eurozone services PMIs did provide fresh impetus.
On the technical front, H4 price left 1.11 unchallenged and chalked up a strong full-bodied bearish candle going into US hours. 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.
Daily support at 1.1084 was mildly engulfed Tuesday, and was retested as resistance yesterday. The move exposes the 50-day SMA (blue – 1.1038) which appears to have begun flattening. 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:
In similar fashion to Wednesday’s outlook, all three timeframes reflect a somewhat bearish vibe. 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 and serving as resistance, is likely enough to entice sellers towards the 1.10 neighbourhood.
Traders considering a short based on the H4 double top pattern may already be in the market; others, however, may have entered on yesterday’s pullback. Although the H4 timeframe appears set to explore lower ground, a retest of the 1.11 handle is still not out of the question. In fact, this would be an ideal location to consider shorts at this point, as lower-timeframe buy stops would likely be filled above yesterday’s high 1.1092, consequently providing liquidity for a push lower.
GBP/USD:
Limited macroeconomic data out of the UK as well as the political front remaining subdued saw the British pound shed more than 25 points, or 0.20%, against the US dollar Wednesday.
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), is so far holding ground. 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.
Downside was further confirmed 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 – 1.2703).
With respect to the weekly timeframe, price action 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 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:
Whether the H4 shooting star candlestick configuration was enough evidence to sell (before the daily channel support was engulfed) was, of course, trader dependent. Yesterday’s downside break of daily channel support certainly adds weight to the setup and may encourage additional selling today.
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 (and a final take-profit target for shorts), 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:
Down 0.10%, the Australian dollar ceded ground to the buck Wednesday as latest headlines reported November’s phase one deal signing could be delayed to December, according to Reuters citing a US official.
Recent selling pressured H4 flow south of its 0.69 handle and through orders at trend line support extended from the low 0.6723, as well as support drawn from 0.6883, which is now holding as resistance. Further selling from here has support coming in at 0.6809 in sight, along with another trend line support etched from the low 0.6670 and the psychological level 0.68.
With respect to the bigger picture, structure remains unchanged from yesterday’s technical briefing:
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 – 0.6948). The 50-day SMA (blue – 0.6809) 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 close beneath H4 trend line support mentioned above at 0.6723/support at 0.6883 will possibly be viewed as a bearish indicator today, targeting H4 support coming in at 0.6809/trend line support etched from the low 0.6670.
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.
Should the current H4 candle close as is off the underside of resistance at 0.6883, this may be considered a sell signal by some traders; others, however, may require a retest of 0.69.
USD/JPY:
USD/JPY bulls failed to sustain gains north of the 109 handle on the H4 timeframe in recent sessions, as latest headlines reported November’s phase one deal signing could be delayed to December, according to Reuters citing a US official. Support on the H4 scale appears limited, according to our technical studies. Trend line support (extended from the low 104.44) may offer a possible ‘floor’, though at this point traders’ crosshairs will likely be fixed on the 108 handle/October’s opening level priced in at 108.07.
On more of a wider perspective, technical research on the daily timeframe has resistance in play at 109.17, which aligns closely with the 200-day SMA (orange – 109.02). 109.17, as underscored in yesterday’s technical outlook, 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:
Wednesday’s technical outlook had the following to report:
109 on the H4 is a key barrier this morning.
A decisive rejection off the top edge of 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.
Should the current H4 candle close as is, therefore, this may be viewed as a signal to sell, with protective stop-loss orders sited above daily resistance at 109.17.
USD/CAD:
Crude oil snapped a three-day winning streak Wednesday as risk appetite cooled, along with a bearish inventory report. WTI selling weighed on the Canadian dollar, consequently lifting USD/CAD 0.20% higher.
Technical action on the weekly timeframe exhibits a bullish presence at the moment as buyers extend last week’s recovery of 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 – 1.3211), with the 200-day SMA (orange – 1.3273) positioned a few points above.
USD/CAD movement recently re-entered 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 and the approach, on the H4 timeframe, forms by way of an ABCD correction (red arrows).
Areas of consideration:
The H4 resistance area at 1.32/1.3187 is likely eyed by a number of traders this morning for possible shorting opportunities. Not only is it bolstered by daily supply at 1.3239-1.3199, it also comes with a H4 ABCD approach (red arrows).
Conservative sellers may look to enter at current price, though position protective stop-loss orders above the top edge of daily supply at 1.3239. An alternative is to wait and see if H4 action produces a bearish candlestick signal and then base entry and risk levels off this structure.
USD/CHF:
USD/CHF prices finished unmoved Wednesday, ranging no more than 25 points on the day. Considering yesterday’s lacklustre performance, the following report will echo thoughts put forward in Wednesday’s technical research.
The technical setting on USD/CHF 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 topping just south of 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 – 0.9916), consequently exposing the 200-day SMA (orange – 0.9953), followed by a nearby area of familiar resistance at 1.0010/0.9986. Note yesterday’s action formed an indecision doji candlestick pattern off the noted 50-day SMA.
Areas of consideration:
With the 50/200-day SMAs closing in on each other, direction on the daily timeframe is limited for the time being. The fact the 50-day SMA offers support at the moment places a bold question mark on the current H4 trend line resistance.
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 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.
Dow Jones Industrial Average:
Major US equity benchmarks wrapped up Wednesday mixed as investors continue to digest the latest rally that lifted Wall Street’s three main indexes to fresh all-time highs. The Dow Jones industrial average closed unchanged; the S&P 500 added 2.15 points, or 0.07% and the tech-heavy Nasdaq 100 erased 14.15 points, or 0.17%.
The 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). So far, the sellers have been unable to capitalise on the recent topping formation, though at the same time, the buyers also lack oomph.
As underlined in Wednesday’s technical briefing, with little stopping the index from exploring higher ground, the daily bearish candlestick motion might just be enough to force a retest at weekly support coming in at 27335.
Areas of consideration:
Outlook unchanged.
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):
The price of gold, in $ terms, printed a modest recovery Wednesday, reclaiming a portion of Tuesday’s downside move. All in all, though, limited change is visible in terms of technical structure. As such, much of the following piece will represent ideas aired in Wednesday’s report.
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. Additionally, the relative strength index (RSI) is seen exiting oversold territory.
Weekly price trades back at the top edge of 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 navigate 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 trades back within the walls of a descending channel (1557.1/1484.6), though tested the upper limit of this boundary yesterday. A break above here has immediate resistance in the form of the 50-day SMA (blue – 1501.0). 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.
Areas of consideration:
Outlook unchanged.
Technically, the expectation on the H4 timeframe is for 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 channel resistance and 50-day SMA. As such, buying may be problematic at this point.
In the absence of clearer price action, opting to remain on the side lines may be the better path to explore.
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