Key risk events today:
Limited.
EUR/USD:
The euro stood at 1.1125 against the dollar at the close of trade Tuesday, 0.22% weaker. Sellers strengthened their grip following sterling swings after UK Parliament rejected UK PM Boris Johnson’s Brexit timetable.
H4 action on the EUR/USD tunnelled back within its ascending channel on the H4 timeframe (1.0879/1.0999), clocking a session low at 1.1117 and exposing the 1.11 handle. Bolstered by August’s opening level at 1.1079 and support coming in at 1.1084, the 1.1079/1.11 region forms a particularly interesting support area (grey). In addition to this, the market has daily support located just north of the zone at 1.1110. 1.1109 also marks an important swing high on the daily chart (black arrow). The breaking of this level suggests an easing of the primary trend may be on the cards.
Weekly flow, however, is seen attempting an exit from its resistance area at 1.1119-1.1295. According to this scale, limited support is visible until reaching the 2016 yearly opening level at 1.0873. Concerning trend, the primary downtrend has been in motion since topping in early 2018 at 1.2555.
Areas of consideration:
With a possible trend change evident on the daily timeframe, buyers may look to enter the market from the 1.1079/1.11 H4 support zone. Ultimately, the initial take-profit target from this base could be located at 1.12 on the H4 timeframe, which happens to align with the 61.8% Fibonacci resistance on the daily timeframe at 1.1214/the 200-day SMA (orange – 1.1204). The only downside to buying, of course, is weekly price testing its resistance area, and the overall trend. In order to try and circumvent this issue, traders may wish to wait and see if additional candlestick confirmation forms out of 1.1079/1.11 before pulling the trigger. This helps identify buyer intent and provides an additional entry and risk measure.
GBP/USD:
In recent news:
Boris Johnson has hit the pause button on his Brexit legislation after MPs rejected his plan to get it through the Commons in three days. MPs backed his Withdrawal Agreement Bill – but minutes later voted against the timetable, leaving it “in limbo”. After the vote, EU Council President Donald Tusk said he would recommend EU leaders backed an extension to the 31 October Brexit deadline – BBC.
In wake of the government’s recent win/loss, H4 price tested the key figure 1.30 to-the-point, before clocking session lows around 1.2862, heading into Asia Pac sub-1.29. With sell stops below 1.29 likely filled, 1.28 is a viable support level today. This is backed by a resistance area coming in at 1.3019-1.2975 sited on the daily timeframe, which aligns with a 161.8% Fibonacci ext. point at 1.2978 (pencilled in from the low 1.1958). Continued selling here has support located at 1.2769, closely shadowed by the 200-day SMA (orange – 1.2712).
Weekly movement remains trading in no man’s land, with focus on supply at 1.3472-1.3204 and long-term trend line resistance (etched from the high 1.5930), and the 2019 yearly opening level at 1.2739 (support).
Areas of consideration:
From a technical perspective, sellers appear to have the upper hand. The break of 1.29, which may hold as resistance today, could serve as a platform to consider shorting opportunities, targeting 1.28 as the initial support target. An ideal scenario is a retest at 1.29 shaped by way of a H4 bearish candlestick formation. Not only will this help identify seller intent, it offers entry and risk levels to work with.
AUD/USD:
Tuesday had the Australian dollar a shade lower vs. its US counterpart, erasing 11 points, or 0.17%. Although snapping a four-day winning streak, hopes of a trade resolution between the US and China appears to be supporting trade-sensitive antipodeans.
Considering the lacklustre week thus far, points aired in previous technical reports will be shared in today’s analysis.
From the weekly timeframe, we can see that since engulfing 0.6744 (blue dashed) in early August, the AUD/USD has been carving a consolidation zone between 0.6894/0.6677 (grey). With the primary downtrend in play since early 2018, the current consolidation may eventually breakout to the downside, despite recent buying. A decisive push lower likely clears the runway to as far south as 0.6359 (not visible on the screen).
After dethroning resistance at 0.6808 on the daily timeframe (now acting support), battle lines going forward rest at swing resistance drawn from 0.6910, set just north of the September 12th high 0.6894. Overhead, it may also interest some traders to note the 200-day SMA (orange – 0.6966) is seen lurking nearby.
H4 movement recently engulfed channel resistance (extended from the high 0.6773) as well as August’s opening level at 0.6848. With limited supply evident to the left of current price (green), a test of 0.6894 could be in store, closely followed by the 0.69 handle.
Areas of consideration:
Outlook unchanged.
According to H4 and daily structure, additional medium-term buying could emerge. A retest at the point H4 channel support and August’s opening level at 0.6848 unite (yellow) is a possibility for potential longs. Failure here could imply a dip to daily support at 0.6808 and the 0.68 handle on the H4.
As underscored above, the 0.69ish region represents a logical upside target off 0.6848, whereas buying from 0.6808, in the event of a dip lower, 0.6848 would then be considered the initial take-profit target.
Irrespective of the support area selected, conservative traders threatened by the overall downtrend might opt to wait for additional confirmation before committing funds to a long position. This could be as simple as a bullish candlestick pattern forming, or even drilling down to the lower timeframes and attempting to trade local structure, a trend line break/retest formation, for example.
USD/JPY:
Brexit-related fears spurred demand for safe-haven assets Tuesday, with USD/JPY movement eking out marginal losses. In recent hours, however, the pair extended losses, in tune with Japan’s Nikkei 225 index, which started the day firm though rapidly pared gains and moved into negative territory.
Holding south of August’s opening level at 108.74 on the H4 scale, recent selling could draw in the 108 handle today on USD.JPY. Note 108 signifies an interesting area of support, given it coincides closely with a 38.2% Fibonacci retracement, October’s opening level at 108.07 and a potential 127.2% AB=CD correction (blue arrows) at 108.11.
Higher-timeframe structure remains unchanged:
In terms of areas to keep an eye on the weekly timeframe, Quasimodo support at 105.35 remains the next obvious downside target, while to the upside, the 2019 yearly opening level falls in as the next resistance at 109.68, merging closely with a 127.2% Fibonacci ext. point at 109.56 (taken from the low 104.44).
Daily price, on the other hand, has a collection of resistances in view between 109.17/108.99, comprised of a resistance level, the 200-day SMA (orange/109.06 – seen flattening) and a Quasimodo resistance. In the event further selling is seen, support at 106.80 is in sight, set just south of the 50-day SMA (blue – 107.34) which is currently facing north.
Areas of consideration:
Technically, a bounce from the 108 handle on the H4 timeframe is certainly a possibility today, in light of its surrounding confluence. With a H4 trend line support (etched from the low 104.44) lurking just beneath 108, though – enticing a possible fakeout scenario – market structure urges traders to consider waiting for a confirmed test at 108 to emerge before committing. A H4 bullish candlestick signal would suffice – entry and risk can then be measured according to this structure.
As for upside targets out of 108, waiting for the AB=CD formation to complete and taking the 38.2% and 61.8% retracement ratios of legs A-D is an option.
USD/CAD:
Results from the autumn Business Outlook Survey indicate that business sentiment improved slightly, but regional differences are more pronounced, according to the Bank of Canada.
Crude oil prices extended gains in late morning trade, after Reuters reported OPEC were to consider deeper oil cuts at its December meeting.
USD/CAD action, as evident from the H4 chart, bottomed at 1.3071 in early trade Tuesday, whipsawed above 1.31 to resistance at 1.3115 – a Quasimodo support-turned resistance level, and later reclaimed 1.31 back to the downside and is now seen retesting the figure as resistance as we head into Asia Pac hours. Aside from yesterday’s low at 1.3071, H4 support is not expected to develop until reaching 1.3028 (not visible on the screen).
In terms of weekly flow, support is not expected to emerge until the 1.3015 July 15 low, followed by Quasimodo support stationed at 1.2887. This follows a recent bearish engulfing candle sited just south of the 2017 yearly opening level at 1.3434. The primary trend has remained north since bottoming in September 2017 (1.2061). Currently, though, the candles appear to be in a secondary downtrend, with its peak at 1.3661.
A closer reading of price action on the daily timeframe reveals the unit to be testing ABCD (black arrows) reversal zone (yellow) between the 127.2% Fibonacci extension point at 1.3066 and the tip of the ABCD correction at 1.3096, following an engulf of support at 1.3136 (now serving as resistance).
Areas of consideration:
In order to confirm upside out of the current daily support zone at 1.3066/1.3096, traders are urged to wait for a H4 close above Quasimodo support-turned resistance at 1.3139. Not only will this likely clear the daily resistance at 1.3136, it potentially unbolts the door for further upside to August’s opening level at 1.3187, closely followed by 1.32.
USD/CHF:
Following the minor break of a major swing low on the H4 timeframe at 0.9843 last Friday, the USD/CHF spent Monday and Tuesday chalking up recovery candles. The move engulfed supply at 0.9890 (green arrow), likely tripping stops, and tested September’s opening level at 0.9896, set just south of 0.99.
0.99 is a particularly interesting level this morning, having seen it converge closely with the 50-day SMA (blue – 0.9892) on the daily timeframe and the underside of a weekly supply area at 1.0014-0.9892.
Areas of consideration:
Keeping it simple, a rejection from 0.99 is a possibility this morning, owing to its surrounding higher-timeframe confluence, targeting Friday’s low at 0.9839 as the initial port of call, followed by the 0.98 handle.
With psychological numbers often falling victim to fakeouts, traders may consider holding fire and waiting for additional candlestick confirmation to form before committing funds to a position – think bearish engulfing pattern or shooting star candlestick patterns (entry/risk can be set according to this structure).
Dow Jones Industrial Average:
US stocks nudged lower Tuesday as traders digested the latest round of Brexit news – MPs rejected Boris Johnson’s plan to get it through the Commons in three days. MPs backed his Withdrawal Agreement Bill – but minutes later voted against the timetable, leaving it “in limbo” (BBC). The Dow Jones Industrial Average erased 39.54 points, or 0.15%; the S&P 500 also declined 10.73 points, or 0.36% and the tech-heavy Nasdaq 100 lost 65.72 points, or 0.83%.
Technically the Dow’s H4 candles trade south of August’s opening level at 26799 in Asia following the recent bearish outside formation, little stopping the unit from extending recent selling to September’s opening level at 26398, which happens to coincide with a 50.0% support value and a 61.8% Fibonacci ratio at 26419.
Research on the daily timeframe shows supply between 27110-26813 (blue – positioned just south of weekly resistance at 27335) regained consciousness Friday and has so far held ground this week. This focuses the spotlight on a potential test of the 50-day SMA (blue – 26574). Both the 50-day SMA and the 200-day SMA (orange – 26139) face north.
Areas of consideration:
Assuming the H4 candles remain in the driving seat sub 26799, knowing we’re coming from daily supply at 27110-26813, a sell could be on the cards.
Entry at current price is certainly an option, with a protective stop-loss order positioned above yesterday’s high 26908, targeting the 50-day SMA at 26574 as the initial take-profit zone, followed by September’s opening level mentioned above on the H4 timeframe at 26398.
XAU/USD (GOLD):
Since October 11, the yellow metal has been compressing within a symmetrical triangle formation (1497.4/1473.8) on the H4 timeframe. Nearby support falls in at a 127.2% Fibonacci extension point at 1477.8, which is closely shadowed by October’s opening level at 1472.8. To the upside, a familiar resistance zone is present at 1519.9-1512.1, seen just south of September’s opening level at 1526.2.
Irrespective of the direction price breaks from the current symmetrical triangle, the take-profit target can be measured by adding the base of the triangle to the breakout point.
Despite having its lower edge breached three weeks back, the weekly support area at 1487.9-1470.2 remains in the fight. 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 push for lower ground. In terms of the longer-term primary trend, gold has been trading northbound since the later part of 2015 (1046.5).
Daily flow shows a bullish flag has been in motion since early September (1557.1/1485.3). Recently, however, the unit crossed beneath its 50-day SMA (blue – 1505.4), consequently opening downside to a possible test of a support area coming in at 1448.9-1419.9 (bolstered by a 38.2% Fibonacci ratio 1448.5 and the lower edge of the daily flag [1485.3]).
Areas of consideration:
Technicians are likely waiting in anticipation of the H4 symmetrical triangle’s breakout. Entry following the break, of course, will be trader dependent. A simple approach, nevertheless, might be to buy/sell on the close of the breakout candle and position stops beyond the outer edge of the opposite triangle limit. An alternative is to wait and see if a retest forms at the underside of the broken triangle. The rejection candle can subsequently be used to base entry and risk levels from.
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