Key risk events today:
German Prelim CPI m/m; US ADP Non-Farm Employment Change; US Advance GDP q/q; US Advance GDP Price Index q/q; BoC Monetary Policy Report, Rate Statement, Overnight Rate and Press Conference; Crude Oil Inventories; FOMC Statement, Federal Funds Rate and FOMC Press Conference.
EUR/USD:
Europe’s shared currency settled a touch higher against the buck Tuesday, underpinned by less-than-stellar US consumer confidence data. According to the US Conference Board, consumer confidence decreased marginally in October, following a decline in September. The Index now stands at 125.9 (1985=100), down from 126.3. This indicator reflects prevailing business conditions and likely developments for the months ahead.
Chart studies reveal the 1.11 handle suffered a break to the upside following the news release, though shortly after encountered mild selling pressure off a H4 trend line support-turned resistance (taken from the low 1.0879). Failure to cap upside here could result in increased demand for the euro to as far north as H4 resistance at 1.1163, as limited supply is seen to the left of current price (green arc).
Against the backdrop of medium-term flow, higher-timeframe movement has daily price tackling resistance priced in at 1.1110. A decisive push beyond this plane exposes last Monday’s high at 1.1179, closely shadowed by the 200-day SMA (orange – 1.1198) and the 61.8% Fibonacci retracement ratio at 1.1211. Weekly flow, as underlined in Monday’s technical briefing, trades at the underside of a long-standing resistance area drawn from 1.1119-1.1295. Increased selling from here has the 2016 yearly opening level at 1.0873 to target. Concerning trend direction, the primary downtrend has been in motion since topping in early 2018 at 1.2555.
Areas of consideration:
The recent break above 1.11 could simply be a run of stops to push lower, according to chart studies. Of course, we will only know this to be true if H4 price reclaims 1.11 to the downside. However, the fact we have a weekly resistance area in play along with a daily resistance level, structurally this suggests sellers may have the upper hand at the moment.
Consequently, buying the break of 1.11 is considered a chancy move today. A H4 close back beneath 1.11, nonetheless, will likely fuel a move to at least 1.1062/the 50-day SMA (blue – 1.1035), and may be something that interests sellers.
GBP/USD:
The British pound advanced vs. the dollar Tuesday amid headlines the UK government won the vote for an early General Election on December 12th, with 438 votes for, and 20 against. Although a step closer to certainty, the 1.29 handle held firm and saw price trim the majority of intraday gains into the close. Technically, the day ended in the shape of a long-legged daily doji candlestick formation, signifying indecision.
The likelihood of a retest at 1.28 on the H4 timeframe is still in sight, according to our technical studies. Traders considering longs off this boundary, though, may want to acknowledge the grey zone sited just beneath, made up 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:
Outlook unchanged.
A conservative long from 1.2738/1.2769 is for H4 price to test this 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, according to higher-timeframe action which shows room to press as far north as a daily resistance area at 1.3019-1.2975.
AUD/USD:
Kicking off with a look at the higher-timeframe technical picture this morning, weekly price, as underscored in Monday’s technical briefing, remains consolidating between 0.6894/0.6677 (light grey). With the primary downtrend in play since early 2018, the current consolidation may eventually breakout to the downside, despite price action toying with its upper edge at the moment. A decisive push lower likely clears the airstrip to as far south as 0.6359 (not visible on the screen).
Price action on the daily timeframe reveals the unit established a ‘floor’ ahead of support at 0.6808 in recent movement and remains on the front foot this week. Below 0.6808 we have the 50-day SMA lurking nearby (blue – 0.6791), which is currently facing northbound after a sizeable downside move. Aside from 0.6882 and the 0.6894 September 12 high, swing resistance resides around 0.6910.
Recent upside on the H4 scale dethroned August’s opening level at 0.6848 and, as of current price, appears poised to retest the level as support today. Resistance on this scale falls in close by at 0.6883, with a break suggesting a run to the 0.69 handle. Beneath 0.6848, a familiar support area is seen between 0.68/0.6809 (formed by a trend line support extended from the low 0.6670, the round number 0.68, a support level at 0.6809, a 50.0 retracement ratio at 0.6803 and a 38.2% Fibonacci retracement ratio at 0.6802).
Areas of consideration:
Outlook unchanged.
In terms of technical confluence, the 0.68/0.6809 support area on the H4 timeframe remains of interest for potential long scenarios this week. In the event we hold firm above August’s opening level at 0.6848, as highlighted in Tuesday’s briefing, an intraday long may also be an option, targeting the 0.6883 as the initial port of call.
Conservative traders threatened by the overall downtrend, however, might opt to wait for additional confirmation before committing funds to a long position. This could be as simple as a H4 bullish candlestick pattern, or even drilling down to the lower timeframes and attempting to trade local structure, a trend line break/retest formation, for example.
USD/JPY:
US equities, specifically the Dow Jones Industrial Average, revealed a pause in upside movement Tuesday, finding a temporary ceiling off H4 resistance at 27086. This – coupled with the 10-year US Treasury yield capped at 1.84% and the US dollar index closing lower for a second successive session – mildly weighed on the USD/JPY yesterday.
From a technical standpoint, following on from recent reports, the 109 handle has been a level of interest for some time, due to its mouth-watering connection with daily resistances 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 addition to this, the 109 handle also came with bearish H4 RSI divergence (blue line).
In the event sellers make a stand from the said daily resistances, support at 106.80 is in view, fixed south of the 50-day SMA (blue – 107.54) which is currently facing north. 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:
Traders with short positions off 109 and protective stop-loss orders sited above daily resistance at 109.17 are in a reasonably good position this morning, with the likelihood of 108.70 (the first downside target on the H4 timeframe) entering the mix today. A break beneath here has H4 support at 108.41 to target, followed by the 108 handle/September’s opening level at 108.07.
USD/CAD:
The Canadian dollar fell sharply across the board Tuesday amid declining WTI prices, a day before the BoC meeting. USD/CAD movement kicked lower to 1.3042 before rotating higher and testing the 1.31 handle on the H4 scale. For those who read Tuesday’s technical briefing you may recall the following pieces:
From the weekly timeframe, we can see the pair has traded lower for three consecutive weeks – each session shaped in the form of a near-full-bodied bearish candle. Support is not expected to emerge until the 1.3015 July 15 low, followed by Quasimodo support stationed at 1.2887. The primary trend has remained north since bottoming in September 2017 (1.2061). Currently, though, the candles appear to be in a secondary downtrend after breaking trend line support (extended from the low 1.2247), with a market peak at 1.3661.
According to the daily timeframe, the stage appears set for a run towards 1.3015 (essentially the July 15 low highlighted on the weekly timeframe). However, following yesterday’s daily bullish outside candlestick formation, this may entice buyers into the market.
Areas of consideration:
Despite the recently formed daily bullish candlestick pattern, sellers still appear to have the upper hand. A decisive retest seen at the underside of 1.31, shaped in the form of a H4 shooting star candlestick pattern (considered a bearish signal), recently took shape, which was a noted move to keep an eye out for in Tuesday’s report. Entry at current price could be an option, with protective stop-loss orders plotted either above the upper shadow of the H4 shooting star (1.3100) or H4 resistance at 1.3115.
Continued selling from current price will likely land the H4 candles at 1.3028, the H4 support, bolstered by the 1.3015 July 15 low on the weekly timeframe.
USD/CHF:
The US dollar concluded a shade lower against the Swiss franc Tuesday, weighed on by trend line resistance extended from the high 1.0027 on the H4 timeframe. The move lower drew in August’s opening level at 0.9934, holding firm into the close by way of mild lower candlestick shadows. A push higher from here and engulf of the said trend line resistance exposes October’s opening level at 0.9977, a trend line support-turned resistance taken from the low 0.9843, Quasimodo resistance at 0.9989 and the key figure 1.0000 (parity). Sub 0.9934, on the other hand, has the 0.99 handle in sight, closely shadowed by September’s opening level at 0.9896.
With respect to the higher timeframes, here’s what Tuesday’s technical briefing reported:
Supply on the weekly timeframe at 1.0014-0.9892 remains in play though does highlight somewhat of a delicate 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. Furthermore, a potential ABCD correction (black arrows) at 1.0214 implies higher prices could be on the cards, engulfing Quasimodo resistance at 1.0124 and drawing in trend line support-turned resistance extended from the low 0.9187. 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).
In recent movement, daily price tested the 200-day SMA (orange – 0.9955) which held firm by way of back-to-back shooting star candlestick patterns (considered a bearish signal). Downside from this angle could see the 50-day SMA (blue – 0.9907) re-enter the fold.
Note the underside of a daily resistance area marks the 0.9986 point (positioned above the 200-day SMA), sited only a few points north of October’s opening level at 0.9977 on the H4. The H4 trend line support-turned resistance, as of current price, aligns almost to-the-point with the underside of the daily structure. Therefore, between 1.0000 and 0.9977 (green) on the H4 appears a reliable location to consider searching for shorting opportunities.
Areas of consideration:
A break of the H4 trend line resistance will likely trip a number of buy stops, filling orders from traders attempting to fade the descending line and those anticipating a breakout higher. These orders offer liquidity for bigger players to short from 1.0000/0.9977 (green). Traders not comfortable selling at 0.9977 and positioning protective stop-loss orders above 1.0000 may elect to wait and see how price action behaves before pulling the trigger. For example, a lower-timeframe bearish flag may form or an ascending wedge or even a diamond top, each offering high-probability opportunities to jump aboard any downside move generated out of 1.0000/0.9977.
A H4 close beneath 0.9934 today may open the door to intraday bearish scenarios towards 0.99. Traders, here, however, are urged to ensure risk/reward is satisfactory given the possibility support may enter the fight before 0.99 at 0.9907: the 50-day SMA.
Dow Jones Industrial Average:
US stocks finished lower Tuesday, a day after the S&P 500 index scored a record close and a day before the Federal Reserve meeting which is expected to deliver another interest rate cut. The Dow Jones Industrial Average erased 19.30 points, or 0.07%; the S&P 500 declined 2.53 points, or 0.08% and the tech-heavy Nasdaq 100 also declined 63.16 points, or 0.78%.
Technically, the Dow witnessed limited change in terms of price movement, holding 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.
XAU/USD (Gold):
Gold, according to the weekly timeframe’s technical setting, remains toying with the top edge of a 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 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 shows the upper edge of a bullish flag entered the mix in the later stages of last week (taken from the high 1557.1) and has held price lower this week. Note the top edge of the bullish flag merges closely with a 50-day SMA (blue – 1504.9) and formed a beautiful shooting star bearish signal Friday. The next downside target from this region falls in at a support area drawn from 1448.9-1419.9 (has a 38.2% Fibonacci retracement ratio aligning with its top edge at 1448.5).
Recent selling on the H4 timeframe overthrew local trend line support etched from the low 1458.9 and re-entered the walls of a familiar support area at 1481.1-1490.2. The break of the trend line support, coupled with daily price portending a strong bearish tone at the moment, places a bold question mark on the said H4 support zone. The only thing backing this area right now is the fact we remain at a weekly support area mentioned above at 1487.9-1470.2.
Areas of consideration:
Neither a long nor short appears attractive at the moment. Irrespective of the price direction selected, clear viable opposition is nearby. In cases such as this, settling for no position Is often the better position.
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