Key risk events today:
UK Manufacturing PMI; US Average Hourly
Earnings m/m; US Non-Farm Employment Change; US Unemployment Rate; US ISM
Manufacturing PMI; FOMC Members Clarida and Williams Speak.
EUR/USD:
Europe’s common currency finished
unmoved against the buck Thursday, unresponsive to European growth and
unemployment indicators.
Technically, this drove an indecisive
close, shaped in the form of a daily doji candlestick pattern sited a few
points south of last Monday’s high at 1.1179, the 200-day SMA (orange – 1.1196)
and a 61.8% Fibonacci retracement ratio at 1.1211.
Heading into the final day of the week
where participants eye the US jobs report, Fed speak and national ISM manufacturing
data, H4 action trades just beneath the base of resistance coming in at 1.1163
after a failed attempt at a breach. 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) on the H4 trades a touch below its overbought value.
Chart studies on the weekly timeframe
reveal price remains engaging with the underside 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, while a push lower has the 2016 yearly opening level
at 1.0873 in sight. Regarding trend direction, the primary downtrend has been
in motion since topping in early 2018 at 1.2555.
Areas of
consideration:
Unchanged from Thursday’s outlook.
Though H4 resistance at 1.1163 held
yesterday, most traders still likely have their crosshairs fixed on the 1.12
handle for shorts. Knowing this barrier merges with the 200-day SMA at 1.1196
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, this represents 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:
Sterling chalked up its fourth
successive close vs. the dollar Thursday, clocking highs of 1.2975. With
month-end flows likely a factor alongside a fading dollar index, GBP/USD trades
firm north of the 1.29 handle this morning, poised to approach the key figure
1.30, based on H4 structure. Note 1.30 held price lower on two occasions during
October, strengthened by a daily resistance area plotted at 1.3019-1.2975 and a
161.8% Fibonacci ext. ratio at 1.2978. Traders may also wish to note the
relative strength index (RSI) rotated lower from overbought status in recent
movement.
With respect to weekly price – following
an engulf of the 2019 yearly opening level at 1.2739 – action remains stable,
with the possibility of a retest forming at 1.2739 or additional upside towards
supply at 1.3472-1.3204 and long-term trend line resistance etched from the
high 1.5930.
Areas of consideration:
The break of 1.29 has potentially set
the technical stage for a bullish theme, targeting the underside of the 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, as of current price, may be watching for a
retest at 1.29 to emerge before committing funds to a position. Should this
unfold prior to the US job’s numbers, taking a position before a big event is
chancy. Generally, it’s best to let the event take its course and then re-evaluate
the situation, rather than be whipsawed on a news spike.
AUD/USD:
Action kicked off on a strong footing
Thursday, strengthened on the back of upbeat Australian building approvals in September.
The move, however, was reasonably short lived, topping at 0.6929 and
consequently reclaiming the 0.69 handle on the H4 timeframe to the downside in
early London. As is evident from the chart, price concluded the day a touch
north of support coming in at 0.6883, with a break lower likely portending a
run towards August’s opening level at 0.6848. Technicians who watch the
relative strength index (RSI) may also wish to note bearish divergence out of
overbought terrain recently completed and forced an exit lower.
In terms of weekly price, the unit is 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 has served
well as support/resistance on several occasions in the past.
Before pressing for higher ground on the
weekly timeframe, though, daily traders must contend with a swing resistance
plotted at 0.6910 – held price lower yesterday by way of a half-hearted
shooting star pattern (considered a bearish signal). A break above this level 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.
Areas of consideration:
Outlook similar to Thursday’s technical briefing.
AUD/USD’s technical framework, according
to our chart studies, remains at a crossroads. While H4 price recently brushed
aside 0.69 and likely tripped a truckload of buy stops, the fact we’re trading
at the top edge of a weekly range at 0.6894 and at daily resistance drawn from
0.6910, buying may be hampered.
Should we tunnel through 0.6883 today, selling
higher-timeframe structure is an option, targeting at least August’s opening
level at 0.6848, perhaps followed by a move to H4 support at 0.6809/daily support
at 0.6808.
USD/JPY:
Trade concerns regarding the US and
China resurfaced Thursday after China voiced doubt about the possibility of a
long term-trade pact with US President Trump. This weighed on market sentiment,
consequently ramping up demand for the safe-haven Japanese yen.
Down 80 points, or 0.74%, USD/JPY action
wrapped up the day closing just north of 108 in the shape of a near-full-bodied
daily bearish candle. Additional layers of H4 support can be seen here at
108.07, October’s opening level, and trend line support extended from the low 104.44.
Despite this, early movement this morning nudged beneath 108 and is challenging
the said trend line support, with a break suggesting a move to 107.
With reference to higher-timeframe
structure, daily price sold off following Wednesday’s shooting star candlestick
pattern (considered a bearish signal) out of daily resistance 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). The next downside target on this scale falls
in close by at the 50-day SMA (blue – 107.67), followed by support at 106.80.
Areas of consideration:
Traders who read Thursday’s technical
briefing may recall the following piece:
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.
Entry at current price is 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.
Well done to any readers who managed to take
advantage of this move.
Going forward, a break of the current H4
trend line support is eyed, which if followed up with a retest (entry/risk can
be set according to the rejection candle’s structure), a bearish play towards
the 50-day SMA as the initial target, could be an option.
USD/CAD:
USD/CAD action observed limited change
Thursday, ranging no more than 45 points. In terms of Canadian growth figures, Statistics
Canada announced real gross domestic product (GDP) edged up 0.1% in August,
following no change in July. On a three-month rolling average basis, real gross
domestic product rose 0.5% in August, compared with a 0.8% increase in July.
Following Wednesday’s test of the 1.32
handle on the H4 scale, which happens to align with 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 (which
recently forced an exit lower), downside appears relatively free until reaching
1.31.
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 face a southerly position at the moment.
Areas of consideration:
Unchanged from Thursday’s outlook.
In light of the technical confluence
supporting 1.32 as resistance on the H4 scale, this could promote further
selling. 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 risk-off flows kept USD/CHF
on the backfoot Thursday, consequently recording its third consecutive daily
loss.
Supply on the weekly timeframe, as underscored
in Thursday’s technical briefing, 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).
Concerning daily movement, recently
closed action extended losses beneath the 50-day SMA (blue – 0.9909) and ended
within striking distance of support surfacing around the 0.9850ish range.
After crossing beneath 0.99 on the H4
scale Wednesday, the candles ran into an interesting area of support at 0.9852-0.9873.
Confirmed by the relative strength index (RSI) testing oversold territory, the
pair, despite a lacklustre attempt thus far, 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:
Unchanged from Thursday’s outlook.
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, remains an idea worthy of interest. Given recent
selling, therefore driving deeper into the said H4 support zone, traders can
enter using lower-timeframe action but position stop-loss orders beneath the H4
zone. Lower-timeframe confirmation could simply be a 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:
Major US equity indexes turned lower
Thursday, as trade concerns regarding the US and China resurfaced after China voiced
doubt about the possibility of a long term-trade pact with US President Trump. The Dow Jones
Industrial Average lost 140.46 points, or 0.52%; the S&P 500 declined 9.20
points, or 0.30% and the tech-heavy Nasdaq 100 closed flat.
Technically, the Dow’s H4 chart reveals
support recently entered the mix at October’s opening level fixed from 26947,
which aligns closely with two trend line supports (25710/27321). Further upside
from this point is likely to challenge Wednesday’s high at 27230, perhaps
followed by a bump towards weekly resistance at 27335, sited only a few points
south of the all-time high 27388.
Areas of consideration:
Although some traders may have effectively
‘missed the boat’ on a long from the two trend line supports on the H4
timeframe, a retest at October’s opening level 26947 may offer a second
opportunity to enter long. Preferably formed by way of a H4 bullish candlestick
signal, a long on the close of this candle, with a protective stop-loss order
plotted either beneath the rejecting candle’s lower shadow or the
aforementioned trend line supports, is certainly worthy of consideration.
XAU/USD (Gold):
Since
early October, 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.
Thursday saw the price of bullion, in $ terms, advance higher amid an increased
demand for safe-haven assets on the back of resurfacing trade concerns between
the US and China.
Outside
of the current H4 range, 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.
Technically
speaking, a breakout higher is the more likely route on the H4, considering the
higher-timeframe’s picture. 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). In conjunction with weekly action, daily price recently
brushed aside the upper edge of a bullish flag (taken from the high 1557.1) and
the 50-day SMA (blue – 1504.3). The next upside target from this region falls
in at the 1535.6 September 24 high, closely shadowed by resistance at 1550.4.
Areas
of consideration:
Having
noted higher-timeframe action is poised to move higher, selling the top edge of
the current H4 range at 1519.9-1512.1, despite the area holding a number in the
times in the past, is considered chancy.
Trading
opportunities in this market, therefore, reside at the lower edge of the H4
range at 1481.1-1490.2; others, however, may be waiting for a breakout north to
occur. While a break higher may be appealing to some traders, nearby H4 resistance
does reside at 1526.2, with a break of this level also leaving little room for manoeuvre
to weekly resistance mentioned above at 1536.9.
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