Friday 8th November: Dollar index closes above 98.00 though faces weekly trend line resistance.
Key risk events today:
Canada Employment Change and
Unemployment Rate; US Prelim UoM Consumer Sentiment; FOMC Member Williams and Brainard
Speak.
EUR/USD:
The European shared currency traded lower against the buck Thursday, erasing more than 0.15% and recording its fourth successive losing session. The dollar index firmed yesterday, breaching 98.00 to the upside as US Treasury yields rose sharply – 10-year note trades at 1.919% – amid positive US/China trade headlines that triggered safe-haven outflows.
EUR/USD
price action on the H4 scale extended losses south of the 1.11 handle, clocking
lows at 1.1036 – levels not seen since mid-October.
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.
Upside
attempts on the daily timeframe remain capped by resistance at 1.1084. Yesterday’s
move, however, drew in the 50-day SMA (blue – 1.1039) which appears to have
begun turning to the upside. 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:
Traders short the H4 double top pattern
likely have their crosshairs firmly fixed on the 50-day SMA today. A break of
this line, according to our technical studies, confirms the downside bias. The initial
take-profit target, as underscored above, is set around the key figure 1.10.
Considering its local confluence (sited close by September’s opening level
at 1.0989 and a 61.8% Fibonacci retracement ratio at 1.0994), active buying
is expected. However, with higher-timeframe structure suggesting a move to as
low as the top edge of daily demand plotted at 1.0950, an intraday bounce is the
expectation.
GBP/USD:
The British pound navigated lower ground
versus the US dollar Thursday, shedding more than 40 points, or 0.33%. The Bank
of England (BoE) left interest rates unchanged at 0.75%, as expected, though policy
makers voted 7-2 to keep borrowing costs on hold this month, with the surprise
dissent prompting a slide in the pound.
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), shook hands with its initial
take-profit target yesterday: the 1.28 handle. Well done to any readers who managed
to take advantage of this move.
Downside found additional support 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 – 1.2702).
With respect to the weekly timeframe, price
action has entered a somewhat indecisive phase over the past three weeks. A
retest at 1.2739 – the 2019 yearly opening level – 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:
With 1.28 recently entering the mix,
short sellers have likely liquidated a large portion of their positions.
Beneath 1.28, shaded in grey, the
1.2739/1.2769 area is possibly of interest today as support (and a final
take-profit target for shorts), made up of weekly and daily supports
highlighted above.
A bounce from 1.2739/1.2769 followed up
with a break back above 1.28 on a H4 closing basis could entice buyers into the
market. Entry on the close of the candle is then an option, with protective
stop-loss orders either plotted beneath 1.2739 or the lower shadow of the
breakout candle.
AUD/USD:
Upbeat trade headlines suggesting the US and China agreed to roll back tariffs at an equally gradual pace as part of the phase-one trade deal witnessed antipodeans gather strength Thursday.
AUD/USD
price action settled a touch beneath the 0.69 handle, capped by a trend line
support-turned resistance extended from the low 0.6723. Pressing higher from
here has tops set around the 0.6928 neighbourhood, followed by H4 resistance
priced in at 0.6957.
More
broadly, however, as highlighted in previous reports, 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 – 0.6946). The 50-day SMA (blue – 0.6813) 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:
With buyers and sellers squaring off
around the 0.69 region this morning, technical studies suggest sellers have the
upper hand, in terms of resistance structure on all three timeframes analysed
above. Should a notable H4 bearish candlestick signal form from 0.69 today,
this may encourage a run lower, targeting yesterday’s session low at 0.6861,
followed by H4 support coming in at 0.6809/trend line support etched from the
low 0.6670.
USD/JPY:
In recent sessions, the market witnessed
the US dollar index, or DXY, take to higher ground and puncture its 98.00 band.
Additionally, US Treasury yields bumped higher with the 10-year note trading at
1.919%. In terms of trade headlines, the US and China have reportedly agreed to
roll back tariffs at an equally gradual pace as part of the phase-one trade
deal.
Trade optimism dented demand for safe-haven
assets Thursday, consequently guiding the USD/JPY northbound and breaking the
109 handle to highs of 109.48. The next upside hurdle on the H4 timeframe falls
in around Quasimodo resistance at 109.74 (not visible on the screen).
With the break of 109 to the upside,
along with daily price recently engulfing its 200-day SMA (orange – 109.02),
USD/JPY buyers remain on strong footing. However, considering the weekly timeframe
has yet to conquer the 2019 yearly opening level nearing at 109.68 and a 127.2%
Fibonacci ext. point at 109.56 (taken from the low 104.44), the uptrend may yet
face a potential ceiling.
Areas of consideration:
While a number of traders will have eyes
on 109 as a point of potential support today, the fact we came within 8 points
of connecting with weekly structure is concerning. Therefore, a cautious stance
in regards to longs is recommended today.
In the event we continue to punch higher
from current price and cross swords with H4 Quasimodo resistance at 109.74,
selling this market countertrend is an option. Knowing the Quasimodo resistance
boasts additional backing from weekly structure is certainly appealing. Given
this is a countertrend trade, though, traders may find comfort in waiting for
additional H4 bearish candlestick confirmation to form before pulling the
trigger (entry/risk levels can then be set according to this pattern).
USD/CAD:
USD/CAD movement remains languishing sub
1.32 on the H4 scale, bolstered by 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 (green). A break above here could see a run to
October’s opening level at 1.3239 materialise. With WTI prices gaining traction
following Wednesday’s modest retreat, the commodity-sensitive Canadian dollar remained
resilient against the greenback Thursday.
With respect to higher-timeframe action,
as underlined in previous reports, weekly price exhibits a bullish presence at
the moment as buyers extend last week’s recovery off 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 – 1.3208), with the 200-day SMA (orange
– 1.3274) positioned a few points above.
Areas of consideration:
The H4 resistance area at 1.32/1.3187 is
still likely eyed by a number of traders for possible shorting opportunities,
as its bolstered by daily supply at 1.3239-1.3199. Downside targets from this
point has the 1.3115 November 5 low in sight, shadowed closely by the 1.31
handle.
USD/CHF:
The safe-haven Swiss franc was a clear
underperformer Thursday amid positive trade headlines between the US and China.
USD/CHF activity added more than 20
points, or 0.23%, drawing the market to highs at 0.9975. H4 structure reveals recent
upside topped just south of an interesting area of resistance (green) between
1.0000 (parity), a Quasimodo resistance at 0.9989 and October’s opening level
at 0.9977. What’s more, the approach is close to completing an ABCD correction
(red arrows) which terminates at 0.9982.
The technical setting on the bigger
picture, nevertheless, has weekly flow trading within the parapets of supply at
1.0014-0.9892. 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, on the other hand, recently
crossed paths with the 200-day SMA (orange – 0.9953), sited just south of a
resistance area coming in at 1.0010/0.9986. Note the 50-day SMA (blue – 0.9918)
remains supportive.
Areas of consideration:
The green area on the H4 scale between
1.0000/0.9977 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 and comes complete with an H4 ABCD
correction. A sell from here has the 200-day SMA set as the initial target.
Dow Jones Industrial Average:
Wall Street’s main equity indexes, the
Dow Jones industrial average and the S&P 500, closed at fresh records
Thursday, as investors digested latest headlines surrounding trade between the
US and China over a new agreement to cancel tariffs in stages. The Dow Jones
industrial average added 182.24 points, or 0.66%; the S&P 500 added 8.40
points, or 0.27% and the tech-heavy Nasdaq 100 advanced 23.62 points, or 0.29%.
From
A technical standpoint, the Dow’s H4 candles trade within an ascending channel
formation taken from a low of 25710 and a high at 26620. A retest of the
channel’s support is certainly an option today, with a break of this barrier
portending an approach towards weekly support coming in at 27335.
Areas of consideration:
Technically, the market likely has eyes
on H4 channel support highlighted above. A retest of this line – coupled with a
H4 bullish candlestick configuration – is likely sufficient to prompt another
run higher. Entry and risk can be calculated according to the H4 candlestick’s
parameters, targeting the previous day’s high as the initial take-profit
target.
XAU/USD (GOLD):
Safe-haven markets tumbled Thursday in
response to the latest headlines surrounding trade between the US and China.
Down 1.48%, the price of gold fell from a high of 1492.1 to a low at 1460.8,
placing the yellow metal at a weekly loss of nearly 3.00%.
Technically speaking, H4 price shattered
the lower edge of a month-long range between a support area coming in
at 1481.1-1490.2 and a resistance zone at 1519.9-1512.1. Selling also overthrew
nearby support in the form of October’s opening level at 1472.8 and finished
the day mildly paring losses off Quasimodo support pencilled in at 1464.2.
The
story on the higher timeframes, however, reveals daily price respected channel
resistance (extended from the high 1557.1) yesterday and is now poised to
challenge a nearby support area coming in at 1448.9-1419.9 (aligns closely with
a 38.2% Fibonacci retracement ratio at 1448.5). In terms of the weekly
timeframe, buyers struggle to hold the support area at 1487.9-1470.2, with a decisive
push beneath here potentially setting the long-term stage for a move towards two
layers of support at 1392.0 and 1417.8.
Areas
of consideration:
Seeing
weekly price have a hard time at its current support area and daily price
exhibit scope to press lower, buying the reaction off the H4 Quasimodo support
at 1464.2 is chancy and unlikely to breach October’s opening level at 1472.8. A
bearish theme, therefore, would be open should a H4 close form beneath 1464.2,
targeting 1448.9 (the top edge of the daily support area) as the initial
take-profit zone.
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