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Key risk events today:

French Flash Services PMI; French Flash Manufacturing PMI; German Flash Manufacturing PMI; German Flash Services PMI; EUR Flash Manufacturing PMI; EUR Flash Services PMI; US Flash Manufacturing PMI.

EUR/USD:

Europe’s shared currency triggered two-month lows vs. the dollar Tuesday, convincingly crossing beneath 1.12 and June’s opening level at 1.1165 on the H4 timeframe. Ahead of tomorrow’s all-important European Central Bank (ECB) monetary policy announcements, which could see lower interest rates, the possibility of further selling is certainly there according to H4 structure, at least until the candles shake hands with 1.11.

Long-standing weekly demand at 1.1119-1.1295 recently come under increasing pressure, with a break lower potentially in store. The next port of call in terms of support can be seen around the 2016 yearly opening level at 1.0873. A closer reading of price action on the daily timeframe, however, reveals the unit also to be treading water within the walls of demand at 1.1075-1.1171, which happens to be glued to the underside of the current weekly demand area.

Areas of consideration:

The zone marked in yellow between May’s opening level at 1.1211 and the 1.12 handle, which also intersects with a trend line support-turned resistance (extended from the low 1.1181) and a channel resistance (taken from the high 1.1392) is of interest for potential selling opportunities. However, before reaching the said zone, June’s opening level at 1.1165 may serve as resistance and force price action towards the 1.11 neighbourhood. For that reason, should the H4 candles chalk up a notable bearish candlestick configuration at 1.1165 today, a short from here is also a consideration (entry/risk can be determined according to the candlestick’s structure).

Considering long opportunities, the research team particularly favours the point (green) at which 1.11 converges with channel support (etched from the low 1.1207). Here, longer-term flow trades marginally beneath weekly demand, though is still within the parapets of daily demand. Conservative traders may opt to wait and see if a bullish candlestick formation develops before pulling the trigger.

GBP/USD:

Sterling headed lower for a third consecutive session Tuesday in the wake of Boris Johnson’s widely expected confirmation as UK conservative party leader. Since crossing swords with the underside of H4 supply at 1.2588-1.2568 last Thursday, the market has been slowly grinding southbound with 1.24 likely on offer as the next support target today.

Beyond 1.24, H4 action may target support at 1.2346, though daily support exists around 1.2374. Note the daily level is an important barrier, given it held price action higher at the beginning of the year in the shape of a mouth-watering daily hammer formation. Should the market rotate higher before testing 1.2374, nonetheless, daily structure has trend line resistance positioned nearby (extended from the high 1.3176) as the next upside target.

The story on the weekly timeframe shows long-standing demand at 1.2365-1.2615 is under increasing pressure, despite back-to-back buying tails developing over the last couple of weeks. In response to this, traders may want to note the 2017 yearly opening level at 1.2329 as the next possible support.

Areas of consideration:

According to the technical studies presented here, additional downside is likely on the cards at least until 1.24 enters the mix, shadowed closely by daily support at 1.2374. Unfortunately, unless the candles pullback and retest 1.25, selling this market is difficult at current price.

Traders are also urged to exercise caution selling any breakout signal beneath 1.24, due to daily support residing close by at 1.2374.

AUD/USD:

Tuesday witnessed the AUD/USD retest the underside of a H4 resistance zone at 0.7041/0.7030 and drive lower. Well done to any of our readers who managed to secure a sell position here as this was a noted move to watch for, targeting 0.70 as the initial take-profit target.

In recent hours, however, the pair steamrolled beneath 0.70 on the back of disappointing Australian PMI data, potentially setting the stage for further downside towards H4 support at 0.6958. According to the higher-timeframe’s position, the break lower should not come as a surprise.

Higher-timeframe flow has weekly activity crossing paths with the 2019 yearly opening level (resistance) at 0.7042. Having seen this base serve well as support on several occasions in the past and hold price action lower early July, active selling from here is not a surprise. The next downside support target can be seen at 0.6828.

From the daily timeframe, Monday’s action concluded by way of a bearish selling wick – almost retesting the underside of resistance at 0.7062 – consequently generating strong selling motion yesterday. Continued selling from current price may lead to a move towards channel support extended from the low 0.6831.

Areas of consideration:

Having all three timeframes propose further selling, a retest at 0.70 as resistance, preferably in the form of a bearish candlestick pattern as this helps position entry and risk levels, could be an option today, targeting H4 support at 0.6958. Given this support aligns closely with daily channel support highlighted above, traders might consider reducing risk to breakeven here and liquidating a portion of the position. Leaving some of the position active is worth the risk as weekly sellers have their downside target set at 0.6828.

USD/JPY:

In a series of daily gains, USD/JPY remains bid above 108 as we head into Asia Pac hours Wednesday. The broad dollar was firmly bid from 97.44 in the DXY Tuesday and reached a fresh high in Tokyo of 97.75, testing weekly resistance at 97.72.

In terms of USD/JPY technical structure, H4 action is challenging the underside of June’s opening level at 108.27. Overhead, another layer of resistance resides close by at July’s opening level drawn from 108.48, while beyond here (the yellow area), we appear to have some room to manoeuvre towards the 109 handle, closely shadowed by resistance at 109.16.

On a wider perspective, daily action reveals its next upside target sets around 109.17, a point higher than H4 resistance highlighted above. To the downside, nevertheless, the 106.78 June 25 low may offer support, closely followed by trend line resistance-turned support (extended from the high 112.40) and then the weekly Quasimodo support at 105.35.

Areas of consideration:

Although the US dollar index voices strong resistance, higher-timeframe structure on the USD/JPY displays room to explore higher ground. On account of this, long opportunities exist above 108.48 on the H4, targeting 109/109.16. A retest of 108.48 as support is likely welcomed confirmation (entry and risk can be determined according to the rejecting candlestick’s structure).

Upon connecting with 109, traders are urged to close any long positions and consider selling. The round number, coupled with H4 resistance at 109.16 and daily resistance at 109.17, provides traders a strong ceiling in which to short. Traders concerned by the possibility of a fakeout materialising through 109 have the option of waiting and seeing if a H4 bearish candlestick develops before initiating a position. This way, seller intent is visible and entry and risk levels are structured.

USD/CAD:

Climbing to its highest levels since late June at 1.3164 on the back of broad-based USD bidding, the H4 candles connected with an interesting area of resistance between the 161.8% and 127.2% Fibonacci ext. points at 1.3172/1.3137 (yellow). Here, USD/CAD prices came under mild pressure as the Canadian dollar likely took advantage of rising crude oil prices.

For those who read Tuesday’s briefing you may recall the research team highlighted 1.3172/1.3137 as a potential sell zone. Formed by way of a H4 AB=CD approach, a H4 resistance at 1.3150, daily resistance at 1.3136 and the H4 RSI nearing its overbought value (pink), this area managed to hold price action firm into the close.

Areas of consideration:

Tuesday’s report also went on to say:

Keeping it simple this morning, the research team favours a reaction from the H4 AB=CD reversal zone at 1.3172/1.3137, given its local and higher-timeframe confluence. Entry at the H4 resistance plotted within at 1.3150 is likely eyed, with a protective stop-loss order plotted a couple of points above 1.3172. Considering the first take-profit target, the 1.31 handle is likely to be problematic for sellers, as is July’s opening level at 1.3087 and the intersecting trend line resistance-turned support (1.3229).

For those short from 1.3150, well done. You enter Wednesday’s session in the green, with the expectation of a descent towards 1.31.

USD/CHF:

Robust demand for the US dollar over the past couple of days helped the USD/CHF find support a few points north of the 0.98 handle and dethrone resistance at 09841 (now serving as support). The 0.99 handle is next in line as resistance on the H4 timeframe, closely trailed by Quasimodo resistance plotted at 0.9932.

Although we’re trading higher at the moment, the research team feel it’s important not to lose sight of the confluence presented around the 0.98 handle. Closely trailed by July’s opening level at 0.9791, a 61.8% Fibonacci retracement value and a support zone at 0.9747-0.9785, the surrounding area offers strong local confluence for a move higher.

On more of a broader perspective, though, little has changed in terms of structure:

From the weekly timeframe, the US dollar surrendered another portion of recent gains off the 2018 yearly opening level at 0.9744 last week, following a rotation lower out of supply at 1.0014-0.9892 by way of a strong bearish selling wick. While this could lead to a revisit of 0.9744, traders may also find use in noting the trend line support-turned resistance (extended from the low 0.9187), closely followed by resistance at 1.0110, should we turn higher this week.

Daily timeframe:

Closer examination of price action on the daily timeframe shows the unit pressing south after failing to test Quasimodo resistance at 0.9963 early July, followed closely by resistance at 0.9986 and the 200-day SMA (orange). To the downside, limited support is in view until reaching trend line support taken from the low 0.9542.

Areas of consideration:

In the event H4 price retests support at 0.9841, preferably in the shape of a bullish candlestick configuration as this aids entry and risk placement, a short-term buying opportunity may be on the cards, targeting the lower edge of weekly supply at 0.9892, followed by the 0.99 handle.

In the event things turn sour and we crack lower, 0.98 will then be in focus for potential longs. Stop-loss placement, in this case, is best positioned beneath the support area mentioned above at 0.9747-0.9785.

Dow Jones Industrial Average:

Stocks rose Tuesday on news face-to-face talks between US and Chinese trade negotiators would begin next week, along with better-than-expected earnings from Dow Jones Industrial Average components. The Dow added 0.65%; the S&P 500 advanced 0.68% and the tech-heavy Nasdaq 100 rallied 0.63%.

From a technical viewpoint, nonetheless, the candles closed within striking distance of all-time highs at 27388. Although weekly price displays room to extend gains to 28070 (not visible on the screen), a 127.2% Fibonacci ext. point taken from the low 21425, daily movement is defending the underside of 27356: the 161.8% Fibonacci ext. point. Continued selling from here has a downside support target set at 26773, located just north of weekly support at 26667.

In terms of H4 flow, the yellow area marked between the 161.8% and 127.2% Fibonacci ext. points at 26883/26978 is still an option for longs in the event price action dips lower. Note this area merges with a trend line support (taken from the low 26436), a 61.8% Fibonacci retracement at 26930 and a 50.0% support value at 26904.

Areas of consideration:

Should the index shake hands with H4 trend line support and merging Fibonacci levels (see above), a long could be considered, with a stop-loss order fixed beneath 26883. The first take-profit target from this point will depend on the approach, but overall the research team have 27356 on the daily timeframe in sight.

If the unit continues pushing for record highs and engulfs daily resistance at 27356, a long on the retest of this barrier is also an option, targeting the weekly resistance level underlined above at 28070.

XAU/USD (GOLD):

Bullion, in $ terms, eked out marginal losses Tuesday, as the US dollar index printed its third consecutive daily gain. Overall, though, technical structure on gold remains unchanged going into Wednesday’s sessions.

In recent action, price action drew the H4 candles to within touching distance of two merging trend line supports (1385.5/1437.7 – green). Beyond here, H4 structure offers July’s opening level at 1395.0 as the next support target.

Weekly structure, as highlighted in Monday’s briefing, crossed paths with a 1:1 correction (black arrows) around 1453.2 shaped from the 1160.3 August 13 low last week. As is evident from the chart, selling has so far been reasonably strong from 1453.2, though will it be enough to reclaim 1417.8 – the next downside support on the weekly timeframe?

The technical landscape on the daily timeframe observed a break of the top edge of a supply zone at 1448.9-1419.9 late last week. While this move was likely enough to trip a portion of the stop-loss orders above here, it’s unlikely to have cleared the path north to supply at 1495.7-1480.3 just yet, given Friday’s run south erasing 1.49%. As for downside targets on this scale, the research team notes to be aware of the 1381.9 July 1 low, followed by support at 1356.8.

Areas of consideration:

Given the lack of movement yesterday, the research team feels Tuesday’s outlook holds weight today:

Although weekly price is selling off from its 1:1 correction point at 1453.2, weekly support is also in motion at 1417.8. This weekly support – coupled with the nearby H4 trend line supports mentioned above – is an area buyers may be looking to get involved. Conservative traders, threatened by recent selling, might opt to wait and see if a H4 bullish candlestick configuration develops before pulling the trigger. This helps recognise buyer intent and provides traders with entry and risk levels to work with.

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Global Markets:

• Asian Stock Markets : Nikkei up 0.93%, Shanghai Composite up 0.17%, Hang Seng up 0.13%, ASX up 0.39%
• Commodities: Gold at $1416.05 (-0.76%), Silver at $16.25 (-0.96%), Brent Oil at $63.39 (+0.21%), WTI Oil at $56.29 (+0.12%)
• Rates : US 10-year yield at 2.055, UK 10-year yield at 0.717, Germany 10-year yield at -0.335

News & Data:

• (JPY) BOJ Core CPI y/y 0.60% vs 0.60% expected
• (CAD) Wholesale Sales m/m -1.80% vs 0.80% expected
• A Weaker CAD As Market Awaits ECB Action
• BOJ chief hints at additional monetary easing steps

Markets Update:

Asian markets, led by Japan, gained slightly in muted early trading on Tuesday, after stocks closed higher on Wall Street to kick off a busy earnings week. Investors were also encouraged by trade developments, after hope for renewed trade negotiations with China was reported.

Investor sentiment was also boosted after media reports indicated U.S. President Donald Trump has agreed to a request by the chief executives of seven technology companies for timely licensing decisions from the Commerce Department regarding Chinese tech giant Huawei.

Japanese stocks closed modestly lower on Monday. The Japanese market is rising on Tuesday following the overnight gains on Wall Street amid expectations of upbeat corporate earnings results from major companies this week. Shares in Tokyo outperformed, while equities also rose in Sydney and Seoul.

The benchmark Nikkei 225 Index is adding 0.93 percent to 21,639.2. Gains were more modest in Hong Kong and Shanghai was little changed. Shanghai’s new STAR market declined following a big pop in its debut on Monday while the Shanghai Composite is trading u by 0.17%. The Australian market is advancing following the positive cues from Wall Street. ASX 200 Index is rising 0.39 percent after touching a high of 6,730.70 earlier.

The yield on 10-year Treasuries rose 1 basis point to near 2.055%. In the currency market, the U.S. dollar is trading in the 108 yen range on Tuesday. Crude oil prices moved higher on Monday, amid escalation in tensions in the Middle East and continue to rise on Tuesday in Asia as traders continued to monitor the developments in Iran.

Rising stock markets in Asia were cited as putting pressure on the safe-haven gold as traders await decisions from multiple central banks in the next two weeks. Gold lost 0.76% to $1,416.05 an ounce.

Upcoming Events:

• 10:00 am GMT – (GBP) CBI Industrial Order Expectations
• Tentative – (GBP) 10-y Bond Auction
• 1:00 pm GMT – (USD) HPI m/m
• 2:00 pm GMT – (USD) Existing Home Sales
• 2:00 pm GMT – (USD) Richmond Manufacturing Index
• 2:30 pm GMT – (AUD) CB Leading Index m/m
• 10:45 pm GMT – (NZD) Trade Balance
• 11:00 pm GMT – (AUD) Flash Manufacturing PMI
• 11:00 pm GMT – (AUD) Flash Services PMI
• &more…

Key risk events today:

Limited.

EUR/USD:

Europe’s shared currency and the US dollar traded flat Monday, as traders look ahead to the ECB on Thursday.

As we head into Asia Pac hours, the EUR/USD’s H4 candles remain toying with the lower edge of its 70-point range between 1.12 and supply at 1.1288-1.1273. As underlined in earlier reports, 1.12 brings with it a 161.8% Fibonacci ext. point at 1.1202, a Quasimodo support at 1.1207 and May’s opening level at 1.1211. It is also worth recalling the 1.13 handle positions itself just north of the current supply zone, and June’s opening level at 1.1165 – merges closely with the top edge of daily demand at 1.1075-1.1171 – is seen south of the said range.

Higher-timeframe structure remains unchanged as we head into Tuesday’s sessions. Here’s what Monday’s briefing had to report:

From the weekly timeframe:

Since November 2018, the weekly candles have been warring for position between long-standing demand at 1.1119-1.1295 and the 2019 yearly opening level (resistance) at 1.1445. Areas outside of the said barriers to be aware of fall in around the 2016 yearly opening level at 1.0873 (support) and a resistance area drawn from 1.1717-1.1862.

As of the week’s close, price action concluded deeper within the limits of the said demand area, further weakening the chances of a bullish move and erasing all of the prior week’s gains.

Daily timeframe:

According to the daily timeframe, the EUR/USD represents a ranging phase. Despite this, the research team’s structural analysis has resistance mounted just north of the range at the 200-day SMA (orange – 1.1318) and support seen lower on the curve by way of demand located at 1.1075-1.1171. It might also interest traders to note the demand is glued to the underside of the current weekly demand area.

Areas of consideration:

Considering Monday’s lacklustre performance, the research team’s outlook remains unaffected:

Having seen the H4 candles form a range between supply at 1.1288-1.1273 and 1.12/1.1211, traders may find the lower edge of the said range of use today (see above). Trading within this area is certainly possible due to its size, large enough to secure reasonable risk/reward. Protective stop-loss orders are generally located a couple of points beyond the range extreme, targeting the opposing range limit.

In the event the upper edge of the current range is taken out this week, selling opportunities exist between the 200-day SMA on the daily timeframe at 1.1318 and the 1.13 handle on the H4. Not only will sellers likely be active here, liquidity in the form of triggered buy stops above the current range edge will be a strong selling point for traders with deeper pockets. The same can be said for June’s opening level (given its connection to daily structure), only for buying opportunities.

GBP/USD:

The British pound came under mild pressure Monday, ahead of frontrunner Boris Johnson’s almost inevitable conservative leadership election victory. Johnson’s victory is expected to drive sterling lower as it would raise the odds of a no-deal Brexit.

H4 movement reclaimed 1.25 to the downside in early London, and clocked lows of 1.2455 as the market transitioned into US hours. A near-retest at 1.25 followed, consequently attracting offers going into the close. In terms of support below 1.25, 1.24 appears the next logical base on the H4 timeframe.

As underscored in Monday’s briefing, the research team feel with buyers’ sell stops likely filled beneath 1.25, and breakout sell orders triggered, further downside could be on the cards.

With respect to higher-timeframe structure, Monday’s report remains valid:

Weekly timeframe:

Since May 20, buyers and sellers have been battling for position between long-standing demand at 1.2365-1.2615 and the 2019 yearly opening level at 1.2739 (resistance). Despite recent movement drilling further into the said demand, price action chalked up a second consecutive buying tail last week, perhaps signifying buyer intent. Areas outside of the current range to be conscious of this week falls in around the 2017 yearly opening level at 1.2329 (support) and supply coming in at 1.3472-1.3204.

Daily timeframe:

Leaving support at 1.2374 unchallenged Wednesday, increased demand for the British pound lifted the market higher Thursday, swelling amid a combination of a waning greenback and increased optimism UK parliament would be able to act to prevent a no-deal Brexit. Things turned mildly sour Friday, however, after shaking hands with supply marked in yellow at 1.2578-1.2519.

Beyond the current supply, the path appears clear for an approach to trend line support-turned resistance taken from the low 1.2960.

Areas of consideration:

Outlook unchanged.

Should the unit retest the underside of 1.25 today in the form of a H4 bearish candlestick configuration, a sell to 1.24 is worth considering, followed by daily support at 1.2374.

Also worth keeping a tab on is the green H4 zone highlighted in Friday’s briefing. Between the 61.8 Fibonacci retracement at 1.2631, June’s opening level at 1.2626 and the round number 1.26, located above the H4 supply at 1.2588-1.2568, this area has ‘fakeout to me’ written all over it, with buy stops above the current supply providing liquidity to sell into. Entry anywhere within the green zone is valid, with protective stop-loss orders positioned a couple of points above 1.2631. Conservative traders may, however, opt to wait for additional candlestick confirmation to form before pulling the trigger. This helps identify seller intent and provides entry and risk levels to work with.

AUD/USD:

The Australian dollar eked out marginal losses vs. its US counterpart Monday, down 0.05%. Despite mild selling, a H4 support area formed by July’s opening level at 0.7030 and May’s opening level at 0.7041 (yellow) held ground. Overhead, supply resides at 0.7102-0.7081, which happens to envelope the 0.71 handle, whereas beneath the current support area we have the key figure 0.70 in sight.

Higher-timeframe flow remains unchanged, with weekly activity meandering a few points south of the 2019 yearly opening level (resistance) at 0.7042. Having seen this base serve well as support on several occasions in the past and hold price action lower early July, there’s a good chance sellers may make an appearance here. The next downside support target can be seen at 0.6828. In the event we push north this week, however, traders may wish to note the 2017 yearly opening level at 0.7199.

From the daily timeframe, Monday’s action concluded by way of a bearish selling wick, almost retesting the underside of resistance at 0.7062. Above here, traders’ crosshairs are likely fixed on the 200-day SMA currently circulating around 0.7091 and channel resistance taken from the high 0.7034. Continued selling from current price, nonetheless, could lead to a move being seen towards channel support extended from the low 0.6831 this week.

Areas of consideration:

Having seen weekly resistance at 0.7042 remain in the fold, and daily price close back beneath resistance at 0.7062 as well as produce a bearish candlestick configuration, entering long from the current H4 support area is chancy.

Taken from Monday’s briefing:

Outlook unchanged.

Assuming the technical studies presented above are correct and we press lower, short-term selling opportunities exist between 0.7030 and 0.70. However, do ensure risk/reward is factored into any sells here, targeting at least a 1:2 ratio. The key figure 0.70 is a support level by and of itself given the interest it attracts.

Should 0.70 fail to offer support, we then have room to potentially push as far south as June’s opening level at 0.6926.

USD/JPY:

Following Japanese PM Abe’s upper house election victory, this fuelled risk appetite amid Asia Monday, prompting mild buying, though was swiftly capped under 108.

As we head into Tuesday’s sessions, the H4 candles are shaking hands with channel resistance etched from the high 108.99, sited just south of 108. Should sellers make an appearance here, the 107.21 18^th July low can be seen as the next support hurdle, closely shadowed by Quasimodo support located just north of 107 at 107.05. Above 108, on the other hand, June’s opening level at 108.27 is next in the firing range in terms of resistance.

Regarding the higher timeframes, yesterday’s limited movement keeps Monday’s analysis fresh:

Weekly timeframe:

Extending losses for a second consecutive week, the USD/JPY pair erased a little more than 20 points. According to technical structure on the weekly timeframe, long-term resistance is set by way of the 2019 yearly opening level at 109.68 and support is not expected to emerge until reaching a Quasimodo formation at 105.35.

Daily timeframe:

Since topping just south of resistance at 109.17, the pair slowly grinds southbound. The next port of call, in regards to support, is trend line resistance-turned support (extended from the high 112.40), aligning with the 106.78 June 25 low, followed by the weekly Quasimodo support mentioned above at 105.35.

Areas of consideration:

For traders who read Monday’s briefing you may recall the piece highlighted the possibility sellers may enter the mix from the point 108 and the H4 channel resistance (see above) merge. Forming a H4 shooting star Japanese candlestick signal off 108 in early trade Monday was, according to the technical studies presented here, enough to consider a short, targeting the 107.21 18^th July low as the initial take-profit target. Well done to any of our readers who managed the sell here.

USD/CAD:

Weaker-than-expected Canadian wholesale trade data, along with a modestly stronger US dollar across the board, lifted the USD/CAD pair to higher ground Monday, up 0.45%.

As is evident from the H4 timeframe, recent trade overthrew July’s opening level at 1.3087, a trend line resistance (taken from the high 1.3229) and the 1.31 handle, potentially setting the stage for a run to resistance at 1.3150. What’s interesting from a technical perspective is the approach to the said resistance forms by way of an AB=CD correction (black arrows), which has a termination point (yellow) between the 161.8% and 127.2% Fibonacci ext. points at 1.3172/1.3137. Indicator-based traders may also wish to acknowledge the RSI is seen nearing overbought territory.

In addition to H4 confluence supporting a sell in this market, as well as the immediate trend facing a southerly bearing since topping in late May at 1.3565, daily resistance is also present around the 1.3136 neighbourhood (aligns closely with the lower edge of the H4 AB=CD reversal zone at 1.3172/1.3137.

Areas of consideration:

Keeping it simple this morning, the research team favours a reaction from the H4 AB=CD reversal zone at 1.3172/1.3137, given its local and higher-timeframe confluence. Entry at the H4 resistance plotted within at 1.3150 is likely eyed, with a protective stop-loss order plotted a couple of points above 1.3172. Considering the first take-profit target, the 1.31 handle is likely to be problematic for sellers, as is July’s opening level at 1.3087 and the intersecting trend line resistance-turned support (1.3229). 

USD/CHF:

Technically, USD/CHF prices remain unchanged as we head into Tuesday. The pair failed to capitalise on broad-based USD bidding underpinned by tempered expectations for an aggressive Fed rate cut in July.

H4 resistance at 0.9841 remains in motion, as does the possibility of a move towards the 0.98 handle for potential longs. Closely trailed by July’s opening level at 0.9791, a 61.8% Fibonacci retracement value, a support zone at 0.9747-0.9785 and a possible AB=CD correction point (black arrows) at 0.9777, the surrounding area offers strong local confluence for a move higher.

On a wider perspective, however, Monday’s briefing had the following to report:

From the weekly timeframe, the US dollar surrendered another portion of recent gains off the 2018 yearly opening level at 0.9744 last week, following a rotation lower out of supply at 1.0014-0.9892 by way of a strong bearish selling wick. While this could lead to a revisit of 0.9744, traders may also find use in noting the trend line support-turned resistance (extended from the low 0.9187), closely followed by resistance at 1.0110, should we turn higher this week.

Daily timeframe:

Closer examination of price action on the daily timeframe shows the unit pressing south after failing to test Quasimodo resistance at 0.9963 early July, followed closely by resistance at 0.9986 and the 200-day SMA (orange). To the downside, limited support is in view until reaching trend line support taken from the low 0.9542.

Areas of consideration:

Outlook unchanged.

Longer-term flow remains unchanged and suggests selling could still be in store from weekly supply at 1.0014-0.9892.

Medium-term flow, also unchanged in terms of tradable zones, has eyes on the 0.98 region (given its surrounding confluence highlighted above) for potential longs. Stop-loss placement, therefore, is best positioned beneath 0.9747-0.9785.

Dow Jones Industrial Average:

US equity indexes concluded marginally higher Monday, underpinned by tempered expectations for an aggressive Fed rate cut at the end of the month. The Dow Jones Industrial Average added 0.07%; the S&P 500 advanced 0.28% and the tech-heavy Nasdaq 100 rallied 0.90%.

From a technical viewpoint, nonetheless, the research team are still exploring the possibility of a dip in price to H4 trend line support (extended from the low 26436). Note this ascending support brings with it a 61.8% Fibonacci retracement at 26930, a 50.0% support value at 26904 and a potential ABCD (black arrows) correction terminating between the 161.8% and 127.2% Fibonacci ext. points (yellow) at 26883/26978.

However, the technical landscape on the bigger picture remains at conflict, with Monday’s report voicing the following:

From the weekly timeframe:

Aside from a brief spell of indecision four weeks back, and last week’s retracement losing more than 230 points, the Dow Jones Industrial Average has emphasised a strong bullish tone since shaking hands with the 2018 yearly opening level at 24660 in early June.

Taking out resistance at 26667 and shortly after retesting it as support has so far provided a floor to this market. With limited resistance in sight until connecting with 28070 (not visible on the screen), a 127.2% Fibonacci ext. point taken from the low 21425, additional buying could still be seen over the coming weeks.

Daily timeframe:

Contrary to weekly price, daily action is defending the underside of 27356: the 161.8% Fibonacci ext. point. Continued selling from here has a downside support target set at 26773, located just north of weekly support at 26667.

Areas of consideration:

Should the index shake hands with H4 trend line support and merging Fibonacci levels (see above), a long could be considered, with a stop-loss order fixed beneath 26883. The first take-profit target from this point will depend on the approach, but overall the research team have 27356 on the daily timeframe in sight.

XAU/USD (GOLD):

Having seen the US dollar explore higher ground Monday, bullion struggled to generate much upside momentum.

In recent hours, the market observed a run to lows of 1415.8, drawing the H4 candles to within touching distance of two merging trend line supports (1385.5/1437.7 – green). Beyond here, H4 structure offers July’s opening level at 1395.0.

Weekly structure, as highlighted in Monday’s briefing, crossed paths with a 1:1 correction (black arrows) around 1453.2 shaped from the 1160.3 August 13 low last week. As is evident from the chart, selling has so far been reasonably strong from 1453.2, though will it be enough to reclaim 1417.8 – the next downside support on the weekly timeframe?

The technical landscape on the daily timeframe observed a break of the top edge of a supply zone at 1448.9-1419.9 late last week. While this move was likely enough to trip a portion of the stop-loss orders above here, it’s unlikely to have cleared the path north to supply at 1495.7-1480.3 just yet, given Friday’s run south erasing 1.49%. As for downside targets on this scale, the research team notes to be aware of the 1381.9 July 1 low, followed by support at 1356.8.

Areas of consideration:

Although weekly price is selling off from its 1:1 correction point at 1453.2, weekly support is also in motion at 1417.8. This weekly support – coupled with the nearby H4 trend line support mentioned above – is an area buyers may be looking to get involved. Conservative traders, threatened by recent selling, might opt to wait and see if a H4 bullish candlestick configuration develops before pulling the trigger. This helps recognise buyer intent and provides traders with entry and risk levels to work with.

The accuracy, completeness and timeliness of the information contained on this site cannot be guaranteed. IC Markets does not warranty, guarantee or make any representations, or assume any liability regarding financial results based on the use of the information in the site.

News, views, opinions, recommendations and other information obtained from sources outside of www.icmarkets.com.au, used in this site are believed to be reliable, but we cannot guarantee their accuracy or completeness. All such information is subject to change at any time without notice. IC Markets assumes no responsibility for the content of any linked site.

The fact that such links may exist does not indicate approval or endorsement of any material contained on any linked site. IC Markets is not liable for any harm caused by the transmission, through accessing the services or information on this site, of a computer virus, or other computer code or programming device that might be used to access, delete, damage, disable, disrupt or otherwise impede in any manner, the operation of the site or of any user’s software, hardware, data or property.

Global Markets:

• Asian Stock Markets : Nikkei down 0.33%, Shanghai Composite down 0.82%, Hang Seng down 0.84%, ASX down 0.17%
• Commodities: Gold at $1427.45 (+0.05%), Silver at $16.38 (+1.13%), Brent Oil at $63.45 (+1.57%), WTI Oil at $56.38 (+1.35%)
• Rates : US 10-year yield at 2.055, UK 10-year yield at 0.736, Germany 10-year yield at -0.317

News & Data:

• (USD) Prelim UoM Inflation Expectations 2.60% vs 2.70% previous
• (USD) Prelim UoM Consumer Sentiment 98.4 vs 98.6 expected
• (CAD) Retail Sales m/m -0.10% vs 0.30% expected
• (CAD) Core Retail Sales m/m -0.30% vs 0.30% expected
• (GBP) Public Sector Net Borrowing 6.5B vs 3.4B expected
• (EUR) Current Account 29.7B vs 21.2B expected
• (EUR) German PPI m/m -0.40% vs -0.10% expected
• (JPY) All Industries Activity m/m 0.30% vs 0.30% expected
• (NZD) Credit Card Spending y/y 6.60% vs 6.70% previous
• Federal Reserve officials lay out case for aggressive rate cuts

CFTC Positioning Data:

• EUR short 31K vs 36K short last week. Shorts trimmed by 5K
• GBP short 76K vs 73K short last week. Shorts increased by 3K
• JPY short 11K vs 4K short last week. Short increased by 7K
• CHF short 12k vs 10k short last week. Shorts increased by 2K
• AUD short 53k vs 54k short last week. Shorts trimmed by 1K
• NZD short 17K vs 22K short last week. Shorts trimmed by 5K
• CAD long 21K vs 9K long last week. Longs increased by 11K

Markets Update:

Asian shares are lower on Monday after Wall Street ended lower last week as investors continue to watch for what may be in store for U.S. interest rates. Momentum for U.S. stocks has slowed since early June, when they began soaring on expectations that the Federal Reserve will cut interest rates for the first time in a decade to ensure the U.S. economy doesn’t succumb to weaknesses abroad. The Fed’s next meeting is scheduled for the end of this month. The markets saw some gain post that but gave back those gains on Friday, after the New York Fed walked back Williams’ comments by saying his speech was not about potential policy action at the upcoming Fed meeting.

The Shanghai Composite Index is down 0.8%, but all eyes are on the debt of China’s new Nasdaq-style STAR tech board. It had a wild opening day as expected, with most firms surging and circuit breakers popping in early trade, thanks to massive oversubscription in IPO shares by retail investors.

Trading in the new market is expected to be volatile in the early going. Japan’s Nikkei fell 0.3% on the more tempered Fed easing views and caution ahead of the domestic earnings season which starts this week. Hang Seng slipped 0.84% while Australia’s ASX 200 bounced between slight gains and losses and closed 0.17% down.

The dollar and U.S. Treasury yields rose on the greater likelihood of a shallower rate cut. The benchmark 10-year Treasury yield stretched Friday’s modest gains and climbed to 2.055%. Growing Middle East tensions following Iran’s seizure of a British tanker lifted crude oil prices. WTI added 1.35% to $56.38 a barrel while Brent crude, the international standard, rose 95 cents to $63.45 per barrel.

The dollar rose to 107.99 Japanese yen from 107.60 yen Friday. Gold slipped from a six-year high as the dollar firmed and as expectations for a deep rate cut by the Fed were dialled back. Spot gold traded at $1,427.45 an ounce after going as high as $1,452.60 on Friday, its strongest since May 2013.

Upcoming Events:

Monday, July 22, 2019

• 10:00 am GMT – (EUR) German Buba Monthly Report
• 12:30 pm GMT – (CAD) Wholesale Sales m/m
• 3:00 pm GMT – (JPY) BOJ Gov Kuroda Speaks
• 10:30 pm GMT – (AUD) RBA Assist Gov Kent Speaks

Tuesday, July 23, 2019

• 5:00 am GMT – (JPY) BOJ Core CPI y/y
• 10:00 am GMT – (GBP) CBI Industrial Order Expectations
• Tentative – (GBP) 10-y Bond Auction
• 1:00 pm GMT – (USD) HPI m/m
• 2:00 pm GMT – (USD) Existing Home Sales
• 2:00 pm GMT – (USD) Richmond Manufacturing Index
• 2:30 pm GMT – (AUD) CB Leading Index m/m
• 10:45 pm GMT – (NZD) Trade Balance
• 11:00 pm GMT – (AUD) Flash Manufacturing PMI
• 11:00 pm GMT – (AUD) Flash Services PMI

Wednesday, July 24, 2019

• 12:30 am GMT – (JPY) Flash Manufacturing PMI
• 7:15 am GMT – (EUR) French Flash Services PMI
• 7:15 am GMT – (EUR) French Flash Manufacturing PMI
• 7:30 am GMT – (EUR) German Flash Manufacturing PMI
• 7:30 am GMT – (EUR) German Flash Services PMI
• 8:00 am GMT – (EUR) Flash Manufacturing PMI
• 8:00 am GMT – (EUR) Flash Services PMI
• 8:00 am GMT – (EUR) M3 Money Supply y/y
• 8:00 am GMT – (EUR) Private Loans y/y
• 8:30 am GMT – (GBP) High Street Lending
• 1:00 pm GMT – (CNY) CB Leading Index m/m
• 1:00 pm GMT – (EUR) Belgian NBB Business Climate
• 1:45 pm GMT – (USD) Flash Manufacturing PMI
• 1:45 pm GMT – (USD) Flash Services PMI
• 2:00 pm GMT – (USD) New Home Sales
• 2:30 pm GMT – (USD) Crude Oil Inventories
• 11:50 pm GMT – (JPY) SPPI y/y

Thursday, July 25, 2019

• 3:05 am GMT – (AUD) RBA Gov Lowe Speaks
• 7:00 am GMT – (EUR) Spanish Unemployment Rate
• 8:00 am GMT – (EUR) German Ifo Business Climate
• 10:00 am GMT – (GBP) CBI Realized Sales
• 11:45 am GMT – (EUR) Main Refinancing Rate
• 11:45 am GMT – (EUR) Monetary Policy Statement
• 12:30 pm GMT – (EUR) ECB Press Conference
• 12:30 pm GMT – (USD) Core Durable Goods Orders m/m
• 12:30 pm GMT – (USD) Durable Goods Orders m/m
• 12:30 pm GMT – (USD) Goods Trade Balance
• 12:30 pm GMT – (USD) Prelim Wholesale Inventories m/m
• 12:30 pm GMT – (USD) Unemployment Claims
• 2:30 pm GMT – (USD) Natural Gas Storage
• 11:30 pm GMT – (JPY) Tokyo Core CPI y/y

Friday, July 26, 2019

• 6:00 am GMT – (EUR) German Import Prices m/m
• 12:30 pm GMT – (USD) Advance GDP q/q
• 12:30 pm GMT – (USD) Advance GDP Price Index q/q

Saturday, July 27, 2019

• 12:30 pm GMT – ()

Sunday, July 28, 2019

• 11:50 pm GMT – (JPY) Retail Sales y/y
• &more…

Key risk events today:

BoJ Gov. Kuroda Speaks; RBA Assist Gov. Kent Speaks.

EUR/USD:

Weekly gain/loss: -0.44%

Weekly close: 1.1220

Weekly perspective:

Since November 2018, the weekly candles have been warring for position between long-standing demand at 1.1119-1.1295 and the 2019 yearly opening level (resistance) at 1.1445. Areas outside of the said barriers to be aware of fall in around the 2016 yearly opening level at 1.0873 (support) and a resistance area drawn from 1.1717-1.1862.

As of the week’s close, price action concluded deeper within the limits of the said demand area, further weakening the chances of a bullish move and erasing all of the prior week’s gains.

Daily perspective:

According to the daily timeframe, the EUR/USD represents a ranging phase. Despite this, the research team’s structural analysis has resistance mounted just north of the range at the 200-day SMA (orange – 1.1318) and support seen lower on the curve by way of demand located at 1.1075-1.1171. It might also interest traders to note the demand is glued to the underside of the current weekly demand area.

H4 perspective:

Friday witnessed the US dollar unwind a portion of Thursday’s losses, which were largely influenced by Federal Reserve member William’s comments, stating it’s better to take preventative measures on rates than to wait for a disaster to unfold. Assisted initially after a NY Fed spokesperson walked back on Fed’s Williams earlier dovish remarks, the buck’s strength continued into the US session Friday after Fed sources diminished hopes of a 50bps cut. This sent the US dollar index back above the 97.00 mark into the close.

Technically speaking on the EUR/USD’s H4 chart, the candles continue to carve out a 70-point range between 1.12 and supply at 1.1288-1.1273 since early July. As underlined in earlier reports, 1.12 brings with it a 161.8% Fibonacci ext. point at 1.1202, a Quasimodo support at 1.1207 and May’s opening level at 1.1211. It might also be worth noting the 1.13 handle positions itself just north of the current supply zone, and June’s opening level at 1.1165 – merges closely with the top edge of the current daily demand – is seen south of the said range.

Areas of consideration:

Having seen the H4 candles form a range between supply at 1.1288-1.1273 and the 1.12 handle, traders may find the range limits of use this week. Trading within this area is certainly possible due to its size, large enough to secure reasonable risk/reward. Protective stop-loss orders are generally located a couple of points beyond the range extreme, targeting the opposing range limit.

In the event the upper edge of the current range is taken out this week, selling opportunities exist between the 200-day SMA on the daily timeframe at 1.1318 and the 1.13 handle on the H4. Not only will sellers likely be active here, liquidity in the form of triggered buy stops above the current range edge will be a strong selling point for traders with deeper pockets. The same can be said for June’s opening level (given its connection to daily structure), only for buying opportunities.

GBP/USD:

Weekly gain/loss: -0.59%

Weekly close: 1.2497

Weekly perspective:

Since May 20, buyers and sellers have been battling for position between long-standing demand at 1.2365-1.2615 and the 2019 yearly opening level at 1.2739 (resistance). Despite recent movement drilling further into the said demand, price action chalked up a second consecutive buying tail last week, perhaps signifying buyer intent. Areas outside of the current range to be conscious of falls in around the 2017 yearly opening level at 1.2329 (support) and supply coming in at 1.3472-1.3204.

Daily perspective:

Leaving support at 1.2374 unchallenged Wednesday, increased demand for the British pound lifted the market higher Thursday, swelling amid a combination of a waning greenback and increased optimism UK parliament would be able to act to prevent a no-deal Brexit. Things turned mildly sour Friday, however, after shaking hands with supply marked in yellow at 1.2578-1.2519.

Beyond the current supply, the path appears clear for an approach to trend line support-turned resistance taken from the low 1.2960.

H4 perspective:

After crossing swords with the underside of supply at 1.2588-1.2568, the GBP/USD reclaimed a portion of Thursday’s gains on Friday and concluded the week marginally beneath 1.25. The move largely came about on the back of USD strength, assisted initially after a NY Fed spokesperson walked back on Fed’s Williams earlier dovish remarks and Fed sources diminishing hopes of a 50bps cut. Brexit uncertainty also remains at the forefront of this market, weighing on most upside attempts. In terms of support below 1.25, 1.24 appears the next logical base.

Areas of consideration:

Despite recent selling, the green H4 zone highlighted in Friday’s briefing remains of interest this week. Between the 61.8 Fibonacci retracement at 1.2631, June’s opening level at 1.2626 and the round number 1.26, located above the H4 supply at 1.2588-1.2568, this area has ‘fakeout to me’ written all over it, with buy stops above the current supply providing liquidity to sell into. Entry anywhere within the green zone is valid, with protective stop-loss orders positioned a couple of points above 1.2631. Conservative traders may, however, opt to wait for additional candlestick confirmation to form before pulling the trigger. This helps identify seller intent and provides entry and risk levels to work with.

Another scenario that may unfold this week is continued selling beneath 1.25. With buyers’ sell stops likely filled by Friday’s selling, and breakout sell orders triggered, further downside could be on the cards. However, selling at current price is chancy, given the limited close lower. Should more of a decisive H4 close form sub 1.25 that’s followed up with a retest, preferably in the form of a bearish candlestick configuration as this helps position entry and risk levels, a sell to 1.24 is certainly worth considering.

AUD/USD:

Weekly gain/loss: +0.29%

Weekly close: 0.7038

Weekly perspective:

Despite the AUD/USD refreshing multi-month highs at 0.7082, last week’s movement concluded a couple of points beneath the 2019 yearly opening level (resistance) at 0.7042.

Technically, 0.7042 remains a resistance of note, having seen it serve well as support on several occasions in the past and hold price action lower early July. The next downside support target can be seen at 0.6828, should the unit press lower. In the event we push north this week, however, traders may wish to note the 2017 yearly opening level at 0.7199.

Daily perspective:

In recent trading, daily price came within touching distance of the 200-day SMA currently circulating around 0.7091 and channel resistance taken from the high 0.7034, before collapsing lower and reclaiming resistance at 0.7062. Continued selling from this point could lead to a move being seen towards channel support extended from the low 0.6831 this week.

H4 perspective:

A brief recap of Friday’s movement on the H4 timeframe reveals the candles encountered selling around the underside of supply coming in at 0.7102-0.7081, which happens to envelope the 0.71 handle. Coinciding with a USD advance that brought the DXY back above 97.00, the Aussie closed on its lows within an area of support formed by July’s opening level at 0.7030 and May’s opening level at 0.7041 (yellow), which intersects with a steep trend line support taken from the low 0.6910.

Areas of consideration:

Having seen weekly resistance at 0.7042 remain in the fold, and daily price close back beneath resistance at 0.7062, buying this market from the H4 support area at 0.7030/0.7041 may end unfavourably.

Assuming the technical studies presented above are correct and we press lower, short-term selling opportunities exist between 0.7030 and 0.70. However, do ensure risk/reward is factored into any sells here, targeting at least a 1:2 ratio. The key figure 0.70 is a support level by and of itself given the interest it attracts.

Should 0.70 fail to offer support, we then have room to potentially push as far south as June’s opening level at 0.6926. Given the lack of fundamental drivers, though, it’s unlikely we’ll overthrow 0.70 today.

USD/JPY:

Weekly gain/loss: -0.19%

Weekly close: 107.68

Weekly perspective:

Extending losses for a second consecutive week, the USD/JPY pair erased a little more than 20 points. According to technical structure on the weekly timeframe, long-term resistance is set by way of the 2019 yearly opening level at 109.68 and support is not expected to emerge until reaching a Quasimodo formation at 105.35.

Daily perspective:

Since topping just south of resistance at 109.17, the pair has been slowly grinding southbound. The next port of call, in terms of support, can be seen in the form of a trend line resistance-turned support (extended from the high 112.40), aligning with the 106.78 June 25 low, followed then by the weekly Quasimodo support mentioned above at 105.35.

H4 perspective:

Following Thursday’s Fed related losses after Fed’s Williams dovish comments, a USD correction developed Friday and reclaimed a large portion of recently lost ground. The move higher was triggered after a NY Fed spokesperson walked back on Fed’s Williams dovish remarks and Fed sources diminished hopes of a 50bps cut.

Analysing the market technically shows the candles came within a couple of points of connecting with channel support (etched from the low 107.85), before turning higher and closing just south of the 108 handle in the shape of a shooting star formation.

Areas of consideration:

Although there’s a chance sellers may enter the mix today based on the shooting star pattern produced on the H4 timeframe, the research team urges caution since the candlestick signal did not connect with H4 resistance. Yes it came close, but that’s not enough. For that reason, waiting and seeing if the H4 candles retest the 108 handle and merging channel resistance (extended from the high 108.99) is recommended. Ideally, should the retest of 108 offer another bearish candlestick formation, as this, coupled with both weekly and daily timeframes suggesting lower prices could be in store, is likely enough to consider selling, targeting H4 Quasimodo support at 107.05.

USD/CAD:

Weekly gain/loss: +0.25%

Weekly close: 1.3058

Weekly perspective:

Since coming into close contact with the 2017 yearly opening level at 1.3434 mid-June, selling has been at the forefront of this market. Despite last week’s minor bullish candle, limited support is evident on the weekly timeframe until reaching a Quasimodo formation at 1.2887. For that reason, traders can expect further downside to materialise over the coming weeks.

Daily perspective:

The last line of defence for buyers on the daily timeframe, until the path is clear for a run to the aforementioned weekly Quasimodo support that is, is the 161.8% Fibonacci ext. point at 1.3028 which entered the mix a week ago. To confirm buyer intent here, the research team notes to watch for a daily close to form above resistance at 1.3136.

H4 perspective:

Since July 11, the H4 candles have been carving out a range between Quasimodo support at 1.3028, which happens to align with a 161.8% Fibonacci ext. point highlighted above on the daily timeframe, and the 1.31 handle. Note 1.31 brings with it a collection of resistances, including July’s opening level at 1.3087, trend line resistance taken from the high 1.3199 and a trend line support-turned resistance extended from the low 1.3037. Traders may have also noticed price action reacted at the point the two said trend lines merge on Friday (yellow).  With so much local confluence at this point, it was hard not to be bearish.

Areas of consideration:

Outlook remains unchanged.

While the H4 range is still intact and daily price is seen bolstering the lower edge of the area in the form of a 161.8% Fibonacci ext., the research team have eyes on a move lower this week, with a final downside target set at the weekly Quasimodo support drawn from 1.2887. Aside from the shorts currently in play from the 1.31 handle – well done to any of our readers who managed to catch this – a decisive H4 close beneath 1.3028 is eyed this week. A H4 close beneath here that’s followed up with a successful retest will likely be sufficient to encourage further downside. As for entry, traders have the option of basing entry and risk levels on the rejecting candle’s structure – of course this would be ideal if the rejecting candle formed by way of a Japanese candlestick formation.

USD/CHF:

Weekly gain/loss: -0.25%

Weekly close: 0.9814

Weekly perspective:

The US dollar surrendered another portion of recent gains off the 2018 yearly opening level at 0.9744 last week, following a rotation lower out of supply at 1.0014-0.9892 by way of a strong bearish selling wick. While this could lead to a revisit of 0.9744, traders may also find use in noting the trend line support-turned resistance (extended from the low 0.9187), closely followed by resistance at 1.0110, should we turn higher this week.

Daily perspective:

Closer examination of price action on the daily timeframe shows the unit pressing south after failing to test Quasimodo resistance at 0.9963 early July, followed closely by resistance at 0.9986 and the 200-day SMA (orange). To the downside, limited support is in view until reaching trend line support taken from the low 0.9542.

H4 perspective:

Having seen the USD/CHF remain beneath resistance at 0.9841 Friday, despite broad-based USD bidding, 0.98 remains an alluring area of support this week. Closely trailed by July’s opening level at 0.9791, a 61.8% Fibonacci retracement value a support zone at 0.9747-0.9785 and a possible AB=CD correction point (black arrows) at 0.9777, the surrounding area offers strong local confluence for a move higher.

Areas of consideration:

Outlook remains unchanged.

Longer-term flow remains unchanged and suggests selling could still be in store from weekly supply at 1.0014-0.9892.

Medium-term flow, also unchanged in terms of tradable zones, has eyes on the 0.98 region (given its surrounding confluence highlighted above) for potential longs. However, traders interested in buying 0.98 are also urged to take into account we could witness a fakeout into 0.9747-0.9785 before rotating higher. Stop-loss placement, therefore, is best positioned beneath this zone at 0.9747.

Dow Jones Industrial Average:

Weekly gain/loss: -0.85%

Weekly close: 27072

Weekly perspective:

Aside from a brief spell of indecision four weeks back, and last week’s retracement losing more than 230 points, the Dow Jones Industrial Average has emphasised a strong bullish tone since shaking hands with the 2018 yearly opening level at 24660 in early June.

Taking out resistance at 26667 and shortly after retesting it as support has so far provided a floor to this market. With limited resistance in sight until connecting with 28070 (not visible on the screen), a 127.2% Fibonacci ext. point taken from the low 21425, additional buying, despite recent selling, could still be seen over the coming weeks.

Daily perspective:

Contrary to weekly price, daily action is defending the underside of 27356: the 161.8% Fibonacci ext. point. Continued selling from here has a downside support target set at 26773, located just north of weekly support at 26667.

H4 perspective:

Stocks fell Friday as investors digested a slew of corporate earnings reports and remarks from a top Federal Reserve official. The Dow Jones Industrial Average closed at -0.25%; the S&P 500 declined 0.62% and the tech-heavy Nasdaq 100 lost 0.88%.

Limited support is visible on the H4 scale until reaching a trend line support extended from the low 26436, which happens to line up with a 61.8% Fibonacci retracement at 26930 and a 50.0% support value at 26904.

Areas of consideration:

Until the index breaks above daily resistance (161.8% Fibonacci ext. point) at 27356, buying this market long term is a challenge. Once/if this level is taken out, a long, preferably on the retest of 27356, is certainly worthy of consideration, with an ultimate upside target set on the weekly timeframe (see above) at 28070.

Should the index shake hands with H4 trend line support and merging Fibonacci levels (see above), however, a long could be considered, with a stop-loss order fixed beneath July’s opening level at 26811 on the H4 timeframe. The first take-profit target from this point will depend on the approach, but overall the research team are looking at 27356 on the daily timeframe.

XAU/USD (GOLD):

Weekly gain/loss: +0.71%

Weekly close: 1425.3

Weekly perspective:

Resistance at 1417.8, which capped downside over the past three weeks, finally gave way last week, allowing bullion to cross paths with a 1:1 correction (black arrows) around 1453.2 shaped from the 1160.3 August 13 low. As is evident from the chart, selling has so far been reasonably strong from 1453.2, though will it be enough to reclaim 1417.8?

Daily perspective:

The technical landscape on the daily timeframe observed a break of the top edge of a supply zone at 1448.9-1419.9 late last week. While this move was likely enough to trip a portion of the stop-loss orders above here, it’s unlikely to have cleared the path north to supply at 1495.7-1480.3 just yet, given Friday’s run south erasing 1.49%.

As for downside targets on this scale, the research team notes to be aware of the 1381.9 July 1 low, followed by support at 1356.8.

H4 perspective:

Friday’s downside moves can be attributed to a stronger dollar across the board. The rather large supply zone drawn all the way back from May 2013 at 1474.4-1441.1 held ground, with the next downside objective seen nearby in the form of a trend line resistance-turned support (taken from the high 1437.7), closely followed by another layer of trend line support taken from the low 1385.5.

Areas of consideration:

Selling this market based on the weekly 1:1 correction at 1453.2 is chancy, given the H4 supports in view. Therefore, it may be best to wait until a H4 close beneath weekly support at 1392.0 is observed. Following this, scope for further selling is seen towards the 1381.9 July 1 low, followed by support at 1356.8.

Well done to those who managed to short the H4 supply zone, however, as this was a noted area to look for shorts in Friday’s report, albeit recommended only with additional bearish candlestick confirmation (which was not seen on the H4 timeframe).

The accuracy, completeness and timeliness of the information contained on this site cannot be guaranteed. IC Markets does not warranty, guarantee or make any representations, or assume any liability with regard to financial results based on the use of the information in the site.

News, views, opinions, recommendations and other information obtained from sources outside of www.icmarkets.com.au, used in this site are believed to be reliable, but we cannot guarantee their accuracy or completeness. All such information is subject to change at any time without notice. IC Markets assumes no responsibility for the content of any linked site.

The fact that such links may exist does not indicate approval or endorsement of any material contained on any linked site. IC Markets is not liable for any harm caused by the transmission, through accessing the services or information on this site, of a computer virus, or other computer code or programming device that might be used to access, delete, damage, disable, disrupt or otherwise impede in any manner, the operation of the site or of any user’s software, hardware, data or property.

Global Markets:

• Asian Stock Markets : Nikkei up 2.00%, Shanghai Composite up 0.77%, Hang Seng up 1.12%, ASX up 0.77%
• Commodities : Gold at $1443.05 (+1.05%), Silver at $16.48 (+1.76%), Brent Oil at $62.84 (+1.47%), WTI Oil at $55.86 (+1.01%)
• Rates : US 10-year yield at 2.047, UK 10-year yield at 0.760, Germany 10-year yield at -0.321

News & Data:

• (USD) Philly Fed Manufacturing Index 21.8 vs 5 expected
• (GBP) Retail Sales m/m 1.00% vs -0.30% expected
• Fed Vice Chair: US economy in good place, but uncertainty has increased
• NY Fed: Speech By Williams Not About Potential Policy Actions
• ‘No-deal’ Brexit dealt blow by UK parliament

Markets Update:

Asian stock markets are in positive territory on Friday following the overnight gains on Wall Street as comments by New York Federal Reserve President John Williams raised hopes of a deeper than expected interest rate cut by the central bank later this month. However, the New York Fed later clarified that the speech should not be read as an indication of potential policy actions

In addition, a positive revenue outlook from Taiwan Semiconductor Manufacturing Co. and better-than-expected fourth-quarter earnings results from Microsoft Corp. boosted tech stocks in Asia. In mainland China, the Shanghai composite rose 0.8% by the afternoon, while the Shenzhen composite added 0.6%. Over in Hong Kong, the Hang Seng index advanced 1.1%.

In South Korea, the Kospi gained 1.4%, as shares of industry heavyweight Samsung Electronics advanced beyond 1%. The Nikkei 225 in Japan added 2% in afternoon trade, as shares of semiconductor equipment manufacturer Tokyo Electron surged more than 4%. The Topix index also rose 1.9%.

The dollar index against a basket of six major currencies stood little changed at 96.841 after losing roughly 0.5% overnight to a two-week low of 96.671 in the wake of comments from the Fed’s Williams. U.S. Treasury yields were lower across the board in light of Williams’ dovish views. The 2-year yield was at 1.7894% after touching a two-week low of 1.7520%. The 10-year yield declined to a 10-day trough of 2.023% and was last at 2.0465%.

In commodities, U.S. crude oil futures reversed a large part of the previous day’s deep losses, rising 1.45% to $56.10 per barrel.

Upcoming Events:

• 09:30 AM GMT – (GBP) Public Sector Net Borrowing
• 01:30 PM GMT – (CAD) Core Retail Sales m/m
• 01:30 PM GMT – (CAD) Retail Sales m/m
• 03:00 PM GMT – (USD) Prelim UoM Consumer Sentiment
• 04:05 PM GMT – (USD) FOMC Member Bullard Speaks
• 09:30 PM GMT – (USD) FOMC Member Rosengren Speaks
• 09:30 PM GMT – (USD) Building Permits
• &more…

Key risk events today:

UK Public Sector Net Borrowing; Canadian Core Retail Sales m/m and Retail Sales m/m; US Prelim UoM Consumer Sentiment; FOMC Members Bullard Rosengren Speak.

EUR/USD:

Federal Reserve member Williams surprised markets Thursday with an extra dovish rendition, stating its better to take preventative measures on rates than to wait for a disaster to unfold. This sent Europe’s single currency higher and the US dollar lower, extending EUR/USD gains towards notable H4 supply at 1.1288-1.1273, which as evident from the chart, is holding firm.

Technically speaking on the H4 timeframe, the candles have been carving out a range between 1.12 and the noted H4 supply since early July. Note 1.12 brings with it a 161.8% Fibonacci ext. point at 1.1202, a Quasimodo support at 1.1207 and May’s opening level at 1.1211. It might also be worth noting the 1.13 handle positions itself just north of the current supply zone.

Against the backdrop of medium-term flow, weekly action remains positioned within the walls of long-standing demand at 1.1119-1.1295. As highlighted in previous reports, upside momentum continues to emphasise a brittle tone here unfortunately, with the unit unable to dethrone resistance by way of the 2019 yearly opening level at 1.1445. According to the daily timeframe, further buying is a possibility until crossing swords with the 200-day SMA (orange – 1.1318). Beyond here, we have Quasimodo resistance in sight at 1.1419.

Areas of consideration:

Having seen the H4 candles form a range between supply at 1.1288-1.1273 and the 1.12 handle, traders may find the range limits of use. Trading within a range is certainly possible, if the area is large enough to secure reasonable risk/reward. Protective stop-loss orders are generally located a couple of points beyond the range extreme, targeting the opposing range limit.

In the event the upper edge of the current range is taken out, selling opportunities exist between the 200-day SMA on the daily timeframe at 1.1318 and the 1.13 handle on the H4. One can only imagine the number of protective stop-loss orders placed above the current H4 supply. This, coupled with sellers from 1.1318/1.13 and buy stops to sell into, is likely enough to entice sellers back into the market. Entry around 1.13 is potentially eyed, with a protective stop-loss order positioned above the 200-day SMA.

GBP/USD:

The British pound was a clear outperformer Thursday, swelling amid a combination of a waning greenback and increased optimism UK parliament would be able to act to prevent a no-deal Brexit. Up 0.90% on the day, the GBP/USD H4 candles snapped back above 1.25 and brushed aside trend line resistance (extended from the high 1.2783), before mildly paring gains into the close off supply at 1.2588-1.2568.  Note the recently broken trend line resistance is currently serving as support. Indicator-based traders may also find use in noting the RSI indicator is seen nearing overbought territory.

With respect to higher-timeframe structure, the research team notes buying activity within the walls of weekly demand at 1.2365-1.2615. While many traders consider this a positive for longs, do remain cognizant of nearby resistance at 1.2739 by way of the 2019 yearly opening level. Things on the daily timeframe, however, could turn bearish from supply marked in yellow at 1.2578-1.2519. Beyond here, the path appears clear for an approach to trend line support-turned resistance taken from the low 1.2960.

Areas of consideration:

The green H4 zone between the 61.8 Fibonacci retracement at 1.2631, June’s opening level at 1.2626 and the round number 1.26, located above the H4 supply at 1.2588-1.2568, has ‘fakeout to me’ written all over it. Buy stops above the current H4 supply provide liquidity to sell into.

While this setup boasts limited higher-timeframe convergence, it is certainly worthy of a bounce should we push for higher ground today. Entry anywhere within the green zone is valid, with protective stop-loss orders positioned a couple of points above 1.2631. Conservative traders may, however, opt to wait for additional candlestick confirmation to form before pulling the trigger. This helps identify seller intent and provides entry and risk levels to work with.

AUD/USD:

Finding local support on the back of Aussie employment data and Federal Reserve member Williams surprising markets with an extra dovish rendition, the Australian dollar surged higher vs. its US counterpart Thursday (up 0.94%), clocking a multi-month high of 0.7076.

According to the weekly timeframe, price action recently crossed above its 2019 yearly opening level at 0.7042. Assuming bids remain defensive, further upside towards the 2017 yearly opening level at 0.7199 may be in store. The story on the daily timeframe also witnessed price action overthrow resistance at 0.7062 yesterday (now serving as support), though faces possible resistance from the 200-day SMA currently circulating around 0.7091. Beyond here, the research team has eyes on a demand-turned resistance area at 0.7203-0.7138.

A closer reading of price action on the H4 timeframe has the candles meandering above a resistance-turned support at 0.7061, with a reasonably clear path north seen to the 0.71 handle. Indicator-based traders may also wish to note the RSI is seen treading water within overbought terrain.

Areas of consideration:

Keeping things Simple Simon this morning, a retest motion at 0.7061 H4 support could be something to watch out for today (black arrows), targeting the 200-day SMA at 0.7091, closely shadowed by 0.71. Ideally, the retesting H4 candle should close in the form of a bullish candlestick (Japanese) configuration before traders consider pulling the trigger (entry and risk levels can be determined according to the candlestick structure).

USD/JPY:

Broad-based dollar selling, influenced largely on the back of dovish comments from Federal Reserve member Williams, filtered through the market Thursday. Down 0.61%, the USD/JPY rotated lower after retesting the underside of 108 on the H4 timeframe. For traders who read Thursday’s briefing you may recall selling 108 was a noted setup to keep eyes open for, so well done to any of our readers who managed to seal a position here.

According to the H4 timeframe, further selling is likely on the cards towards Quasimodo support at 107.05, closely shadowed by the 107 handle. In terms of where we stand on the bigger picture, the technical studies on the weekly timeframe remains unchanged:

Breaking a two-week bullish phase, the US dollar rotated lower against the Japanese yen last week, engulfing the preceding candlestick’s body and erasing more than 55 points. According to technical structure, resistance is set by way of the 2019 yearly opening level at 109.68 and support is not expected to emerge until reaching a Quasimodo formation at 105.35.

With respect to the daily timeframe, buying is expected to enter the fray off trend line resistance-turned support extended from the high 112.40. Note this descending line is positioned beneath 107 on the H4 timeframe.

Areas of consideration:

As highlighted above. The H4 Quasimodo support at 107.05 is seen as the next downside target for shorts from 108. While a reaction is expected to form here, sellers may want to consider leaving a portion of their short position running in case we break through 107 and head for the daily trend line resistance-turned support mentioned above.

USD/CAD:

In previous reports, the research team highlighted the range between trend line resistance (1.3229) and July’s opening level at 1.3087 on the H4 timeframe (green) as a potential sell zone. Included within this area is the round number 1.31 and a trend line support-turned resistance taken from the low 1.3037.

As can be seen from the H4 chart this morning, the area remains in the fold though so does Quasimodo support at 1.3028, which happens to align with a 161.8% Fibonacci ext. point on the daily timeframe.

Well done to any of our readers who remain short this market, as further selling is suggested on the weekly timeframe with support not visible until connecting with Quasimodo support at 1.2887.

Areas of consideration:

Outlook remains unchanged.

Ultimately, the research team still have eyes on a move beneath the H4 Quasimodo support underlined above at 1.3028, with a final downside target set at the weekly Quasimodo support drawn from 1.2887. So, aside from the shorts currently in play from the H4 sell zone discussed above in green, a decisive H4 close beneath 1.3028 is eyed. A H4 close beneath here that’s followed up with a successful retest will likely be enough to encourage further downside. As for entry, traders have the option of basing entry and risk levels on the rejecting candle’s structure – of course this would be ideal if the rejecting candle formed by way of a Japanese candlestick formation.

USD/CHF:

Having seen the USD/CHF probe lower Thursday, largely due to dovish comments from Federal Reserve member Williams, the H4 candles are hovering a few points north of 0.98 this morning. As underlined in Thursday’s briefing, 0.98 is an alluring area of support. Closely trailed by July’s opening level at 0.9791, a 61.8% Fibonacci retracement value a support zone at 0.9747-0.9785 and a possible AB=CD correction point (black arrows) at 0.9777, the surrounding area offers strong local confluence for a move higher.

Higher up on the curve, weekly flow is selling off from supply at 1.0014-0.9892 after shaking hands with the base two weeks ago. While this may lead to a revisit of 0.9744: the next downside support target, traders may also find use in noting the trend line support-turned resistance (extended from the low 0.9187), closely followed by resistance at 1.0110, should we turn higher.

Closer examination of price action on the daily timeframe shows the unit pressing south after failing to test Quasimodo resistance at 0.9963, followed closely by resistance at 0.9986 and the 200-day SMA (orange). To the downside, limited support is in view until reaching trend line support taken from the low 0.9542.

Areas of consideration:

Outlook remains unchanged.

Longer-term flow remains unchanged and suggests selling could still be in store from weekly supply at 1.0014-0.9892.

Medium-term flow, also unchanged in terms of tradable zones, has eyes on the 0.98 region (given its surrounding confluence highlighted above) for potential longs. However, traders interested in buying 0.98 are also urged to take into account we could witness a fakeout into 0.9747-0.9785 before rotating higher. Stop-loss placement, therefore, is best positioned beneath this zone at 0.9747.

Dow Jones Industrial Average:

Kicking off with a look at the weekly timeframe this morning, the research team notes that aside from a brief spell of indecision three weeks back, the Dow Jones Industrial Average has emphasised a strong bullish tone since shaking hands with the 2018 yearly opening level at 24660 in early June. Taking out resistance at 26667 and shortly after retesting it as support propelled the index to fresh record highs of, as of current price, 27388. With limited resistance in sight until connecting with 28070 (not visible on the screen), a 127.2% Fibonacci ext. point taken from the low 21425, additional buying could be seen over the coming weeks.

Contrary to weekly price, daily action is defending the underside of 27356: the 161.8% Fibonacci ext. point. Continued selling from here has a downside support target set at 26773, located just north of weekly support at 26667.

US stocks reversed course from an early slump and closed higher Thursday to break a two-day losing streak after technology and bank stocks rallied (AP). The Dow Jones Industrial Average closed at +0.01%; the S&P 500 advanced 0.36% and the tech-heavy Nasdaq 100 added 0.19%.

Aside from the 38.2% Fibonacci support retracement on the H4 timeframe at 27104, limited support is visible on this scale until reaching a trend line support extended from the low 26436.

Areas of consideration:

Until the index breaks above daily resistance (161.8% Fibonacci ext. point) at 27356, buying this market is a challenge. Once/if this level is taken out a long, preferably on the retest of 27356, is certainly worthy of consideration, with an ultimate upside target set at the weekly resistance coming in by way of a 127.2% Fibonacci ext. point taken from the low 21425.

XAU/USD (GOLD):

In recent sessions, market participants witnessed bullion surge higher vs. its US peer, concluding Thursday +1.44%. From a technical standpoint on the H4 timeframe, a continuation move to the upside was expected given the pennant pattern formation (1381.9/1437.7). As you can see, price action dethroned the top edge of the pennant in recent trading and shortly after retested the limit as support, which was followed through with a strong move to the upside that ended with price closing within the lower limits of a rather large supply at 1474.4-1441.1. Well done to any of our readers who managed to catch the recent run higher.

Glued to the top edge of the said H4 supply zone is a weekly supply area coming in at 1487.9-1470.2, though before reaching this zone, price must contend with a 1:1 correction (black arrows) around 1453.2 shaped from the 1160.3 August 13 low.

The technical landscape on the daily timeframe, however, recently observed price action break the top edge of a supply zone at 1448.9-1419.9. While this move was likely enough to trip a portion of the stop-loss orders above here, its unlikely to have cleared the path north just yet. In the event we do break higher, nevertheless, traders may wish to note supply at 1495.7-1480.3 as the next upside target on this scale (not visible on the screen).

Areas of consideration:

Daily supply at 1448.9-1419.9 had the upper edge of its base clipped in recent movement, though price action has yet to close above the perimeter. This – coupled with H4 price entering the jaws of a large supply at 1474.4-1441.1 and weekly price connecting with a 1:1 correction around 1453.2 – we could be in for some selling today, possibly recapturing a large portion of Thursday’s gains.

To take advantage of this, traders may opt to wait for H4 price to print a bearish candlestick configuration at current price and entering based on this structure. The first downside target from here is likely to be back around the top edge of the H4 pennant.

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