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Leverage is vitally important, yet it remains a misunderstood concept for many traders.

The leverage ratio essentially governs the margin required in an account to trade.

1:100 leverage means for every 100 USD traded, 1 USD margin is required (or 1%). 1:200 leverage, therefore, means for every 200 USD traded, 1 USD margin is required (or 0.5%). Here, a trader can effectively control 200 x more money than what is in the account.

Lots

• A standard lot is 100,000 currency units.
• A mini lot is 10,000 currency units.
• A micro lot is 1,000 currency units.

As an example, one standard lot of EUR/USD is 100,000 euros, while one mini lot of EUR/USD represents 10,000 euros.

Currency pairs consist of two currencies. The euro, in the case of EUR/USD, represents the base currency and the US dollar denotes the quote or counter currency. It is the base currency that’s bought/sold, always representing 1 unit. The quote currency informs traders what the value of the base currency is worth.

If GBP/USD trades at $1.3000, 1 GBP is valued at 1.30 USD. 10 GBP, therefore, would be worth 13.00 USD.

Is Leverage a Loan?

Leverage in the derivatives market, including spot FX, is not a loan from your broker as derivatives are based on agreements. Unlike futures and options contracts, margin FX products traded through MetaTrader cannot be settled by physical or deliverable settlement of currencies – they’re rolled or swapped indefinitely and settled in cash.

In spot Forex, currencies are traded in pairs. If you enter long GBP/USD at $1.2000, you agree to buy GBP and sell USD. Remember, spot FX trades in agreements.

With the above in mind, imagine GBP/USD trades at $1.2900 and the trader enters long 100,000 units, 100,000 GBP are to be received and 129,000 USD are to be delivered within the agreement. Say the pair trades to $1.3000 and the same trader decides to liquidate the position (the agreement), 100,000 GBP is now worth 130,000 USD, a 1,000 USD profit. No currency ever changes hands and no loan is required from the broker.

Margin

Margin is a percentage of your equity put aside by your broker to execute trades. This is to cover the possibility of loss in your account. Margin is not a cost or a fee. This value, used margin, will not fluctuate during a trade. As long as the equity level remains above margin, the account will not hit the broker’s stop-out level.

Free margin is the money in a trading account available for executing additional positions. It’s also the value current position(s) can move against you before the account receives a margin call.

As far as your broker is concerned, your margin requirement will be calculated in your account currency.

• If your account is denominated in USD and the base currency of the pair traded is also in USD, the margin requirement can be calculated by dividing your leverage ratio. For instance, an account set at 1:100 equates to a 1.00% margin requirement (1/100). So, trading one standard lot (100,000 units) equals 1,000 USD margin. Trading one mini lot (10,000 units) equals 100 USD margin.
• If your account currency is different to the pair traded, a different calculation is required. For an account denominated in AUD, though trading EUR/USD, multiply the position value (100,000 units for a standard lot) by the current EUR/AUD price and then multiply this value by the margin percentage (1% in this case). To trade EUR/USD with an account denominated in AUD at current prices you need 1,631.6 AUD margin (100,000 * 1.6316 [EUR/AUD] * 0.01).
• If your account currency is the same as the quote currency of the pair traded, you must multiply the position value (100,000 units if one standard lot) by the current price of the pair traded and multiply this value by the margin percentage, which in this case is 1% (1:100 leverage). Trading EUR/AUD with an account denominated in AUD, with one standard lot, requires 1,630.9 AUD margin to execute a trade (100,000 * 1,6309[EUR/AUD] *0.01).

The Stop-Out Level

Forex brokers seldom call clients to initiate a margin call. However, it is an option in cTrader, a trading platform provided by many popular brokers in the retail foreign exchange industry.

The term you need to focus on is the stop-out level. IC Market’s stop-out level on MT4/MT5 and cTrader is 50%. This means if your equity dips beneath 50% of your used margin level, the platform will automatically liquidate the most unprofitable trades. So, if used margin is 1,000 USD and your account trades to 499.99 USD (49.9%), trades will begin to close. At this point you also have the option of depositing additional funds to increase your margin level.

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.

Key risk events today:

UK Retail Sales m/m; Canada Retail Sales m/m; US CB Leading Index m/m; US Prelim UoM Consumer Sentiment.

(Previous analysis as well as outside sources – italics).

EUR/USD:

Europe’s single currency slipped through several key H4 technical supports Thursday, missing weekly support at 1.1733 by a hair before recoiling back to unchanged levels.

H4, as of current price, trades north of 1.18, with technical eyes perhaps directed towards trend line resistance, extended from the high 1.2010. Absorbing selling pressure here moves Quasimodo resistance at 1.1889 into sight, as well as the psychological band 1.19.

From the weekly timeframe, support mentioned above at 1.1733, a previous Quasimodo resistance, came within striking distance of making an appearance yesterday. Resistance on the weekly scale can be found at 1.2004, the 2018 yearly opening value sited just south of Quasimodo resistance priced in at 1.2092. Also clear on the weekly scale is the month of July witnessed vigorous upside, overthrowing trend line resistance, taken from the high 1.2555, and the 2019 yearly opening value at 1.1445.

Since transitioning into the month of August on the daily timeframe, the current weekly support has proved useful, as has daily resistance coming in at 1.1940 and 1.2002. Note yesterday’s action produced a hammer candlestick pattern a few pips ahead of the weekly support level. Passing 1.2002 on the daily timeframe shifts focus to the weekly Quasimodo resistance mentioned above at 1.2092, whereas dipping sub 1.1733 on the daily scale could see price make its way to channel resistance-turned support, extended from the high 1.1147.

Areas of consideration:

H4 Quasimodo resistance at 1.1889 may appeal to sellers. Not only does the level form a few pips south of the 1.19 handle, we’re also coming off fresh lows on the H4 scale (1.1737), proposing strength to the downside. Furthermore, stops taken from above the trend line resistance and minor swing high at 1.1882 could provide liquidity to sell (buy stops).

A retest at 1.18 today, knowing we’ve just produced a hammer candle pattern, could also be of interest, particularly if shaped in the form of a H4 bullish candlestick configuration.

GBP/USD:

For those who read Thursday’s technical briefing you may recall the piece highlighted the following (italics):

1.30 not only represents a widely watched level in this market, it comes with additional H4 resistance at 1.3009 and daily resistance seen at 1.3017.

Bearish themes could develop off 1.3017/1.30 (H4 red) today, targeting support at 1.2944 (since removed) as an initial take-profit zone. Having noted weekly price displaying promise ahead of support at 1.2739, sellers out of 1.3017/1.30 will likely reduce risk to breakeven at 1.2944 and bank partial profits. The next downside target rests around the 1.29 point (H4).

As evident from the H4 timeframe, 1.3017/1.30 held firm and had price shake hands with 1.29.

Weekly price is making a stand just north of support in the form of the 2019 yearly opening level at 1.2739 and aligning trend line resistance-turned support, extended from the high 1.5930. Technical studies project room to advance as far north as the 2020 yearly opening level at 1.3250.

From the daily timeframe, resistance mentioned above at 1.3017 is yet to be challenged. Support at 1.2769 is seen to the downside, accompanied by the 200-day SMA (orange – 1.2730). Reaching for higher territory, nevertheless, shines the spotlight on resistance around 1.3200.

Areas of consideration:

1.3017/1.30 (H4 red) could remain active Friday on account of its appealing confluence. Rupturing the zone, however, signals H4 buyers may attempt to approach resistance at 1.3064 (a prior Quasimodo support), closely shadowed by August’s opening level at 1.3078 and the 1.31 handle. This, of course, is in line with weekly structure.

AUD/USD:

Thursday had AUD/USD finish significantly off session lows to close the day unchanged.

As of current price, H4 is attempting to reclaim 0.73 to the upside after coming within a few pips of testing two trend line supports, taken from the lows 0.6963/0.7076. Aside from peaks around 0.7342, September’s opening level at 0.7376 can be seen as the next obvious resistance, followed by weekly resistance at 0.7379 along with daily resistance (Dec 4 high) from 0.7393, and then 0.74 (H4).

The weekly timeframe’s picture (unchanged):

Sellers south of resistance at 0.7379 failed to sustain downside momentum past 0.7191 in recent trading, leaving nearby support from 0.7147 unchallenged. Having seen this market trend higher since bottoming at 0.5506 in late March, the odds of price surging through current resistance and heading for another layer of resistance at 0.7495 are high. Exploring territory under current support, however, shines focus on the 2020 and 2019 yearly opening levels at 0.7016 and 0.7042, respectively.

The daily timeframe (unchanged):

Price has so far gleaned moderate support from 0.7235. Resistance at 0.7393 (December 4 high) commands attention in the event further bidding develops, a level that capped upside heading into September ahead of Quasimodo resistance at 0.7442. Overthrowing 0.7235 shifts attention to as far south as support at 0.7049.

Areas of consideration:

A decisive H4 close above 0.73 could reignite buying interest, targeting resistances underlined in bold.

Should buyers fail to overthrow 0.73, the two H4 aforementioned trend line supports could offer a floor, given the reasonably close relationship they have with daily support at 0.7235.

USD/JPY:

Risk aversion, coupled with the US dollar index prodding back under 93.00, weighed on USD/JPY Thursday. Processing a fourth consecutive daily decline, price action shook hands with weekly support coming in at 104.70.

Breaching the latter potentially clears higher timeframe flow to as far south as a weekly Quasimodo support level at 102.55. On the H4, however, we can see beyond the 104.18 July 31 low Quasimodo support lies at 104.07, sited just north of the 104 handle.

Areas of consideration:

The current weekly support boasts a noteworthy history.

From the weekly timeframe, you’ll note the level has capped downside since April 2018. For that reason, although sellers have exhibited a dominant existence this week, buyers could retaliate from the weekly base and approach 105 on the H4 as an initial resistance.

Yet, any sustained move under 104.70 is likely to activate another wave of selling, taking aim at the 104ish neighbourhood and, according to the higher timeframes, potentially 102.55 support on the weekly chart.

USD/CAD:

For those who read Thursday’s technical briefing you may recall the following (italics):

Seeking bullish scenarios above 1.32 on the H4 could prove frustrating, hindered by daily resistance from 1.3225 and H4 resistance at 1.3232. A sell-off from 1.3232/1.32, therefore, could EVENTUALLY take hold, bolstered by weekly price recently engaging trend line resistance (taken from the low 1.2061) and the market trending lower since mid-March. H4 sellers may be waiting for a close to form beyond local trend line support, drawn from the low 1.3119.

Breakout buyers, as you can see, did indeed find difficulty above 1.32 yesterday, with 1.3232/1.32 establishing a formidable ceiling. With H4 candles currently exploring terrain south of 1.32, local trend line support (1.3119) is next on tap, with a break perhaps exacerbating downside, targeting 1.31.

Areas of consideration:

Weekly price coming off trend line resistance and daily retesting resistance at 1.3225 is likely to force H4 under local trend line support (1.3119) today. This movement may have current sellers pyramid their positions and is also likely to attract fresh shorts to at least 1.31.

USD/CHF:

Technical movement on the weekly timeframe shows buyers and sellers continue to battle for position north of support at 0.9014, potentially gleaning additional impetus from ABCD support at 0.9051 (black arrows). Resistance at 0.9255, a previous Quasimodo support level, calls for attention should we transition north. 

The month of August on the daily timeframe chalked up a falling wedge pattern from the high 0.9241 and a low of 0.9056. The beginning of September saw the upper border of the falling wedge give way, consequently unlocking a bullish reversal signal. Resistance at 0.9187 swiftly put a lid on gains, however, directing moves to just north of the falling wedge. We have since spent the majority of the week printing indecisive daily candles. Lifting from current price targets the aforementioned resistance; dips, nonetheless, brings in weekly support at 0.9014.

Early hours Thursday saw H4 tackle August’s opening value at 0.9136. Accepted by sellers, price went on to burrow through 0.91 in recent trading, threatening a test of lows around 0.9055. This is followed by September’s opening value at 0.9038 and then H4 trend line resistance-turned support (extended from the high 0.9241) as well as weekly support mentioned above at 0.9014.

Areas of consideration:

H4 dipping a toe below 0.91 signals intraday weakness and implies September’s opening value at 0.9038 could make an appearance today. Should a 0.91 retest form, this may tempt conservative sellers to enter the fight.

Longer term, the trend remains lower, though it would be unwise to overlook weekly support at 0.9051 and associated ABCD support.

Dow Jones Industrial Average:

Major US equity benchmarks tumbled Thursday, weighed by a soft labour market. The Dow Jones Industrial Average dipped 130.40 points, or 0.47%; the S&P 500 dropped 28.48 points, or 0.84% and the Nasdaq traded lower by 140.19 points, or 1.27%.

Technically, weekly shows price holding south of the 2020 yearly opening value at 28595 (sited just under Quasimodo resistance at 29409). Additional bearish sentiment advertises demand (green) at 25916-26523, an area active buyers may try and defend.

From the daily timeframe, the lower limit of an ascending wedge, taken from the low 22803, along with support from 27640, continues to bolster the unit. Technicians will also acknowledge the hammer candlestick pattern formed yesterday. Rupturing the aforementioned supports could lead to price crossing paths with the 200-day SMA (orange – 26298), while a recovery positions the 2020 yearly opening level at 28595 (weekly timeframe) in range.

Across the page on the H4 timeframe, the unit has September’s opening value at 28369 sited as resistance, joined by a 61.8% Fibonacci retracement ratio at 28436. To the downside, support can be seen at 27360, also sharing space with a 61.8% Fibonacci retracement ratio at 27204.

Areas of consideration:

• September’s opening value at 28369 on the H4 as a resistance zone.
• Support at 27360 on the H4 scale.
• Daily support at 27640 and lower limit of rising wedge. Note we also saw a daily bullish candlestick pattern form from this area yesterday, enough to perhaps entice technical buying today.

XAU/USD (GOLD):

The higher timeframe technical picture remains unchanged – here’s a reminder of where we left things in Thursday’s technical briefing (italics):

Weekly price remains buoyed by $1,921 support (located ahead of support at $1,882), the previous major all-time high (September 2011). With the current trend trekking north since 2016, the support combination between $1,882 and $1,921 may be enough to encourage additional buying, with most targeting all-time peaks at $2,075 as the initial point. Failure to hold gains could see channel resistance-turned support, etched from the high $1,703, enter view.

From the daily timeframe, candle activity continues to hold onto gains north of support at $1,911, though is seen grinding along the underside of a trend line support-turned resistance, taken from the low $1,455. Further buying targets the $1,992 September 1 high followed by the $2,015 August 18 high. A dip sub $1,911 will draw weekly support mentioned above at $1,882 into the frame.

A closer reading of price action on the H4 timeframe had Thursday cross swords with support at $1,941, following a dip from September’s opening value at $1,966, a line drawn just ahead of August’s opening value at $1,975.

Traders who read Thursday’s technical briefing may recall the following (italics):

A $1,941 support retest could emerge on the H4 timeframe, a level that may appeal to dip buyers. A recovery from the noted support is backed by the weekly timeframe, yet might be hindered by daily structure (trend line resistance). A H4 bullish candlestick signal formed from the said H4 support may persuade buying, targeting $1,966/$1,975 as a primary point on the H4. Above here, traders will likely reach for $2,000.

Areas of consideration:

The reaction from $1,941 support on the H4 chalked up a mild outside reversal candle, which seems to have been welcomed by buyers. As underlined above, the initial upside target from current price falls in around $1,966/$1,975.

Should we fail to secure support, traders’ crosshairs are likely to drop back to the higher timeframe support zone at $1,911.90-$1,921.00 (green H4), an area which has plugged downside since August and recently (September 8) offered a solid buy signal.

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 0.67%, Shanghai Composite down 0.41%, Hang Seng down 1.79%, ASX down 1.22%
• Commodities : Gold at $1951.50 (-0.96%), Silver at $27.02 (-1.66%), Brent Oil at $41.93 (-0.69%), WTI Oil at $39.83 (-0.82%)
• Rates : US 10-year yield at 0.679, UK 10-year yield at 0.216, Germany 10-year yield at -0.485

News & Data:

• (AUD) Unemployment Rate 6.80% vs 7.70% expected
• (AUD) Employment Change 111.0K vs -40.0K expected
• (NZD) GDP q/q -12.20% vs -12.50% expected
• (USD) Federal Funds Rate <0.25% vs <0.25% expected
• (USD) Crude Oil Inventories -4.4M vs 2.1M expected
• (USD) Retail Sales m/m 0.60% vs 1.10% expected
• (USD) Core Retail Sales m/m 0.70% vs 1.00% expected
• (GBP) CPI y/y 0.20% vs 0.10% expected
• BoJ Gov Kuroda: Japanese Economy Started To Pick Up
• BOJ to hold fire, signal resolve to work closely with Suga’s new cabinet

Markets Update:

Asian stock markets are mostly lower on Thursday amid worries about the economic recovery from the coronavirus pandemic despite a dovish monetary policy announcement by the U.S. Federal Reserve, with the central bank leaving interest rates unchanged and signalling rates are likely to remain at near-zero levels for years to come. The economic projections provided by the central bank along with the announcement suggest most Fed officials expect interest rates to remain unchanged through at least 2023.

Japan’s Nikkei 225 slipped 0.7% while the Topix index dipped 0.4%. Mainland Chinese stocks were also lower, with the Shanghai composite and the Shenzhen component down 1%. In Australia, the S&P/ASX 200 traded 1.1% lower. Hong Kong’s Hang Seng index led losses among the region’s major markets as it fell 1.8%.

The U.S. dollar index, which tracks the greenback against a basket of its peers, sat at 93.517 after earlier touching a high of 93.592. As the dollar gains, oil prices gave up some of their big gains made on Wednesday on a drawdown in U.S. crude and gasoline inventories, with Hurricane Sally forcing a swath of U.S. offshore production to shut.

Upcoming Events:

• 11:00 AM GMT – (GBP) MPC Official Bank Rate Votes
• 11:00 AM GMT – (GBP) Monetary Policy Summary
• 11:00 AM GMT – (GBP) Official Bank Rate
• 11:00 AM GMT – (GBP) MPC Asset Purchase Facility Votes
• 12:30 PM GMT – (CAD) ADP Non-Farm Employment Change
• 12:30 PM GMT – (USD) Philly Fed Manufacturing Index
• 12:30 PM GMT – (USD) Unemployment Claims

Key risk events today:

Australia Employment Change and Unemployment Rate; BoJ Monetary Policy Statement and Press Conference; (BoE) MPC Official Bank Rate Votes; BoE Monetary Policy Summary, Official Bank Rate, MPC Asset Purchase Facility and Asset Purchase Facility; Canada ADP Non-Farm Employment Change; Philly Fed Manufacturing Index; US Unemployment Claims.

(Previous analysis as well as outside sources – italics).

EUR/USD:

EUR/USD continues to dance mid-way between 1.19 and 1.18 on the H4, therefore limited technical change occurred Wednesday.

Above 1.19, September’s opening value is seen at 1.1937; to the downside, beyond 1.18, Quasimodo support at 1.1781 is visible, followed by August’s opening level at 1.1771.

Further afield, weekly support is seen at 1.1733, a previous Quasimodo resistance; resistance on the weekly scale can be found at 1.2004, the 2018 yearly opening value sited just south of Quasimodo resistance priced in at 1.2092. Also clear on the weekly scale is the month of July witnessed vigorous upside, overthrowing trend line resistance, taken from the high 1.2555, and the 2019 yearly opening value at 1.1445.

Since transitioning into the month of August on the daily timeframe, weekly support, mentioned above at 1.1733, has proved useful, as has daily resistance coming in at 1.1940 and 1.2002. Passing 1.2002 on the daily timeframe shifts focus to the weekly Quasimodo resistance mentioned above at 1.2092, whereas dipping sub 1.1733 on the daily scale could see price make its way to channel resistance-turned support, extended from the high 1.1147.

Areas of consideration:

Outlook unchanged.

• A fakeout through 1.18 into H4 Quasimodo support from 1.1781 and August’s opening level at 1.1771 could be in store. Tripping sell-stop liquidity under 1.18, and luring any fresh buyers off noted H4 supports, may be enough to generate a H4 close back above 1.18, creating a possible intraday buy signal.
• The same can be seen above 1.19 on the H4, though right now the round number is proving a tough nut to crack. Piercing 1.19 and testing September’s opening level at 1.1937 (tripping buy-stop liquidity above the round number) may force a H4 close back under 1.19 and promote a bearish scenario. Note September’s opening level forms a close connection with daily resistance at 1.1940.

GBP/USD:

GBP/USD finally mustered enough oomph to overthrow 1.29 on the H4, taking on resistance at 1.2944 (now serving support) and shaking hands with the key figure 1.30. UK CPI data exhibited an upbeat tone, though the obvious catalyst behind the pound’s recent strength was USD softness.

1.30 not only represents a widely watched level in this market, it comes with additional H4 resistance at 1.3009 and daily resistance seen at 1.3017, in view thanks to the recent recovery from daily support priced in at 1.2769.

Weekly price is making a stand just north of support in the form of the 2019 yearly opening level at 1.2739 and aligning trend line resistance-turned support, extended from the high 1.5930. Technical studies project room to advance as far north as the 2020 yearly opening level at 1.3250.

Areas of consideration:

Bearish themes could develop off 1.3017/1.30 (H4 red) today, targeting support at 1.2944 as an initial take-profit zone. Having noted weekly price displaying promise ahead of support at 1.2739, sellers out of 1.3017/1.30 will likely reduce risk to breakeven at 1.2944 and bank partial profits. The next downside target rests around the 1.29 point (H4).

AUD/USD:

For those who read recent technical writing you may recall the following (italics):

As evident from the H4 chart this morning, AUD/USD latched onto a healthy bid Tuesday, ripping through any defence 0.73 had in place. Peaks of 0.7342 were achieved before the pair reclaimed earlier gains and retested 0.73 as support.

0.73 remained supportive Wednesday, withstanding a recent downside attempt. Continuing to defend the round number swerves September’s opening level at 0.7376 into the firing range on the H4, followed by weekly resistance at 0.7379 along with daily resistance (Dec 4 high) from 0.7393, and then 0.74 (H4).

The weekly timeframe’s picture (unchanged):

Sellers south of resistance at 0.7379 failed to sustain downside momentum past 0.7191 in recent trading, leaving nearby support from 0.7147 unchallenged. Having seen this market trend higher since bottoming at 0.5506 in late March, the odds of price surging through current resistance and heading for another layer of resistance at 0.7495 are high. Exploring territory under current support, however, shines focus on the 2020 and 2019 yearly opening levels at 0.7016 and 0.7042, respectively.

The daily timeframe:

Price has so far gleaned moderate support from 0.7235. Resistance at 0.7393 (December 4 high) commands attention in the event further bidding develops, a level that capped upside heading into September ahead of Quasimodo resistance at 0.7442. Overthrowing 0.7235 shifts attention to as far south as support at 0.7049.

Areas of consideration:

Conservative buyers are still likely weighing up the odds of entering into a long position from the recent 0.73 retest. Technically, there’s room for buyers to stretch their legs from here until reaching September’s opening level at 0.7376 on the H4. Should the current H4 candle close as is, in the shape of a hammer candlestick pattern, this may be adequate enough to tempt bids.

USD/JPY:

As of writing, USD/JPY is staging a moderate recovery off session lows around 104.80. Technically, the move is reinforced by a H4 AB=CD (red arrows) correction (and 1.27 BC projection at 104.82). Note this formation also gleans additional support from a 78.6% H4 Fibonacci retracement ratio at 104.79, with weekly support priced just south of the level at 104.70.

Supply remains prominent at 108.16-106.88 (dark green) on the weekly timeframe, capping upside since price made its way off support mentioned above at 104.70 at the end of July. Should buyers eventually govern control, the 2020 yearly opening level at 108.62 may eventually enter view, closely tracked by Quasimodo resistance at 109.38 and the 2019 yearly opening level at 109.68.

Daily supply at 107.55/106.89 (yellow), an area housed within the lower boundary of weekly supply mentioned above at 108.16-106.88, has proved tough to overthrow. Downside, as you can see, recently threw price within touching distance of weekly support underlined above at 104.70. In the event buyers climb, Quasimodo resistance is stationed at 107.64, reinforced by a 61.8% Fibonacci retracement ratio at 107.68 and 200-day SMA (orange – 107.77).

Areas of consideration:

Should we regain footing back above 105 today on the H4, traders may interpret this as a bullish cue to approach H4 resistance at 105.24. Downside risk remains, however, since weekly support at 104.70 still likely calls for attention. Therefore, prospective buyers may hold fire and wait and see if the candles cross swords with the weekly support level before pulling the trigger.

USD/CAD:

USD/CAD trimmed earlier losses Wednesday, finishing the session mostly unmoved.

As shown on the H4 timeframe, and aired in recent technical writing, the pair has been caught within a range south of 1.32 since last Thursday’s recovery from two trend line resistances-turned support, extended from highs 1.3646 and 1.3451. Given the above, our technical outlook remains unchanged, therefore the following will echo thoughts put forward in Wednesday’s technical briefing.

Brushing aside 1.32 on the H4 turns attention back to resistance at 1.3232, with a break perhaps exposing the 1.33 handle and a possible three-drive completion at the 127.2% Fibonacci extension point from 1.3318. Traders may also wish to acknowledge the H4 resistance boasts a close connection with daily resistance at 1.3225.

From the weekly timeframe:

Snapping an eight-week bearish phase, USD/CAD staged a stronger-than-expected recovery last week off support at 1.3059 (pinned just north of the 2020 yearly opening level at 1.2975). This led to trend line support-turned resistance, taken from the low 1.2061, making an appearance, commanding enough of a presence to generate a mild end-of-week correction. Continued upside highlights the 2017 yearly opening level at 1.3434 as potential resistance.

From the daily timeframe:

Quasimodo support at 1.3042 has remained notable since the beginning of September, with the buck latching onto a strong bid in early trading last week to shake hands with resistance mentioned above at 1.3225, a prior Quasimodo support. Interest from the aforementioned resistance was expected having seen the level merge with weekly trend line resistance. In terms of resistance beyond 1.3225, we do not see much to hang our hat on until crossing swords with trend line resistance, etched from the high 1.4265, which happens to align closely with trend line support-turned resistance, taken from the low 1.2957, and the 200-day SMA (orange – 1.3519). However, before reaching the said daily levels, we must contend with weekly resistance around 1.3434.

Areas of consideration:

Outlook unchanged due to the recent lacklustre performance.

On one side, weekly support at 1.3059 and daily Quasimodo support at 1.3042 recently made an appearance, prompting a bullish move. On the other side we also had weekly price test trend line resistance and daily price probe resistance from 1.3225.

With the above in mind, seeking bullish scenarios above 1.32 on the H4 could prove frustrating, hindered by daily resistance from 1.3225 and H4 resistance at 1.3232. A sell-off from 1.3232/1.32, therefore, could EVENTUALLY take hold, bolstered by weekly price recently engaging trend line resistance and the market trending lower since mid-March. H4 sellers may be waiting for a close to form beyond local trend line support, drawn from the low 1.3119.

Climbing above 1.3232, nevertheless, ignites possible bullish themes and places 1.33 (H4) in the firing range (and a three-drive pattern completion around 1.3318).

USD/CHF:

Following a subdued start to the week, the US dollar concluded higher against the Swiss franc Wednesday, recently overrunning the 0.91 handle on the H4.

Above 0.91, August’s opening value at 0.9136 steps in view, while brushing aside this base places H4 Quasimodo resistance at 0.9184 in sight and daily resistance at 0.9187.

Technical movement on the weekly timeframe shows buyers and sellers continue to battle for position north of support at 0.9014, potentially gleaning additional impetus from ABCD support at 0.9051 (black arrows). Resistance at 0.9255, a previous Quasimodo support level, calls for attention should we transition north. 

The month of August on the daily timeframe chalked up a falling wedge pattern from the high 0.9241 and a low of 0.9056. The beginning of September saw the upper border of the falling wedge give way, consequently unlocking a bullish reversal signal. Resistance at 0.9187 swiftly put a lid on gains, however, directing moves to just north of the falling wedge. Should we see buyers build on Wednesday’s gains and eventually upset resistance at 0.9187, the falling wedge take-profit target could be the next port of call around 0.9294 (blue arrows). Dips, nonetheless, brings in weekly support at 0.9014.

Areas of consideration:

H4 dipping a toe in waters above 0.91 signals possible continuation to the upside today, targeting August’s opening level at 0.9136, with the prospect of additional upside pressure forcing price to touch gloves with daily resistance at 0.9187. Conservative buyers may seek a 0.91 retest before committing; others may be satisfied entering on a H4 close north of the round number.

Dow Jones Industrial Average:

After the Fed announced it’ll keep interest rates lower over the next few years, the Dow eked out modest gains Wednesday. However, the S&P 500 fell as tech stocks declined.

The Dow Jones Industrial Average advanced 36.78 points, or 0.13%; the S&P 500 dropped 15.71 points, or 0.46% and the Nasdaq traded lower by 139.85 points, or 1.25%.

For those who read Wednesday’s technical briefing you may recall the following based on the H4 chart (italics):

To the upside, September’s opening value at 28369 rests as possible resistance, joined by a 61.8% Fibonacci retracement ratio at 28436 and a potential AB=CD bearish pattern (purple arrows) at 28418, along with a 1.27 BC projection at 28420.

As evident from the H4 timeframe this morning, the unit clipped September’s opening value at 28369 in recent hours and pencilled in a healthy rotation. 

Further out, weekly shows price holding south of the 2020 yearly opening value at 28595 (sited just under Quasimodo resistance at 29409). Additional bearish sentiment advertises demand (green) at 25916-26523, an area active buyers may try and defend.

From the daily timeframe, the lower limit of an ascending wedge, taken from the low 22803, along with support from 27640, continues to bolster the unit. Rupturing the aforementioned supports could lead to price crossing paths with the 200-day SMA (orange – 26299), while a recovery positions the 2020 yearly opening level at 28595 (weekly timeframe) in range.

Areas of consideration:

Logical downside targets from September’s opening value can be seen at the 38.2% Fibonacci retracement ratio at 27951 (taken from the AB=CD formation), followed by the 61.8% Fibonacci base at 27664. Note the latter is arranged just north of daily support mentioned above at 27640, therefore active buying from this space is perhaps in the offing should we reach this far south.

XAU/USD (GOLD):

Spot gold finished Wednesday off session peaks at $1,973, effectively mirroring Tuesday’s segment.

September’s opening value at $1,966 on the H4 timeframe is proving a tough level to overcome, a line drawn just ahead of August’s opening value at $1,975. Above here, traders will likely reach for $2,000, while extending the recent $1,966 rejection may guide price back to support at $1,941.

Weekly price remains buoyed by $1,921 support (located ahead of support at $1,882), the previous major all-time high (September 2011). With the current trend trekking north since 2016, the support combination between $1,882 and $1,921 may be enough to encourage additional buying, with most targeting all-time peaks at $2,075 as the initial point. Failure to hold gains could see channel resistance-turned support, etched from the high $1,703, enter view.

From the daily timeframe, candle activity continues to hold onto gains north of support at $1,911, though is seen grinding along the underside of a trend line support-turned resistance, taken from the low $1,455. Further buying targets the $1,992 September 1 high followed by the $2,015 August 18 high. A dip sub $1,911 will draw weekly support mentioned above at $1,882 into the frame.

Areas of consideration:

A $1,941 support retest could emerge on the H4 timeframe, a level that may appeal to dip buyers. A recovery from the noted support is backed by the weekly timeframe, yet might be hindered by daily structure (trend line resistance). A H4 bullish candlestick signal formed from the noted support may persuade buying, targeting $1,966/$1,975 as a primary point on the H4. Should we fail to secure support, traders’ crosshairs are likely to drop back to the higher timeframe support zone at $1,911.90-$1,921.00 (green H4), an area which has plugged downside since August.

Above $1,975 on the H4, breakout buyers will likely reach for $2,000.

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 up 0.09%, Shanghai Composite down 0.36%, Hang Seng down 0.18%, ASX up 1.04%
• Commodities : Gold at $1973.40 (+0.37%), Silver at $27.55 (+0.32%), Brent Oil at $41.34 (+2.00%), WTI Oil at $39.16 (+2.30%)
• Rates : US 10-year yield at 0.674, UK 10-year yield at 0.202, Germany 10-year yield at -0.490

News & Data:

• (GBP) CPI y/y 0.20% vs 0.10% expected
• (GBP) Claimant Count Change 73.7K vs 99.5K expected
• Japan’s Lower House Elects Yoshihide Suga As New Prime Minister
• Fed nominee Shelton doesn’t yet have Senate support, Thune says

Markets Update:

Asian stock markets are mixed on Wednesday with modest gains following the positive cues overnight from Wall Street and as investors turned cautious ahead of the U.S. Federal Reserve’s monetary policy decision due later in the day.

While the Fed is widely expected to leave interest rates unchanged, investors are likely to pay close attention to any tweaks to the accompanying statement. The central bank’s latest economic projections may also attract attention.

Mainland Chinese stocks saw losses by the afternoon. The Shanghai composite declined 0.4% while the Shenzhen component shed 1%. Over in Australia, the S&P/ASX 200 advanced 1%. In Japan, the Nikkei 225 closed fractionally higher at 0.1% positive while the Topix index advanced 0.2%. Hang Seng was down by 0.2%.

The yield on benchmark 10-year Treasury notes was at 0.674%, from Tuesday’s close of 0.679%. In the currency market, the yen touched a two-week high of 105.23 per dollar as traders bet on a more accommodative Fed, and was last at 105.31.

Ahead of the Fed announcement, the U.S. dollar index — which tracks the greenback against a basket of its peers — was at 93.046 after an earlier high of 93.185. In contrast to the muted activity elsewhere, oil prices jumped as a hurricane disrupted U.S. offshore oil and gas production and as U.S. stockpiles fell.

Upcoming Events:

• 12:30 PM GMT – (USD) Core Retail Sales m/m
• 12:30 PM GMT – (USD) Retail Sales m/m
• 02:30 PM GMT – (USD) Crude Oil Inventories
• 06:00 PM GMT – (USD) FOMC Economic Projections
• 06:00 PM GMT – (USD) FOMC Statement
• 06:00 PM GMT – (USD) Federal Funds Rate
• 06:30 PM GMT – (USD) FOMC Press Conference
• 10:45 PM GMT – (NZD) GDP q/q

Key risk events today:

UK CPI y/y; US Retail Sales m/m; US Core Retail Sales m/m; Crude Oil Inventories; FOMC Economic Projections, FOMC Statement, Federal Funds Rate and Press Conference; New Zealand GDP q/q.

(Previous analysis as well as outside sources – italics).

EUR/USD:

As the DXY closes out Tuesday off worst levels (92.79), EUR/USD on the H4 spun lower from the 1.19 handle in reasonably strong fashion. Above 1.19, September’s opening value is seen at 1.1937; to the downside 1.18 invites an approach. Beyond 1.18, Quasimodo support at 1.1781 is visible, followed by August’s opening level at 1.1771.

Further afield, weekly support is seen at 1.1733, a previous Quasimodo resistance; resistance can also be found at 1.2004, the 2018 yearly opening value sited just south of Quasimodo resistance priced in at 1.2092. Also clear on the weekly scale is the month of July witnessed vigorous upside, overthrowing trend line resistance, taken from the high 1.2555, and the 2019 yearly opening value at 1.1445.

Since transitioning into the month of August on the daily timeframe, weekly support, mentioned above at 1.1733, has proved useful, as has daily resistance coming in at 1.1940 and 1.2002. Passing 1.2002 on the daily timeframe shifts focus to the weekly Quasimodo resistance mentioned above at 1.2092, whereas dipping sub 1.1733 on the daily scale could see price make its way to channel resistance-turned support, extended from the high 1.1147.

Areas of consideration:

• A fakeout through 1.18 into H4 Quasimodo support from 1.1781 and August’s opening level at 1.1771 could be in store. Tripping sell-stop liquidity under 1.18, and luring any fresh buyers off noted H4 supports, may be enough to generate a H4 close back above 1.18, creating a possible intraday buy signal.
• The same can be seen above 1.19 on the H4, though right now the round number is proving a tough nut to crack. Piercing 1.19 and testing September’s opening level at 1.1937 (tripping buy-stop liquidity above the round number) may force a H4 close back under 1.19 and promote a bearish scenario. Note September’s opening level forms a close connection with daily resistance at 1.1940.

GBP/USD:

Early momentum derived from UK jobs and earnings found 1.29 a difficult hurdle to overcome on Tuesday, despite flirting with peaks at 1.2926. H4 posts nearby resistance at 1.2944, with a break here perhaps exposing the key figure 1.30 and another layer of resistance plotted at 1.3009.

What’s technically appealing around 1.29 is a daily trend line support-turned resistance, taken from the low 1.1409, converges with the round number. The daily trend line made a show following a mild recovery from daily support at 1.2769 (ahead of the 200-day SMA [orange – 1.2732]) last week.

On the other side of the field, weekly price is making a stand just north of support in the form of the 2019 yearly opening level at 1.2739 and aligning trend line resistance-turned support, extended from the high 1.5930. We also see room to advance as far north as the 2020 yearly opening level at 1.3250.

Areas of consideration:

Bearish themes could develop from 1.29 today – the level benefits from daily trend line resistance. However, a spike to H4 resistance at 1.2944 could also take shape prior to sellers making an appearance. Moves from 1.2944/1.29 likely have 1.28 set as a downside target, followed by the support area at 1.27/1.2755 (yellow), applied to the H4 scale.

AUD/USD:

For those who read Tuesday’s technical briefing you may recall the following (italics):

Although 0.73 has proven a tough nut to crack, it appears sellers may be loosening their grip. In addition to Thursday’s spike to 0.7324 potentially filling the majority of sellers’ protective stop loss orders, the lack of downside pressure seen since informs observers buyers are likely taking control.

A H4 close above 0.73, therefore, might arouse breakout buyers; a retest at the round number following a close higher could also tempt conservative players to participate.

Irrespective of the entry technique, 0.74/0.7376 offers a logical upside target.

As evident from the H4 chart this morning, AUD/USD latched onto a healthy bid Tuesday, ripping through any defence 0.73 had in place. Peaks of 0.7342 were achieved before the pair reclaimed earlier gains and retested 0.73 as support.

The weekly timeframe’s picture remains unchanged:

Sellers south of resistance at 0.7379 failed to sustain downside momentum past 0.7191 in recent trading, leaving nearby support from 0.7147 unchallenged. Having seen this market trend higher since bottoming at 0.5506 in late March, the odds of price surging through current resistance and heading for another layer of resistance at 0.7495 are high. Exploring territory under current support, however, shines focus on the 2020 and 2019 yearly opening levels at 0.7016 and 0.7042, respectively.

The daily timeframe also exhibits unchanged structure:

Price has so far failed to glean much support from 0.7235. To the upside, however, resistance at 0.7393 (December 4 high) commands attention, a level that capped upside heading into September ahead of Quasimodo resistance at 0.7442. Overthrowing 0.7235 shifts focus to as far south as support at 0.7049.

Areas of consideration:

Conservative buyers are likely weighing up the odds of entering into a long position from the recent 0.73 retest. Technically, there’s room for buyers to stretch their legs until reaching September’s opening level at 0.7376 on the H4, followed by weekly resistance at 0.7379 along with daily resistance (Dec 4 high) from 0.7393 and then 0.74 (H4). Therefore, a H4 bullish candlestick signal developing from 0.73 may elbow buyers into the market today.

USD/JPY:

For those who read Tuesday’s technical piece you may recall the following (italics):

Room seen to push lower on the higher timeframes might see bearish themes emerge from August’s opening value on the H4 at 105.75 today. Though do bear in mind a spike to September’s opening value at 105.88 could also take shape before sellers make an appearance.

Sellers from 105.88/105.57 are likely to consider reducing risk to breakeven upon crossing the 127.2% Fibonacci extension point at 105.57, with a downside target plotted at H4 support around 105.24 (essentially representing the daily lows around 105.20).

As can be seen from the H4 scale this morning, price held August’s opening level at 105.75 Tuesday as resistance and charged to lows at 105.30, bottoming a handful of pips ahead of support at 105.24.

Supply remains prominent at 108.16-106.88 (dark green) on the weekly timeframe, capping upside since price made its way off support at 104.70 at the end of July. Should buyers govern control, the 2020 yearly opening level at 108.62 may eventually enter view, closely tracked by Quasimodo resistance at 109.38 and the 2019 yearly opening level at 109.68.

Daily supply at 107.55/106.89 (yellow), an area housed within the lower boundary of weekly supply mentioned above at 108.16-106.88, has proved tough to overthrow. Downside from current price has lows at 105.20ish to target (black zone), with a break exposing weekly support underlined above at 104.70. In the event buyers climb, however, Quasimodo resistance is stationed at 107.64, reinforced by a 61.8% Fibonacci retracement ratio at 107.68 and 200-day SMA (orange – 107.78).

Areas of consideration:

Short sellers from 105.75 finished Tuesday’s session in the green, with scope to push for H4 support at 105.24 and the 105 handle. Ultimately, if we cross under 105, we’re then likely looking at re-joining weekly support at 104.70.

Consequently, some of the current sellers will leave a portion of their position running to take advantage of any further downside that may emerge.

USD/CAD:

USD/CAD pared earlier losses Tuesday, technically sponsored by H4 trend line support (taken from the low 1.2994), ending the session a shade higher. As shown on the H4 timeframe, we remain clinging to the underside of 1.32. As you can see, price has been caught within a narrow range south of the round number since last Thursday’s recovery from two trend line resistances-turned support, extended from highs 1.3646 and 1.3451. 

Brushing aside 1.32 turns attention back to resistance at 1.3232, with a break perhaps exposing the 1.33 handle and a possible three-drive completion at the 127.2% Fibonacci extension point from 1.3318. Traders may also wish to acknowledge the H4 resistance boasts a close connection with daily resistance at 1.3225.

From the weekly timeframe:

Snapping an eight-week bearish phase, USD/CAD staged a stronger-than-expected recovery last week off support at 1.3059 (pinned just north of the 2020 yearly opening level at 1.2975). This led to trend line support-turned resistance, taken from the low 1.2061, making an appearance, commanding enough of a presence to generate a mild end-of-week correction. Continued upside highlights the 2017 yearly opening level at 1.3434 as potential resistance.

From the daily timeframe:

Quasimodo support at 1.3042 remained a notable base last week, with the buck latching onto a strong bid in early trading to shake hands with resistance mentioned above at 1.3225, a prior Quasimodo support. Interest from the aforementioned resistance was expected having seen the level merge with weekly trend line resistance. In terms of resistance beyond 1.3225, we do not see much to hang our hat on until crossing swords with trend line resistance, etched from the high 1.4265, which happens to align closely with trend line support-turned resistance, taken from the low 1.2957, and the 200-day SMA (orange – 1.3519). However, before reaching the said daily levels, we must contend with weekly resistance around 1.3434.

Areas of consideration:

Outlook unchanged due to the recent lacklustre performance.

On one side, weekly support at 1.3059 and daily Quasimodo support at 1.3042 recently made an appearance, prompting a bullish move. On the other side we also had weekly price test trend line resistance and daily price probe resistance from 1.3225.

With the above in mind, seeking bullish scenarios above 1.32 on the H4 could prove frustrating, hindered by daily resistance from 1.3225 and H4 resistance at 1.3232. A sell-off from 1.3232/1.32, therefore, could take hold, bolstered by weekly price also recently engaging trend line resistance and the market trending lower since mid-March. H4 sellers, however, may wait for trend line support (1.2994) to be taken before committing.

Climbing above 1.3232, nevertheless, ignites the possibility of bullish themes and places 1.33 (H4) in the firing range (and a three-drive pattern completion around 1.3318).

USD/CHF:

Given Tuesday’s lacklustre close, the following echoes similar thoughts put forward in recent writing.

USD/CHF, once again, finished the day off session lows, establishing back-to-back daily hammer candlestick formations (bullish signals).

0.91 remains a point of resistance on the H4 timeframe, with support fixed at 0.9038, September’s opening value (sharing space with a trend line resistance-turned support, taken from the peak 0.9241). Above 0.91, August’s opening value at 0.9136 steps in view, while brushing aside this base places H4 Quasimodo resistance at 0.9184 in sight (and daily resistance at 0.9187).

Technical movement on the weekly timeframe shows buyers and sellers continue to battle for position north of support at 0.9014, potentially gleaning additional impetus from ABCD support at 0.9051 (black arrows). Resistance at 0.9255, a previous Quasimodo support level, calls for attention should we transition north. 

The month of August on the daily timeframe chalked up a falling wedge pattern from the high 0.9241 and a low of 0.9056. The beginning of September saw the upper border of the falling wedge give way, consequently unlocking a bullish reversal signal. Resistance at 0.9187 swiftly put a lid on gains, however, directing moves to just north of the falling wedge. Should we see buyers take over from current price and upset resistance at 0.9187, the falling wedge take-profit target could be the next port of call around 0.9294 (blue arrows). Further dips, nonetheless, brings in weekly support at 0.9014.

Areas of consideration:

Although the current trend displays a strong bearish posture, buyers are attempting to make a stand off weekly support at 0.9014. In addition to this, daily price is establishing support north of the falling wedge upper boundary.

An attempt to breach 0.91 is possible on the H4. This would likely see buyers target August’s opening level at 0.9136, with the prospect of additional upside pressure forcing price to touch gloves with daily resistance at 0.9187.

Breakout buyers north of 0.91 could latch on to the breakout candle’s close as a means of entry; other traders might seek a retest at the round number before pulling the trigger.

Dow Jones Industrial Average:

Elevated on the back of a rally in technology stocks, US equity benchmarks mostly advanced Tuesday. The Dow Jones Industrial Average ended flat; the S&P 500 rallied 17.66 points, or 0.52% and the Nasdaq traded higher by 133.67 points, or 1.21%.

Technically, limited change has been seen.

The H4 timeframe reveals support at 27360, shadowed closely by a 127.2% Fibonacci extension point at 27233 and a 61.8% Fibonacci retracement ratio at 27204. Beyond the latter, we’re watching support at 27033, a level that joins closely with a potential AB=CD correction (black arrows) at 26985 and 1.27 BC projection at 26914. To the upside, September’s opening value at 28369 rests as possible resistance, joined by a 61.8% Fibonacci retracement ratio at 28436 and a potential AB=CD bearish pattern (purple arrows) at 28418, along with a 1.27 BC projection at 28420.

Further out, weekly shows price holding south of the 2020 yearly opening value at 28595 (sited just under Quasimodo resistance at 29409). Additional bearish sentiment advertises demand (green) at 25916-26523, an area active buyers may try and defend.

From the daily timeframe, the lower limit of an ascending wedge, taken from the low 22803, along with support from 27640, continues to bolster the unit. Rupturing the aforementioned supports could lead to price crossing paths with the 200-day SMA (orange – 26297), while a recovery positions the 2020 yearly opening level at 28595 (weekly timeframe) in range.

Areas of consideration:

H4 support found between 27204/27360 could hamper downside and perhaps promote bullish themes, as could H4 support at 27033 and joining AB=CD correction.

It is also worth pencilling in September’s opening value at 28369 on the H4, having seen its connection with a 61.8% H4 Fibonacci retracement ratio at 28436 and AB=CD confluence.

XAU/USD (GOLD):

Kicking off from the top this morning, we can see weekly price remains buoyed by $1,921 support (located ahead of support at $1,882), the previous major all-time high (September 2011). With the current trend trekking north since 2016, the support combination between $1,882 and $1,921 may be enough to encourage additional buying, with most targeting all-time peaks at $2,075 as the initial point. Failure to hold gains could see channel resistance-turned support, etched from the high $1,703, enter view.

From the daily timeframe, candle activity continues to hold onto gains north of support at $1,911, though is seen grinding along the underside of a trend line support-turned resistance, taken from the low $1,455. Further buying targets the $1,992 September 1 high and the $2,015 August 18 high. A dip to lower terrain, on the other hand, will draw weekly support mentioned above at $1,882 into the frame.

Across the page on the H4, September’s opening value at $1,966 is proving a tough level to overcome, following a recent retest at support from $1,941. Above August’s opening value at $1,975, traders will likely be reaching for $2,000.

Areas of consideration:

A $1,941 support retest could emerge on the H4 timeframe today, a level that may appeal to dip buyers, particularly after forming a higher peak yesterday. A recovery from the support is backed by the weekly timeframe, though currently against daily structure. A H4 bullish candlestick signal formed from the noted support may persuade buying, targeting $1,966/$1,975 as a primary point on the H4.

Should we fail to secure support, traders’ crosshairs are likely to drop back to the higher timeframe support at $1,911.90-$1,921.00 (green H4), an area which has plugged downside since August.

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 0.44%, Shanghai Composite up 0.51%, Hang Seng up 0.35%, ASX down 0.08%
• Commodities : Gold at $1971.20 (+0.38%), Silver at $27.50 (+0.51%), Brent Oil at $39.54 (-0.18%), WTI Oil at $37.17 (-0.24%)
• Rates : US 10-year yield at 0.674, UK 10-year yield at 0.206, Germany 10-year yield at -0.480

News & Data:

• (GBP) Claimant Count Change 73.7K vs 99.5K expected
• (NZD) Westpac Consumer Sentiment 95.1 vs 97.2 previous
• (EUR) Industrial Production m/m 4.10% vs 4.00% expected
• Suga wins party vote, all but assuring election as Japan PM
• Swiss Producer and Import Price Index fell in August 2020 by 0.4%

Markets Update:

Asian stock markets are mostly higher on Tuesday with modest gains following the positive cues from Wall Street and as investors turned cautious ahead of key central bank meetings this week.

The U.S. Federal Reserve’s monetary policy statement is due on Wednesday, while the Bank of Japan and the Bank of England are scheduled to announce their respective monetary policy decisions on Thursday.

Japanese stocks declined on the day, as the Nikkei 225 slipped 0.4% while the Topix index shed 0.6%. Mainland Chinese stocks edged higher by their close, with the Shanghai composite up 0.5% while the Shenzhen component advanced 0.9%. Hong Kong’s Hang Seng index gained 0.3%.

Over in Australia, the S&P/ASX 200 closed 0.1% lower, as the Reserve Bank of Australia on Tuesday released minutes from its September meeting, where members noted that “the downturn had not been as severe as earlier expected and a recovery was under way in most of Australia.”

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 92.918 after an earlier high of 93.1. The Japanese yen changed hands at 105.72 per dollar after strengthening sharply yesterday from levels above 105.9 against the greenback.

Upcoming Events:

• 09:00 AM GMT – (EUR) ZEW Economic Sentiment
• 09:00 AM GMT – (EUR) German ZEW Economic Sentiment
• 12:30 PM GMT – (CAD) Manufacturing Sales m/m
• 12:30 PM GMT – (USD) Empire State Manufacturing Index
• 12:30 PM GMT – (USD) Import Prices m/m
• 01:15 PM GMT – (USD) Capacity Utilization Rate
• 01:15 PM GMT – (USD) Industrial Production m/m
• 02:30 PM GMT – (AUD) CB Leading Index m/m
• Tentative – (NZD) GDT Price Index
• 10:45 PM GMT – (NZD) Current Account
• 11:50 PM GMT – (JPY) Trade Balance

Key risk events today:

RBA Monetary Policy Meeting Minutes; UK Employment Data.

(Previous analysis as well as outside sources – italics).

EUR/USD:

Technically, Monday is currently fading session peaks at 1.1888, aided by a 61.8% Fibonacci retracement ratio at 1.1877 based on the H4. Above 1.19, September’s opening value is seen at 1.1937; to the downside 1.18 invites an approach. Beyond 1.18, Quasimodo support at 1.1781 is visible, followed by August’s opening level at 1.1771. Additionally, an AB=CD bullish pattern is present between 1.1779 and 1.1759 (AB=CD [black arrows] structure/1.618 BC projection).

Breaking the aforementioned H4 supports shines the spotlight on weekly support at 1.1733, a previous Quasimodo resistance. Resistance on the weekly timeframe is found at 1.2004, the 2018 yearly opening value sited just south of Quasimodo resistance priced in at 1.2092. Also clear on the weekly scale is the month of July witnessed vigorous upside, movement that overthrew trend line resistance, taken from the high 1.2555, and the 2019 yearly opening value at 1.1445.

Since transitioning into the month of August on the daily timeframe, weekly support, mentioned above at 1.1733, has proved useful, as has daily resistance coming in at 1.1940 and 1.2002. Passing 1.2002 on the daily timeframe shifts focus to the weekly Quasimodo resistance mentioned above at 1.2092, whereas dipping sub 1.1733 on the daily scale could see price make its way to channel resistance-turned support, extended from the high 1.1147.

Areas of consideration:

• A fakeout through 1.18 into the noted 1.1759/1.1781 H4 support area could be in store. Tripping sell-stop liquidity under 1.18, and luring any fresh buyers off noted H4 supports, may be enough to generate a H4 close back above 1.18, creating a possible intraday buy signal.
• The same can be seen above 1.19 on the H4. Piercing 1.19 and testing September’s opening level at 1.1937 (tripping buy-stop liquidity above the round number) may force a H4 close back under 1.19 and promote a bearish scenario. Note September’s opening level forms a close connection with daily resistance at 1.1940.

GBP/USD:

Pound sterling emerged strong Monday, aided by a bout of short-covering and USD downside.

Leaving 1.27/1.2755 (yellow) unchallenged on the H4 (made up of 1.27, a 61.8% Fibonacci retracement ratio at 1.2718 [green], weekly support at 1.2739 and H4 support at 1.2755), fed by sell-stop liquidity under 1.28, GBP/USD bulls recently entered an offensive phase and shook hands with 1.29. Daily support drawn from 1.2769 likely aided recent upside, located just north of the 200-day SMA (orange – 1.2733).

Note H4 price action pencilled in a shooting star candlestick pattern (bearish signal) off 1.29, a level intersecting with daily trend line support-turned resistance, extended from the low 1.1409.

Penetrating current support on the daily timeframe immediately throws weekly support at 1.2739 (2019 yearly opening level) into the fray and associated weekly trend line support, currently connecting closely with the 200-day SMA. Moves to the upside on the daily scale, assuming we crank back above trend line resistance, points to resistance plotted at 1.3017.

Areas of consideration:

With the 1.27/1.2755 area (yellow) yet to be tested on the H4, suggesting weekly buyers are yet to join the party, the recent candle reaction off 1.29 on the H4 might be enough to tempt additional selling back to at least 1.28, closely shadowed by 1.27/1.2755 as a final support target for shorts.

Conservative traders watching 1.27/1.2755 as a possible reversal zone will likely want to observe a H4 close form back above 1.28 before committing, with daily trend line resistance set as the initial target.

AUD/USD:

The Australian dollar ended a shade higher against its US counterpart Monday, yet remained capped under 0.73 on the H4. In light of the lacklustre performance, much of the following will echo thoughts put forward in Monday’s technical briefing.

From the weekly timeframe:

Sellers south of resistance at 0.7379 failed to sustain downside momentum past 0.7191 in recent trading, leaving nearby support from 0.7147 unchallenged.

Having seen this market trend higher since bottoming at 0.5506 in late March, the odds of price surging through current resistance and heading for another layer of resistance at 0.7495 are high. Exploring territory under current support, however, shines focus on the 2020 and 2019 yearly opening levels at 0.7016 and 0.7042, respectively.

From the daily timeframe:

Price has so far failed to glean much support from 0.7235. To the upside, resistance at 0.7393 (December 4 high) commands attention, a level that capped upside heading into September ahead of Quasimodo resistance at 0.7442. Overthrowing 0.7235 shifts focus to as far south as support at 0.7049.

From the H4 timeframe:

Following last Wednesday’s upbeat recovery from two trend line supports (0.7076/0.6963) and the 0.72 handle, 0.73 made its way back into view. A break above 0.73 could have bullish themes take over and approach September’s opening level at 0.7376. The latter, as aired in previous writing, is located close by weekly resistance at 0.7379 and daily resistance at 0.7393.

Areas of consideration:

Although 0.73 has proven a tough nut to crack, it appears sellers may be loosening their grip. In addition to Thursday’s spike to 0.7324 potentially filling the majority of sellers’ protective stop loss orders, the lack of downside pressure seen since informs observers buyers are likely taking control.

A H4 close above 0.73, therefore, might arouse breakout buyers; a retest at the round number following a close higher could also tempt conservative players to participate.

Irrespective of the entry technique, 0.74/0.7376 offers a logical upside target.

USD/JPY:

As the DXY tests sub 93.00 to the downside, USD/JPY made quick work of 106 on the H4 Monday, as well as September’s opening value at 105.88 and August’s opening value at 105.75. H4, as you can see, is currently finding some respite off a 127.2% Fibonacci extension point at 105.57, generating enough impetus to possibly force a 105.75 retest for continuation moves to support at 105.24 and the 105 handle.

Supply remains prominent at 108.16-106.88 (dark green) on the weekly timeframe, capping upside since price made its way off support at 104.70 at the end of July. Should buyers govern control, the 2020 yearly opening level at 108.62 may eventually enter view, closely tracked by Quasimodo resistance at 109.38 and the 2019 yearly opening level at 109.68.

Daily supply at 107.55/106.89 (yellow), an area housed within the lower boundary of weekly supply mentioned above at 108.16-106.88, has proved tough to overthrow. Downside from current price has lows at 105.20ish to target (black zone), with a break exposing weekly support underlined above at 104.70. In the event buyers climb, however, Quasimodo resistance is stationed at 107.64, reinforced by a 61.8% Fibonacci retracement ratio at 107.68 and 200-day SMA (orange – 107.80).

Areas of consideration:

Room seen to push lower on the higher timeframes might see bearish themes emerge from August’s opening value on the H4 at 105.75 today. Though do bear in mind a spike to September’s opening value at 105.88 could also take shape before sellers make an appearance.

Sellers from 105.88/105.57 are likely to consider reducing risk to breakeven upon crossing the 127.2% Fibonacci extension point at 105.57, with a downside target plotted at H4 support around 105.24 (essentially representing the daily lows highlighted above at 105.20).

USD/CAD:

USD/CAD makes its way into Tuesday’s session unmoved, as Monday pencilled in indecisive price action between1.3196/1.3153. Given the narrow range, points aired in previous writing hold valid going into fresh trading.

From the weekly timeframe:

Snapping an eight-week bearish phase, USD/CAD staged a stronger-than-expected recovery last week off support at 1.3059 (pinned just north of the 2020 yearly opening level at 1.2975). This led to trend line support-turned resistance, taken from the low 1.2061, making an appearance, commanding enough of a presence to generate a mild end-of-week correction. Continued upside this week highlights the 2017 yearly opening level at 1.3434 as potential resistance.

From the daily timeframe:

Quasimodo support at 1.3042 remained a notable base last week, with the buck latching onto a strong bid in early trading to shake hands with resistance at 1.3225, a prior Quasimodo support. Interest from the aforementioned resistance was expected having seen the level merge with weekly trend line resistance. In terms of resistance beyond 1.3225, we do not see much to hang our hat on until crossing swords with trend line resistance, etched from the high 1.4265, which happens to align closely with trend line support-turned resistance, taken from the low 1.2957, and the 200-day SMA (orange – 1.3520). However, before reaching the said daily levels, we must contend with weekly resistance around 1.3434.

From the H4 timeframe:

USD/CAD witnessed limited movement Monday, extending Friday’s lacklustre activity around the underside of the 1.32 handle. This followed last Thursday’s recovery from two trend line resistances-turned support, extended from highs 1.3646 and 1.3451.

Brushing aside 1.32 turns attention back to resistance at 1.3232, with a break perhaps exposing the 1.33 handle and a possible three-drive completion at the 127.2% Fibonacci extension point from 1.3318. Traders may also wish to acknowledge the H4 resistance (1.3232) boasts a close connection with daily resistance at 1.3225.

Areas of consideration:

On one side, weekly support at 1.3059 and daily Quasimodo support at 1.3042 recently made an appearance, prompting a bullish move. On the other side we also had weekly price test trend line resistance and daily price probe resistance from 1.3225.

With the above in mind, seeking bullish scenarios above 1.32 on the H4 could prove frustrating, hindered by daily resistance from 1.3225 and H4 resistance at 1.3232. A sell-off from 1.3232/1.32, therefore, could take hold, bolstered by weekly price also recently engaging trend line resistance and the market trending lower since mid-March. 

Climbing above 1.3232, nevertheless, ignites the possibility of bullish themes and places 1.33 on the H4 in the firing range (and a three-drive pattern completion around 1.3318).

USD/CHF:

USD/CHF, at the time of writing, trades off session lows at 0.9058, with no obvious technical support propelling the move.

0.91 remains a point of resistance on the H4 timeframe, with support fixed around 0.9038, September’s opening level, sharing space with a trend line resistance-turned support, taken from the peak 0.9241. Above 0.91, August’s opening level at 0.9136 steps into view, while brushing aside this base places H4 Quasimodo resistance at 0.9184 in the show (and daily resistance at 0.9187).

Technical movement on the weekly timeframe shows buyers and sellers continue to battle for position north of support at 0.9014, potentially gleaning additional impetus from ABCD support at 0.9051 (black arrows). Resistance at 0.9255, a previous Quasimodo support level, calls for attention should we transition north. 

The month of August on the daily timeframe chalked up a falling wedge pattern from the high 0.9241 and a low of 0.9056. The beginning of September saw the upper border of the falling wedge give way, consequently unlocking a bullish reversal signal. Resistance at 0.9187 swiftly put a lid on gains, however, directing moves to just north of the falling wedge. Should we see buyers take over from current price and upset resistance at 0.9187, the falling wedge take-profit target could be the next port of call around 0.9294 (blue arrows). Further dips, nonetheless, brings weekly support in view at 0.9014.

Areas of consideration:

Although the current trend displays a strong bearish posture, buyers are attempting to make a stand off weekly support at 0.9014. In addition to this, daily price is hovering north of the falling wedge upper boundary.

An attempt to breach 0.91 is possible on the H4. This would likely see buyers target August’s opening level at 0.9136, with the prospect of additional upside pressure forcing price to touch gloves with daily resistance at 0.9187.

Breakout buyers north of 0.91 could latch on to the breakout candle’s close as a means of entry; other traders might seek a retest at the round number before pulling the trigger.

Dow Jones Industrial Average:

Major US equity indices rebounded Monday, lifted amid a recovery in technology shares. The Dow Jones Industrial Average advanced 327.69 points, or 1.18%; the S&P 500 rallied 42.57 points, or 1.27% and the Nasdaq traded higher by 203.11 points, or 1.87%.

Technically, the H4 timeframe reveals support at 27360, shadowed closely by a 127.2% Fibonacci extension point at 27233 and a 61.8% Fibonacci retracement ratio at 27204. Beyond the latter, we’re watching support at 27033, a level that joins closely with a potential AB=CD correction (black arrows) at 26985 and 1.27 BC projection at 26898. To the upside, September’s opening value at 28369 rests as possible resistance, joined by a 61.8% Fibonacci retracement ratio at 28436 and a potential AB=CD bearish pattern (purple arrows) at 28418, along with a 1.27 BC projection at 28420.

Further out, weekly shows price holding south of the 2020 yearly opening value at 28595 (sited just under Quasimodo resistance at 29409). Additional bearish sentiment advertises demand (green) at 25916-26523, an area active buyers may try and defend.

From the daily timeframe, the lower limit of an ascending wedge, taken from the low 22803, along with support from 27640, continues to bolster the unit. Rupturing the aforementioned supports could lead to price crossing paths with the 200-day SMA (orange – 26297), while a recovery positions the 2020 yearly opening level at 28595 (weekly timeframe) in range.

Areas of consideration:

H4 support found between 27204/27360 could hamper downside and perhaps promote bullish themes, as could H4 support at 27033 and joining AB=CD correction. It is also worth pencilling in September’s opening value at 28369 from the H4, having seen its connection with a 61.8% H4 Fibonacci retracement ratio at 28436 and AB=CD confluence.

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