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; ECB Main Refinancing Rate and Monetary Policy Statement; ECB Press Conference; US Core Durable Goods Orders m/m; US Durable Goods Orders m/m; US Flash Manufacturing PMI.
EUR/USD:
A broadly depressed euro challenged session lows a touch north of the 1.11 handle Wednesday, ahead of today’s preliminary Eurozone PMIs and ECB President Draghi’s final policy meeting and presser. The US dollar index, measured by factoring in the exchange rates of six major world currencies, eked out marginal gains and drew price action to within touching distance of weekly resistance at 97.72.
Ultimately, London concluded unchanged with the EUR/USD hovering just north of 1.11. Bolstered by August’s opening level at 1.1079 on the H4 timeframe, support coming in at 1.1084, a 50.0% retracement ratio at 1.1085 and a trend line support (extended from the low 1.0879), the 1.1079/1.11 region forms a particularly interesting support area (grey).
In addition to this, the market has daily support located just north of the zone at 1.1110, which entered the mix yesterday. Although considered a reasonably minor pullback from Monday’s high at 1.1179, the break of 1.1109 (an important swing high on the daily timeframe – black arrow) suggests an easing of the primary trend may be on the cards. The primary trend, according to weekly movement, has been in motion since topping in early 2018 at 1.2555. Adding to this downbeat tone, the unit is currently testing the lower limits of a resistance area at 1.1119-1.1295, with room to press as far south as the 2016 yearly opening level at 1.0873.
Areas of consideration:
Outlook unchanged.
With a possible trend change evident on the daily timeframe, buyers may look to enter the market from the 1.1079/1.11 H4 support zone. Ultimately, the initial take-profit target from this base can be set at Monday’s high point 1.1179, closely followed by 1.12. Note 1.12 happens to align with the 61.8% Fibonacci resistance on the daily timeframe at 1.1214/the 200-day SMA (orange – 1.1204) – bot considered the next upside targets on the daily scale.
The only downside to buying, of course, is weekly price testing its resistance area, and the overall trend. In order to try and circumvent this, traders may wish to wait and see if additional candlestick confirmation forms out of 1.1079/1.11 before pulling the trigger. This helps identify buyer intent and provides an additional entry and risk measure to consider.
GBP/USD:
The British pound was left mostly unchanged against the buck Wednesday, with the GBP/USD currently trading a few points south of 1.29 as a lack of clarity and rising odds of a general election continues to haunt markets. Tuesday witnessed a 0.68% decline after MPs rejected UK PM’s Boris Johnson’s plan. MPs backed his Withdrawal Agreement Bill – but minutes later voted against the timetable.
With respect to the technical framework, it’s difficult to rule out the possibility of fresh upside attempts through 1.29, though having seen scope for the H4 candles to explore ground to at least 1.28, active sellers may make an appearance. Note just beyond 1.28, denoted via the grey zone, a noteworthy daily support resides at 1.2769. This level houses strong historical significance and holds just north of the 200-day SMA (orange – 1.2712) which is seen flattening from a down move.
Technical research on the weekly timeframe remains trading in no man’s land, with focus currently on supply at 1.3472-1.3204 and long-term trend line resistance (etched from the high 1.5930), as well as the 2019 yearly opening level at 1.2739 (support).
Areas of consideration:
From a technical perspective, particularly on the H4 and daily timeframe, sellers appear to have the upper hand. The recent break of 1.29, which may hold as resistance today, could serve as a platform to consider shorting opportunities, targeting 1.28 as the initial support target. An ideal scenario is a retest at 1.29 shaped by way of a H4 bearish candlestick formation. Not only will this help identify seller intent, it offers entry and risk levels to work with which is paramount when dealing with fixed levels in the market.
AUD/USD:
Tuesday had the Australian dollar a shade lower vs. its US counterpart, and extended its downward slide Wednesday. The recent move pressured H4 price south of August’s opening level at 0.6848, clocking fresh weekly lows at 0.6833 and exposing the 0.68 handle as the next feasible support zone. Shouldered closely together with two trend line supports, both extended from the low 0.6670, a H4 support level at 0.6809, a 50.0 retracement ratio at 0.6803 and a 38.2% Fibonacci retracement ratio at 0.6802, this area (grey) holds plenty of reasons to consider this a buy zone.
On more of a broader perspective, technical research also has daily support position within the H4 zone (0.68/0.6809) at 0.6808. This is simply an extension of the H4 support at 0.6809, though includes additional data points seen clearer on the daily timeframe.
From the weekly timeframe, we can see that since engulfing 0.6744 (blue dashed) in early August, the AUD/USD has been carving a consolidation zone between 0.6894/0.6677 (grey). With the primary downtrend in play since early 2018, the current consolidation may eventually breakout to the downside, despite recent buying. A decisive push beneath the current range, likely clears the runway to as far south as 0.6359 (not visible on the screen).
Areas of consideration:
With buyers/sellers squaring off around August’s opening level at 0.6848, alongside limited higher-timeframe supporting structure, focus on the H4 scale shifts to the potential reversal zone highlighted above at 0.68/0.6809 today.
Conservative traders threatened by the overall downtrend, however, might opt to wait for additional confirmation before committing funds to a long position. This could be as simple as a bullish candlestick pattern forming, or even drilling down to the lower timeframes and attempting to trade local structure, a trend line break/retest formation, for example.
USD/JPY:
Demand for the US dollar increased Wednesday, lifting the USD/JPY to highs at 108.70 against the Japanese yen and through the upper boundary of a H4 bullish flag (108.94/108.46). Assuming buyers remain defensive, Quasimodo resistance at 108.94 is next in the firing range, closely trailed by 109.
The 109 handle has been a level of interest for some time, due to its mouth-watering connection with daily resistance. A collection of resistances are in view between 109.17/108.99, comprised of a resistance level at 109.17, the 200-day SMA (orange/109.06 – seen flattening) and Quasimodo resistance at 108.99. In the event further selling is seen, support at 106.80 is in view, set just south of the 50-day SMA (blue – 107.35) which is currently facing north.
In terms of areas to keep an eye on the weekly timeframe, Quasimodo support at 105.35 remains the next obvious downside target, while to the upside, the 2019 yearly opening level falls in as the next resistance at 109.68, merging closely with a 127.2% Fibonacci ext. point at 109.56 (taken from the low 104.44).
Areas of consideration:
Traders looking to buy the breakout of the H4 bullish flag face robust resistance around 109. Therefore, those who pursue this bullish theme may want to consider adopting strict trade management rules.
Those eyeing 109 as a possible sell zone might opt to simply enter at market off the 109 base and position protective stop-loss orders above 109.17. Conservative traders may elect to wait and see how H4 action behaves before pulling the trigger. This helps avoid whipsaws through 109, which is common viewing around psychological boundaries.
As for downside targets out of 109, 108.70 appears a logical starting block, followed by the upper edge of the H4 bullish blag.
USD/CAD:
US EIA Weekly Crude Stocks (1.699M vs. Exp. 2.232M [Prev. 9.281M]) reinforced WTI’s advance Wednesday, settling above $55.50/bbl. The rise in crude oil bolstered the Canadian dollar, therefore weighing on the USD/CAD market from the 1.31 region to lows at 1.3073.
With sellers seemingly in control, Tuesday’s low at 1.3071 is under threat. Interestingly, the next downside target beyond this line is not expected to enter the fray until reaching 1.3028 (not visible on the screen).
Recent selling also places 1.3066/1.3096, a notable support zone, under attack. Made up of an ABCD (black arrows) reversal zone (yellow) between the 127.2% Fibonacci extension point at 1.3066 and the tip of the ABCD correction at 1.3096, this area has yet to chalk up anything meaningful to the upside.
With reference to weekly flow, support is not expected to emerge until the 1.3015 July 15 low, followed by Quasimodo support stationed at 1.2887. This follows a recent bearish engulfing candle sited just south of the 2017 yearly opening level at 1.3434 and continued selling last week. The primary trend has remained north since bottoming in September 2017 (1.2061). Currently, though, the candles appear to be in a secondary downtrend, with its peak at 1.3661.
Areas of consideration:
On account of the above analysis, sellers appear to be gaining the upper hand now. A decisive break of Tuesday’s low at 1.3071 would help confirm this and validate weakness within the daily support zone mentioned above at 1.3066/1.3096.
A close beneath 1.3071 on a H4 closing basis, preferably followed up with a retest in the shape of a H4 candlestick signal would, given the overall technical surroundings, be sufficient to sell, targeting 1.3028, the H4 support, as well as the 1.3015 July 15 low on the weekly timeframe.
USD/CHF:
In recent sessions, USD/CHF movement marginally overthrew the 0.99 handle to the upside, likely tripping buy stops while shaking hands with a trend line support-turned resistance taken from the low 0.9799. Above here, H4 action appears free to press as far north as August’s opening level at 0.9934 today, with a break of this level having trend line resistance extended from the high 1.0027 to target, followed closely by October’s opening level at 0.9977.
In conjunction with H4 flow, daily price crossed its 50-day SMA (blue – 0.9895), which according to this timeframe unlocks the door to a possible move towards the 200-day SMA (orange – 0.9955), closely shadowed by a familiar resistance zone at 1.0010-0.9986.
Recent moves on the weekly timeframe has the unit trading around the underside of supply at 1.0014-0.9892. Note this area was marginally engulfed early October, potentially setting the long-term stage to resistance at 1.0110 and Quasimodo resistance at 1.0124.
Areas of consideration:
What we have this morning is H4 activity sandwiched between 0.99 and a trend line support-turned resistance; daily flow suggesting higher prices and weekly action testing supply. In terms of confluence, this leaves little to hang one’s technical hat on, therefore opting to remain on the sidelines for the time being may be the better option today.
Dow Jones Industrial Average:
US Stocks modestly firmed Wednesday after investors processed a slew of earnings reports. The Dow Jones Industrial Average added 45.85 points, or 0.17%; the S&P 500 also added 8.53 points, or 0.28% and the tech-heavy Nasdaq 100 climbed 14.86 points, or 0.19%.
Recent bidding, according to H4 technical structure, came about following a test of a support area coming in at 26522-26622. Further buying on this scale could lead to October’s opening level at 26947 entering the mix/trend line resistance (extended from the high 27322), and possibly resistance priced in at 27058. Beyond the aforesaid support zone, nonetheless, we have September’s opening level residing at 26398, which happens to coincide with a 50.0% support value and a 61.8% Fibonacci ratio at 26419. 26398 is therefore is prime to help facilitate a fakeout through the said support zone.
Research on the daily timeframe shows price is capped between supply at 27110-26813 (blue – positioned just south of weekly resistance at 27335) and the 50-day SMA (blue – 26600). Both the 50-day SMA and the 200-day SMA (orange – 26153) still face north.
Areas of consideration:
The yellow zone between the H4 support area at 26522-26622 and September’s opening level at 26398 provides an interesting buy zone, in the event prices dip lower today.
The area between H4 resistance at 27058, October’s opening level at 26947 and trend line resistance offers a potential reversal zone for sellers today.
XAU/USD (GOLD):
Since October 11, the yellow metal has been compressing within a symmetrical triangle formation (1497.4/1473.8) on the H4 timeframe. Wednesday witnessed price action breakout north of this formation, retest the top edge and modestly hold ground. Breakout buyers here likely have protective stop-loss orders plotted beneath the opposing limit around 1482.4, with an initial take-profit target set at the resistance area drawn from 1519.9-1512.1, followed by September’s opening level at 1526.2.
Strengthening the H4 timeframe’s bullish theme is weekly price trading from a support area at 1487.9-1470.2. Weekly resistance is seen at 1536.9, whereas two layers of weekly support are visible at 1392.0 and 1417.8, in the event we push for lower ground. In terms of the longer-term primary trend, gold has been trading northbound since the later part of 2015 (1046.5).
Daily flow shows a bullish flag has been in motion since early September (1557.1/1485.3), with room to push higher within its limits to test the its upper boundary which looks set to merge with the 50-day SMA (blue – 1504.9).
Areas of consideration:
Longs at current price, given overall price action and the recent breakout above the H4 symmetrical triangle, are certainly worthy of consideration this morning. Conservative traders may opt to wait and see if H4 price can engulf yesterday’s high 1496.2 before pressing the buy button. Irrespective of the entry technique, the initial take-profit target, as underscored above, is set at the resistance area drawn from 1519.9-1512.1, followed by September’s opening level at 1526.2.
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