Key risk events today:
US Core Retail Sales m/m and Retail Sales m/m; US Prelim UoM Consumer Sentiment.
(Previous analysis as well as outside sources – italics).
EUR/USD:
Europe’s shared currency accelerated to the upside against the US dollar Thursday, dragging EUR/USD north of 1.18 to highs just above 1.1850.
1.1850, as you can see, proved a tough nut to crack, reinforced on the back of the DXY recovering earlier losses above 93.00.
In terms of notable data, US jobless claims sunk under 1 million, the first time since March 21.
US Department of Labour noted:
In the week ending August 8, the advance figure for seasonally adjusted initial claims was 963,000, a decrease of 228,000 from the previous week’s revised level. The previous week’s level was revised up by 5,000 from 1,186,000 to 1,191,000. The 4-week moving average was 1,252,750, a decrease of 86,250 from the previous week’s revised average. The previous week’s average was revised up by 1,250 from 1,337,750 to 1,339,000.
Price action based on the weekly timeframe shows we recently struck a fresh 27-month peak at 1.1916. North of 1.1733 support (prior Quasimodo resistance), the 2018 yearly opening level at 1.2004 is seen as the next available resistance, whereas a dip to deeper water could have the pair tackle the 2019 yearly opening level at 1.1445.
Wednesday’s advance chalked up a bullish outside daily candle off the current weekly support level (1.1733), and witnessed Thursday modestly extend gains. Resistance on the daily chart, however, can be seen parked at 1.1940, with a break largely exposing weekly resistance mentioned above at 1.2004 (2018 yearly opening level). Beyond 1.1733 (on the daily chart) could draw attention to daily support at 1.1594, a level closely connected with channel resistance-turned support, taken from the high 1.1147.
Areas of consideration:
For those who read Thursday’s technical briefing you may recall the following (italics):
With 1.18 now being challenged as resistance, following yesterday’s rotation off 1.1733 weekly support, those long this market have likely reduced risk to breakeven and banked partial profits. Traders who missed the 1.1733 test (and those currently long) are likely watching for a H4 close above 1.18 to form, in favour of further gains to the following targets: the 1.19 handle on the H4, daily resistance at 1.1940 and possibly weekly resistance at 1.2004.
As evident from the H4 chart, movement is pulling back from 1.1850 and threatening a possible revisit at 1.18.
A retest at 1.18, accompanied by a H4 bullish candlestick signal, will likely be considered an encouraging sign for buyers, targeting the aforementioned zones in bold. Those already long the breakout above 1.18 may also view a 1.18 retest as a location to pyramid long positions. One cautionary point to be aware of, nevertheless, is the possibility of a fakeout through 1.18 into August’s opening level at 1.1771 (H4).
GBP/USD:
Asian trading, along with the European morning session on Thursday, witnessed GBP/USD enter an offensive phase, gleaning impetus from optimistic Brexit rhetoric.
Heading into US hours, upside momentum overthrew 1.31 on the H4 timeframe and came within striking distance of Tuesday’s 1.3132 peak before returning under 1.31. Potentially fuelled through buy-stop liquidity above 1.31, price recently marched back through August’s opening level at 1.3087 and twisted the spotlight towards the 1.30 key figure (converges with Quasimodo support – left shoulder from 1.3004).
The recent trend line resistance break on the weekly timeframe may have long-term traders consider bullish positions. Resistance can be seen by way of the 2020 yearly opening level at 1.3250, closely tailed by a 161.8% Fibonacci extension point at 1.3308. Leaving said resistances unchallenged and retreating south could call for a retest at the 2019 yearly opening level drawn from 1.2739 (dovetails closely with the recently broken trend line).
Quasimodo resistance at 1.3173 remains a prominent base on the daily timeframe, (entering the fold last week), a level situated south of 1.3250 daily resistance. Interestingly, the latter shares the same space with resistance on the weekly timeframe, the 2020 yearly opening level. An extension to the downside may have a support area between 1.2769/1.2846 nudge its way into focus, positioned ahead of the 200-day SMA (orange – 1.2708) and trend line support, taken from the low 1.1409.
Areas of consideration:
Outlook unchanged.
Although weekly price indicates a shift to 1.3250ish, daily action remains capped by Quasimodo resistance at 1.3173, threatening moves as far south as 1.2769/1.2846.
Against the backdrop of higher timeframe activity, the 1.30 figure on the H4 timeframe presents robust support to keep a tab on, knowing the level joins with Quasimodo support at 1.3004. Consequently, buyers could make a stand from this region and attempt a recovery.
A decisive breakout north of 1.31 will equally likely arouse the interest of buyers, particularly those favouring breakout strategies. Upside targets fall in at daily resistance from 1.3173, followed by 1.32 on the H4.
AUD/USD:
Stronger-than-expected Australian job’s numbers immediately lifted AUD/USD to peaks at 0.7187 in the early hours Thursday, despite price swiftly reclaiming gains to pre-announcement levels.
Recent hours witnessed the pair respond to mild supply around 0.7189-0.7172 (yellow) on the H4 and turn things toward August’s opening level at 0.7128, a level sharing space with two trend line supports, taken from lows 0.6832 and 0.6921. A retest at this combination today could trigger intraday buying. Failure to hold may swing the 0.71 handle back into reality, followed by an area of support (green) at 0.7063-0.7083 and a 38.2% Fibonacci retracement ratio at 0.7085.
Weekly and daily movement remains pretty much stationary right now, therefore recent analysis remains valid heading into Friday’s session:
Buyers and sellers continue to battle for position around weekly resistance at 0.7147. As a result, upside momentum has been diminishing in recent weeks, underscoring the possibility of a retreat to the 2020 and 2019 yearly opening levels at 0.7016 and 0.7042, respectively. Conversely, assuming 0.7147 snaps, resistance at 0.7308 is likely to make an appearance this week.
Technical structure based on the daily timeframe has Quasimodo resistance at 0.7235 in sight (a level that impacted price action last Friday), and support coming in by way of 0.7049. Given the current uptrend (present since March), prudent traders will also acknowledge the likelihood of eventually reaching higher and perhaps crossing swords with Quasimodo resistance at 0.7339.
Areas of consideration:
August’s opening level at 0.7182 on the H4 is likely considered attractive, owing to H4 trendline convergence. A H4 bullish candlestick printed from this area today may tempt buyers into the fight. H4 supply at 0.7189-0.7172 may be set as an initial upside target, with a break edging price to the 0.72 handle.
USD/JPY:
Transitioning into European hours Thursday, USD/JPY dipped to lows at 106.56, underscoring the possibility of a retest at H4 support from 106.43. Buyers, however, regained consciousness as London got underway, bolstered on the back of rising US Treasury yields and a DXY recovery north of 93.00.
As of writing, Thursday trades unchanged (albeit considerably off worst levels), following four consecutive days of gains. As a result, H4 candles are retesting the 107 handle and trend line support-turned resistance, taken from the low 106.63. Seeking higher terrain above 107 today could have price make its way to Quasimodo resistance at 107.40.
Longer-term traders finally responded to the recent hammer pattern on the weekly timeframe, established off support at 104.70. By and of itself, this is a strong bullish signal, with obvious upside targets resting as far north as the 2020 yearly opening level from 108.62 and the 2019 yearly opening level at 109.68.
The daily timeframe shows price action recently traded through resistance at 106.35 (a prior Quasimodo support). Ousting 106.35 was high probability (as pointed out in recent analysis), not only because of where the unit trades from on the weekly timeframe, but also due to the lacklustre (bearish) response from 106.35. Above the latter, we now have supply to contend with at 107.54-106.67 (yellow), as well as Quasimodo resistance coming in at 107.64. Also worth acknowledging is the prospect of establishing an ABCD bearish correction (black arrows) that conveniently terminates around 107.64.
Areas of consideration:
Outlook unchanged.
Governed by the weekly timeframe’s current position, longer-term analysis suggests the possibility of additional gains materialising north of resistance at 106.35 (now a serving support) on the daily timeframe.
The retest at the underside of 107 as resistance (and nearby H4 trend line resistance) has clearly attracted profit taking. Taking into consideration where we trade on the bigger picture, a H4 close above 107 is potentially in store. This may perhaps ignite bullish scenarios today, targeting H4 Quasimodo resistance at 107.40, followed by daily resistance at 107.64.
USD/CAD:
For those who read Thursday’s technical briefing you may recall the following (italics):
While the immediate downtrend is clearly in full force, technical structure between 1.32 and 1.3225 (yellow – made up of the 1.32 handle on the H4, H4 Quasimodo support at 1.3211, daily Quasimodo support at 1.3225 and weekly channel support) puts up a reasonably dominant support zone, an area buyers may attempt to defend today.
As can be seen on the H4 chart, price nosedived into 1.32/1.3225 Thursday. Buyers, albeit after mildly surpassing 1.32 to lows at 1.3192, have made an appearance, though we may not see any additional upside until European trading.
Areas of consideration:
Traders who managed to secure a bullish position within 1.32/1.3225 are likely eyeballing 1.33 as an initial upside target. Considering the higher timeframe support involved out of 1.32/1.3225, pushing beyond 1.33 is also a possibility to H4 trend line resistances, extended from highs 1.3646 and 1.3451.
USD/CHF:
A mild risk-averse tone, together with the DXY spiking below 93.00, invited USD/CHF through 0.91 to lows at 0.9082 Thursday, a day after daily price formed a bearish outside day (from daily resistance plotted at 0.9187) and snapped a four-day bullish phase.
Leaving daily support at 0.9072 unchallenged, H4 is currently seen attempting to regain a footing back above 0.91, sponsored by a recovery in the DXY and rising US Treasury yields.
Meanwhile, on the weekly timeframe, we can see we recently come off a seven-week decline. Buyers and sellers, however, wrapped up last week’s action hesitantly, forming a long-legged doji candlestick pattern at an ABCD completion point (black arrows) around 0.9051. The doji suggests forces of supply and demand are possibly nearing equilibrium. Therefore, given we’re testing ABCD support, along with additional support present nearby at 0.9014, traders may interpret the recent indecision as a potential change of direction.
Areas of consideration:
While the underlying trend points southbound, weekly price recently crossing swords with an ABCD correction at 0.9051, in the shape of a long-legged doji candlestick pattern, implies a recovery may eventually surface.
Against the backdrop of higher timeframe direction, buyers appear fragile at 0.91, consequently shifting attention to daily support underlined above at 0.9072 as a potential reversal zone today. Conservative buyers off 0.9072 will likely seek a H4 close above 0.91 before pulling the trigger, ultimately targeting daily resistance at 0.9187.
In the event sellers remain in the driving seat, however, and 0.9072 fails to hold, the key figure 0.90 (H4) is a base then potentially in the firing range, a level merging closely with weekly support at 0.9014.
Dow Jones Industrial Average:
US equities finished modestly lower Thursday, despite a notable decrease in US jobless claims. The Dow Jones Industrial Average fell 80.12 points, or 0.29%; the S&P 500 dropped 6.92 points, or 0.20%, while the tech-heavy Nasdaq 100 concluded higher by 20.65 points, or 0.19%.
From a technical standpoint, chart studies remain unmoved.
Activity on the H4 timeframe established position off daily support at 27640 Wednesday and closed a touch off session peaks. Thursday, albeit dipping to lows at 27788, spent the majority of the session confined within a narrow range.
From the weekly timeframe, we recently secured ground above the 27638 high, following a mid-June retest at the 2018 yearly opening level from 24660. As we head into Friday, the unit is poised to make a run for the 2020 yearly opening level at 28595. A closer reading of price action on the daily timeframe, however, reveals resistance can be found at 28208, following the retest of daily support mentioned above at 27640.
Areas of consideration:
Those who managed to secure a long entry from daily support at 27640 (a noted move to watch for in recent reports) may have already reduced risk to breakeven. Most, though, will have the daily resistance at 28208 marked as a valid take-profit target, with a break likely pushing for weekly resistance at 28595, the 2020 yearly opening level.
Another dip to current daily support, however, may draw out additional bullish scenarios, again likely targeting daily resistance at 28208.
XAU/USD (GOLD):
For those who read Thursday’s technical piece you may recall the following (italics):
With weekly and daily support levels clearly in action, along with the trend facing north since 2016, H4 resistance at $1,942.10 is unlikely to deliver much downside momentum. With that being the case, bullish themes could be in store today should we carry price through the aforementioned resistance, targeting H4 resistance at $1,981.30 as an initial take-profit zone, followed closely by the $2,000.00 mark.
As evident from the H4 timeframe, technicians will observe price penetrated resistance at $1,942.10 on Thursday and retested the latter as support, seen clearer on the M30 timeframe.
With reference to the higher timeframes, technical action recently retested $1,921.00, the previous all-time high (September 2011), as well as weekly support coming in at $1,882.70. Additionally, traders will acknowledge daily price shook hands with trend line support, extended from the low $1,455.32, along with converging support from $1,911.90.
Areas of consideration:
Bullish scenarios off H4 support at $1,942.10, targeting H4 resistance at $1,981.30 as an initial take-profit zone, followed closely by the $2,000.00 mark, are likely considered today.
Breaking $2k may clear upside to a H4 Quasimodo formation at $2,036.30.
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