Key risk events today:
German IFO Business Climate; Revised UoM Consumer Sentiment; Revised UoM Inflation Expectations.
EUR/USD:
Europe’s shared currency concluded 0.24% weaker against its US counterpart Thursday, pulling the EUR/USD to 1.11. The pair initially rose amid better-than-expected French PMI data, though was dampened on the back of German PMI data. The ECB made no new policy moves yesterday, given the stimulus package introduced at its previous meeting. The US dollar index crossed above 97.50, bolstered by upbeat flash manufacturing PMI, though now faces weekly resistance at 97.72.
The 1.11 handle on the H4 timeframe, reinforced by August’s opening level at 1.1079, support coming in at 1.1084, a 50.0% retracement ratio at 1.1085, an ABCD correction (blue arrows) at 1.1090 and a trend line support (extended from the low 1.0879), forms a particularly interesting support area (grey).
Although H4 structure promotes a reasonably robust support zone, sellers appear to be strengthening their grip on the bigger picture. Daily action marginally overthrew support at 1.1110 yesterday and produced a bearish outside day formation. The next support target on this scale falls in around the 50-day SMA (blue – 1.1034). Adding to this downbeat tone, weekly price 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:
While higher-timeframe structure suggests further losses could be in store, a bounce from the 1.1079/1.11 H4 support zone remains a strong possibility, targeting the 38.2% and 61.8% Fibonacci retracements of legs A-D at 1.1127 and 1.1147, respectively (taken from the H4 ABCD correction). Traders likely eye sub 1.1079 for protective stop-loss orders.
GBP/USD:
The British pound yielded ground to the US dollar Thursday as UK Prime Minister Boris Johnson called for a general election on Dec. 12 to break Britain’s Brexit impasse, conceding for the first time he will not meet his ‘do or die’ deadline to leave the European Union next week (Reuters).
H4 movement, in one fell swoop, shed more than 60 points sub 1.29, consequently permitting a test of 1.28 in the shape of an AB=CD correction (blue arrows), which held firm into the close. With The bounce off 1.28 coming within touching distance of the H4 38.2% Fibonacci retracement value at 1.2868 (a traditional take-profit target linked to AB=CD patterns), a dip beneath 1.28 to trip sell stops and test higher-timeframe supports may be on the menu today.
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 is currently striving for a retest at the 2019 yearly opening level drawn from 1.2739 (support).
Areas of consideration:
From a technical perspective, the grey zone on the H4 scale, made up of the weekly support at 1.2739 and daily support at 1.2769, is likely an area price will test today should we run stops beneath 1.28. A conservative long from this region would be for H4 action to test the said higher-timeframe zone and close back above 1.28. Entry at the close of the breakout candle with a protective stop-loss order sited beneath its lower shadow is, therefore, an option to consider.
AUD/USD:
The Australian dollar remained on the backfoot vs. the buck Thursday amid broad dollar strength and mixed trade news. By way of a near-full-bodied daily bearish candle, the AUD/USD settled a few points north of a particularly interesting support zone on the H4 timeframe at 0.68/0.6809. Formed by two trend line supports, both extended from the low 0.6670, the round number 0.68, 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, 0.68/0.6809 (grey) holds plenty of reasons to consider this a buy zone.
On more of a broader perspective, technical research also has daily support positioned within the H4 zone at 0.6808. This is simply an extension of the H4 support at 0.6809, though includes additional data points 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. A decisive push beneath the current range likely clears the runway to as far south as 0.6359 (not visible on the screen).
(Italics represent previous analysis).
Areas of consideration:
As the H4 candles approach 0.68/0.6809, we’ll likely witness the buyers/sellers square off here today for a potential move higher. 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, or even drilling down to the lower timeframes and attempting to trade local structure, a trend line break/retest formation, for example. As for an upside target out of 0.68/0.6809, August’s opening level at 0.6848 is an option.
USD/JPY:
Following Wednesday’s advance, which culminated in breaking the upper limit of a H4 bullish flag (108.94/108.46), the USD/JPY, although somewhat subdued, retested the broken flag as support and held ground Thursday. Assuming buyers remain defensive, Quasimodo resistance at 108.94 is next in the firing range, closely trailed by 109.
As highlighted in Thursday’s technical briefing, 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).
(Italics represent previous analysis).
Areas of consideration:
Traders looking to buy the retest of the H4 bullish flag face robust resistance around 109. Therefore, those who pursue this bullish theme should consider adopting strict trade management rules.
Those eyeing 109 as a possible sell zone, on the other hand, might opt to simply enter at market off the 109 base and position protective stop-loss orders above 109.17. Conservative traders, though, 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 noted H4 bullish flag.
USD/CAD:
USD/CAD prices traded unmoved Thursday, forming a clear-cut daily doji candlestick formation at the lower end of Wednesday’s range. Despite this, WTI remains in reasonably firm position, attempting to reclaim $56.00/bbl. Considering Thursday’s lacklustre performance, much of the following report will echo thoughts put forward in previous analysis.
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. Daily movement, however, remains supported by a 127.2% Fibonacci extension point at 1.3066, though this area has yet to chalk up anything meaningful to the upside.
In terms of price action on the H4 timeframe, the unit continues to languish sub 1.31, with support not expected to enter the fray until reaching 1.3028 (not visible on the screen).
Areas of consideration:
On account of the above analysis, sellers appear to be gaining the upper hand. A decisive retest seen at the underside of 1.31/H4 resistance at 1.3115 (preferably in the shape of a H4 bearish candlestick pattern) would help confirm this downside bias and validate weakness off the 127.2% Fibonacci extension point at 1.3066 on the daily timeframe. Downside targets fall in at 1.3028, the H4 support, as well as the 1.3015 July 15 low on the weekly timeframe.
USD/CHF:
USD/CHF bulls continued their offensive phase Thursday, adding nearly 0.20%. The key event yesterday was the European Central Bank (ECB) meeting but had a limited impact on currencies, given the stimulus package introduced at its previous meeting.
Technically, the H4 candles retested 0.99, albeit slightly surpassing the figure to bring in buyers off September’s opening level at 0.9896, and concluded the session a few points short of August’s opening level at 0.9934. A break of this level has 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 remains buoyant north of its 50-day SMA (blue – 0.9898), 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 back within the walls of supply at 1.0014-0.9892. Note this area was marginally engulfed early October, potentially setting the long-term stage for a run to resistance at 1.0110 and Quasimodo resistance at 1.0124.
(Italics represent previous analysis).
Areas of consideration:
Having weekly price toying with supply and daily price eyeing its 200-day SMA around 0.9955, we could potentially see a test of the converging H4 trend line resistance extended from the high 1.0027 enter the mix and hold lower. Therefore, a break of August’s opening level at 0.9934 followed by a test of H4 trend line resistance by way of a H4 bearish candlestick formation (entry and risk can be calculated on the back of this structure), could be of interest to some traders for possible shorts.
Dow Jones Industrial Average:
Major US equity benchmarks finished mixed Thursday amid a spell of corporate quarterly results. The Dow Jones Industrial Average declined 28.42 points, or 0.11%; the S&P 500 added 5.77 points, or 0.19% and the tech-heavy Nasdaq 100 climbed 77.25 points, or 0.98%.
Considering the Dow’s somewhat subdued status yesterday, technical research remains unchanged.
H4 action remains bolstered by a support area coming in at 26522-26622. Further buying on this scale could lead to October’s opening level at 26947/trend line resistance (extended from the high 27322) entering the mix, 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. Between 26398 and the underside of the support area at 26522, therefore, is considered a fakeout zone (yellow), as there are undoubtedly a number of sell stops just waiting to be plucked beneath 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 – 26616). 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 also offers a potential reversal zone for sellers today.
Irrespective of the area selected, conservative traders may still elect to wait for additional candlestick confirmation to form before pulling the trigger. Not only does this help avoid whipsaws, it provides additional entry and risk limits to consider.
XAU/USD (GOLD):
No-deal Brexit fears weighed on market sentiment Thursday, consequently underpinning demand for gold’s safe-haven status.
H4 action retested the top edge of a symmetrical triangle formation (1497.4/1473.8) and advanced. Breakout buyers here likely have protective stop-loss orders plotted beneath the opposing triangle 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).
Contrary to weekly and H4 flow exhibiting scope for higher ground, daily price shows the upper edge of a bullish flag entered the fight yesterday (1557.1/1485.3) as well as the 50-day SMA (blue – 1504.8). A break above this line would confirm a strong upside bias.
Areas of consideration:
Those long the break of the H4 symmetrical triangle may want to consider reducing risk to breakeven and banking a portion of the position at this point, due to daily movement recently shaking hands with resistance (see above). The remainder of the position can be left in motion in case further upside is observed towards the H4 resistance area at 1519.9-1512.1, followed by September’s opening level at 1526.2.
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