Technical Analysis 05 July: U.S. Dollar Pushes Major Currencies into Further Retracement
US trading is back along with more liquidity after two days of low volumes. Today eyes are turned towards UK Services PMI @ 8:30 AM GMT and FOMC Meeting Minutes @ 6:00 PM GMT
EURUSD, Daily timeframe
Pair in Uptrend
Yesterday, we saw a third consecutive day of retracement from the pair, about 23 pips down. We’re very much in an Uptrend, so we’ll be looking for potential long entries. In the current development, the potential will be at better (i.e.) weaker prices. So, what are the scenarios?
Scenario 1: Price drops to test the support at 1.1300 level (see chart). Mind you that the level could be probed (i.e. price falling below 1.1300) but it is important where it closes for the day. So, if we see a bullish candle rejecting the 1.1300 support and closing above it, this would show us continuation of the Uptrend. Target is the immediate resistance at 1.1450, next target is at 1.1500 level.
Scenario 2: The major pair goes to test the farther support at 1.1109. In this development, it would be better to see a bullish bounce from the level on Daily candle. Target would be 1.1300, next is 1.1400 level
Scenario 3: Price starts to zigzag between the support at 1.1300 and the immediate resistance at 1.1450. In this scenario we have to wait for a break either way.
GBPUSD, Daily timeframe
Pair in Uptrend
On Tuesday, we saw a minor drop of 23 pips by the sterling against the dollar. At 05:15 a.m. GMT+1 price is up 20 pips since the opening of the day and we’re at one of the supports discussed yesterday (i.e. 1.2933 level). We’re in an Uptrend and since we’re looking to go with the major predominant trend, we’d be looking for potential longs around key levels.
Scenario 1: If price closes above yesterday’s candle (i.e. above 1.2960), this might be appropriate time for long entries. Targets are located at 1.3050, next one is 1.3100, and then 1.3200.
Scenario 2: Pair continues to be in retracement mode, looking to test supports at 1.2866 and 1.2814. Note that price could reject either of those levels and you could see price indications of rejection formed by four-hour candles moving away from them. Also, if price just goes through those levels and keeps on falling with no indication of rejection whatsoever, then you’re gonna have to wait for a bullish signal to occur.
Scenario 3: If price drops below 1.2814 and closes underneath for the day, then we’re likely to see price falling as far as 1.2628, a major support level. As long as the pair closes above 1.2628, we’re in positive ground, looking for long signals around the mentioned levels.
AUDUSD, Daily timeframe
Pair is in a wide range
The Aussie is the third major currency weakening against the dollar. Yesterday, the Reserve Bank of Australia kept the interest rates unchanged at 1.50%. During the day the Aussie dropped about 55 pips. A reason why the major pairs have cooled off on their bullish stance is the U.S. news that came out this Monday. We saw the ISM Manufacturing PMI significantly increase at 57.8. The expectations were for a much lower performance at 55.2. This data for the U.S. economy is important because it shows its overall health. What we’re being told is that the U.S. economy is accelerating in its growth. Now, let’s get back to the Aussie. What levels do we see the Australian dollar reaching?
Scenario 1: If price recovers against the dollar and closes above yesterday’s bearish candle (i.e. above 0.7685), we’d be looking for more appreciation of the Aussie aiming for 0.7550 resistance level which is quite strong, as it has been respected multiple times. We need to see a break of 0.7550 and more importantly a bullish daily candle above it to have price action support the bulls.
Scenario 2: The pair continues to weaken. A potential target if bears continue to be in control is the support at 0.7505. A break and closure on daily timeframe, would suggest further depreciation of the Aussie, looking to fall as far as 0.73700
Scenario 3: If price reaches the support at 0.7505 this could be a fit place for longs, only if we see a bullish rejection. Most important here is how convincing of a rejection it is. We need a 4Hour bullish candle (at least) and even better is a Daily bullish rejection candle. Targets are the near –term Resistance at 0.7700 and then 0.7550.
Gold (in a wide range)
Bias: Awaiting price for clear direction
The precious metal moves in inverse correlation to the U.S. dollar and in doing so it’s been going down the past few days. The precious metal showed significant weakness last week, and it had about 38 pips to reach the discussed support at 1215.05. The last two positive days appear really weak and we might see price testing that 1215.05 support level more convincingly. This support also presents a potential ground for longs. But if a day closes below it, then we’d be looking for further weakness.
Scenario 1: If price action steadily drops below 1215.05 next stop is the major support level at1200.10. A daily and the weekly closure in negative territory below 1200.10 will potentially send the precious metal into a freefall toward 1122.49
Scenario 2: Price could reject the 1215.05 level. And, by rejection it is meant that price tests it again and then convincingly pulls away with a bullish engulfment closing above 1239.41. In this development, we’d be looking for targets at 1260.10 and then 1300.36.
Wishing you happy and successful trading!
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