Technical Analysis 06 July: Market holding its breath before NFP number
EURUSD, Daily timeframe
Pair in Uptrend
Yesterday, the euro dollar didn’t change much in its price movement. The pair closed about 12 pips higher by forming a pinbar which rejected the support discussed yesterday at 1.1300. Strategy is always to move in line with the major trend, and currently we’re in an Uptrend. What can we expect from here?
Scenario 1: First, of all we do have a rejection candle but there are a couple of things to consider. One is that the candle doesn’t carry much of strength (i.e. only 12 pips up). Second, we expect strong and high-impact news to come out today, the ADP Non-farm employment change. More, importantly tomorrow is Non-farm payrolls Friday. These factors may cause big players to await the data on the sidelines before taking actions.
A more conservative approach would be to wait for clear price action in either direction. Note that price might test 1.1300 again and even probe lower before taking off in alignment with the trend. Upon a more solid bullish rejection of 1.1300, a potential entry could be appropriate after a 4-hour bullish candle closes. The target to aim for is the immediate1.1450 level. If you see that price steadily advances beyond that level, just continue to ride the price action.
Scenario 2: Only if price stalls at the near-term Resistance at 1.1450, we might see price action pulling back into a range bound motion located between that Resistance and the immediate support at 1.1300. We’ll need a market catalyst to break out from that range to either direction.
Scenario 3: Price makes a deeper correction to test the support at 1.1109. We’ll see this behavior from price if daily candles close in negative ground. This will be a pointer that the pair is in a correction mode. We have to wait for a bullish H4 rejection of 1.1109 for potential longs. Target would be the immediate, 1.1300 and next one is 1.1450.
GBPUSD, Daily timeframe
Pair in Uptrend
Similarly to the euro dollar pair, the pound only slightly advanced against the dollar with 16 pips up for the day. The candle is also not a strong rejection formation. Due to today’s market events from the U.S. and especially with volatility to increase tomorrow from the NFP, we have to expect these events will lend a better price action picture. Clarity is needed for precision of potential entries. So, what do we expect?
We might see price testing one of the three support levels: S1 at 1.2933 (that is a retest since price is already slightly above), S2 at 1.2866, and S3 at 1.2814. We’d be looking for a rejection bullish candle from one of these levels for an appropriate long.
Scenario 2: Price starts to wiggle around the current level at S1 1.2933. In this scenario, we also have to wait for more price action to confirm direction.
Scenario 3: If price closes for the day and also for the week below 1.2814, this would be a no-man’s territory as we might see price further decreasing to 1.2628. We’d be looking for potential trades around that far support at 1.2628. Those would be again in line with the trend.
AUDUSD, Daily timeframe
Pair is in a wide range
On Wednesday, the Aussie rose about 4 pips. Currently, we’re in the middle between levels. So, we’ll have to wait for one of the discussed levels to be reached to orient ourselves. The price developments we’re currently monitoring are the following:
Scenario 1: If price reaches the immediate resistance at 0.7630, it could do two things. Either close above it or respect the resistance and start to drop back. We need a H4 candle to close significantly above 0.7630 to have potential for longs. Once price closes above 0.7630, it will then turn into a support level. Target in sight is the strong resistance level at 0.7750.
Scenario 2: Provided the Austrian dollar reaches the support at 0.7505, we longs could be initiated only if (and this is obligatory) price bounces from the support and closes above it either on 4-Hr or Daily candle. The daily candle would be a more conservative approach into a potential entry. Target will be 0.7630 and next one is 0.7750
Scenario 3: Price closes the day below 0.7505. This is now a short-term resistance level. We’d be looking for potential shorts. Next target is the level at 0.7324
Gold (in a wide range)
Bias: Awaiting price for clear direction
Yesterday, we saw price approaching and pulling away from the support located at 1215.05 we’ve been discussing. As with currencies, we might see volatility from NFP causing price to move back to immediate levels, close in range (i.e. back to 1215.05) before taking off. That’s okay. We just need NFP to pass for the noise to be out of the picture. Scenarios to look for are:
Scenario 1: Price may test 1215.05 again and reject it will a bullish formation. If price closes above that level, we can aim for targets at 1239.41; next target is 1260.10 and then Is the long-distance (which will take time and patience) located at 1300.36. This is our bullish scenario.
Scenario 2: If we see the dollar strengthening against the basket of major currencies, we’re likely to see the price of gold dropping to the support at 1200.10. A closure on daily candle below it, would suggest further weakness, and we’d be looking to ride it, as far as price doesn’t tell us otherwise.
Wishing you happy and successful trading!
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