Cryptocurrencies and Forex Analysis May 29th: Ether declines 14%
EURUSD, Daily timeframe
On Friday, the euro dollar pair broke though the support at 1.1700 and continued to depreciate to close the week around 1.1650s area. This is how the week closed. Six weeks of bearish price action straight. On Monday the pair continued to drop steadily another 65 pips. There are three market developments on our watch list:
The level at 1.1700 was until recently seen as a support (already a breached one) could now function as a level of short-term resistance. The euro could move north and test the resistance. If there is a bearish reaction on the 4-hour timeframe, this would signal an opportunity to go short. Target level is the support at 1.1500.
Should the major pair recover to close the day considerably above 1.1700 (between 100 and 150 pip-bullish movement), this could send a wave of optimism that the euro still has some fight in it against the dollar. Target level to aim for is the resistance at 1.2200.
A drop below the 1.1500 support level could send the market into a freefall panic selloff. Traders should be very careful not to place any long trades below that area. Officially, the euro falling below 1.1500 would mark the return into a down trend. No longs.
Gold, Daily timeframe
On Monday, the precious commodity remained below 1300.00. We’ve previously discussed that gold and the euro have positive correlation in their movements. This means that the precious metal will either follow suit to the bearish price action of the euro, or the precious metal is currently quicker to react to upcoming changes. The scenarios we’ve mapped out are the following:
The area at 1300.00 is a key place. And, currently the price of gold is literally sitting on it. This week, we have key data from the U.S. (Non-farm payrolls and German Manufacturing PMI on Friday) that could set the course for future price action.
These are only some of the catalysts that could influence the market. We also have to remember that traders often trade off the rumors (i.e. market predictions for events) and once the events are out, then they trade out of positions. In this scenario, traders await more data from the market prior to taking action.
Price moves aggressively up and closes the day with another 100-150 pips in bullish direction. This would position the market above the key area at 1300.00 and back within the limits of the range. Target level would become the upper band of the range located at 1350.00.
A drop that erases the gains made during the previous week (bearish price action trading around 1280.00 would signal that the market could be beat up by strength from the dollar. Should the greenback win positive vote of confidence against the market of major currencies, this will have a negative impact on gold as well. Target level is the support at 1260.00
Bias: Bearish, Daily timeframe
The market has been consistently bearish and trading in the same direction as the dominant down trend. We did see a rejection from the resistance level located at $9,500 and currently the market is trading around $7,800. The market developments we’re monitoring have been played out in three different scenarios:
Bitcoin continues to fall and depreciate in price. The movement could be directional and steady. There is also a chance for aggressive bearishness but those moves are usually provoked by a fundamental market catalyst such as a news event. Immediate support level is located at $5,800.
The virtual currency could regain strength and attempt to test the immediate resistance level at $9,500. From this level, there are two possible routes to go. First off, if there is a rejection on the daily timeframe with a negative candle, this could offer a sport to go short. Target level would be the same as described in Scenario 1. The only difference would be that the potential for profit would be larger.
If price smashed through the support located at $5,800, then traders might witness a further push to the downside. Beyond the support at $5,800, there is no level to hold price back. This could translate into a selloff. Hold onto short positions for as long as the weakness continues.
Bias: Bearish, Daily timeframe
The support level at $600 did not hold and now Ether is once again trading below it. On Monday, the market declined 14% under pressure from bears. The market is clearly influenced by negative market bias and price action is oriented toward the same direction as the bear trend. The three market alternatives we’ve placed on our watch list are:
More weakness coming into the market. When you turn to the daily timeframe you can see that the only support level left is the area at $360. This would be our first target as on the way down.
If the market breaches that level that would strongly suggest that bears have got a tight grip on the market and negative market bias is likely to continue. How far you may ask? Well, the answer is to the very starting point of the market. Traders have to remember that the only direction they should be biased toward is the right one- the direction that has higher chance of success – that’s why we’ve chosen to follow the trend.
A complete recovery from the bear trend may seem distant for the time being. However, we have seen the market skyrocket upon surprising news hitting the wires. The level that would mark the end of the bear trend and the resurrection of the Uptrend is above $1180. Target level would be the peak at $1,380.
Wishing you Happy and Successful Trading!
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