Technical Analysis 07 July: Majors are Up
EURUSD, Daily timeframe
Pair in Uptrend
Yesterday, the euro gained 73 pips against the US dollar. It became clear from the U.S. ADP Employment Change that 27, 000 jobs less than expectations were added to the economy in June- markets reacted accordingly by majors appreciating in value against the U.S. dollar. So, where are we headed to now? Price moved away from the support at 1.1300 that we’ve been discussing, so the Uptrend is in place. We’d be looking to trade with the trend.
Scenario 1: We’ll be looking for a break of the short-term resistance at 1.1450. A potential opportunity could present itself if price tests this level. The test would be a test of 1.1450 in terms of the level having become a short-term support now. The test could be on some of the lower timeframes (such as 1-hour for example). The reason, being the volatility created around the NFP news coming out. First target is 1.1500, then 1.1550 and our third target is 1.1600.
Scenario 2: Price could make the break and closure of 1.1450 without looking back. This might be an option for traders who are already in a long trade with a potential stop loss below 1.1300 (below the daily candle of the 5th of July). Note that these distances could be managed from a risk management point of view, if you trade with the minimum volume 0.01. With the minimum possible volume even is suitable for small account balances. Targets are the levels from Scenario 1.
Scenario 3: If news has negative impact on the Euro Zone currency, then price may return back to 1.1300. This scenario is not in line with the trend, so no positions to be initiated. If the day closes below the support at 1.1300, we’re likely to see price dropping to approach the support at 1.1109. We’d have to wait for further price action development.
GBPUSD, Daily timeframe
Pair in Uptrend
Similarly to the euro, the British pound also increased in value on Thursday. We had a positive price action of 37 pips. The trend shows that bulls are in control, so we’d be looking to go with the main price movement. Destination is Up. Where could market catalysts take us to?
Scenario 1: We need to see a break and a bullish candle (at least one 4-hour candle) closing above the immediate resistance at 1.3050. If this takes place, the once resistance has now turned into a support level. And, we be looking for a retouch on it by a 1-hour or even as low as 15- minute timeframe candle. Note that longer-time candles clear out the noise in the markets and thus are preferable for entry signals. So 1-hour rejection is good, 4-hour timeframe is even better.
First target is 1.1500, then 1.1550, and then our third potential target is located at 1.1600
Scenario 2: News could generate an impulsive candle so that price doesn’t make a retouch of previous levels and it just advances up. Targets are those from Scenario 1:
Scenario 3: We see the pair respecting the Resistance level at 1.3050. Note that it has been a level of resistance respected 3 times before. This means that if price respects the Resistance, it will be back below it to test one of the supports 1.2933, below is 1.2866 and the deeper support level at 1.2800. In this development, stay put. We’ll have to wait for further price development.
AUDUSD, Daily timeframe
Pair is in a wide range
On Thursday the pair dropped about 20 pips. There are a couple of developments worth discussing so let’s get straight to it.
Scenario 1: The closest Resistance in sight is 0.7630. Price could do two things from this level. It could either respect it as a Resistance and start to drop from there, or it could breach and close above it. There are two approaches to initiating potential entries. If you see a 4-Hour candle (after the NFP news) closing below the 0.7630 Resistance, then that would be appropriate time for potentially going short. Target is located at 0.7505. Next target is 0.7505.
Scenario 2: If price breaks convincingly above 0.7630 and closes on a 4-Hour timeframe with a bullish candle, then bulls have taken over price action and we’d be looking for targets at 0.7700 and then the solid resistance at 0.7750 is our next target.
Scenario 3: Price may start to move within a small range, taking place between the support at 07505 and the resistance at 0.7630. Range trades might take advantage of this price action, but generally, it doesn’t lend a clear pattern for trading and such small ranges require more time spent in front of the screen (unless you’re trading with a mechanical system).
Gold (in a wide range)
Bias: Testing near-term support
It seems like the precious metal will test the support at 1215.05 once again. We’re still awaiting clarity for proper positioning since price could go either way.
Scenario 1: If we see price rejecting the support at 1215.05 on a Daily timeframe (it could first probe it and then return to close above the level) we could have potential bias for longs. This should be done after the NFP takes place. Best at least an hour or two after the event. So, if we do witness this bullish bias, our target is located at 1239.41. Next one is 1260.10.
Scenario 2: If the dollar strengthens against the basket of major currencies, then we’ll see price falling towards the support at 1200.10. If it closes below it, then we could be in for a long short aiming toward as far as 1122.49 support level.
Wishing you happy and successful trading!
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