Technical Analysis 11 September: Markets are trending
EURUSD, Daily timeframe
On Friday, the most traded and liquid pair respected the Resistance at 1.2067 and closed about 30 pips below it. It should be noted that we do not have a bearish engulfment candle so price is currently testing the resistance but still there is no sign of a retracement to a previous level.
So, what developments are on our watch list?
Price could continue to consolidate until there is a serious news catalyst (or volatility from either the European or American Session) hitting the market. The area we’re observing is 1.2067. A zig zagging motion is not conductive to initiating positions. We need volatility for the market to create opportunities. We’ll be awaiting an impulsive candle for correct positioning.
Price breaks out and pushes up and beyond the temporary resistance at 1.2067. This bullish scenario is in line with the established uptrend, and since the strategy is to ride the Uptrend, we’d be looking at targets located at 1.2100, 1.2150 and 1.2200.
The pair could retrace back to the immediate support at 1.1900. This is a potential area for going long. A valid setup would involve a strong bullish rejection candle moving away from 1.1900. This formation is needed for the setup to have a confluence of levels. Wait out the signal (the bulls getting control back from the specific area). If, there is no such rejection, we could be seeing a deeper form of retracement falling toward 1.1600 support level.
GBPUSD, Daily timeframe
Bias: Pair in Uptrend
Last week we saw strong performance from the cable with a positive week of over 240 pips up and a bullish Friday with over 100 pips up for the day. The pair is approaching the target discussed at 1.3300. If this level is breached with the same conviction of the pr evious week, the Uptrend continuation movement will likely continue. The scenarios we’re considering are the following:
Bulls remain a tight grip on the pair and the upward movement persists. If price reaches 1.3300 Resistance level, it could break above toward 1.3350, next target is at 1.3400 and then 1.3450 level. This scenario is from the long-term uptrend perspective, where the trend is intact. We do have to consider other probabilities since markets offer chances but no certainties and we have to always have to have potential development that at the back of our minds as alternative price action movement that could take place.
Price respects (even if temporarily) the Resistance area at 1.3300 and starts to retrace to test the immediate support at 1.3050. The support level at 1.3050 could offer better prices and potential level for doing business on the long side. This would be a valid situation, if price confirms that the level is a support area. A confirmation signal would be a bullish rejection candle which closes the day in positive higher ground. This would suggest that the retracement has stopped at the support level and price is resuming activity in line with the Uptrend.
Price could start consolidating around 1.3300. Oftentimes, price is biding its time before aggressively breaking out of consolidations or tight ranges. If this scenario takes place and you’re in a trade, it might be wiser to await a market catalyst to push price further.
AUDUSD, Daily Timeframe
On Friday, the Australian dollar touched the Resistance level at 0.8066, and then started to pull back away from it in the late afternoon. Mind you, the daily candle made a test, but this is not a rejection. As you can see, price still closed a few pips above opening price for the day. The pair is moving in an uptrend, and we’d be looking to position ourselves in such a way as to maximize the probability of success. Strategy is to ride the main movement and never against it. The scenarios we’re monitoring are the following:
Price could break and close above the short-term resistance level at 0.8066. if this takes place, next target we’re aiming for is in 0.8100, then 0.8150, 0.8200 and 0.8250. This scenario is riding the trend.
The pair if influenced by unexpected negative news could drop and test previous levels. The immediate support is located at 0.7900. If this is a simple retest we would know. How? If the level represents a level of confluence and bulls step on the scene to form a bullish daily candle rejecting the 0.7900. However, if we see the day closing below that level, then bearish bias would be stronger, and next level of potential support is 0.7750. Again this is a level where we could potentially be doing business on the long side, if we see price pulling away from it on a daily timeframe.
On Friday, we saw gold closing a few pips below opening price for the day. This is quite normal as there are traders who don’t like to hold trades open during the weekend. The predominant uptrend is in place and we’d be looking for potential long trades. The target at 1338.00 was reached on Friday as per scenario 1. Currently, developments we’re monitoring are:
In alignment with the Uptrend, the bullish action continues and next potential target is located at 1400.00. The immediate support is the previous resistance level at 1338.00.
A price retracement would be the development respecting 1338.00 as a level of resistance. We need a bearish daily candle in order to observe that development. The immediate support is located at 1300.36. This is a potential level for entering the uptrend from better prices. A bullish rejection on the daily timeframe is a must.
Wishing you happy and successful trading!
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