Technical Analysis 18 July: Pairs awaiting further news
EURUSD, Daily timeframe
Pair in Uptrend
On Monday, we saw the most liquid pair testing the near -term support at 1.1450 and during the afternoon hours, it gained ground back above it. The bullish impulsive candle on a daily timeframe gave further support to the uptrend movement. Where to from here?
Scenario 1: We could see the pair advancing in points and continuing to move towards the following target levels: Target one is located at 1.1500, next one is 1.1550 and upon a solid market catalyst (keep your eyes on ECB’s interest rate decision this Thursday).
Scenario 2: The euro could start moving sideways prior to ECB as professionals sometimes prefer to be on the sidelines untill there is clarity in the market. If this scenario takes place, the outcome of the decision will be instrumental in providing the necessary clarity.
Scenario 3: We could witness retests of prior levels which could provide potential entry points. Note, that we need to see clear 4-Hour candles to rebound from those levels. We could watch out for retests of 1.1400 and even 1.1300 levels. Once again, a clear bullish action is required, so we have a potential valid long signal.
GBPUSD, Daily timeframe
Pair in Uptrend
The pound retested the immediate support located around 1.3050. From here, we have to wait for an impulsive bullish movement spurred either by the European Session or a news event. We’re looking to go with the trend, so the bullish price action we’re awaiting should be at least on the 4-Hour timeframe.
Scenario 1: We could see price shoot up after retesting the newly formed support at 1.3050 (which was previously a resistance level.) The restest took place on Monday during the late afternoon hours. What we need for a valid long entry is a an impulsive bullish candle. We’re looking at the following potential target levels: 1.3150, next target is 1.3200 and third target (and also potentail level of resistance is located at 1.3200).
Scenario 2: Price could retest previous support levels. Bear in mind that if the daily candle closes below 1.2934, this will be a bearish engulfment, and price could reach the support at 1.2800 and even the distant support at 1.2618. Those should be viewed as potential prices for entries. It is obligatory that we have a rejection from those levels to join the upward movement. Four -hour rejection candle is a good option, a better one could be a daily candle (this is the more conservative approach with a wider stop loss below the daily candle).
Scenario 3: If there is unexpected news that impact the pound negatively, a significant move with the week closing below 1.2618, would tilt the scales to the bearish side. Stay flat in situations of unexpected nature until price settles in.
AUDUSD, Daily timeframe
Pair is challenging the range
We’re looking at a minor lowering of price, about 24 pips. It’s normal for price to take its time after the impulsive movement on Friday which strengthened the Aussie by about 96 pips. We can be looking for opportunities around specific levels. As usual our strategy is to take positions in direction of the predominant movement. The bias is tilted to the bullish side, and until we see evidence of the opposite, we’ll be looking for suitable long entry points.
Scenario 1: Price could head down to retest the immediate support located at 0.7750. We could aim towards 0.7900 and even 0.8000 if we take a long-term approach. Potential stop loss is below 0.7750. Also bear in mind that price could retest that level a couple of times before hitting off.
Scenario 2: Tuesday, price could gain in price without looking to retest previous levels. Targets are as per scenario 1
Scenario 3: If price closes below 0.7700, we could see a retest of 0.7705. A suitable spot for longs, provided there is a bulish rejection of the level. 4-hour candle provided it is a convicing move could provide a valid signal.
Gold (in a wide range)
Bias: Short-term long (until further proof for solid bullish direction)
The precious metal continued to gain in value on Monday. We’d be looking to join the bullish movement. However, it’s important to remember that price could retest previous support levels. So what are the options?
Scenario 1: The potentail retest we’re talking about is located at the immediate support is at 1210.50. That retest could take place if the dollar briefly gains in value against the major pairs. It’s useful to always have in mind the major trend movements and the big picture which is represented by the longer time-frames. You could get a really good view (just for general idea ) by taking a look at the Weekly timeframe, and positioning ourseleves on the Daily timeframes. Those longer tme frames are extremely useful as they take out the noise we get during the day on low timeframes such as the hourly and lower timeframe candles.
Scenario 2: Price refuses to look back and heads straight to test the near -term resistance level at 1239.40. If it manages to ascend and break above it and close, then targets to aim for can be seen at 1260.10 and then the far out target level at 1300.36. Those levels provide a lot of potential provided you have your risk management parameters in place. Remember, to always have a stop loss, be very disciplined about it, and a reward to risk ration of at least 3:1 ( that is you’re aiming for $ 150 in profit if you’re risking $ 50 – this is just an example).
Scenario 3: In the scenario where price closes below 1210.40 for the day, stay flat. The bias is no longer bullish and we’d belooking for appropriate levels to go short.
Wishing you happy and successful trading!
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