Technical Analysis 3 August: Dollar is Getting Weaker and Weaker
EURUSD, Daily timeframe
Pair in Uptrend
We had a positive price action on Wednesday with the pair gaining about 68 pips. The market is trending and out long-term bullish approach is in line both with the technicals and the fundamentals. Currently, we’re witnessing Scenario 2 playing out where the day before had an inside bar formation (indicative of continuation of the predominant movement). The target at 1.1800 has been both reached and surpassed. The second target at 1.1850 has also been hit. What’s next in our Scenarios?
Scenario 1: We’d be looking for more bullishness into higher grounds with the pair aiming for 1.1900, then 1.1950 and eventually 1.2000.
Scenario 2: The euro might show signs of hesitation and even retracement to previous levels. We’d be looking for a spike or a tailed candle during Friday’s Nonfarm payrolls. This is quite normal as there will be a lot of traders trying to capture movements on both sides. However, it’s best to keep a perspective on the long-term Uptrend.
Scenario 3: Price could start to wobble and move sideways. If we see price action evidence of that, it will likely be prior to the events on Friday. After the NFP number is out, in an hour or two the price will take its course back to normal.
GBPUSD, Daily timeframe
Pair in Uptrend
That’s the second pair that is reaching out for new heights. We had a positive price movement action on Wednesday with the pair gaining about 41 pips. Bulls are holding their tight grip. It’s important to remember we have interest rate decision today. There will be volatility and during the first minutes of the news coming out, it’s likely for price to show a knee-jerk reaction both ways. Those are the times that traders who have very tight stop losses get hit and out of the market. So, it might be reasonable to stay away during the news and participate once the noise of the news is out of the picture. We didn’t see serious evidence of price retracement today on the larger time frames.
Scenario 1: Price could continue to advance further and further into positive territory. Strategy is to go with the flow of the market. So, potential targets are into higher and higher price levels. Targets to look out for are 1.3300, 1.3350 and 1.3400.
Scenario 2: During the interest rate decision, price could retest 1.3150. We’ll need a rejection on the 1-hour or 4-hour timeframe with bulls getting back in control to jump back on board with the trend. If no such price action occurs, stay put.
Scenario 3: In case there is a surprising cut in the rate, price could get hammered and start dropping, Since, negative price action is not part of trend trading, we be looking for levels of support. The support level at 1.3050 is a very strong support level and potentially, we could view the level as a business level for going long. Only if there is a bullish rejection from 1.3050, there could be a valid setup for going long. If not, we have to await further price action to position ourselves accordingly.
AUDUSD, Daily timeframe
Pair is in an Uptrend
The Australian dollar really seems to be making an effort at moving up. Price action hasn’t been active and we could be looking for more conviction on Friday with the Nonfarm payrolls. Uptrend is intact, we just need a boost from a fundamental (news) point of view. Those trading the Aussie have to be patient. The pair was up about 20 pips on Wednesday.
Scenario 1: The immediate support that could be tested if price continues to drop is located at 0.7900. If we see a rejection from that level, that could offer an opportunity to go long. Target levels are located at 0.8000, next one is 0.8050 and then 0.8100.
Scenario 2: Price could continue to wiggle sideways before the awaited catalyst appears. Not a good time to trade. We need direction to position ourselves correctly. A bullish daily candle that covers entirely a negative price action from the previous day could offer a buying signal. It’s best to await a daily confirmation.
Gold (in a wide range)
Gold is edging up. We’re looking at the big picture and waiting patiently for levels to be reached. Since the dollar is losing more and more ground by the day, the precious metal could continue to be a safe haven for investors.
Scenario 1: Bullish action continues to prevail and we could be looking at the distant Resistance and target level at 1300.36 to be hit at some point in the future. Depending on volatility and aggressiveness of price action, this could take several weeks or a couple of months. Of course, we also have to be prepared for bearish scenarios and the best way to do that is always have a stop loss to secure capital preservation. Thinking in probabilities is useful. Being aware of unexpected events changing the game should be always at the back of a trader’s mind.
Scenario 2: This Friday we have the NFP as mentioned several times. This brings temporary uncertainty in the market prior to the event taking place. As you know markets do not like uncertainty and sometimes they react with sideways price action. That’s absolutely normal. We have to be aware of price potentially dropping in case investors stay on the sidelines temporarily. Another retest of 1260.10 is possible. If price closes below it, price action could drop as low as 1239.41. This level could offer another opportunity to go long. It’s better to wait for a rejection candle on the Daily timeframe.
Wishing you Happy and Successful Trading!
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