Technical Analysis 4 August: It’s All About The NFP Today
EURUSD, Daily timeframe
The euro dollar gained about 27 pips on Thursday trading around 1.1871 in the late afternoon. The market appears quiet but we need to be aware of the high volatility coming up today with the Nonfarm payrolls. Banks and professional traders alike follow closely the event and reactions within the first minutes of the news coming out. It’s useful to be cautious of robots trading the action as well. Since volatility will pick up, it’s better to await an hour or two after the market has cooled off, to potentially re-enter. The reason being that, even if a trader is in the correct direction, the first few minutes can be so volatile as to shake off one’s position out of the market. After the event, noise is out of the picture and there is more accuracy and clarity as to direction of price action.
After the event, we’ll be awaiting a potential recovery of price in line with the uptrend. Potential targets are located at 1.1900, 1.1950 and 1.2000.
A potential retracement could take place with price returning to 1.1750. This could be a spike reaching lower and testing the level. The important thing is what happens after. Movement will likely be observed in both directions. Keep your eyes on the big picture and the prevalent trend until price tells us otherwise.
If price weakens below 1.1700, this could mean a deeper retest going as far as the pivotal 1.1600. If price rejects with euro strength and bullishness the level at 1.1600, this could provide a potential valid setup for a long trade. However, if price slides lower and closes the day below it, more bearishness could be expected.
GBPUSD, Daily timeframe
Pair in Uptrend
There was no change implemented in the interest rate on Thursday and the market reacted negatively to the lack of increase or cut for that matter. The pound dropped a little more than 80 pips and traded around 1.3134 in the late afternoon. So, what scenarios do we have in mind?
The pound could retest the support we’ve been discussing at 1.3050. This level has been previously a level of rejection about three times, and now it could provide a level of support and potential barrier for price. It could be viewed as a support only if price action bounces from it on the 4-hour timeframe. Targets to consider above are 1.3270 and then 1.3300 and 1.3350.
If price closes below 1.3050, this could mean more weakness within the uptrend. In situations like this, it’s better to be patient and take a logical approach as to how to proceed. Next level to provide a support is 1.3000. If those are not respected by price, prepare for more weakness.
Price could just recover tomorrow to previous heights reached recently, namely toward 1.3270. This could mark the end of the week but it could also show than pressure is to the upside which is quite important and in line with our long-term strategy to capture the uptrending market.
AUDUSD, Daily timeframe
Pair is in an Uptrend
The Australian dollar dropped about 42 pips and is currently in a retracement mode. Whether this is temporary short-term action, price will tell us today after the NFP has settled in. Price almost reached the level we discussed for retest, i.e. 0.7900. Let’s see what to look forward to in terms of probabilities playing out.
Price could bounce from 0.7874 where we have tails of candles from previous days. This could lead to a prolonged range bound action from the pair. We’re looking to trade in situations where price is clearly trending. So, a ranging market would be a no-go, unless you’re specialized in consolidations and trading the lower timeframes.
Price could weaken and make a correction as part of the uptrend. The correction might present itself in price going as low as 0.7750. This could be a suitable point for initiating longs only if the level gets rejected by price (better on the Daily timeframe). Potential targets would be 0.8050 and then 0.8100.
Price could recover today if the news from the nonfarm payrolls is really bad and worse off than expected. If this happens, targets above are at 0.8100, then 0.8150.
Gold (in a wide range)
The precious metal retested 1260.10 once again today and then moved north and thus rejected the level. As you can see price action is choppy. And, choppy price action doesn’t provide favorable conditions for trading unless you’re trading long-term and stop losses are wider depending on your trading style.
If the U.S. news disappoints, this could be good news for traders going long on Gold. The metal often provides a safe haven for a lot of investors and traders alike. The ultimate observable target for the next couple of weeks (months) is the level at 1300.36.
If price drops below 1260.10 for the day, the observable support level that could be reached is 1239.41. This could become a level for doing business provided price rejects it on at least one-day daily timeframe.
Wishing you Happy and Successful Trading!
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