Technical Analysis October 19th: Gold about to erase previous week’s movement
EURUSD, Daily timeframe
Bias: Pair in Uptrend
On Thursday, we had a mildly bullish day with about 30 pips up. On the whole, price action in the euro dollar pair is chopped up. In order to have a valid setup to go with the trend, we need a directional move showing strength. Currently, we’re on stand-by mode. The different scenarios we’re monitoring are:
For a temporary period of time the pair could continue consolidating. A sideways movement trapped between the support at 1.1700 and the resistance at 1.1900 is a probability that we are not looking to capitalize on. Our strategy of choice is riding the established trend. Thus, we have to wait for a breakout to the upside.
A closure on the daily timeframe below the support at 1.1600 would mean further weakness. The following levels could be tested: 1.1500 and 1.1300. These two could also offer areas to go long from provided bulls take control and price shoots up and closes with more than 70-80 pips up and away from one of those levels. The bullish rejection is a must.
A breakout from 1.1900 and price closing above the level, would be a bullish sign that the trend is now in continuation mode. Targets above are 1.2065, 1.2100 and 1.2150.
GBPUSD, Daily timeframe
Bias: Pair in Uptrend
Similarly to the euro, the pair is pushing up. Yesterday, the cable advanced 20 pips against the dollar. This however is not a signal to go long from. We’re observing specific levels of confluence for that purpose. The following scenarios are on our watch list:
If we see price closing above the resistance at 1.3300, then this would be bullish opportunity to go long from. Remember to always protect yourself with a stop loss and determine reasonable risk management based on your equity, risk appetite and volumes. Targets above are: 1.3650 and 1.3840.
Price could move in a zig zagging manner between the support at 1.3050 and the immediate resistance at 1.3300. This is a no-go territory as we’re not interested in tight ranging consolidations.
If the pair drops and closes below the support at 1.3050, we could be in for more short-term weakness going toward 1.2800. No longs to be initiated. Wait for a bullish rejection candle of at least 80-90 pips bouncing form one of those levels.
AUDUSD, Daily Timeframe
Last week in the Aussie dollar, we had a clear bullish engulfment candle bouncing from the major support at 0.7750. We always have to keep in mind the predominant direction of price plus where the weekly candle closed the previous five business days. Yesterday, we has another day of hesitance, where price closed to levels similar to the opening price. The developments we’re focused on are:
There could be another retest of the immediate support at 0.7750. The level is important but it is more important whether price respects the support by pushing up from it or breaches it and closes significantly lower. If is a breach and closure below, then no buying positions are to be taken.
If price respects the support at 0.7750, we could go long- just have a mental note that the pair might be temporarily moving within a ranging space between 0.7750 and 0.7900. So, don’t hold in case price drops from 0.7900 and closes a 4-hour candle below it.
A break above 0.7900 would suggest that the bullish bias is again back in play and we could aim toward the resistance and target level at 0.8066.
Sentiment has turned to negative (at least in the short-term). It’s better to await the end of the week for more clarity. We had three consecutive days of negative price action. The point of turn was the resistance level at 1300.36. We will reconsider our positioning if price closes the week below 1274.46. Price falling that far would nullify the bullish activity from the previous week. This would be the time to assess if the turn of the market is a more serious one or part of a deeper retracement.
Price closing below 1260.70 would suggest more weakness coming in. Next level to be tested is 1239.41. No longs in this scenario. We do not go against the market flow.
If the commodity recovers, this could be from the support at 1260.70. We would have a valid recovery only if the daily timeframe shows us a bullish engulfment formation of at least 100- 150 pips up in positive direction and pushing away from 1260.70. Targets above are: 1300.36 and then 1350.00.
Wishing you happy and successful trading!
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