Technical Analysis October 31st: Markets await macro news

31 October, 2017 - 07:34AM

EURUSD, Daily timeframe

Bias: Pair in Uptrend /retracing

The euro gained about 25 pips on Monday. The movement is small and cannot be viewed as a rejection (considering the major weakness we saw last week). We have no technical reason to go long for the time being. We’re monitoring the following scenarios:

Scenario 1:

Levels that could be reached on the way down are 1.1500 and 1.1300. From those we could potentially do business on the long side. An obligatory element is a bullish rejection from one of those levels on the daily timeframe. Considerable rejection is bullishness with the magnitude of over 90 to a 100 pips in positive direction. If the setup from those levels is being met, targets above are 1.1700 and 1.1900.

Scenario 2:

The pair could start to zig zag (the way it used to the previous two months. If this takes place, we should be watching out for a breakout and not trade the consolidation. Consolidations offer small potential unlike trends which we’re aiming to capitalize on.

Scenario 3:

Closure above 1.1900 would suggest that the uptrend is back active. This potential movement would likely be triggered by a macro event with major significance. Be on the watch for calendar events and the respective times when news is expected. Targets above are 1.1900 and 1.2065.

 

GBPUSD, Daily timeframe

Bias: Pair in Uptrend

The pound pushed up over 71 pips for the day on Monday. We’re clearly observing a ranging motion and should be patient for a breakout to either side so that we could position ourselves accordingly. So far, price action is choppy and we’re not interested in trading muddy waters. The following developments are on our watch list:

Scenario 1:

We could see the pair move between the two immediate levels at 1.3050 and the resistance at 1.3300. It’s better to await a break to either side. We’re not interested in consolidations and ranging movements.

Scenario 2:

Price could head down towards the support at 1.3050 once more. This is a level has provided multiple times on the daily timeframe. A valid rejection would be a spike closing above, a pin bar or if you’re a more conservative trader, a bearish engulfment pushing away from 1.3050. Targets above are 1.3300 and 1.3650. Notice that those are also levels of potential resistance.

This means that price could pull away from them. If it does, this would mean that the level is indeed offering (at least a short-term) resistance.

Scenario 3:

A price recovery above 1.3300 would suggest that the market is in a bull trend and we’d be aiming for targets at 1.3650 and 1.3840. This would be a scenario with a faster recovery.

 

AUDUSD, Daily Timeframe

Bias: Retracing

Price gained a meager 14 pips and almost closed where it opened the day. We might see retests of higher levels so that price only drops again. No solid signs of recovery and so we should not attempt to go long until specific levels are reached.

Scenario 1:

A retouch of 0.7750 is possible. If we observe during the day that a 4 hour candle pulls back from 0.7750 and closes with a bearish movement (engulfment), we could go short.

This is a short –term strategy based on the US index gain against the major currencies and the Head and shoulders pattern currently observed. Once again, this is a short-term approach since the pair is still moving within the context of a retracement. Level below is 0.7505.

Scenario 2:

If price closes the day above 0.7750, this could be an opportunity to go long. Targets above are the recently reached 0.7900 (also a level of resistance) and 0.8066.

Scenario 3:

We’d be entering a bear trend if the week and the month close below 0.7500. This is the level that separates the bull from the bear trend. So, if no rejection occurs to pull away from 0.7500, that would be a price indication that the bears are having a tight grip over the market and the dollar is getting stronger.

 

Gold

Bias: neutral

A second day of bullish price action. However, price activity is not solid. We need volatility and force in order to make an informed decision as to the direction of the commodity.

Scenario 1:

If we continue to see more bullishness pushing away from the support at 1260.70, we could go long. Remember to exit the potential trade once price reaches the resistance at 1300.36. On the whole, price action is choppy so we need to manage the trades accordingly.

Scenario 2:

If price closes on the daily and weekly timeframe above 1300.36, we could aim for the more distant target at 1350.00. Note that this is a strong level of resistance that could be observed by price.

Scenario 3:

If price closes a day from this week below 1260.70, then bias would be negative and we could aim for targets at 1239.41 and 1210. 46.

 

Wishing you happy and successful trading!

 

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