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Last week I wrote a two-part series on the EURUSD. On Wednesday, I stated that the upcoming Fed rate decision and presser would test buyers’ resolve above the 1.1700 area. It would either trigger a bounce higher to 1.1830 or fail and expose 1.1530.
It took 24 hours for the market to provide an answer. Thursday’s 1.1640 close meant the pair was likely to come under additional selling pressure which is what I mentioned as part of Thursday’s commentary.
Friday saw more of the same with the single currency losing another 38 pips by the 5 pm EST close. We also saw a slight bounce during the U.S. afternoon session. No doubt some rebalancing taking place on the last trading day of September.
For the week ahead, sellers will need to contend with 1.1530 support to extend last week’s selloff. That level will need to fail on a daily closing basis (using a New York close chart) to trigger a sub-1.1530 move.
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Speaking of what’s below 1.1530, there isn’t much until the year-to-date low of 1.1300. You may remember this level as our profit target for our short entry in August.
As for resistance, the area just below 1.1700 must hold on a daily closing basis for the bearish scenario to remain intact. However, buyers may find it difficult to surpass 1.1620 which is the level that stunted Friday’s rally attempt.
Last but not least, keep in mind that sellers managed to carve a bearish engulfing week. While it didn’t occur at a major swing high, it does give me another reason to believe EURUSD is getting closer to resuming the downtrend that began in April.
Similar to EURUSD, the GBPUSD appears to have broken a key support area last week. Friday’s close puts the pair below 1.3050 which served as support during the second half of September.
However, keep in mind that this area of support could extend as low as 1.3020. In which case the pound is still holding above it as of Friday’s close.
It’s going to depend on how the market reacts following a retest of 1.3050 resistance. If we see this level tested as new resistance this week and it rejects the advance, chances are the pair is headed lower.
As for support, there’s good reason to keep 1.2800/50 on your chart. It’s the intersection of former descending channel resistance and a horizontal level that became significant at the end of August.
We could also see a bid develop at 1.2925/55. This is the location of the early September gap as well as several highs and lows that make the area stand out.
Last Tuesday we looked at how USDJPY was approaching the year-to-date high ahead of Wednesday’s FOMC. The area spanned from 113.15 to 113.40.
The idea was to use the current uptrend to our advantage following a daily close (New York 5 pm EST) above the 113.15/40 area. I was never interested in shorting the pair from here given the bullish momentum of late.
Thursday’s close cleared 113.15 and Friday managed to carve a new 2018 high of 113.70. The significance of Friday’s close is that any rotation lower into 113.15/40 could trigger an influx of buying pressure.
Whether or not USDJPY will pullback this week is anyone’s guess. But if it does, you’ll want to keep a close eye on that 113.15/40 region.
As I mentioned last week, there isn’t much in the way of resistance until 114.35. The area has capped the previous three rally attempts since May of last year, so I do expect to see quite a bit of selling pressure here if tested.
Buyers still have their work cut out for them, but it’s worth pointing out that a daily close above 114.35 would expose the next key resistance at 115.30.
However, if you’re searching for an entry, it may be best to wait for a pullback to support. The USDJPY closed Friday more than 100 pips above the daily mean (10 and 20 EMAs), so we may see the pair unwind some this week before the next leg higher materializes.
Gold has been trending lower for the better part of 2018. Apart from the first four months of the year, sellers have had control without much argument from buyers.
The closest gold bulls have come to reversing the trend came on August 16 when the market reached a year-to-date low of 1160. However, the relief rally sputtered out at the end of August, and the market has been moving sideways ever since.
Thursday’s selloff attempted to reestablish the 2018 downtrend, but buyers were quick to step in before the weekend.
That said, gold is currently retesting several September lows as new resistance. The 1193 area attracted buyers between the 4th and 26th of September. It should, therefore, serve as new resistance moving forward.
Gold ended the week just below the 1193 figure. But so far, the price action isn’t giving any indication that it’s time to sell. Part of Friday’s bounce could have been due to end-of-month rebalancing, but we lack a sell signal nonetheless.
To continue playing devil’s advocate, the downtrend that began in April is getting stretched. Not so much on the daily or weekly time frames, but the 10 and 20 EMAs on the monthly chart are up near 1250.
Translation: There may not be much downside left, but if there is, it’s likely to materialize near 1193 resistance.
One way to combat negative factors like the ones I just mentioned is to stay patient and wait for a price action signal. Perhaps the market will show its hand this week with a bearish pin bar near 1193..
Alternatively, if gold begins to close back above those September lows at 1193, it’s probably best to stand aside. Such a move would expose the next resistance area at 1208.
For now though, the 1193 area remains resistance. Bearish price action from here could take the market back to the year-to-date low at 1160. We could also see some support build near 1182.
The S&P 500 has experienced some incredible gains since early 2009. For perspective, the index carved a low of 666.80 on March 6, 2009, and here we are nearly a decade later at 2916.
It’s been a remarkable uptrend regardless of your beliefs about why it shouldn’t have happened or why it isn’t sustainable. I have my own feelings about it, yet here we are approaching the 3000 handle.
I pointed out the rising wedge you see below on Thursday of last week. The gist of that commentary was that the uptrend is still very much intact, but the price action since July hints at some exhaustion from buyers.
I wanted to review the S&P 500 once more given what happened on Friday. You’ll notice that buyers stepped in at 2903. That’s the exact location of rising wedge support, so no surprise there.
However, Friday’s bounce does provide us with a clue. It helps support the idea that the market is paying attention to this lower level that extends from the June low. Thus, a daily close below it is likely to expose some of those support levels I wrote about on Thursday.
For now, the S&P is still in rally mode. And as I stated last week, a close below wedge support could produce a retracement as shallow as 2870 or something more substantial to 2790 or 2740.
It’s a waiting game at the moment. And while a break of this rising wedge won’t signal the end of a decade-long rally, it would serve as a warning shot to those considering buying the index at these lofty prices.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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