Wait EUR/USD – MT is Sideways Volatile
Technical Overview: The overall market trend remains sideways with the recent sell-off being capped by the secondary support level at 1.17127. Any strong rejection on the secondary support level may attract buyers with a good risk-reward ratio targeting the secondary resistance level at 1.19. If price continues to trade below the secondary support level, it may signify a start of an overall bearish market.
Fundamental Overview: The recent sell-off was supported by the risk-off environment, increasing demand for the dollar, strong data from the US, and rising concerns in the future of the European economy. The Eurozone ZEW Economic Sentiment for October was below expectations and the spike in COVID-19 cases may continue to contribute to the slowdown of the economy.
Despite a drop in the jobless claims and strong retail data in the US, with the ongoing presidential debate, political uncertainty continues to loom and may limit the gains for the dollar. With weakness in both currencies, it is best to wait until we get a clear direction of where the market is heading to. In the week ahead, the focus will be on the ECB speech, FED speech, and the presidential debate. Any mention of the need for further stimulus by the ECB may send the currency pair lower.
Wait USD/JPY – MT is Sideways Normal
Technical Overview: The contraction of the Bollinger band is suggestive of a continuation of a sideways market type. Price continues to trade within the key resistance level at 106.8 and the key support level at 105.0. Will wait for a breakout to have more conviction on the direction of the market.
Fundamental Overview: In the speech made by Bank Of Japan (BOJ) Kuroda, BOJ will not hesitate to take additional easing measures as deemed necessary to ensure the recovery of Japan’s economy. Japanese Prime Minister Yoshihide Suga requested additional economic stimulus measures in the hope to boost the economy.
With BOJ fully supportive of easing its monetary policy and the ongoing presidential debate in the US, it is best to stay away from the market until we have a stronger conviction on the direction. Focus will be placed on Japan’s trade data, FED’s speech, and the presidential debate. Should the trade data coming out from Japan fails to meet expectations, this may spur the BOJ to take the necessary action.
Wait GBP/USD – MT is Bull Normal
Technical Overview: With price continuing to trade above the ascending trendline, the overall Bull market is still intact. The pair is currently trading within an ascending triangle and it will be best to wait for a breakout. A break above the secondary resistance level at 1.30 may attract buyers with a good risk-reward ratio targeting the key resistance level at 1.34. A break of the ascending trendline would suggest a potential retest of the key support level at 1.26038.
Fundamental Overview: Despite the mention of a hard Brexit, the pound has shown resilience and managed to cap losses. The UK will extend its efforts to reach a post-Brexit trade deal with the European Union (EU) after failing to come to an agreement on the 15th of October. Europe is also eager to have a deal with the UK, opening doors to a soft Brexit.
The currency pair was mainly driven by the progress of Brexit. In the coming week ahead, any tensions between Europe and the UK that may lead to a hard Brexit will weigh strongly on the pound. The focus will also be on UK consumer data, market manufacturing, and market services.
Wait AUD/USD – MT is Bull Normal
Technical Overview: Overall Bullish Market Type remains intact as price remains above the Key Support Level at 0.70268. The 4-month-old ascending trendline has managed to provide support limiting the recent sell-off. However, we do not see any strong rejection on the ascending trendline which is suggestive of a potential retest of the Key Support Level. It is best to wait for a confirmation of price action to have more conviction on the direction of the pair. If the currency pair starts trading below the key support level, it may be an early sign of a reversal of the overall bull market.
Fundamental Overview: There is a high possibility of a rate cut should the unemployment data in Australia show no improvement. Phillip Lowe, Governor of the Reserve Bank of Australia (RBA), said “he could cut rates to 0.1% and leave rates at lower levels for longer”. Should the unemployment data and the Australian economy fail to show any improvement, this may be a start of a long term bear market for the currency pair.
With the political uncertainty in the US, it will be best to wait to ensure we have enough conviction in the direction of the market. Attention will be on data coming out of China, The RBA minutes, and the Australia retail sales data. Any mention of a possible rate cut would trigger shorts for the AUD/USD.
Steve Lucas is our head market analyst. He has been trading since the 80’s and sending out market analysis since 2007. He is trusted by major hedge funds and investment banks around the world to get the direction right. When you live and breath the markets like Steve does, you develop a “sixth sense” about the market. In Steve’s Corner, we get his view on what the highest probability trades will be.
This week, Steve’s favorite call is GOLD. Please see our signal report for more details.