September has been a brutal month for risk on assets. Last week, the US August PCE data came out higher than expected while the UMich September US final consumer sentiment came in lower than expected. Market did not respond much and even if a decline in strength of the United States Dollar, stock indices did not respond accordingly as the market is now pricing in the certainty of a recession.
Even though there is high amount of fear in the market. The level of the VIX index is still not trading at an extreme level as compared to the recent COVID crash. This could potentially indicate that the equities market has room for more downside movement.
Upcoming Economic Release:
The S&P500 has been trading in consolidation between 3625 and 3740 region. However, price broke out of the consolidation just before the market closed off for the week. Usually, traders will cover their position before the market close for the weekend and with price pushing lower just before market closes, it indicate that most traders are bearish.
Dollar Index (DXY)
The strong momentum of the United States Dollar began to lose some steam this week as it traded in consolidation earlier on the week but pushed lower towards the minor support at the 111.75 region which price is now trading closely to. A breakout of the 112.6 resistance can indicate more bullish momentum while a breakout of the 111.75 support can push price towards the next key support at located at the 110.6 region.
Spot Gold (XAU/USD)
Gold prices reached a new low earlier the week but reversed back to above the 50 exponential moving average (EMA) on the 1-hour time frame. It reached the resistance level at 1660 region and reverses back towards the 50-EMA before continue the upward price momentum and closing off the week back to the range between 1660 and 1680. Once again, a breakout confirmation of the 1680 resistance will indicate a potential reversal for gold while a breakout confirmation of the 1660 support will mean a more bearish tone with trend continuation.
GBP/JPY (Analysis 39-1)
Recap (Week 39 - Last Week) Stopped
Long at market position got stopped out due to the strong emotional market earlier the week over the concerns between the contradicting approach between the British government and the Bank of England (BOE).
Trade Analysis / Setups
Cotton #2 - December Futures (Analysis 40-1)
Analysis: The price of cotton is extended towards the downside and now trades within the key support region. We will be taking a long position upon the market opening and since there is no strong confirmation of reversal, this will be labelled as a high risk trade.
Long opportunity: At market reopening towards 88.38 as Take Profit - 1 level as High Risk Trade.
Cheers to all our member who managed to pack some profits this trading week.
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