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Hey Traders,
Last week economic calendar was packed with important releases which caused a volatile week for many markets, especially the Dollar and equities. The FOMC statement was initially viewed as dovish as the FEDs statement stated that they will need to consider the lag that the rise of interest have in the economy. Market participants viewed it was a sign of slowing down or potential pivot of the FEDs but the idea was dropped when Powell gave his speech as he was less positive about a peak in rates so soon.
However, Fridays Non Farm Payroll came in better than expected, supporting equities and resulted in a strong sell off in the Dollar due to the confirmation that the labor market is secularly strong and showing little signs of slowing except for the technology industries.
The CPI will be the key highlight of next week.
Upcoming Economic Release:
S&P500 Futures
Price broke out of the ascending trend line and fell back to within the range between 3550 and 3750. The recent lower time frame sideways price movement trades between the 0.5 and 0.61 of the Fibonacci Retracement of the upward movement. A deeper retracement can push price towards the 0.38 which is further supported by the minor support region at 3660.
However with the bearish outlook on the equities in the medium term outlook and the contracting of the economy (October ISM down, New Orders at new low, New export order enter contraction). It was a good thing that the higher than expected Non farm payroll (NFP) was the one of the few positive economic releases that prevented further bearish pressure on equities. Considering both the Fundamentals and Technical outlook, long positions should only be considered if price were to breakout of the 3775 region which will likely signal a continuation of the short term bullish breakout of the consolidation.
Dollar Index (DXY)
The United States Dollar Index experienced some wild swings this week. As mentioned in our previous post, if price were to push past the 111.0 resistance region, we will likely see the Dollar push towards 111.28 which was what happened last week. Price continued to push on towards the descending trend line but was met with strong selling pressure and reverses back towards the minor support at 111.0 region. Potential long can be taken at 110.11 key support region if strong bearish momentum were to continue early next week.
In addition to the reversal of the descending trend line, the Dollar Index has now developed a descending triangle. Any breakout confirmation of the pattern can provide us with the next strong direction of the Dollar Index.
Spot Gold (XAU/USD)
Gold broke out of the 1644 minor support region and fell towards the 1621 key support region, as per what we analysed in our previous post. The strong bearish momentum which began from 1679 resistance region towards the 1621 key support region provided us an opportunity to take a long position as per our recap shown below. The price reversal from the key support region was of strong momentum which is now extended and due for a retracement / pullback.
Gold continues to trade in consolidation. The lower time frame consolidation is between 1621 and 1679 region. A breakout confirmation of the 1621 can push price further especially if the Dollar continues to appreciate while a breakout confirmation of the 1679 can push price towards 1730.
Trade Recap
Sugar #11 Futures - Front Month (Analysis 44-2)
Recap (Week 44 - Last Week) Take Profit - 1
Long at market reopening position reached Take Profit - 1 level where we announced to close the position fully.
Spot Gold (XAU/USD) - Exclusive Trade
Recap (Week 44 - Last Week) Take Profit - 3
Long at market position reached Take Profit - 3 level where we announced to close the position fully.
Trade Analysis / Setups
USD/CAD (Analysis 45-1)
Analysis: USD/CAD has developed a head and shoulders formation which signal a reversal of the currency pair. However the recent price momentum is too strong for any short positions to be taken as any retracement in price is supported by the support region of the head and shoulders formation. The ideal short entry can be taken when price trades sideways (in the lower time frame) around the 1.35165 key level and breaks out of the lower time frame formation.
Short opportunity: Retest confirmation at 1.35165 region towards 1.32231 as Take Profit - 1 level.
NZD/CAD (Analysis 45-2)
Analysis: NZD/CAD continues to trade above the ascending trend line. However strong short opportunity can be taken if price were to break out of the 0.78847 key level which will be further supported by:
Break out of ascending trend line
Potential head and shoulders formation
Short opportunity: Break and retest confirmation 0.78847 region towards 0.77767 as Take Profit - 1 level.
Cheers to all our member who managed to pack some profits this trading week.
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