Stock indices could have finished the bearish retracement.
The past trading week brought many reversals and U-turns for major assets in the financial markets. Equities and other high-yield instruments were vulnerable to the selling pressure, and the risk-off action continued in the first half of the previous week. However, investors and traders took profits from show positions and stepped-in with heavy-volume buying for U.S. stock indices. As a result, safe-haven assets had found a local top, while high-risk securities gained strength. For instance, most of the U.S. benchmark charted a long whipsaw on the weekly timeframe, finishing almost flat. German DAX 30 and French CAC 40 continued the bearish correction, falling by -1.8% and -1.1% respectively.
A mixed bias for major currencies.
Although the U.S. dollar index measuring the greenback’s strength versus the volume-weighted basket of six major currencies dropped -1.08% this past week, the overall trend was not so clear for some of the pairs. For example, EUR/USD (+0.8%) and GBP/USD (-1.11%) were moving in completely opposite directions, causing a sharp swing in the EUR/GBP cross-rate (+1.94) for the second week in a row. Euro closed the trading week at the highest level since March 2009 or more than a decade. Safe-haven currencies were also in demand as USD/CHF slid another 1%, while USD/JPY declined by -0.85%. The Australian, New Zealand and Canadian dollars charted long shadows on the weekly timeframe, suggesting that a local bottom has been found. Emerging markets currencies (South African Rand, Mexican Peso and Turkish Lira) were vulnerable to another round of sell-off on the back of the risk-off sentiment. Another currency pair which appreciated to 10-year highs was Chinese Yuan as USD/CNH closed the trading week above 7.0900, breaking through significant technical resistance and psychological level.
The gold price tested $1500 per ounce.
Such a high gold price level was noticed in March 2013, more than six years ago. The gold bulls lifted the yellow metal above $1510 high this past week, but take-profit orders were triggered and the price bounced back below $1497 (+3.93% weekly result). Silver followed the leader and gained +4.70%, testing $17.00 per ounce for the first time in 14 months. Platinum gained less than 2% in choppy trading. WTI Crude oil was testing $50.50 per barrel, while Brent Crude oil price (-4.84% to $58.23) charted the lowest price level since the beginning of the year.
EUR/USD weekly forecast: Bullish.
The most popular currency pair had changed the technical sentiment thanks to a sustainable growth noticed in the past week. Most of the weekly appreciation was achieved in one single trading session on Monday as EUR/USD jumped 0.85%, closing the day above 1.1200. The round-figure psychological level was attracting daily prices throughout the rest of the week. There was also an attempt to breach 1.1250 resistance on-the-go, but that action was met with heavy-volume selling pressure from postponed orders and real-money accounts. The latest price action reminds a flag continuation pattern, which could be used by the bulls to push rates higher in the near future.
The daily chart below has a more precise resistance than the round-figure mark of 1.1200 - a simple moving average with 89-days period. So far, the bulls failed to print at least one daily close above it. Therefore, the resistance must be eliminated before concluding further uptrend. MACD indicator turned bullish as the histogram entered the positive territory, while its both lines are headed north after the crossover last Monday. 13-days Relative Strength Index had also turned bullish as its value appeared above the 50% threshold. Everything points to a bullish continuation rather than a bearish reversal. Pivot points to monitor are 1.1250, 1.1277 (highest daily close on July 18) and 1.1334.
Long positions are preferred as the overall technical sentiment is bullish unless EUR/USD charts some kind of a reversal signal on shorter timeframes. So far, the bulls should dominate. The buy-dips strategy could be applicable if the market would be so kind as to give an attractive depth for fresh longs. A range of 1.1168/82 should act as the support as many buy-stop orders are placed there. An aggressive approach is to go long right on Monday open, counting on a bullish breakthrough and accelerations. In that case, targets should be placed in accordance with pivot points described above as the bears could counter-attack. A conservative way of trading suggests a wait-and-see position until an intraday buy-signal occurred.
WTI Crude weekly forecast: Bearish.
The price of oil continued the downtrend this past week, charting another attempt to breach the ascending formation at the level of $50.50. The black gold dropped more than 5.5% in three-days sell-off. However, the bulls had considered such a low price as a perfect opportunity to enter the market on a long-term perspective. As a result, WTI Crude bounced back up to the resistance range at around $54.23/89. The overall technical pattern reminds a bullish reversal, however, it’s too early to conclude that the bearish decline is over as the oil price should overcome many obstacles on its way to success.
The daily chart below shows a descending triangle with a static baseline at $50.55. The sequence of lower lows was maintained this past week, which confirmed the negative sentiment in the long run. The bears should keep controlling the market until the price of oil remains below the 89-days simple moving average. However, The short-term momentum suggests a deeper bounce north as Commodity Channel Index went off the oversold territory, which a strong buy-signal. What’s more, WTI Crude did not stay below the parallel projection of the resistance trendline for a long and bounced back above it. The combination of those factors points to the strength of bulls. Resistances are as follows: $55.61 (the lowest close rate on July 18), $58.30 (the peak from July 30) and $58.56 (SMA89 as of Monday, August 12, but it’s descending).
Conservative traders should follow the general trend’s direction, which is bearish. However, the current price is too dangerous to enter the market with fresh shorts as higher bullish bounce might happen. Therefore, traders should monitor the resistance levels described above and search for reversal intraday signals there. Such a signal might be a long upper shadow on a four-hourly candlestick, for instance. On the other hand, the aggressive trading approach suggests that such a high depth could not be reached and the oil price would continue declining right from the current level in the same way it did last Monday. Thus it’s recommended to hold a portion of oil shorts, getting ready to add more volume if needed. Mid-term targets are the same as before. First, WTI Crude should overcome the baseline of the triangle and chart new low below $50.55. Second, a daily close rate should be below the static support line. Third, a bearish acceleration might occur targeting $42.40, the recent bottom from December last year.
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