Global equities suffered from a strong sell-off in the last two days of the past trading week, despite a certain optimism in the first half of the trading cycle. Investors and traders were disappointed with U.S.-China trade war escalation as there was no major macroeconomic news impacting the price action. The last trading week of August promises a tougher selling pressure as financial markets are heading into the busy AUtumns season and most of the traders come back from vacation. For instance, S&P 500 had lost almost 3% of its value, tech-heavy NASDAQ dropped 1.57%, while the Dow Jones Industrial Average had a similar performance of losing 1.53%. German DAX 30 was also on the defensive tone as the benchmark was falling almost 2.5% throughout the week but managed to recover part of the losses, and finished the week with a moderate decline of 1.12%. French CAC 40 index had the smallest decline among others, sliding only 0.46%. Japanese Nikkei 225 (-1.12%) reflected the investor’s pessimistic mood in Asia.
The U.S. dollar traded with a bearish tone.
The U.S. dollar index seems to get stuck within a tight consolidation range as red weekly candlesticks come right after green ones. However, the volatility is still strong enough, and it would be too early to talk about possible bullish continuation for the greenback as the world’s reserve currency suffered losses versus all major peers except the British Pound. As a result, DXY finished the trading week in the red, losing 0.96% of its value, and printing the largest daily loss since January 2017 last Friday. EUR/USD gained 0.47%, USD/CHF slid -0.37% after a failed test of 0.9880 resistance, USD/JPY reflected traders’ sentiment for equities and charted the lowest weekly close rate below 105.50 for the first time since May 2018. Commodity currencies were vulnerable to risk aversion. The Australian dollar edged lower by 0.38% versus the greenback, New Zealand dollar slid -0.44%, while USD/CAD edged higher by +0.13 but remained below 1.3300 round-figure resistance.
The price of gold continued the uptrend.
After hovering around $1500 per ounce, the yellow metal surged last Friday, appreciating to new highs at around $1525. What’s more this trading week started with another spike of bullish trade and the price of gold ticked higher to $1542. Some analysts predict the gold price to keep strengthening this Autumn up to $1650 per ounce despite overbought technicals. Silver followed the trend and appreciated more than 2%, testing the resistance level of $17.50 per ounce. Platinum and Palladium kept the tendency to grow. WTI Crude oil failed to sustain gains above $56.00 per barrel and slid back lower to $53.90 as a result.
EUR/USD weekly forecast: Neutral.
Although the pair were trying the water below 1.1070 (two consecutive lows at 1.1063 and 1.1052) several times this past week, there was no daily close below 1.1080 support. What’s more, EUR/USD soared more than 100 pips on Friday, which is quite a rare performance in recent market conditions. As a result, the daily pattern might be similar to a double bottom, if we compared to local lows. The lack of further bearish continuation might signal a reversal in the long run or consolidation at least.
The main concern for the bulls, according to the daily chart below, is that Parabolic SAR is still bearish as its dots did not jump below the rate. However, Stochastic RSI went off the oversold territory, pointing to strong bullish momentum near the defensive barrier of 1.1050 dollars per euro. Both lines of the oscillator performed the bullish crossover, and the overbought zone is rather far from current levels. Williams %R oscillator bounced off the lower band but remained to hover around the middle of the range. As long as the local bottom at 1.1029 stands and the daily close rate is above 1.1078, EUR/USD is vulnerable to further upside retracement with a target of 1.1200 and 1.1250 in extension.
It’s recommended to stay out of the market so far, as there are no clear signals to conclude the nearest development of the trend. Therefore, traders should get ready to short the pair on a possible test of the resistance range mentioned above in case of obvious reversal signals intraday. Otherwise, if the bears tried another test to push the pair lower, that would give an entry opportunity to long EUR/USD as the bottom of the range seems to be a tough nut to crack even with a third attempt. The nearest support is coming at around 1.1100.
WTI Crude weekly forecast: Bearish.
WTI Crude oil continued the sequence of lower highs, which confirms the bearish sentiment. The daily chart below shows a perfect entry signal on August 21 when the black gold had a failed attempt to test the upper side of the range above $56.00 per barrel. The long shadow of the daily candlestick was hammered by strong selling pressure as the commodity was entering the multiple resistance ranges. 89-days simple moving average and the descending trendline resistance acted as a signal to short oil. As a result, of three-days decline, the price bounced back below $54.00 support, losing more than 200 pips.
Bears still dominate as MACD indicator is bearish, while its histogram is headed to cross the zero level, while its lines are about to cross each other again. Fast RSI oscillator with a period of 13 days is still below the 50% threshold, pointing to the weakness. The bears have to overcome the closest horizontal support of $52.00 to continue the downtrend. Otherwise, such bullish attempts to recover will continue and give perfect opportunities to enter the market with quick short positions. Another possible scenario is a bearish breakthrough below $51.06, the lowest daily close rate charted on June 12.
It’s recommended to use the same sell-highs trading strategy as before. The goal is to wait for a bullish bounce and find a long upper shadow or another reversal bearish signal before pulling the trigger. Going long on oil with such an obvious downtrend would be too dangerous. Before that, the price of oil should eliminate the sequence of lower highs on the daily timeframe. One more option for profitable trading is to place a postponed order below $51.50, counting on a bearish breakthrough and acceleration.
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