Today's price action offered a significant technical event in the form of a channel breakout to the upside, as a upper border imposed very little resistance against a push.
Question remains: Are we looking at higher highs?
First, my system has now given up its directional signal, as it turned to an early market reversal signal. From this standpoint, bears should now look at the following two significant nearby levels to decide whether to hold on or shift position:
1 - A larger Head & Shoulder ("H&S") pattern stands guard @ 1.38749 against any advance, with a right shoulder apex defining a last bastion of resistance before opening up to a historical high.
2 - The pattern ("WW", defined by points 1-2-3-4-5) terminates at the 1-4 Profit Target Line, which should be considered a significant level of overhead resistance.
Hence, we are considering two potential scenarios here:
1 - A scenario sees price retracing from the WW, validates the upper border of the recent channel, and continues to loftier 1.40's levels.
2 - A scenario interprets both right shoulder and WW's Target Line as interdiction to bulls, and price resumes its decline towards our forecast abysmal target @ 1.35008.
Taking a step back, all this is taking place within a fundamental context of ill-defined and non-committal central banks. On one side, a recent statement made today suggested that the Euro was "too high", while the ECB made no clear statement whether it would or not have recourse to easing interventions.
On the other side of the pool, the Fed is retracting and redefining contradictory easing statements made between voting members.
So, from a fundamental point of view, there really isn't any clear directional hint.
As indicated before, I personally believe that directional moves are discounted within the charts, and that my predictive analysis and forecasting has been able to forecast and hit the recent target dead-on @ 1.36707. The recent signal has turned to neutral. Hence, until a clear signal exists, I will keep my position small, looking at retracements from the WW's Target Line, and follow-through with a tight stop-loss.
Predictive Analysis and Forecasting
- All my predictive analyses, forecast and signals are based on unshared proprietary patterns, strategies and market research results, which shall remain unshared and unknown to you, the reader. So, do your own due diligence before trading any market/asset. Additionally, my signals, forecasts, analyses and directional opinions are for educational purposes only and are not trading recommendations. Again, do your own due diligence first, then seek financial advice from a licensed professional, and only then enter the market at your own perils - David Alcindor - TradingView.com Alias: 4xForecaster
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- Pointing To The Rise Of The USD. Sometimes. Soon. Actually, Now!
Recently, I mentioned that the USD would probably reverse to the bull side.
One of the most obvious reasons is that the Fed will progressively taper its synthetic dilutive intervention, forcing USD to rise.
A second reason, which is just as similar is the ECB's probable action-above-word, when it finally acts upon its concerns about too-high a Euro, as it refers to 1.20 as a preferable level.
However, there is also a more indirect venue that is likely to push the USD higher, is that is the demand that other currencies are likely to put on the greenback by the mere virtue of an unfavorable competitive market developing in China right now.
To put it simply, China's currency is falling. Although this provides for cheaper purchase from the standpoint of a country importing from China, it also translate to a relative increase in the cost of export for other exporting economies in the Asia waters.
While the larger economies have focused on a "race-to-the-bottom" by lowering the price of their sovereign currencies in order to improve their export revenues, a similar race could ensue among trading partners in Asia. In other words, I would expect to see a growing number of countries starting to purchase USD against their own currencies, so as to push the value of their currencies to ever so competitive exporting prices, in turn pressuring the USD to rise by the mere demand on that counter-currency.
While Forex analysis has more pulleys and levers through intermarket influences, I believe that this one simple balancing action is a probable scenario, as China's Yuan continues to decline. For more visual on the current trends in USD, simply look at such emerging market currencies as the Turkish Lira (USDTRY), South African Rand (USDZAR), ... in fact relative to most of the USD pairs.
You will see that USD has turned bullish in the M15 charts, while H1 and H4 are already turning bullish as well.
From a Gold standpoint, last night, I alerted a friend that XAUUSD would probably meet resistance in the 1320/30 range. Today, price fail to rise above the 1324 level over 5 consecutive 4-hour candles. While we approach one full day of resistance, look also at the current decline in AUDUSD and a topping of EURUSD to appreciate the implication:
USD is getting strong and stronger.
- Question is: Is Euro Next Currency TO Fall?
In this updated chart, I have added an overhead resistance that falls narrowly in range with a prior high before the completion of this failed head-and shoulder's head:
While there are no explicit signs of fatigue, USD has strengthened against many other currencies, and it may be a matter of time before the ECB puts into action its allusion to a QE-style intervention.