Weekly view: The US dollar continued to sag against the EUR last week, resulting in the pair connecting with the underside of a supply area seen at 1.1327-1.1139. Not only does this zone boast strong downside momentum, it also happens to be glued to the underside of a major resistance area drawn from 1.1533-1.1278 that has capped upside in this market since May 2015.
Daily view: Turning our attention to the daily chart, we can see that the pair recently touched base with a resistance level penciled in at 1.1135. Perhaps the most compelling factor here, however, is that just above this number, there’s a strong-looking collection of daily structural convergence made up of the following: a daily trendline resistance taken from the low 1.0516, a 61.8% FIB resistance at 1.1771 and also a quarterly open line extended from September at 1.1156 (green circle).
H4 view: A quick recap of Friday’s trade shows that there were no drastic moves seen following the US employment release. The non-farm employment change came in slightly lower than expected at 161k for the month of October. Be that as it may, August and September’s prints were upwardly revised by 44k. This – coupled with a tick higher seen in average hourly earnings at 0.4%, as well as the unemployment rate falling to 4.9%, as expected, could be enough juice to hike US rates in December.
The day ended closing marginally above the aforementioned daily resistance barrier at 1.1135, following a beautiful to-the-pip rebound off a trendline support drawn from the high 1.1279.
Direction for the week: Technically speaking, we feel the major is structurally overbought given both the weekly and daily timeframes (see above). Therefore, a selloff could potentially be seen down to daily demand coming in at 1.1039-1.0998 (the next downside target on the daily timeframe).
Direction for today: Today’s action will likely be slow for two reasons. Firstly, the economic calendar is reasonably light, and secondly, tomorrow is Election Day and is what the majority of the market has been waiting for. Technically, nonetheless, there’s a chance we may see price punch its way up to the underside of a H4 supply at 1.1205-1.1185. This zone is located around the top edge of the daily convergence zone mentioned above, along with being housed within the above said weekly supply. As such, it’s highly likely to produce a healthy reaction.
Our suggestions: Speaking as a technician, the only area we’d consider trading from is the above said H4 supply zone. Nevertheless, looking at this market from a fundamental standpoint, we’d only look to trade this H4 supply zone today, so as to give price a chance to move in our favor, prior to the elections.
Data points to consider: There are no high-impacting events due for release on Monday.
Levels to watch/live orders:
• Buys: Flat (stop loss: N/A). • Sells: 1.1205-1.1185 (reasonably sized H4 bearish close required prior to entry – stop loss: ideally beyond the trigger candle or the supply zone itself).
Comments
jaxx
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Hello
Could you please give more details about this - "reasonably sized H4 bearish close required prior to entry"
The candle must open above 1.1185 and must close below 1.1185 ?
or the candle's high must be above 1.1185 and its close must be below 1.1185?
Thanks
ICmarkets
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Hi Jaxx,
It does not necessarily have to close below .1185, It all depends on surrounding candle action at the time. A full-bodied bearish candle that closes below the previous candle low would be sufficient for us, but may not be for other traders. The reason we say ''reasonably sized'' is simply due to risk/reward. Ideally, we do not want it to be too large since the entry/stop distance would also be too big, hence distorting risk/reward.
Hope this clears up the question. If not, get back to us.
jaxx
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Thanks
another question: if the price reaches above 1.1205, will this invalidate the trade? or H4 close above 1.1205 is needed for invalidation?
ICmarkets
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If price prints a decisive close above 1205, then for us at least, yes the trade is invalidated.
jaxx
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I am talking about the case, when the trade is not trigerred yet
ICmarkets
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We may be reading your question wrong here. If the trade has not triggered yet, that would mean the H4 bearish candle has yet to form, and as this is the signal to trade, there would be no case before the trade has triggered.
jaxx
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Hello
if the trade is triggerred, you have clearly stated that the SL will be beyond the trigger candle.
My question is about the case, when the trade is not triggered yet, but the price goes (or even closes) well above 1.1205 - for instance 1.1240. So I wonder how high is this "well above", which invalidates the trade.
thanks
Could you please give more details about this - "reasonably sized H4 bearish close required prior to entry"
The candle must open above 1.1185 and must close below 1.1185 ?
or the candle's high must be above 1.1185 and its close must be below 1.1185?
Thanks