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MORNING BRIEF FOR JULY 13

08:40 13.07.2017

 

The Canadian dollar is the major beneficiary in FX markets after the Bank of Canada raised its rates by 0.25% to 0.75% and slightly upgraded its growth forecasts. There was not even a hint for dovishness. So, the loonie surged on the rate announcement. USD/CAD was down 1.2676 from Wednesday’s opening of 1.2913. Not it trades a little bit higher from yesterday’s low at 1.2743. On the upside, there is solid resistance at 1.2820. The odds for a drop to lower levels are not high. It seems that pair is entering into the consolidation phase.  

 

US yields and the dollar were generally lower after Janet Yellen said the Fed won’t rush to tighten monetary policy while testifying to the Congress. Markets noted that Yellen is now less sure that inflation on track towards the Fed’s target. She doesn’t know how inflation will further respond to the Fed’s tightening measures. The Fed’s concerns about the current inflation rates suggest that there were downside risks to its forward guidance.

 

The euro was one of the few currencies that lost out yesterday against the USD.  It dipped to 1.1390. In Tokyo morning, EUR/USD managed to recoup some of its earlier losses having risen to 1.1440. In the meanwhile, it will likely continue to trade choppily within the range of 1.1320 – 1.1490.

 

USD/JPY was a great mover in the past few sessions. After rising briefly above 113.50 dropped harshly below 113. While the immediate bias is tilted to downside we don’t expect significant downfall from the current levels. Most likely, the pair will be trading sideways.

 

Aussie was one of the standout winners of yesterday’s session. It spiked to 0.7685. In the Asian session, it extended its gains to 0.7695.

 

Sterling rose to 1.2895, notwithstanding the exit stage left of Scottish tennis player from Wimbledon, due to the stronger-than expected unemployment rate (jobless rate is up from 1.8) and earning data.

 

Oil prices skipped some points overnight as OPEC said its expected demand for its crude will likely decline next year as its rivals increase their production despite the efforts to curb oil glut.

 

What is coming up:

Yellen will continue testifying Thursday.

US producer price index and unemployment claims are due at 3:30 pm (MT time).

The Congressional Budget office is poised to release its analysis of President Trump’s 2018 fiscal year budget. It is coming under fire from Trump administration, inevitably given the conservative (realistic?) growth assumptions that the CBO uses to do the fiscal maths.

Charles Evans and Lael Brainard are set to speak later today. Both of them on the dovish side of the Fed’s hawk- dove spectrum (additional losses for the USD?).

 

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NZD/USD: KIWI WOKE UP THE SHARK

09:41 13.07.2017

 

On the NZD/USD daily chart, Bears failed to keep quotes below the support at 0.723. It was a signal of their weakness, the Bull acted proactively. A successful test of the resistance at 0.7345 might lead to the restoration of the uptrend and increase the risks of the realization of the target 113% of the Shark pattern.

 

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On the NZD/USD hourly chart, after short-term correction and consolidation within the Splash and Shelf pattern on the 1-2-3 basis, the restoration of the uptrend has started. A break of the upper border of the shelf near the resistance at 0.7305 will lead to the continuation of the rally.

 

1499928051-3696dc2326705fd45dfa7b732beb8

 

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GBP/USD: POUND IS AT A STALEMATE

09:43 13.07.2017

 

BUY 1.2925

 

SL 1.287

 

TP1 1.3030, TP2 1.3200.

 

On the GBP/USD daily chart, the pound is in a stalemate: bulls cannot return the quotes to the borders of the near-term upward channel, while bears cannot return quotes to the borders of the short-term downward channel. We will find out the further destination of the pair after the workout of the triangle pattern.

 

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On the GBP/USD hourly chart, the failure of bears to keep the pound below the level of 1.2855 is a signal of their weakness. A break of the diagonal resistance at 1.2925 (the upper border of the downward trading channel) will increase the risks of the restoration of the uptrend.

 

1499928159-2cf183d9aa99dd882e50bd88c66a5

 

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EUR/USD: "V-BOTTOM" PATTERN

11:58 13.07.2017

 

1499936248-76ce92213d7ea312a5a7a3553c369

 

Bears faced support at 1.1398, so we've got a "V-Bottom" pattern, which pushed the price to resistance at 1.1464. Therefore, bulls are likely going to test the next resistance at 1.1494. If a pullback from this level happens, there'll be an opportunity to have a decline towards the nearest support at 1.1444 - 1.1425.

 

1499936248-43b122d22703347bc4c11ed72efb6

 

There's a "Thorn" pattern, which has been formed on the 89 Moving Average. In this case, the market is likely going to achieve the closest resistance at 1.1479 - 1.1488. However, if we see a pullback from this area, bears will probably try to reach support at 1.1444 - 1.1425.

 

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GBP/USD: CONFIRMED "THORN" PATTERN

12:01 13.07.2017

 

1499936248-30692a667c9e916298d8b857ddd9d

 

The price faced support at 1.2817, so there's a "Thorn" pattern, which has been confirmed. Therefore, the pair is likely going to continue moving up in the direction of the next resistance at 1.2947 - 1.2982. Meanwhile, if a pullback from this area happens, there'll be an option to have a downward price movement towards support at 1.2926 - 1.2887.

 

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The last "Pennant" pattern has been broken, so bulls found resistance at 1.2915. Nevertheless, the market is likely going to move on, so we should keep in mind the next resistance at 1.2947 - 1.2967 as an intraday target. If we see a pullback from these levels, bears will have a green light to reach the 89 Moving Average.

 

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BANK OF CANADA RAISED RATE. WILL OTHER CENTRAL BANKS FOLLOW ITS LEAD?

 

12:47 13.07.2017

 

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Canada became the first G-7 country to join the US in raising interest rates yesterday, proving the fact that the world’s central bankers have started entering a tightening cycle (as they promised at Sinatra’s forum on central banking).

 

The Bank of Canada raised its benchmark rate to 0.75% from 0.5% its first time in 7 years, having said that futures rate hikes/adjustments to the current monetary policy stance will be guided by the country’s economic fundamentals – by the incoming data flow. Governing Council responsible for setting rates said the current economic outlook warrants a partial withdrawal of monetary policy assistance.

 

The next banks in line to tighten their extremely loose monetary policies are the Bank of England, the ECB, and Bank of Japan.

 

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But will they do so?

 

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The Bank of Japan’s tone is still extremely dovish notwithstanding the other banks’ intention to tighten their current monetary policy setting. The BoJ’s Governor Haruhiko Kuroda has recently once again demonstrated its commitment to keep the yield curve at zero level and to weaken the yen to moderate levels if needed.

 

The Bank of England gives very ambiguous signals with regard to its monetary policy projections. The bank’s governor Mark Carney was even accused of behaving like a “reliable boyfriend” to the financial markets as he had sent the opposite signals about the likely timing of the first interest-rate hike.

 

The members of monetary policy committee almost introduced a hike at their previous meeting if not 1 – 2 members voting for holding the monetary policy unchanged. Why some of BoE’s officials still refuse to remove a monetary policy stimulus? The British economy is quite strong with the unemployment being at its lowest level in more than four decades, inflation staying well above the bank’s 2% target. Under the following circumstances normally raise the interest rate. But there’s BREXIT. Some analysts believe that the BOE’s policymakers will raise their benchmark rate despite these Brexit-provoked cautions. The exit from the EU has not proven yet to be an economic catastrophe for the UK. In contrast, the economy kept expanding. So, let us keep fingers crossed for a rate increase at the upcoming bank’s meeting.  

 

While we cannot trust the BoE’s policymakers when they are communicating with financial markets, the ECB’s officials seem to be quite reliable speakers. The only fault of the latter one is that they are not always generous on delivering the details of the monetary policy plans. It is really unnerving. It is still not clear, for example, when the ECN starts trimming its bond-buying scheme, how it will proceed. The present Eurozone economic conditions are more or less favorable for a recourse to tightening measures. The euro area economic activity and confidence remain strong, the unemployment rate continues to fall. The only impediment to the ECB’s way to hiking is still low inflation rates figures (currently staying at 1.3% below the bank’s 2% target). Most analysts expect the ECB’s policymakers to announce the deceleration of their bond purchases’ pace in September. But you should beware that the impact from this announcement will not necessarily produce great swings in the pair with EUR. The ECB may be very creative in how it tapers QE. Don’t expect it sticking to the Federal Reserve’s textbook and just roughly reducing their monthly purchase by a certain amount of money. And this ECB’s creativeness may not send the EUR to heights traders would prefer.  

 

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GOLD MARKET OVERVIEW

14:53 13.07.2017

 

Gold prices posted a fourth-straight gain on Thursday reaching $1222.50 amid political uncertainty in the US and a bit dovish read on Fed’s Chair Janet Yellen’s testimony to Congress. Most analysts believe that gold’s rally was triggered by the turmoil in White House following Donald Trump Junior’s release of emails linked to his meeting with a Russian Lawyer. It was said that she wanted to convey some compromising information on Hillary Clinton, then Democratic presidential candidate, the information that would have helped the current president to gain the upper hand. All this email release story intensified the focus on whether Trump’s campaign had some collusion with Russian government or not.   

 

White House linked drama is widely seen as cutting the offs for Trump’s pro-growth policies. Janet Yellen’s testimony was an additional catalyst for the golds’ rally. US dollar slumped significantly after the Fed Chair’s testimony. As gold and USD have the negative correlation, the precious metal surged.

 

In the longer term, gold may post some additional gains as demand for the bullion will be increasing. India, one of the major gold importer countries, more than doubled its purchases of gold in June amid a rush by the country’s jewelers to store up more gold ahead of a radical tax change. Indian government prepares one of the most radical tax overhaul this year. Imports will certainly decline in case of tax rate increase. At the present moment, the impact from increased Indian demand for gold is not observed. But it will be more salient once the festival season starts in mid-August (when retail purchases of gold will increase). Indians buy gold for marriages (as a gift to a couple of as a part of the bridal costume) and for other festivals.

 

Meanwhile, the gold is trading at $1220.45. Technically, there is a scope for extension towards $1230.95, $1248.65 levels. If the US dollar manages to regain its strength (for example, thanks to the stronger reading of CPI figures which is due tomorrow at 3:30 pm MT time), the gold prices will be hurt. It might slide towards the supports at $1.204.75 (this week low) and $1194. 25.

 

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EUR/USD: BEARISH "THREE METHODS" PATTERN

15:33 13.07.2017

 

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There's an "Engulfing", which has been confirmed by the last bearish "Three Methods" pattern. So, the market is likely going to decline towards the 55 Moving Average in the short term.

 

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The 144 Moving Average acted as support, so there's an "Engulfing" pattern, which hasn't been confirmed yet. In this case, bulls are likely going to test the 34 MA during the day. If a pullback from this level happens, bears will have a green light to deliver a new local low.

 

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USD/JPY: BULLISH "HARAMI"

15:39 13.07.2017

 

1499949152-3c1471cd684439dce5239ac6118a9

 

There's a possible "Three Methods" between the Moving Averages. If this pattern confirms, bears are likely going to reach the 55 Moving Average shortly.

 

1499949152-282e82f47ff67d909093f291a25ca

 

We've got a bullish "Harami", which has been formed on the lower "Window". So, the pair is likely going to test the upper "Window" in the coming hours. If a pullback from this level happens, there'll be an opportunity to have another decline.

 

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EUR/USD: DEVELOPING ENDING DIAGONAL

16:15 13.07.2017

 

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There's a developing ending diagonal in wave [v] of C. It seems like wave (iv) has been formed, so bulls are likely going to deliver wave (v) of [v] in the coming hours. In this case, we could have a new high soon.

 

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As we can see on the one-hour chart, wave (iv) took the form of a double zigzag. Therefore, the market is likely going to form another zigzag in wave (v) of [v], so 8/8 MM Level could be broken.

 

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EUR/USD: TIME TO REBOUND?

00:20 14.07.2017

 

EUR/USD is currently trading inside a strong demand zone that has been established by our Fibonacci’s projections. The 200 SMA at H1 chart is also providing the line in the sand for bulls, at which could gather enough momentum to ride the bullish bias. When that happens, the pair could be targeting the 1.1531 level, which corresponds to the -23.6% Fibonacci retracement level. To the downside, such scenario will get invalidated once it breaks below 1.1312.

 

RSI indicator is close to turn neutral, calling for a consolidation at the current stage.

 

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MORNING BRIEF FOR JULY 14

08:56 14.07.2017

 

It is a Bastille day in France. The US President and other foreign heads are visiting France and watching military parade on the Champs-Élysées. Donald Trump has already posted a tweet about his unbreakable relationship with the French President Emmanuel Macron.

 

Markets yesterday saw the AUD and NZD at the top of the FX leader board. The economic data has been quite strong with rising consumer inflation expectations joining the pickups in consumer and business confidence, but it was a sharp increase in Chinese imports that allowed the Aussie to hit its highest level in three months (0.7740). A break of the year-to-date high at 0.7750 might lead to a rapid rise towards the 2016 high of 0.7850 (with one additional resistance at 0.7778 ahead of this high). If quotes return to 0.7670 it will be an indication of the end of the rally.

 

The US dollar has strengthened against the yen as Fed Chair Janet Yellen reminded everyone that FOMC members still plan to raise rates despite subdued inflation figures. She said that it is premature to say that the inflation trend is below 2%. She also talked up the improvements in the US economy; her comments on labor market didn’t play so much to a dovish tilt (the labor market is quite tight; there might be pressure on wages). Yellen was also asked about the timing of the Fed’s plan to reduce balance sheet.

 

The US dollar gained some additional support from the US data showing the number of unemployment benefits fell last week for the first time in a month and producer prices somehow rose in June. In today’s spotlight, a number of other US economic indicators including CPI, retail sales and industrial production for June. The past three CPI releases were disappointing and there was a sense in Yellen’s testimony that this wasn’t all “one offs”. Also, Fed’s Kaplan will be speaking and the UoM consumer sentiment will be released.

 

EUR/USD missed some points overnight sliding to 1.1368 from 1.1454 on dovish comments from ECB Governing Council member Rimsevics. He said that QE will continue for a few years as inflation is still far below the central bank’s goal. However according to the WSJ, Mario Draghi might begin discussion of reducing their bond purchase program next month in Jackson Hole. At the time of writing, the euro is trading near 1.1410. From here it will likely trade choppily, within a broad range of 1.1320 – 1.520.

 

Sterling spike towards 1.2960 in the Asian session. Yesterday we got some hawkish comment from Bank of England member McCafferty (he said that he will likely vote for a rate increase at the MPC meeting in August). The current technical outlook is still neutral. GBP/USD should move clearly above 1.3000 to indicate the start of the bullish phase.

 

The Canadian dollar remained near its strongest in over a year level after the Bank of Canada raised its benchmark rate this week for the first time since 2010. USD/CAD is at 1.2725 a few pips higher from its Wednesday’s low of 1.2676. The immediate resistance can be found at 1.2770 (yesterday’s high).

 

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EUR/USD: EURO RETURNED TO CLOUD AGAIN

09:13 14.07.2017

 

Technical levels: support – 1.1400; resistance – 1.1470.

 

Trade recommendations:

 

Buy — 1.1410; SL — 1.1390; TP1 — 1.1470; TP2 – 1.1500.

Reason: bullish Ichimoku Cloud, but horizontal Senkou Span A and B; a new dead cross of Tenkan-sen and Kijun-sen with horizontal Kijun-sen; the market is returned to the Cloud and supported by Senkou Span A.

 

1500012824-5974574d0f06c411e972e24d898d2

 

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GBP/USD: BULLS FEELS GOOD

09:14 14.07.2017

 

Technical levels: support – 1.2900/20; resistance – 1.3000.

 

Trade recommendations:

 

Buy — 1.2920; SL — 1.2900; TP1 — 1.3000; TP2 — 1.3020.

Reason: bullish Ichimoku Cloud with rising Senkou Span A; a new golden cross of Tenkan-sen and Kijun-sen; the prices breaking out the resistance of Senkou Span A and entered to the positive area; waiting for the new local highs.

 

1500012824-5838ef800660551113de2aff99712

 

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EUR/USD: DEVELOPING WAVE A OF (V)

11:28 14.07.2017

 

1500020819-abe61bd767f088a8306f1aa42db12

 

There's a developing ending diagonal in wave [v] of C. Inside this pattern, wave (iv) may have been formed. So, there's an opportunity to have wave (v) of [v] in the short term. In this case, the high of wave (iii) is likely going to be broken soon.

 

1500020819-4a0de2e2bacce0287bf6da1bf136e

 

As we can see on the one-hour chart, we've got a double zigzag pattern in wave (iv). Also, there's a developing wave a, which is likely going to be ended on 7/8 MM Level, which could be a departure point for wave b of (v).

 

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GBP/USD: BULLISH "THORN" PATTERN

10:59 14.07.2017

 

1500018929-322828050f21687117455e1e10743

 

We've got a pullback from the Moving Averages and a bullish "Thorn" pattern, so the price is rising. The main intraday target is resistance at 1.2982 - 1.3006, so if we see a pullback from this area, there'll be an opportunity to have a bearish correction.

 

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The price has broken the local downtrend, but bulls faced resistance at 1.2967. Nevertheless, we're likely going to see the price even higher in the short term. In this case, we should keep in mind the closest resistance at 1.2982 - 1.2991 as the next bullish target. If a pullback from these levels happens, bears will have a green light to deliver a local correction.

 

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USD/CAD: OUTLOOK FOR JULY 17-21

15:00 14.07.2017

 

USD/CAD fell below 1.2680 in the past week after the Bank of Canada raised its benchmark rate by 25 basis points to 0.75%. While markets had priced in a rate hike, the central bank’s a much more hawkish rhetoric was a real surprise for them and busted the CAD further. The neutral tone delivered by Fed Chair Janet Yellen during her testimony to the US Congress has also resulted in a rapid depreciation of the USD. A relative surge in oil prices has also contributed to the Loonie’s appreciation.

 

At their recent meeting, the BOC’s officials dismissed the lack of inflation as temporary. But following the rate increase they will likely become more data dependent trying to assess the impact of policy tightening in the context of heightened household indebtedness. This makes the next week’s inflation data very important. A print below market expectation might result in Loonie’s depreciation. Another focus will be on the Canadian foreign security purchases and manufacturing sales coming on Monday and Wednesday respectively. From the US we will get the US empire state manufacturing index on Monday, some housing data on Wednesday and Philly Fed Manufacturing index on Thursday.

 

USD/CAD is trading near 1.2725 now. As Stochastic is still in the oversold area there might be an extension of the recent rebound towards the resistances at 1.2820, 1.3015. A return of quotes below the Wednesday’s low of 1.2678 and subsequent breach of this level would allow us to target lower levels. But in the short-term, the following scenario will unlike realize.

 

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EUR/USD: BEARISH "HIGH WAVE"

15:36 14.07.2017

 

1500035706-d4b7726f0013eff14e5b67f779807

 

The 34 Moving Average has acted as support, so we've got a "Hammer", but this pattern hasn't been confirmed yet. So, we could have a local downward correction in the short term. Meanwhile, bulls are likely going to test the nearest resistance afterwards.

 

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We've got a bearish "High Wave", but this pattern remains unconfirmed. In this case, the market is likely going to test the closest support, which could be a departure point for another upward price movement.

 

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USD/JPY: "SHOOTING STAR DOJI" PATTERN

15:38 14.07.2017

 

1500035706-eb1e25e8205ae672e78f21fc6f410

 

The 21 Moving Average is acting as resistance. All the last candles are bearish, so there isn't any reversal pattern so far. Therefore, the pair is likely going to test the lower "Window" in the short term.

 

1500035706-2555c558d35ab9a5f1b74b8fd5501

 

There's a "Shooting Star Doji", so the price is declining. In this case, the 144 Moving Average is likely going to act as support. If we see a pullback from this line, bulls will have a green light to return to the market.

 

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AUD/CHF RISING INSIDE MINOR IMPULSE WAVE 3

17:31 14.07.2017

 

AUD/CHF rising inside minor impulse wave 3

Next buy target - 0.7620

AUD/CHF continues to rise inside the sharp minor impulse wave 3 – which earlier broke through the multiple consecutive resistance levels – 0.7400 (previous by target), 0.7460 (top of the previous minor correction (iv)), 50% Fibonacci correction of the previous downward ABC correction (2) from February, and most recently – the pair broke through 0.7520 (monthly high from June). AUD/CHF can then be expected to rise further to the next buy target at the next resistance level 0.7620 (top of the earlier wave (ii) from May).

 

GAUnjfn.png

 

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AUD/USD BROKE MULTI-MONTH RESISTANCE LEVEL 0.7740

17:33 14.07.2017

 

AUD/USD broke multi-month resistance level 0.7740

Next buy target - 0.7900

AUD/USD continues to rise inside the minor impulse wave (iii) – which earlier broke through the powerful multi-month resistance level 0.7740 (which has been steadily reversing all upward impulses of this currency pair from the middle of 2016, as can be seen from the daily AUD/USD chart below). The breakout of this resistance level should lead to the substantial strengthening of of the bullish pressure on this currency pair. AUD/USD is expected to rise to the next buy target at the next resistance level 0.7900.

 

GAUnNjs.png

 

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AUD/NZD: PULL BACKS COULD COME SOON

06:02 17.07.2017

 

AUD/NZD has been following a cycle started from the end of June and it’s currently in an extreme zone for bulls, as the price action had reached the area between 1.0619 and 1.0688, which are the Fibonacci expansion zone of 123.6% and 161.8%. Such territory can provide another selling wave for the pair and if that happens, we can expect a decline towards 61.8% at 1.0507.

 

To invalidate that scenario, the pair should break above 1.0688 in order to test the 1.0700 psychological level. RSI indicator at H4 chart is currently overbought.

 

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EUR/USD: EURO SUPPORTED BY CLOUD

10:06 17.07.2017

 

Technical levels: support – 1.1430; resistance – 1.1515.

 

Trade recommendations:

 

Buy — 1.1430; SL — 1.1410; TP1 — 1.1490; TP2 – 1.1515.

Reason: bullish Ichimoku Cloud, but horizontal Senkou Span A and B; a dead cross of Tenkan-sen and Kijun-sen with horizontal Tenkan-sen and Kijun-sen; the prices are supported by Cloud and bounced to positive area.

 

1500275164-5974574d0f06c411e972e24d898d2

 

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USD/JPY: DOLLAR ENTERED INTO CLOUDY AREA

10:08 17.07.2017

 

Technical levels: support – 112.10; resistance –  113.30.

 

Trade recommendations:

 

Buy — 112.10; SL — 111.90; TP1 — 113.00; TP2 — 113.30.

Reason: bullish Ichimoku Cloud, but horizontal Senkou Span A and B; a dead cross of Tenkan-sen and Kijun-sen and the lines are horizontal; the market is in a correction to Senkou Span B – waiting for bouncing.

 

1500275164-3dcc4d3b0e9d38341d309e86e7227

 

 

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AUD/USD: BULLS GOT COMFORTABLE

10:48 17.07.2017

 

Recommendation:

 

BUY 0.7715

 

SL 0.7660

 

TP1 0.7850 TP2 0.8025.

 

On the daily chart, AUD/USD keeps moving up to 161.8% target of the inverted “Crab” pattern. The nearest support levels are close to 0.7750 (historical level) and 0.7715 (previous high). As long as the pair is trading above the convergence area of 0.7715-0.7750, bulls will remain in control.

 

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On H1, there are “Three Indians” and “Spike and ledge” patterns. The decline below the line of “Three Indians” will increase the risks of correction towards 0.7715/0.7725.

 

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