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Andy’s Technical Take Week of September 30th 2019

Although the recent volatility remains comparatively low in the FX market, many critical events happened this past week, especially in the scope of technical analysis. The U.S. dollar index closed the week at the highest level since May 2017 as EUR/USD re-tested the multi-year low at 1.0920. Global equities were vulnerable to bearish retracement after U.S. stock indices failed to rewrite all-time highs. The price of safe-haven Gold had an attempt to come back to the uptrend, testing $1535 per ounce, but failed to hold the mid-week gain and slid below the psychological round-figure mark of $1500. The crypto crash was also a bit unexpected for some market pundits, noticing that more than $40 billion was wiped out of the market and major coins dropped -20% on average.

This week I want to focus on the most liquid cross-rate — EUR/GBP — as many analysts expect the upcoming week to be crucial for the Brexit mess. According to a Bloomberg report, Pound traders will watch the Annual Tory Meeting closely and the volatility in Sterling pairs could soar. I used to deliver a couple of thoughts about possible technical levels for the British Pound recently (GBP/USD, GBP/JPY), but several charts made me interested in the currency again and here is why.

The weekly chart below points to a possible end of the bearish retracement for EUR/GBP as the Ichimoku leading span remained bullish. After the rate breached the Base Line Support two weeks ago, it was reasonable to expect a test of Ichimoku Cloud’s upper band, which happened recently. The green arrow underlines that the bears failed to get EUR/USD inside the cloud, which is usually a strong buy signal following the long-term trend that began in May 2019.

The previous week’s close was just 6 pips below the Base Line resistance and if the bulls breached the curve with weekly close rates then the Conversion Line (0.9055) will act as the target. The distance of 150 pips gives an attractive potential to long positions. The Average Directional Index points to a strong spike in the trend’s momentum as its mainline crossed the threshold from below last week. Although the surplus between -DI and +DI lines is still negative, both curves are extremely close to the bullish crossover. Another bullish signal might come from the Stochastic RSI oscillator, the lines of which had already crossed each other in oversold territory. A confirmation of the signal has to come when the indicator’s lines get out of the oversold zone.

According to the daily chart below, the uptrend that started on May 6th and peaked on August 19th is still in play as the bearish retracement was limited by the 38.2% Fibonacci Retracement level. After the 50% Fibo resistance was cleared (6 pips remain), the bulls would eye the psychological round-figure target of 0.9000 (61.8% Fibo comes 2 pips above it). I would also point to an intermediate resistance range between the 55- and 89-day EMAs (0.89499 and 0.89672 respectively). Intraday action and momentum in that range have to be monitored to confirm or deny the long position’s expediency. Another important indicator to keep an eye on is the 13-day RSI oscillator. Once it crossed the level of 50 (daily close price, not including whipsaws), the bulls would increase the buying pressure.

Best wishes in the market this week traders!

This post is contributed by MyFxLab. MyFXLab provides daily technical analysis written by professional traders. The site was founded by former Goldman Sachs FX traders and executives from some of the world’s largest brokers.

To view more premiere technical content and become a member, visit www.myfxlab.com

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