After breaking 1.1300 to the downside and starting a new correction towards 1.1250, EURUSD has reached the short-term correctional target at 1.1260 and returned to test 1.1300 from below. Possibly, today the pair may form a new descending structure to reach 1.1250 and finish the correction. Later, the market may resume trading inside the uptrend with the target at 1.1380.
GBPUSD, “Great Britain Pound vs US Dollar”
GBPUSD has finished the ascending wave at 1.2580; right now, it is falling to reach 1.2515 and may later grow towards 1.2555, thus forming a new consolidation range. If later the price breaks this range to the downside, the market may resume trading downwards with the target at 1.2460.
USDRUB, “US Dollar vs Russian Ruble”
After completing the ascending wave at 72.20, USDRUB is about to finish the first descending impulse towards 71.20 and may later grow to reach 71.70, thus forming a new consolidation range between these levels. If later the price breaks this range to the downside, the market may form a new descending structure with the short-term target at 70.60.
USDJPY, “US Dollar vs Japanese Yen”
USDJPY is still consolidating around 107.50. Today, the pair may fall towards 107.40 and then start another growth to reach 107.80. Later, the market may form a new descending structure with the short-term target at 106.90.
USDCHF, “US Dollar vs Swiss Franc”
After finishing the ascending impulse at 0.95450 along with the correction towards 0.9415, USDCHF is expected to form one more ascending structure to break 0.9460 and then continue trading upwards with the predicted short-term target at 0.9510. However, there might be an alternative scenario, which implies that the price may break 0.9410 to the downside and continue trading inside the downtrend to reach 0.9380.
AUDUSD, “Australian Dollar vs US Dollar”
AUDUSD is forming another descending wave to reach 0.6905, Later, the market may start another growth towards 0.6940 and then resume falling with the short-term target at 0.6860.
BRENT
Brent is still correcting towards 42.42 and may later form one more ascending structure to reach 43.80. After that, the instrument may start another decline to return to 42.42 and then resume moving upwards with the target at 45.02.
XAUUSD, “Gold vs US Dollar”
After breaking 1786.00 to the upside, Gold is expected to test it from above and then continue growing with the short-term target at 1799.17. Later, the market may start a new correction to reach 1777.77 and then resume trading upwards with the target at 1800.00.
BTCUSD, “Bitcoin vs US Dollar”
BTCUSD is falling towards 9126.00 and may later correct to reach 9250.00 thus forming a new consolidation range between these two levels. If later the price breaks this range to the upside, the market may form one more ascending structure with the target at 9550.00; if to the downside – resume trading inside the downtrend to reach 8700.00.
S&P 500
After forming the consolidation range above 3160.0 and breaking it to the downside, the Index is expected to correct towards 3120.0. After that, the instrument may resume trading upwards with the target at 3240.3.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The daily chart shows a new ascending wave after the correction towards 38.2% fibo. If GBPUSD is able to break the key high at 1.2813, the price may continue growing towards 50.0% and 61.8% fibo at 1.2895 and 1.3242 respectively. However, if the pair reverses after testing the high, the asset may continue the long-term correction with the targets at 50.0% and 61.8% fibo at 1.2111 and 1.1946 respectively.
The H1 chart shows a more detailed structure of the uptrend after the convergence. By now, the pair has already reached 50.0% fibo. Later, it may continue growing towards 61.8% and 76.0% fibo at 1.2598 and 1.2678 respectively. If the price breaks the support at 1.2252, the instrument may continue the mid-term downtrend.
EURJPY, “Euro vs. Japanese Yen”
As we can see in the H4 chart, EURJPY is growing towards 50.0% fibo. There is a strong possibility that later the pair may form a new descending impulse, which may be heading towards the low at 119.31. After breaking it, the instrument may continue trading downwards to reach 61.8% and 76.0% fibo at 118.79 and 117.50 respectively. The key resistance is the high at 124.43.
The H1 chart shows a more detailed structure of the correctional uptrend and divergence on MACD, which may indicate the completion of the pullback and a further decline towards the low at 119.31. However, one shouldn’t exclude another scenario, according to which the asset may start a new rising impulse. In this case, the upside targets may be at 61.8% and 76.0% fibo (122.47 and 123.19 respectively).
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The EUR/USD currency pair is in a sideways trend. Unidirectional trends are not observed. A trading instrument is consolidating in the range of 1.1260-1.1300. Demand for risky assets remains at a rather low level. Some countries have begun to apply quarantine measures again due to increased coronavirus infection. Representatives of the FOMC believe that the unemployment rate in the US will remain at a high level. Positions need to be opened from key support and resistance levels.
Today, the news feed is pretty calm. We recommend you to pay attention to the EU economic forecasts.
Indicators do not send accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.
Trading recommendations
Support levels: 1.1260, 1.1220, 1.1190
Resistance levels: 1.1300, 1.1330, 1.1345
If the price fixes below the level of 1.1260, a drop in the EUR/USD quotes is expected. The movement is tending to the round level of 1.1200.
An alternative could be the growth of the EUR/USD currency pair to 1.1330-1.1350.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.24815
Open: 1.25338
% chg. over the last day: +0.39
Day’s range: 1.25318 – 1.25667
52 wk range: 1.1466 – 1.3516
On the GBP/USD currency pair, the bullish sentiment prevails. The pound sterling has set new local highs. The GBP/USD quotes have found resistance at 1.2585. The mark of 1.2530 is already a “mirror” support. Investors expect additional drivers. In the near future, a technical correction of the trading instrument is possible. Positions must be opened from key levels.
We recommend you to pay attention to the hearing of the Bank of England Monetary Policy Committee.
Indicators point to the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates the bearish sentiment.
Trading recommendations
Support levels: 1.2530, 1.2470, 1.2435
Resistance levels: 1.2585, 1.2620
If the price fixes below 1.2530, a correction of the GBP/USD quotes is expected. The movement is tending to 1.2480-1.2450.
An alternative could be the growth of the GBP/USD currency pair to 1.2610-1.2640.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.35324
Open: 1.35985
% chg. over the last day: +0.49
Day’s range: 1.35842 – 1.36238
52 wk range: 1.2949 – 1.4668
An ambiguous technical pattern has developed on the USD/CAD currency pair. Loonie is currently consolidating. The trading tool is testing local support and resistance levels: 1.3580 and 1.3620, respectively. The USD/CAD quotes are tending to grow. We recommend you to pay attention to the dynamics of “black gold” prices. Positions must be opened from key levels.
At 15:15 (GMT+3:00), data on housing starts in Canada will be published.
Indicators do not send accurate signals: the price has crossed 100 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy USD/CAD.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates a bearish sentiment.
Trading recommendations
Support levels: 1.3580, 1.3555, 1.3520
Resistance levels: 1.3620, 1.3650
If the price fixes above 1.3620, further growth of the USD/CAD quotes is expected. The movement is tending to 1.3650-1.3670.
An alternative could be a decrease in the USD/CAD currency pair to 1.3555-1.3530.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 107.347
Open: 107.544
% chg. over the last day: +0.14
Day’s range: 107.427 – 107.710
52 wk range: 101.19 – 112.41
The USD/JPY currency pair is still in a prolonged flat. Unidirectional trends are not observed. Local levels of support and resistance are still: 107.45 and 107.75, respectively. Participants in financial markets expect additional drivers. We recommend you to pay attention to the dynamics of yield on US government bonds. Positions must be opened from key levels.
The news feed on the Japanese economy is quite calm.
Indicators do not send accurate signals: the price has crossed 50 MA and 100 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates the bullish sentiment.
Trading recommendations
Support levels: 107.45, 107.25, 107.05
Resistance levels: 107.75, 108.10
If the price fixes above 107.75, USD/JPY is expected to rise. The movement is tending to 108.00-108.25.
An alternative could be a decrease in the USD/JPY currency pair to 107.25-107.00.
When looking at the price action in Gold, it may not be clear why a deeper look is worth our time. Well, we think, for several reasons, that we can expect a sharp move to be on the way.
While the precious metal has so far failed to substantially break above 1,800 USD, the stabilisation slightly below may surprise.
In fact, the Fed’s balance sheet shrank by another 163 billion USD last week, resulting in the third week in a row that the Fed saw a reduction here. While this might surprise at first glance, a deeper look shows what’s happening: the reduction results out of a continuing decline in demand for the US central bank’s USD swap lines from foreign central banks like the ECB, BoJ or BoE.
While the balance sheet reduction continues this week with 130 billion USD of FX swaps expiring, Gold traders and precious metal traders in general seem to prepare and anticipate a more aggressive approach from the Fed in the near future, most likely to happen once Equity markets start to see sharp volatility again.
Once this happens, chances become elevated that we get to see an attempt to break above 1,800 USD, then to the highest levels since 2012, levelling the path rather sooner than later up to the current all-time high around 1,920 USD.
Technically the mode on a daily time-frame in Gold stays bullish as long as we trade above 1,660 USD:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between April 8, 2019 to July 7, 2020). Accessed: July 7, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.
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– Continuing our research from Part I, into what to expect in Q2 and Q3 of 2020, we’ll start by discussing our Adaptive Dynamic Learning predictive modeling system and our belief that the US stock market is rallied beyond proper expectation levels. The Adaptive Dynamic Learning (ADL) modeling systems attempts to identify price and technical indicator DNA markers and attempts to map our these unique price setups. Then, it attempts to learn from the past DNA markers and apply that learned price behavior to future price DNA markers. In this manner, it learns from the past and applies that knowledge to the future.
ES ADL PREDICTIVE MODELING
On June 15, 2020, we published this article referencing the ADL predictive modeling system and how the US stock markets were, at that time, 12% to 15% overvalued based on this analysis. Continuing this research, our researchers still believe the ES (S&P500) is very likely to fall to levels near $2500 before finding support just below that level. These predicted ADL price levels strongly suggest that the true valuation levels for the ES are near $2500 – not near the overvalued levels closer to $3000.
NQ ADL PREDICTIVE MODELING
Additionally, an update NQ ADL Weekly chart suggests the NQ has rallied to levels that appear to be extremely overvalued. The current ADL prediction levels suggest the NQ ADL valuation levels should be near $6600 – not near $10,325 as they are now. This suggests a massive -36% price disparity between the current overvalued rally level of the NQ and the expected ADL price level based on our advanced predictive modeling system.
Now that we’ve attempted to explain one of the core elements of our research estimates, let’s get further into the data that is likely to present a very real opportunity for skilled technical traders.
ECONOMIC CYCLES
As you are likely well aware of by now, a series of catastrophic economic events continue to unfold throughout the globe. Most importantly, the ability to earn revenues for consumers and corporations while dealing with hard fixed costs. In previous articles, we’ve suggested our belief that a unique event in localized economies is not much of a concern because global central banks can support the market well enough to allow economic activity to resume near fairly normal levels. We’ve suggested that the bigger problem is when an extended economic contraction takes place that is a global or more wide-spread economic event. This type of economic crisis is much more dangerous because of two factors:
_ A. The continued lack of revenue generation increases the pressure on the individual or corporation to cut costs, employees, or other assets. Without the ability to earn, these individuals or corporations begin to eat up cash reserves very quickly and will quickly begin to identify their longer-term sustainability objectives. Unless the economy starts to recover quickly, this crisis for the individual or corporation could be a moderately slow and dangerous “bleed-out” event leading to bankruptcy.
_B. The efforts of localized governments and global banking institutions initially attempt to mitigate the risks of such an event. This is usually done by providing greater capital resources to certain industries, the general banking system, and in other ways/sources. Currently, within the US, a number of forbearance programs have been initiated to take away certain pressures for homeowners and others. Still, the economy must continue to operate within normal boundaries and bills must be paid. With an extended economic collapse, such as we may be experiencing with the COVID-19 virus event, the problems for consumers and corporations grow bigger and more dangerous the longer the economic contraction event continues.
When you really start to understand the cycle of these events and then begin to understand the domino-effect process that may already be playing out in some form, skilled technical investors should already be preparing for extended price volatility and unknowns over the next 6+ months or longer. Allow us to explain, in simple terms, how this cycle plays out…
_ Local consumers/workers are laid-off or fired from jobs. This puts immediate earnings pressure on local families and individuals and it pushes them into a protective mode where they suddenly must decide between essential items (food, medicine, personal care, transportation, and other essentials) vs. non-essential items (movies, dining out, travel, discretionary purchases, and others). Currently, there are more than 35 million unemployed people in the US (roughly 10% of the total population.
_ The COVID-19 shutdown within the US has disrupted the earning capabilities of many businesses over the past 3+ months. As consumers slow down their purchases and businesses close because of government shutdown orders, the problems amplify for many business owners and employees. If you have ever owned your own business, you understand the risks involved and the ongoing hard costs associated with owning a business. Just because the governor orders a “shutdown” doesn’t mean that your hard monthly costs are going away too. This ongoing problem sets up another crisis event in the making – the Business Owner risk factor. How long before these individual business owners simply can’t sustain their operations any longer and are forced into bankruptcy?
_ Local governments derive their operating budgets from taxes and revenues generated within their communities. With the COVID-19 shutdown crippling these revenues, we estimate that Q3 and Q4 2020 will become a point of “bleed-out” for many local governments. They may be able to manage their budgets for a few months within the economic contraction period, but we believe the longer this economic contraction event continues, more and more pressure will be put on local and regional (city/state) governments where revenues have likely collapsed 25% to 45%+ recently.
_ The bigger cycle start to take place. (A) With consumers laid-off and/or fired from their jobs, their income levels drop dramatically and their spending decreases dramatically. (B) With business owners struggling to survive with hard costs and payroll in a depressed economic environment, these businesses will either find a way to survive or fail – laying off more people and creating further disruption in earnings/revenues for workers and local governments. (C) With local governments slow to react to the economic contraction (and mostly hiring under contract), the decreases in revenue over time may present a very real issue for government agencies and become a real problem 4 to 6+ months into the economic contraction.
_ When businesses and governments suddenly realize the scale and scope of the economic contraction, they will attempt to balance their books by adapting (developing new sources of revenue: products, services, taxes, fees) and/or begin to contract themselves. Either of these two options is fraught with risk and could potentially increase the risks of a more extended economic contraction event. Raising taxes or fees on consumers/businesses within a massive economic contraction event will likely push more individuals/businesses into bankruptcy – further decreasing the government revenues. Developing new products/services and marketing them to consumers requires capital and resources. If the product is not a success, the business takes a huge risk making these aggressive transitional moves – which may lead to increased economic concerns. As long as the consumer is struggling and not earning sufficiently, the foundation of the economic structure is at risk of collapsing even further.
This cycle is sometimes called the “death cycle” in economic terms. It is a cycle where economic contraction leads to further economic contraction. The process of breaking this cycle is simple, the entire economic engine must “unwind” sufficiently to remove/reduce the overextended valuation and “fluff” within the system. Once this has happened, then a new economic foundation will begin to establish where growth and opportunity will resume within local and regional economies.
IMPORTANT ECONOMIC DATA
Now, let’s look at some of the data that supports our research.
The World Uncertainty Index has recently skyrocketed above 50, the highest level over the past 60+ years. Since the low point, in 1985, the World Uncertainty Index has continued to rise with higher peaks and higher troughs over the past 30+ years. Currently, this index suggests there is a massive amount of uncertainty throughout the globe related to economic function, central banks, geopolitical issues, and humanitarian issues.
Bay very close attention to the peaks in this index and the dates of these peaks (2004, 2013, 2020). The 2004 and 2013 peaks occurred roughly 3 to 4 years after a major stock market bottom setup. The current index high would suggest a market bottom may have set up in 2016 and a peak in this Uncertainty index may still be 12 to 24 months away. This suggests we may still experience a moderately high degree of uncertainty and a number of unknown global and economic crisis events over the next 12 to 24 months.
The US Federal Reserve has recently begun another massive quantitative easing phase and actively begun to purchase various forms of debt, bonds, and equity within the financial markets. Paying attention to the rallies in the Fed buying activity and the World Uncertainty Index, you’ll see the peaks in the Uncertainty index align with the midpoints of the Fed activities. Generally, the uncertainty levels rise as the US Fed intervenes and executes QE policies to support the global markets.
This Global Commodity Price Index chart highlights the recent collapse in raw commodity prices and illustrates the incredibly depressed level of commodities related to global economic activities. Over the past 20 years, the only time when commodity prices were lower was in early 2000~2005 – just after the 9/11 economic contraction. The current Commodity Price Index level suggests we have entered a new deflationary price cycle with the peak setup near August/September 2018 – just before the big downside price contraction started in October 2018. Our researchers have continued to highlight that point on multiple charts as the true peak in the US and global markets
At this point in time, developing a safe and protected strategy to ride out these uncertain times is essential. We’ve been advising our clients to stay safely away from the global stock market trends and we issued a Black Swan warning on February 21, 2020, telling all of our clients to “get into cash immediately”. Since then, we’ve advised our clients to move their capital into selected sectors to take advantage of hedging opportunities and targeted trading opportunities over the past 3+ months.
We continue to believe the best way to profit from these market trends is to develop a super conservative investment model where Cash is King and proper hedging is essential. There are plenty of great trades to select from – assuming we want to take on the additional risks associated with these trades.
We believe the next 3+ months will result in a massive volatility spike, likely seeing the VIX move above 50~60 again, as Q2and Q3 earnings and expectations continue to shock the investment community. We do not believe this potential “V-Shaped” recovery is sustainable and continues to advise our clients to be prepared downside price reversion.
Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.
Chris Vermeulen Chief Market Strategies Founder of Technical Traders Ltd.
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.
The US dollar has strengthened against a basket of world currencies. The dollar index (#DX) has updated local highs. Demand for risky assets has weakened amid new outbreaks of coronavirus disease. Investors are concerned about the possible return of restrictive measures. Optimistic economic releases from the USA have supported the greenback. In June, the ISM U.S. Purchasing Managers Index accelerated from 45.4 to 57.1.
The Reserve Bank of Australia, as expected, kept the basic parameters of monetary policy at the same level. The regulator confirmed its readiness to soften monetary policy if necessary. We also recommend paying attention to the speeches of FOMC representatives.
The black gold prices are consolidating. WTI crude oil futures are currently testing the $40.40 per barrel mark. Today, we recommend paying attention to weekly crude oil inventories in the USA according to API data.
Market indicators
Bullish sentiment was observed yesterday in the US stock market: #SPY (+1.54%), #DIA (+1.77%), #QQQ (+2.46%).
The 10-year US government bonds yield is consolidating. At the moment, the indicator is at the level of 0.67-0.68%.
The news feed on 2020.07.07:
– The number of open jobs in the US labor market (JOLTS) at 17:00 (GMT+3:00).
EURGBP is trading at 1.1304; the instrument is moving above Ichimoku Cloud, thus indicating an ascending tendency. The markets could indicate that the price may test the cloud’s upside border at 1.1210 and then resume moving upwards to reach 1.1385. Another signal in favor of further uptrend will be a rebound from the support level. However, the bullish scenario may be canceled if the price breaks the cloud’s downside border and fixes below 1.1240. In this case, the pair may continue falling towards 1.1185.
XAUUSD, “Gold vs US Dollar”
XAUUSD is trading at 1784.00; the instrument is moving above Ichimoku Cloud, thus indicating an ascending tendency. The markets could indicate that the price may test the cloud’s upside border at 1780.00 and then resume moving upwards to reach 1805.00. Another signal in favor of further uptrend will be a rebound from the rising channel’s downside border. However, the bullish scenario may no longer be valid if the price breaks the cloud’s downside border and fixes below 1765.00. In this case, the pair may continue falling towards 1735.00.
USDRUB, “US Dollar vs Russian Ruble”
USDRUB is trading at 71.50; the instrument is moving above Ichimoku Cloud, thus indicating an ascending tendency. The markets could indicate that the price may test Tenkan-Sen and Kijun-Sen at 70.95 and then resume moving upwards to reach 73.05. Another signal in favor of further uptrend will be a rebound from the rising channel’s downside border. However, the bullish scenario may be canceled if the price breaks the cloud’s downside border and fixes below 69.65. In this case, the pair may continue falling towards 68.15.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
As we can see in the H4 chart, the uptrend continues. After finishing another Doji reversal pattern not far from the rising channel’s downside border, XAUUSD is reversing and correcting from the horizontal resistance level. One may assume that later the pair may complete the pullback and resume trading upwards. In this case, the upside target is at 1800.00. At the same time, one shouldn’t exclude an alternative scenario, according to which the market may fall and return to 1759.50.
NZDUSD, “New Zealand vs. US Dollar”
As we can see in the H4 chart, the ascending tendency continues. After forming a Harami pattern not far from the resistance level, NZDUSD is reversing and may later reach the support area at 0.6520. After testing this area, the instrument may resume growing towards the target at 0.6590.
GBPUSD, “Great Britain Pound vs US Dollar”
As we can see in the H4 chart, after forming several reversal patterns, including Harami, close to the resistance level, GBPUSD has started reversing. At the moment, the pair is expected to continue the descending tendency. In this case, the downside target is at 1.2355. Still, there is another scenario, which suggests that the instrument may continue trading upwards to reach 1.2620 without reversing and forming any significant corrections.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
The EUR/USD currency pair went down. The trading tool has updated local lows. At the moment, EUR/USD quotes are consolidating in the range of 1.1250-1.1280. Demand for risky assets has weakened amid new outbreaks of coronavirus disease. Investors are concerned about the possible return of restrictive measures. Greenback was supported by optimistic economic releases from the USA. In June, the ISM U.S. Purchasing Managers Index accelerated from 45.4 to 57.1. The single currency is tending decline. We recommend opening positions from key support and resistance levels.
The news feed on 2020.07.07:
– the number of open jobs in the US labor market (JOLTS) at 17:00 (GMT+3:00).
We also recommend paying attention to the speeches of FOMC representatives.
Indicators do not send accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram has begun to decline, indicating the bearish sentiment.
Stochastic Oscillator is in the oversold zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.1250, 1.1220, 1.1190
Resistance levels: 1.1280, 1.1300, 1.1325
If the price fixes below the level of 1.1250, a further fall in the EUR/USD quotes is expected. The movement is tending to 1.1220-1.1200.
An alternative could be the growth of the EUR/USD currency pair to 1.1300-1.1325.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.24618
Open: 1.24815
% chg. over the last day: +0.15
Day’s range: 1.24624 – 1.25181
52 wk range: 1.1466 – 1.3516
The GBP/USD currency pair is still being traded in a flat. Unidirectional trends are not observed. The pound sterling is testing local support and resistance levels: 1.2460 and 1.2510, respectively. Investors expect additional drivers. In the near future, a technical correction of the trading instrument is possible. Positions must be opened from key levels.
The news feed on the UK economy is pretty calm.
Indicators do not send accurate signals: the price has crossed 50 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which gives a signal to sell GBP/USD.
Trading recommendations
Support levels: 1.2460, 1.2435, 1.2400
Resistance levels: 1.2510, 1.2540
If the price fixes above 1.2510, GBP/USD is expected to rise. The movement is tending to 1.2540-1.2570.
An alternative could be a decrease in the GBP/USD currency pair to 1.2430-1.2400.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.35601
Open: 1.35324
% chg. over the last day: -0.09
Day’s range: 1.35246 – 1.35885
52 wk range: 1.2949 – 1.4668
USD/CAD quotes have moved to growth. The trading tool has updated local highs. At the moment, the USD/CAD currency pair is consolidating in the range of 1.3555-1.3585. The technical pattern signals a further correction of quotes. We are expecting important economic releases from Canada. We recommend you to pay attention to the dynamics of prices of “black gold”. Positions must be opened from key levels.
At 17:00 (GMT+3:00), Ivey index of business activity in Canada will be published.
Indicators do not send accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram has started to rise, indicating a possible correction of the USD/CAD currency pair.
Stochastic Oscillator is in the overbought zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 1.3555, 1.3520, 1.3490
Resistance levels: 1.3585, 1.3610, 1.3650
If the price fixes above 1.3585, further growth of the USD/CAD quotes is expected. The potential movement is to 1.3610-1.3650.
An alternative could be a decrease in the USD/CAD currency pair to 1.3530-1.3500.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 107.460
Open: 107.347
% chg. over the last day: -0.20
Day’s range: 107.246 – 107.790
52 wk range: 101.19 – 112.41
Since the beginning of this week, trades in USD/JPY have been very active. At the same time, a unidirectional trend is not observed. The trading instrument is in a sideways trend. At the moment, USD/JPY quotes are testing the resistance level of 107.75. The mark of 107.45 is immediate support. We recommend you to pay attention to the dynamics of yield on US government bonds. Positions must be opened from key levels.
The publication of important economic reports from Japan is not planned.
Indicators signal the power of buyers: the price has fixed above 50 MA and 100 MA.
The MACD histogram has started to rise, indicating bullish sentiment.
Stochastic Oscillator is in the overbought zone, the %K line has crossed the %D line. There are no signals at the moment.
Trading recommendations
Support levels: 107.45, 107.25, 107.05
Resistance levels: 107.75, 108.10
If the price fixes above 107.75, USD/JPY is expected to rise. The movement is tending to 108.00-108.25.
An alternative could be a decrease in the USD/JPY currency pair to 107.25-107.00.
– One thing is very certain right now – we live in very interesting times. As the world rushes head-first into the 21st Century, it appears one of the most pressing issues before all of us is to navigate the risks and opportunities that continue to stack up ahead of us. Within the first 20 years of this century, the global markets have experienced many shifts and big price rotations. Emerging markets, Oil, Technology, Bio-Tech, Miners, Metals, Currencies, Cryptos – we can look at all of these on a longer-term basis and see a boom cycle and a moderate bust cycle event.
The current trends suggest global investors are pouring capital into the US technology stocks which is what is driving the NASDAQ to new all-time highs. We published this article in late June suggesting a parabolic top pattern may be setting up in the global markets – which may be very similar to the DOT COM peak in 1999~2000 explained here.
Our researchers believe the global shift away from risk and into hot sectors are driving capital investments into a frenzy right now. It reminds us of the frenzy in the US in the late 1990s when housing, technology stocks, and credit expansion rolled into a frothing expansion phase – then burst suddenly in 1999. There were plenty of signs in 1997 and 1998 that the frenzy buying was a huge risk – but traders and consumers simply ignored the risks and kept buying.
Similarly, this same type of bubble mentality happened in 2017 with Bitcoin. In less than 24 months, Bitcoin rallied from $370 in early 2016 to $19,666 near the end of 2017 – a massive 8000%+ rally. The similarities of the Bitcoin rally and the rally of the US stock market in the late 1990s is the mentality of the investors throughout these bubbles – the “no fear” mentality that it will keep going higher and higher. The same type of mentality appears to be happening in the US stock markets right now and the data suggests something vastly different is really taking place.
Unlike what happened throughout recent history, the globe has recently experienced a massive disruption event – the COVID-19 virus. This disruption has displaced economic output and consumer earnings on a massive scale – and we are just starting to learn how disruptive these economic factors may be. One item we believe is severely under-estimated is “consumer earning capabilities”. The number of jobless in America has risen to well over 35 million (over 10% of the population). If the COVID-19 virus continues to disrupt consumer’s ability to earn income and engage in the economy over the next 6+ months or longer, there is a very real possibility that the V-shaped recovery everyone believes is happening will simply not happen at all.
One of the most ominous signs of a broader consumer and commercial contraction happening in the US markets is the skyrocketing delinquency rates for commercial real estate. Trepp recently published new data suggesting the commercial real estate market is experiencing a massive increase in delinquencies of 30+ days which may lead to a wave of high-value defaults. Other research suggests US Banks may face $48+ Billion in commercial real estate loan losses.
The Q2:2020 earning estimates have decreased by such a large amount that all investors should prepare for a shocking series of data over the next 30+ days. Nike surprised everyone with a nearly $800 million loss for their Q4 ending May 31, 2020. We just read that PizzaHut parent, NPC, filed for bankruptcy recently. This recent Bloomberg article suggests a massive wave of US corporate bankruptcies could continue throughout 2020 and well into 2021 and extended economic pressures erode the foundations and operations of hundreds or thousands of US businesses ().
What is happening in the US markets right now is that foreign and US investors are piling into this deep price rotation expecting the US Fed to do whatever is necessary to support the markets throughout the COVID-19 virus event. We believe the risks for investors have never been higher as the global markets teeter on the edge of a partial recovery while the COVID-19 virus surges again throughout the US.
We’ve kept our clients actively protected from the risks within the markets and continue to advise them on how to identify profitable trades within the current market trends.
In the next part of this article, we’ll explore more data facets related to the Q2:2020 and the future expectations of the US and global markets. Our biggest concern is the destructive capabilities of the general consumer. At some point, we have to understand the consumer drives 85% of the US GDP and future expectations. If this event destroys the consumer, then it will destroy future expectations.
Keep in mind, we do not trade or invest on fundamentals or economic cycles because we know they can lead or lag stock prices by several months at times. Our focus as technical traders is to follow the price trend and trade accordingly. Stay tuned for part II.
Get our Active ETF Swing Trade Signals or if you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Passive Long-Term ETF Investing Signals which we are about to issue a new signal for subscribers.
Chris Vermeulen Chief Market Strategies Founder of Technical Traders Ltd.
NOTICE: Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research. It is provided for educational purposes only. Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.
