Market Outlook EURUSD, Gold, and Oil Are Poised For Big Moves

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Market Outlook: EUR/USD, Gold, and Oil Are Poised For Big Moves

The FOMC Is In Control Of The Market

While global events ranging from the trade war to the trade deal, economic data, geopolitics, and the coronavirus have markets on the move it is the FOMC that controls their longer-term direction. At least this week, that is. This week we’ll get a sneak peak into the mind of the committee via the minutes and that, along with some key data points, will have profound impact on the outlook for interest rates this year.

Right now, as I write this, the market has priced in at least one rate-cut by summer 2020 and the possibility of two, maybe three more by the end of the year. This is due in large part because of the coronavirus, an event whose economic impact is yet to be seen. The FOMC has said there will probably not be any cuts or hikes this year, Jerome Powell just said the other day before Congress that current policy was appropriate, so the market is smarter than the FOMC or really, really wrong.

The data this week, aside from the minutes, includes PPI, Housing Starts/Permits, the Philly Fed MBOS, and Leading Indicators; all crucial reads on the state of the U.S. economy. Strong data could easily sway the market and put renew the bid we’ve seen in the dollar over the last few weeks.

Euro Poised To Fall

The EUR/USD is poised to fall. This trade has not only the U.S. outlook to move it but also the EU’s. There is a lot of data from the EU this week to include business sentiment and PMI readings for the bloc. Most of the other data is country-specific with quite a bit from Germany. The price action suggests traders are banking on weaker than expected EU data and stronger U.S. data, a situation that will lead to continuation of the down-trend. At present, price action is consolidating at the new low. MACD momentum is consistent with consolidation and convergent with the low showing strength within the movement. Stochastic is oversold but this condition can persist for quite a while in a down trend. Support is near 1.0825, if price falls below there I would enter bearish positions, my target for next support is close to 1.0600.

Oil Prices Are Bottoming

Oil prices are bottoming after last week’s OPEC meeting. The cartel has agreed to extend production cuts into the summer and possibly deepen them in an attempt to shore up prices. The price action is now sitting at a bottom and forming a possible double-bottom because of it. The risk is the coronavirus and its impact on demand, so long as demand holds up prices should be able to at leas sustain this support level, near $50 dollars. The baseline for the Double Bottom is near $52.25, if price action can make a move above there and hold it we can expect to see upward drift over the next few weeks.

Gold, On The Verge Of Breaking Out

Gold is trending near a long-term multi-year high and may be on the verge of a break out. Resistance is near the $1,600 level where price action is forming a flat-topped triangle. The indicators are rolling into a bullish signal that, if accompanied by a price move, points to higher prices in the short to medium term. The risk is with the dollar. If the FOMC minutes and data support continued strength in the dollar this trade could bust. If price action doesn’t sustain a break or resistance confirms at $1,600 look for gold to move down to the $1,560, $1,520, and $1,480 levels.

Pound Outlook: GBP/USD Finally On the Move

Pound Technical Highlights:

  • GBP/USD’s tight price action should give-way to a move soon
  • There are a couple of key levels/lines/pattern to watch

GBP/USD’s tight price action should give-way to a move soon

GBP/USD has been on a planet of its own in recent trade doing nothing notable as other currencies made big moves in the past week. Even the Euro, which was long overdue for volatility, finally woke up prior to GBP coming out of its slumber. The participation on Friday should set up the next week with more volatile price action.

The choppy downward price behavior is initially resolving lower into support around the 12770/12693-area. This zone is created by price support back to May and the 200-day MA. Friday’s sell-off may turn out to be a false move, as often times is the case with cable after coming out of a congestion area.

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But for now, though, I will respect the break. However, should we see it turn higher off noted support back over the 13000-line, then a broader rally could very well begin to evolve. Longer-term, GBP/USD appears to be putting in a bottoming formation.

Since December of 2020 the price sequence is taking on the shape of a bottoming inverse head-and-shoulders pattern, but it is a bit premature to discuss beyond a sentence or two. If a rally does begin to grow legs above 13000, we can start to discuss a run to the neckline situated up near 13600, and possibly beyond.

GBP/USD Daily Chart (initial break lower)

GBP/USD Weekly Chart (Bottoming pattern could be developing)

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Trading Market Outlook; Litecoin, The Dollar, Gold

It’s A Good Week For Trading

The charts are pointing to a good week for trading, depending on what you trading and how you trade it of course. What I mean is that it looks like markets from crypto to currency to commodities and equities are on the move. The charts are set up for some text book movements that could become quite large. Some are driven by the Wuhan Virus outbreak but not many. In most cases the virus is an excuse to sell or buy a market already wound up so there are underlying forces at play.

The Cryptocurrency Market

The broad cryptocurrency market has been in rally mode since mid-December. After hitting a peak early this month the market retreat to test support and support has confirmed. Just this weekend coins ranging from Litcoin to Bitcoin and even Ethereum bounced from their short-term EMA’s and began to move higher. Technically speaking, this move confirms the uptrend that began at the end of last year and suggest upward price pressure will continue. Litecoin has been leading the market and continues to do so now. The indicators are still weak but have begun to roll over in what could become a very bullish signal. Stochastic is already showing a weak bullish crossover, if LTC/USD moves up to set a new near-term high the MACD will follow. The target, upon breaking to new highs, is then $66 and $80.

The Dollar Index Is Edging Higher

The Dollar Index is edging higher on a number of underlying factors including U.S. economic health and the Wuhan Virus. The Dollar is supported by the stability of the U.S. economy relative to the world during the trade war, the virus is adding a little updraft with flight-to-safety trading. The indicators are bullish so I would expect to see price action continue to drift higher. The risk is in this week’s central bank meetings which includes the FOMC. The FOMC is not expected to alter policy or even the statement, they’ve returned to “wait and see” mode, so any variation from expectations could be market-moving.

Gold Shines But Resistance Is Capping Gains

Gold prices are edging higher and look bullish. The technical set up is near-perfect with both indicators showing solid buy-signals. The risk is in the resistance. Resistance is at the previous high and capping gains, at least for now. It looks like Gold will test $1,560 but that’s not certain. What is certain is the metal will have to post a solid break above that level, hold it, and close above it for me to be more than casually bullish. That may happen with the FOMC meeting, maybe with the virus, but we’ll have to wait and see. Until then I expect to see some bearish candles start to form.

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