I would like to start this weekly blog by reviewing my blog dated 16th October (please click here see the daily chart image from that date). I was looking at a continuation pattern (rectangular formation) on the US Dollar Index and as you can see from the image above, the Dollar started its appreciation. Let us now observe the weekly chart below to understand why the Dollar did not manage to complete the upwards move.
As you may notice I have placed the Dollar Index in an upwards channel and it found rejection right at resistance. This week I would like to see another sideways move, which will imply continuation for a buy, or some retracement to then continue the move upwards to resistance, marked by the blue horizontal line. This week is full of fundamental news coming out of the USA. I would like you to pay attention to three very important financial data in particular: the ADP Non-Farm Employment Change and Federal Funds Rate, both on Wednesday. This is followed by the NFP on Friday. Those two days (Wednesday and Friday) will be critical for any trader, especially news traders. The financial data that comes out of the US is getting stronger and therefore, investors might start to think that an interest rate hike is likely before the end of 2016. The overall sentiment coming from most financial analysts is that the Fed will hike the interest rate in December, as happened last year.
The EURUSD currency has made a technical move this past week, as I predicted (please click here to go and read my weekly blog dated 16th October – see ‘trade idea’). The EURUSD has now found support at the 1.0850 price area and has immediately bounced back up. This coming week, as far as the fundamental news is concerned, the Euro will be very quiet, however, we will see volatility in the EURUSD because of the USA financial news. As you can see from the image above, the EURUSD has broken twice what appears to be an ascending triangle, which indicates to me that it probably never meant to be an ascending triangle in the first place, as the pattern means ‘buy’ as a continuation, and this pair is clearly selling rather than buying. Taking this into consideration, I would like to see the break of 1.0850 price level and a continuation to the next support area marked by the lower horizontal yellow line. Trade idea: After the break of the support at 1.0850 I am expecting the price to drop to 1.0800 as first target and 1.0750/30 as second target. This move will be caused by a mixture of strong USA data and a technical move in this currency pair.
By Elkana Roveglia – www.TakeMyTrades.com