AUD/USD’s reversal last week, just below the 200-week moving average at 8000/8010, is a warning to bulls. This remains the main challenge for bulls this week in overbought conditions.
It could be worth trying short positions on a re-test with stops above 8050. Risks increase to the downside as we test first support at 7894/90. But eventually this is likely to break, targeting 7875/73 and strong support at 7845/40.
This is the last line of defence for bulls so a bounce from here is likely on the first test. Try long positions with stops below 7810. A break lower, however, is another sell signal, initially targeting 7788/85.
EUR/USD bulls are starting to hit some selling pressure as we approach the 2015 high at 1.1701/11. We are in a big two-and-a-half-year sideways trend and this is the upper limit in severely overbought conditions.
In fact the 1.1710/1.1740 area encompasses important longer-term Fibonacci resistance. If you think the seven-month recovery is overdone (as I do) this is the area to try short positions, with stops above the 500-week moving average at 1.1800.
We generated a minor sell signal on Monday, for which we’ve been waiting for a few days. We tested minor support at 1.1650/40 but we overran by 16 pips. There is stronger seven-week trendline support at 1.1599/95, which is likely to hold the downside on the first test.
Bulls will not just roll over and let bears take control without a battle. Try long positions with stops below 1.1565. A break lower eventually, however, is a sell signal. This targets minor support at 1.1550/45 and strong support at 1.1490/85 for a buying opportunity.
Gold has been in one big sideways trend for most of this year but the failed test of resistance at 1260/61 signals the bear trend will now resume. If we are lucky enough to get close to 1259/61 today, exit long positions and try shorts with stops above 1266. An unexpected break higher, however, would target 1272/73.
Having stopped just short of the 1260/61 resistance, we hit the first target of 1253. If we continue lower look for 1250 then good support at 1247/45.
A bounce from here is likely on the first test as bulls try to maintain the two-week recovery. But the profit potential on long positions may only be up to the low/mid-1250 area. Further losses target the best support for today at 1239/38. Try long positions with stops below 1233.
I wrote about the US Dollar Index last week, suggesting the dollar had further to fall and could target a six-and-a-half-month trendline, now at 93.30/20. We are closing in on this target and are severely oversold on the daily chart now.
A bounce just above this level would not surprise at this stage. This would tie in nicely with the important resistance levels for the markets mentioned above.
Only a sustained break below the longer-term 23.6% Fibonacci support at 92.88 signals continued losses. I favour a bounce from the area above 93.30/20, at least in the short term.
Technical Analyst & Trader
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