Short-term trading levels around the FOMC
Major forex pairs and gold will likely react to today’s FOMC decision on US interest rates, one way or the other. So what are the key technical levels you need to watch to the upside and downside?
AUD/USD could now target strong resistance at 7530/35. This is key to direction into the end of the week. Short traders need stops above 7575. Bulls require a two-day close above 7535 to turn the outlook more positive but this looks unlikely. We would then target 7590/99, perhaps as far as 7625/30.
Today’s first support is at 7445/40. Long traders need stops below 7410. Note that a sustained break below 7420 is a medium-term sell signal and initially targets 7390/86, then 7354/50.
The euro and the yen
The EUR/USD outlook is quite negative with first resistance at 1.0690/95. Short traders need stops above 1.0715. A break higher would target strong resistance at 1.0770/80. This is the main challenge for bulls this week.
If we hold below 1.0655/60 this targets minor support at 1.0610/05, then 1.0575/85 and 1.0535, before last week’s low at 1.0506/03. Further losses this week would target the 2015 low at 1.0460/56. Obviously this is very important. A two-day close below here would be an additional sell signal and could lead the pair towards 1.0110/00 in the weeks ahead.
The failure of USD/JPY to beat resistance at 115.60/65 is seen as more negative now after Monday’s bearish candle on the daily chart in severely overbought conditions. The first support at 114.75/70 is probably the most important of the day. Long traders need stops below 114.30.
A break below 114.60 is more negative and targets less important support at 113.90/85. If we continue lower look for 113.25/20 and then a buying opportunity at 112.65/55, with stops below 112.20.
We have minor resistance at 115.40/44 and then more important resistance at 115.60/65. Obviously this week’s high at 116.12 needs to be watched. On a break higher in the strong bull trend look for 116.42/49 and 117.85/90.
Bulls losing control of cable?
GBP/USD bulls are losing their grip with failure to beat (or even test) important longer term resistance at 1.2800/10. If GBP/USD holds below 1.2660 this targets good support at 1.2610/00. Further losses would signal that bulls have done as much as they can over the past couple of weeks to build a recovery and are losing control again.
Continuing downward pressure would then target 1.2560 and 1.2540. Good support at 1.2510/00 is the last line of defence for bulls this week. If you go long here use stops below 1.2470. A break lower, however, is a sell signal and targets 1.2445, then 1.2430/25.
The first resistance is at 1.2670/60 but a move above here targets 1.2695/1.2700 and 1.2730. If we continue higher look for last week’s high at 1.2770/74. We then meet very important longer-term resistance at 1.2800/10.
This is key to direction going forward with a strong chance we would top out here. Short traders need wide stops above 1.2860. We need a minimum weekly close tonight above 1.2815 for bulls to build on gains into next week.
A new leg higher for gold?
Gold could have bottomed out this week and could start the next leg higher in the new bull trend. It is possible that the first half of 2016 was the first leg in a new bull trend and this is the first major correction. If the correction has just ended we are ready for a bigger leg higher into 2017.
This is an opportunity with extremely low risk as we place stops below this week’s low of 1151. The first resistance is at 1164/1165 but a move above 1168 targets 1173/74, then strong resistance at 1178/79. We should pause here today but further gains into the end of the week would target 1185, perhaps as far as strong resistance at 1194/96.
No further gains are expected at this stage and we could see a small correction from here. If you try long positions in the low-1160 area use stops below 1149. A break lower, however, would continue the four-month bear trend to target 1147/46 and then 1140/39.
Technical Analyst & Trader
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