The Euro continues consolidating

The EUR/USD is currently consolidating in a relatively tight range just above the 1.1600 level as shown on the daily chart. The pair may be waiting for the NFP numbers to be released this Friday before taking a more clear direction. Today’s FED announcement caused a lot of volatility, but the EUR/USD did not take a clear trend. The MACD indicator is showing us that the bearish trend has come back, but the pair may go in any direction. To the downside, the most relevant support is at the 200 day EMA, around the 1.1500 zone. Below the 1.1500 level, the 1.1400 or the 1.1300 levels may also act as supports. To the upside, the closest resistance is at the 1.1700 level, but the 55 day EMA could also act as resistance. In order for the EUR/USD to go back to its bullish trend, the price must break above the 1.2100 level in the long run.

Gold bounces from the 200 day EMA

Gold was retracing to the downside from the 1300 zone to break below the 55 day EMA (purple line) until it reached the 200 day EMA (blue line) around the 1266 level. Gold had already bounced once from the 200 day EMA at the beginning of October and on this second visit to the moving average it bounce again to the upside. We could possibly see the formation of a double bottom pattern around the 200 day EMA, which is a bullish reversal pattern. But in order for the double bottom pattern to be confirmed, the price of gold must break above the 1300 level, which is its signal line. For now, gold may stay consolidated, stuck between the 200 day EMA and the 55 day EMA around the 1285 level. On the other hand, if the price manages to break below the 200 day EMA, then gold would have the road clear to fall all the way to the 1204 zone.

Summary of the futures market

In the United States, trading futures began in the mid-19th century with the establishment of central grain markets where farmers could sell their products either for immediate delivery, also called the spot or cash market, or for forward delivery. These forward contracts were private contracts between buyers and sellers and became the forerunner of today’s exchange-traded futures contracts. Both forward contracts and futures contracts are legal agreements to buy or sell an asset on a specific date or during a specific month. Where forward contracts are negotiated directly between a buyer and a seller and settlement terms may vary from contract to contract, a futures contract is facilitated through a futures exchange and is standardized according to quality, quantity, delivery time and place. The only remaining variable is price, which is discovered through an auction-like process that occurs on the Exchange trading floor. Conventionally, traders are divided into two main categories, hedgers and speculators.

Hedgers use the futures market to manage price risk. Speculators on the other hand accept that risk in an attempt to profit from favorable price movement. While futures help hedgers manage their exposure to price risk, the market would not be possible without the participation of speculators. They provide the bulk of market liquidity, which allows the hedger to enter and exit the market in an efficient manner. Speculators may be full-time professional traders or individuals who occasionally trade. Some hold positions for months, while others rarely hold onto a trade more than a few seconds. Regardless of their approach, each market participant plays an important role in making the futures market an efficient place to conduct business.

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They trade to make money, not to be right – They understand the strengths and possible pitfalls of what it is they do for a living, and use that knowledge to curb their emotional output.

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they have a game plan, and follow it explicitly – Each trade is planned and opportunities are scouted for before any trading takes place. They steer away from the killer of all killers: overtrading.

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They think about the trade, not the money behind it - Focusing on money can destroy your means to objectively assess the trade itself.

Consolidation on orange juice

The price of the orange juice contract for November has gotten into a consolidation as shown on the weekly chart, around the 154.73 level where we can also find the 200 week EMA and the 55 week EMA. On the consolidation a pennant or triangle has been formed and due to the fact that the MACD indicator is still showing a bullish trend, it is possible to see the price breaking to the upside. In order for a bullish breakout to be confirmed, the price must overcome the 164.55 level. If there is a real breakout of the 164.55 level, then the price of orange juice would have the road clear all the way to the 189.00 zone, level which already acted as resistance in the past. To the downside, the most important support levels are at the 140.00 level or the low at the 125.00 level.

Pullback on copper could have been over

The price action on copper has been caused by the economic indicators in China. The rally that the commodity had to the 317.84 level, the pullback to the 55 day EMA, and the following rise to the 325.86 level have been the result of a variety of fundamental data out of the Asian Giant. Whatever happens in China directly affects the price of copper due to the fact that China is the main consumer of commodities and the industrial metal. From the last peak that copper reached at the 325.86 level, there was a bearish pullback that took it to the 317.84 zone, which acted as a support and that it was resistance in the past. Apparently, the bearish pullback that copper had to the 317.84 zone is over and the price may try to bounce back up, but in order to keep its bullish trend, it must break above the 325.86 level. The angle of inclination of the 55 day EMA (purple line) is telling us that the bullish trend is still in place, but if the copper keeps falling, that same moving average may act as support. The 200 day EMA may also act as support, but at the moment is too far away.

Possible bearish continuation on gold

Gold bounces to the downside from the 1300 zone as shown on the weekly chart and it may try to reach the 1260 level where we can find the 200 week EMA and the 55 week EMA exactly at the same level. The price of gold has already bounced to the upside from the 1260 zone, therefore we could see another bullish bounce from that area in case the price falls to that zone. On the other hand, if gold breaks below the 1260 level, then it may have the road clear to fall all the way to the low at the 1204 level or the 1200 level. The 1300 level may still act as a resistance to the upside, but another possible scenario is that the 55 week EMA (purple line) may cross above the 200 week EMA (blue line) and form what it is known as a “golden cross”, which has bullish implication in the mid-term. A breakout above the 1300 level may take the price of gold all the way up to the peak at the 1357 level.

Risk aversion supports the Yen

The main stock market indices around the world are in the red. Risk aversion has come back into the markets with a vengeance after the disappointing earnings reports of some of the corporations in the United States and Europe. Additionally, the Chinese economy seems to be deaccelerating and that has pressured the emerging markets and the main Asian indices to the downside. As the risk aversion rises, the traders and investors find refuge in the Yen and other safe-haven assets like gold. That is why we see a strong drop on the USD/JPY during today´s session, due to the fact that the Yen is que quote currency on the pair.  However, despite today’s drop, the USD/JPY is still boxed between the 113.00 level and the 112.00 level. The 55 day exponential moving average is still above the 200 day exponential moving average, which is an indication that the pair keeps a slight bullish trend. Besides the aforementioned, the USD/JPY has already visited in different occasions the 113.00 level and the more times the pair visits that level, the higher the probabilities of breaking it to the upside. To the downside, the most relevant support level is at the 200 day EMA, around the 111.23 level.

Resistance becomes support on copper

In technical analysis we can see on many occasions that a support level may become resistance or resistance may become support. That happens mostly because of psychological reasons. On the daily chart of copper we can see that the commodity was having a good bullish trend until it reached the 317.84 level from where it bounces to the downside. On the bearish bounce from the 317.84, the level is labeled as a resistance. The price then falls to the 55 day EMA (purple line) from where it goes back up. When the price goes back to the 317.84 level, at that zone some traders open short positions believing that the level was going to act as resistance once more, but the bullish momentum was so strong that the price continued higher until it reached the 325.86 level. The short positions enter negative territory, but when the price retraces to the downside and visits the 317.84 level again, those short positions go back to breakeven and the sellers feel relieved, rushing to close those short positions before the price goes back up. That is why that zone becomes support and the price may try to bounce back up from there. However, in order for the bullish trend to be sustained, the price of copper must break above the high at the 325.86 level. In case the price keeps dropping, then its next most relevant support is at the 55 day EMA, around the 298.97 level.

Silver is pressured to the downside

Silver falls during two sessions in a row after reaching a high around the 17.44 level as shown on the daily chart. The drop on silver coincides with the drop on gold after the rally on the Dollar and a rise of risk appetite. Precious metals are often used as safe haven instruments and that is why they rise on risk aversion and fall on risk appetite. Silver made a high on the 18.19 level after a very good rally, but recently it has been oscillating around the 200 day EMA. Today the price of silver falls below the 200 day EMA and below the 17.00 level. However, the 17.00 zone may act as support and silver may bounce to the 17.44 level. A breakout above the 17.44 level could take silver back to the peak at the 18.19 level. On the other hand, if silver breaks below the 17.00 level, its most relevant support could be the 16.29 level followed by the 16.00 level.

Uncertainty around Brexit stalls the rally on the GBP/USD

The GBP/USD was in a good bullish pullback from the 1.3000 zone as shown on the daily chart until it got to the 1.3300 zone where it stalls its rally. The probability that the Bank of England may raise its interest rates has been diminished by the uncertainty surrounding the Brexit negotiations. That is why during today’s session we can see that the GBP/USD has bounced to the downside from the 1.3300 zone. However, the 1.3200 level may act as a support, especially when we can see the 55 day EMA around that level. Below the 1.3200 level its next support could be the 1.3000 level where we can also find the 200 day EMA very close to that zone. To the upside, in case the pair breaks above the 1.3300 level, its next resistance may be the 1.3500 level, followed by the highs that it made around the 1.3600 level.

Complex head and shoulders pattern on the EUR/USD

A few weeks back we identified a head and shoulders pattern on the EUR/USD over the daily chart with the neckline around the 1.1800 level, which was broken to take the pair to the 1.1700 level. We could say that such head and shoulders pattern was confirmed, but the drop was not too deep. On the last couple of weeks we saw that the EUR/USD pulled back to the 1.1900 level where it is trying to come back down. The pullback to the 1.1900 level is important, because the pair already bounced to the downside from that level on the 2^nd of august. Therefore, this bearish bounce from the 1.1900 level could be forming the right shoulder of a bigger pattern that includes the previous head and shoulders, that is why it is called a complex head and shoulder pattern. The pattern has two shoulders on the left and two shoulders on the right, the head is still the peak at the 1.2100 level. The neckline for the new pattern is the red trendline just below the 1.1700 level. If the EUR/USD breaks below the neckline, the pair may drop to the 1.1500 level, where we can find the 200 day EMA.

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The Dollar weakens

The Dollar index was retracing to the upside from the 91.00 zone to the 94.00 zone, breaking on its way up above the 55 day EMA as shown on the daily chart. During such bullish retracement the stochastics indicator rose from the oversold zone to the overbought zone in 20 trading sessions. However, during the last 4 trading sessions, the stochastics fell to the oversold area, indicating that this time the drop has been faster. Therefore, the index may fall to the 92.00 level and a breakdown below the 92.00 level it may visit the low at the 91.00 level. On the other hand, the US fundamentals may support the greenback in the next few months and the Dollar index may try to go back to the 94.00 level or even try to break above that level.

Copper follow up

Since the end of June to the beginning of September, copper had a very good bullish trend while the Chinese economy was showing signs of expansion. The health of the Chinese economy is positively correlated to the price of copper due to the fact that China is one of the main copper consumers in the world. Once the price reached the 317.77 zone, it started retracing to the downside until it reached the low at the 289.37 level, where we can also find the 55 day EMA as shown on the daily chart. Copper consolidated for a couple of weeks around the 55 day EMA until it started rallying again as the Chinese fundamental data became optimistic once more, causing the price to reach the 305.00 level. Today the bullish momentum accelerated and the price of gold reached the 61.8% Fibonacci retracement at the 306.86 level. The 61.8% Fibo may act as resistance for the commodity, but if it breaks that level to the upside, then the 76.4% Fibo has a higher probability of acting as a resistance. In case the price of copper comes back down, the 55 day EMA may act as support.

Pullback on the GBP/USD

The Pound versus the Dollar falls near the 1.3000 level, but it was not able to touch that level. On a second visit to the 1.3000 level, the pair may touch it, but it may be difficult to break that level to the downside, due to the fact that around the 1.3000 level we can see the 200 day EMA and the 76.4% Fibonacci retracement as shown on the daily chart. The GBP/USD is currently pulling back to the upside, but as shown on the chart the pair has touched exactly the 55 day EMA where it stalls at the moment. From the 55 day EMA, the pair may try to go back down, but if it continues to the upside, then the 1.3200 level along with the 50% Fibo could also act as resistance. Below the 200 day EMA, its next support level could be the 1.2800 zone. Another possible scenario is that the GBP/USD may stay bouncing up and down between the 200 day EMA and the 55 day EMA without taking a clear direction and consolidating for a while.

The drop accelerates on the GBP/USD

The GBP/USD continues dropping as shown on the daily chart and accelerates its bearish momentum below the 61.8% Fibo, around the 1.3100 level. The pair is retracing the rally that it made from the 1.2800 level to the 1.3600 level that took around one month to complete. At the moment, the GBP/USD is getting closer to the 1.3000 level, where we can also find the 200 day EMA (blue line) and the 76.4% Fibo. That zone has a high probability of acting as support due to all the factors coinciding around that area, but the fundamental data should also help the Pound regain some of the lost ground versus the Dollar, otherwise the pair may just continue falling. In case of a bearish breakdown below the 1.3000 level, its next support level could be the 1.2800 from where it started rallying, completing what it is known as a parabolic retracement of 100%. In case the pair bounces from the 1.3000 level to the upside, its next resistance could be the 1.3200 level where we can find the 55 day EMA.

Possible breakout-pullback pattern on the USD/CAD

The breakout-pullback pattern is completed when the price of an asset breaks an important support or resistance zone to then pullback to the same area and continue in the direction of the initial breakout. On the weekly chart of the USD/CAD we can see that the 200 week EMA (blue line) stopped the price on its first visit when it was falling from the peak at the 1.3800 level. The bounce from the 200 week EMA takes the price to the 1.2700 level, but then it bounces back down to visit the 200 week EMA for a second time, but on the second occasion, the price breaks below the 200 week EMA and makes a low around the 1.2069 level. From the 1.2969 level the USD/CAD bounces to the upside and reaches the 200 week EMA again where it is trying to stall at the moment. A breakout-pullback pattern may be completed on the USD/CAD if the prices bounces to the downside from the 200 week EMA, but the stochastics indicator has just come out of the oversold zone and still has enough room to continue higher; therefore, the USD/CAD may break above the 200 week EMA. On the other hand, the 200 period EMA usually acts as a very good support/resistance zone, especially on the higher timeframes, and this time it may work even better since it is coinciding with the 55 day EMA around the 1.2491 level.

US crude exports rise

WTI oil continues falling and breaks below the 50.00 level after it was published that the US oil exports have risen to an all-time high of two million barrels per day. The prices of WTI oil has been pressure to the downside due to a rise in US production, while Brent oil that trades in Europe has been supported by the production cuts that OPEC has put in place. That was prompted oil buyers to prefer WTI oil over Brent, because it is cheaper and at the same time, the US oil companies have been exporting more oil to meet the demand. On the daily chart of WTI oil we can see that the price may continue falling to the 49.00 level, where we can also find the 55 day EMA. The 200 day EMA (blue line), may also act as a support. To the upside, the 51.00 level, the 52.00 level, or the 53.00 level may act as resistance.

The bearish trend is still in place on gold

Gold has had a very good bearish trend due to the fact that the risk appetite has risen among investors that are choosing instruments with a higher return. The recent rally on the Dollar has also contributed in the pullback that gold is having due to the negative correlation that exists between the greenback and the precious metal. On the daily chart of gold we can see that the price has come very close to the 200 day EMA and the 200 week EMA around the 1261 level and that zone may act as a support, but on the other hand, the MACD indicator is showing us that the bearish trend is still in place and it is getting stronger according to the bars on the histogram. Therefore, we could also see a breakdown of the 1261 level. If the price of gold breaks below the 1261 level, then it would have the road clear to drop all the way to the 1206 level where it started it latest bullish trend. If gold bounce to the upside from the 1261 zone, then it would have to break above the bearish trendline in order to go back to its bullish trend.

The retracement continues on the GBP/USD

The GBP/USD continues retracing to the downside since it made a high at the 1.3600 level. On the daily chart we can see that when the pair broke below the 1.3500 level, the bearish momentum accelerates to break today below the 1.3300 level. At the moment, the pair is getting close to the 1.3200 zone, which could act as support due to different factors around that zone. The 50% Fibonacci retracement from the latest rally that the GBP/USD made from the 1.2800 zone to the 1.3600 zone could contribute to help stall the retracement at the 1.3200 level. The 55 day EMA (purple line) around the 1.3200 level may also act as a support for the GBP/USD. But besides all the factors around the 1.3200 level, the area with a higher probability to act as a support is the 1.3000 level. At the 1.3000 level we have the 200 day EMA (blue line), which traditionally acts as a better support or resistance zone. At the 1.3000 level we can also see the 76.4% Fibo, which also acts as a better support or resistance zone than the 50% Fibo. And finally the 1.3000 level itself is a round number level with a higher probability of acting as a support or resistance.