Prices Don’t Always Move in a Straight Line: S&P 500, EUR/USD, AUD/USD
Joe Perry October 28, 2020 10:22 AM
US Dollar is higher today on fears of contagion from the coronavirus
Stocks are lower today and the US Dollar is higher today as fears of contagion from the coronavirus and the possibility of more national lockdowns are taking hold (It was just recently released that Germany’s lockdown will begin on Monday and France is preparing a Stay-at-Home order). This may also be some unwinding of long positions heading into the election next week. Yesterday, we discussed how the Yen is considered a flight to safety. The US Dollar is also considered a flight to safety has increased today with the breakdown in stocks.
S&P Futures broke below horizontal support and a descending triangle on Monday. Today, the index broke below the 61.8% Fibonacci retracement level from the lows of September 24th to the highs of October 12th, near 3331.72. The target or the breakdown of a descending triangle is the height of the triangle added to the breakdown point, which is near 3260. Horizontal support also crosses near that level. However, the RSI is in oversold conditions on a 240-minute timeframe and may be getting ready for a bounce. If so, sellers will be looking to enter short positions near resistance at 3355 and near 3400.
Source: Tradingview, FOREX.com, CME
Going back to early September, EUR/USD has been confined to a range between roughly 1.1600 and 1.2000. However, as we mentioned the US Dollar is considered a flight to safety, and as a result is heading higher (EUR/USD lower) within that channel. The pair is currently breaking down from a descending triangle as well, and its target is 1.1700 with support just below at 1.1680. However, the RSI is diverging, and the pair may be ready for a bounce. If so, sellers will be looking to enter short positions near 1.1800.
Source: Tradingview, FOREX.com
After a beat last night for Australian CPI, the Aussie initially went bid. However, as coronavirus fears began to spread around the globe, AUD/USD caved to the pressure and the US Dollar began moving higher (AUD/USD lower). As a result, the pair is looking to push through a descending triangle of its own. The RSI is not yet in oversold territory; however, AUD/USD is already down 100 pips off its highs. The pair may bounce before trying to break though support near .7000. Sellers will be looking to enter short positions near .7100.
Source: Tradingview, FOREX.com
After expanded moves already today in many of the US Dollar pairs, traders may wish to wait for a bounce (or retracement) entering long US Dollar positions (short counter-currencies). However, with coronavirus fears spreading, national lockdowns pending, and US election and Brexit uncertainty, traders need to be nimble and ready for headline risk. Make sure to use proper risk/reward management.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.