Free Profitable Forex Newsletter
Hey! This is Philip with this week's Fx update of the Free Profitable Forex Newsletter!
We are starting with the EURUSD update since the ECB meeting was the highlight of the day and triggered volatile fluctuations across USD pairs, including XAUUSD (Gold). Read below for the outlook and charts on gold.
EURUSD Update & ECB Takeaways
ECB President Lagarde disappointed the EURUSD bears today as she retained a largely hawkish stance at the presser. Not only she wasn’t worried about the recent (rather sharp) appreciation of the euro, but she maintained a sanguine view on inflation as well, despite last week’s whopping CPI miss. The ECB staff economic projections also showed optimistic views on inflation and GDP growth in the following months, and the central bank didn’t signal any
planned increase of the QE purchases (PEPP).
All of these moves by the ECB are perceived as hawkish. Thus the uptrend in EURUSD held and is now unlikely to break in the near future. The risks for a breakout above 1.20 and a test of 1.22 have increased after today’s ECB meeting.
Our short EURUSD from last week reached the first target at 1.18, while the 2nd target to 1.15 is now canceled as the ECB’s decision changes the rationale on which the trade was based. A bearish breakout is still possible, however, as EURUSD still remains inside its 1.17 - 1.20 range. And as we are already seeing, some of the earlier gains are being reversed going into today’s close.
Gold Consolidating in a Triangle
In the meantime, gold was also trading higher versus the USD today in tandem with the euro, which is rather strange since the ECB’s policies shouldn’t so directly and explicitly affect how other assets trade versus USD. Nonetheless, they did, and not only gold, both most other currencies were up against the dollar today. It seems that the market is focussed more specifically on where the dollar is going at the moment, so even developments in other countries
trigger broad moves in USD.
However, not much has changed in the established technical situation for gold is it remains firmly in consolidation mode. The precious metal remains inside the triangle pattern that is awaiting a break out of in one direction or the other. Some pretty interesting moves (i.e., likely sharp) can be expected once gold breaks out of this triangle.
The potential for a downside correction seems slightly more probable than an upside breakout from the current perspective. Namely, if we examine the situation based on the Elliott wave principle, the triangle appears to be a complex wave “b” (see chart below) of an ABC correction that started on August 7. If wave C is as large as wave A (which is probable in these types of corrections), then it can potentially take gold down by $200 or more.
This puts the $1750 area as the potential endpoint of such a corrective move. It would also converge there with the prior highs from May.
The described situation is shown on the chart below:
In the opposite scenario (i.e., bullish), we need a strong close above the $1990 high to open the potential for further gains. Under this scenario, the support trendline (that connects to the March lows) would remain unbroken, and the potential for further gains above $2075 would be alive. However, considering the substantial rally from March to August, this scenario seems much less
probable because positioning is still extended long while the expectations for an immediate increase in central bank monetary stimulus have receded.
Trade signals from the past weeks
- September 02 – Short EURUSD from 1.1870, 1st target reached at 1.18 = +70 pips
TOTAL: +70 pips in the past week
TOTAL: +2750 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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