U.S. stock indices renewed all-time highs led by NASDAQ.
The greed-fear barometer shifted toward the left side this past week. Financial markets were driven mostly by high-yield assets such as equities and stocks as government bonds, gold and safe-haven currencies were consolidating losses. U.S. stock indices continued the bullish rally, finishing the trading week at highest rates. So the S&P 500 benchmark closed at 3022.8 points, gaining +1.56%, while tech-heavy NASDAQ soared +2.52% to 7992.9 weekly close rate. Solid corporate earnings reports, as well as stronger-than-expected U.S. Gross Domestic Product growth, helped equity investors to boost risk-on appetite and fuel bullish sentiment. The only exception was the Dow Jones Industrial Average, which remained flat on a weekly basis. In other regions, major stock indices appreciated 1% on average, following the global leader.
U.S. dollar index charted 10-week highs.
Capital flows headed in the United States, and the U.S. dollar index, measuring the greenback’s strength versus a volume-weighted basket of six major currencies, did not hesitate to take advantage of that. As a result, DXY tested the level of 98.05 points, closing the trading week at the highest rate in 10 weeks, and appreciating +0.86%. Weakest currencies were New Zealand and Australian dollars, losing -1.91% and -1.87% versus the greenback, respectively. Major European currencies were declining at the same pace as DXY grew. However, the British Pound and Euro charted multi-weeks lows, continuing the downtrend. For instance, GBP/USD dropped to 1.2384, the lowest rate since April 2017, while EUR/USD slipped to 1.1100 support for the first time in 26 months. The Canadian dollar retraced to 1.3200 resistance, while USD/CHF and USD/JPY were also trading with a bullish bias. It’s also worth mentioning an impressive decline of South African Rand as USD/ZAR surged more than 2.5% after hovering below 14.00 handle.
The price of WTI Crude oil was trying to recover part of recent losses, but failed to impress the bulls and closed the trading week below crucial technical level of $57.34 per barrel ($56.16, +0.79%). Gold was consolidating in a tight range between $1410 and $1430 per ounce, while other precious metals including Silver (+1.14% to $16.39), Platinum (+2.19% to $862.50) and Palladium (+2% to $1535.50) gained strength.
EUR/USD weekly forecast: Bearish.
The bears pushed EUR/USD below the 1.1200 round-figure support level on Tuesday and continued the selling pressure throughout the whole trading week. However, the bulls fought back on Thursday, underlining the importance of 1.1100 support figure. The bullish retracement was limited by 1.1187 local top as the bears stepped in with heavy-volume offers. As a result, EUR/USD renewed multi-months low at 1.1101 and finished the day almost unchanged. Friday’s action was also headed south and the pair ended up at 1.1276, just one pip lower than the recent bottom charted on May 30.
Since the previous support of 1.11941 was breached, and EUR/USD tested the next support level by daily low rates, the overall technical sentiment shifted to bearish. The sequence of higher lows was breached and the pair charted lower lows counting from May 30. Therefore, the bullish retracement might come to an end with risks of further downtrend to resume. Current rate is far below 21-days simple moving average, MACD trend indicator is deeply bearish with the histogram in negative territory and quite a large negative surplus between its lines. There is a risk of bullish divergence on MACD histogram as the recent histogram’s low is higher than the previous one. However, that was not confirmed by 13-days Relative Strength Index and possible divergence can be breached in the nearest days as RSI value has plenty of room to go south before the oversold level achieved.
The sell-highs strategy is preferable for intraday aggressive traders with pivot points to watch at around 1.1187 (recent high) and 1.1169 (descending 34-bars simple moving average on the four-hourly chart). However, such a depth might not be given by market players as the selling pressure continues weighing on the pair. Therefore, a breakthrough trading method might be on the table with postponed sell-stop orders below the local low of 1.1101. If the recent bottom was rewritten, then the bears would eye a crucial psychological target of 1.1000 with a potential temporary pit stop at 1.10237, the highest daily rate on May 9, 2017. It would be too early to talk about long positions on EUR/USD as long-term bullish reversal signals are still absent.
WTI Crude weekly forecast: Bearish.
The black gold bulls had an attempt to get the price back to growth but failed to do so. The highest weekly quote was printed on Wednesday when WTI Crude was trding at $57.62 per barrel. However, Tuesday’s daily close below crucial technical resistance and the bounce back below $57.00 did not allow traders to conclude a bullish reversal. On the other hand, the oil price refused to slip below $56.00, finishing the trading week at $56.16 with uncertain price action on Thursday and Friday.
The daily chart below clearly shows two resistance levels, which held the price of oil from the bullish rebound this past week. The first one is the 61.8% Fibonacci retracement level from the growth which started in December last year ($57.34). The second barrier is the 55-days simple moving average ($57.21), which holds prices from further appreciation since the bearish breakthrough on July 16. Another strong sell-signal came from 13-days RSI, which charted a bounce-by-trend below the 50% level (red arrow on the indicator’s window), and kept declining. ADX and DI indicator is extremely bearish with negative surplus below the threshold and further downside pressure as the general technical outlook remains negative, and the bullish momentum is weak.
Those traders who still do not have short positions for WTI Crude oil in their portfolios should consider opening them on potential bullish whipsaws in the upcoming week. Attractive entry levels for the aggressive trading approach are indicated above, while conservative traders should wait for a re-test of the resistance range between $58.19 and $60.00. On the other hand, such a high quote might not be charted this week, and the bears might push oil prices below the 50% Fibo retracement level at $54.62. If that happened, the market would focus on lower targets at $51.90 and $50.63 in extension.