Weekly forex technical forecast September 30 - October 4

Global equities retraced

Major stock indices declined this past week. Global market players were absorbing the impact from the U.S. Federal Reserve’s decision to stay on hold in terms of softening the interest rates and monitoring the macroeconomic and geopolitical environment. Equity investors did not find any reason to buy stocks at such high prices, especially after the bulls failed to rewrite all-time highs of U.S. benchmarks.

As a result, the S&P 500 index fell to 2962.8 points (-1.29%), tech-heavy NASDAQ charted second consecutive red candle on the weekly timeframe (-1.46% to 7693.8 points), while blue chips of the Dow Jones Industrial Average slid -0.73 to 26823.0 points. Overseas indices were mainly bearish, but German DAX 30 and French CAC 40 benchmarks managed to recover part of mid-week losses (-0.70% and -0.88%, respectively). Japanese Nikkei 225 declined -0.91%.
Weekly forex technical forecast September 30 - October 4

Safe-havens had a mixed bias

U.S. 10-year Treasury yields were driven by additional demand for safe-havens inside the United States on the back of the bearish action of equities. US10Y fell -3.18% to 1.684, keeping the downside swing after the rally two weeks ago. If the local bottom at 1.500 breached, the yield could accelerate the long-term downtrend started on October 1, 2018. German 10-year yields extended the negative value, underlining the sustainable demand for safe-havens in Europe.

In contrast, the price of gold failed to keep the bullish momentum and erased all of the mid-week gains. As a result, another red candlestick was drawn on the weekly chart (-1.32%), and one more weekly close below $1500 per ounce was noticed ($1496.78). Silver had an extremely volatile week, soaring above $18.70 per ounce initially, and reversing the action towards $17.54 weekly close with the total decline of -2.51% counting from the open price. Platinum followed precious metals as its price slid -1.57% to $930.51 per ounce, while Palladium continued the unprecedented bullish rally and closed the week at the all-time high of $1681 per ounce, gaining +2.41%. The price of Palladium soared more than +133% in three years and almost +250% since the bottom charted in February 2016.
Weekly forex technical forecast September 30 - October 4

The U.S. dollar index extended gains

The world’s reserve currency was in demand this past week. The index measuring the greenback’s power in relation to the volume-weighted basket of six major currencies closed the trading week at the highest level since May 2017 - 99.13 (+0.67%).

However, that growth was mainly related to EUR/USD, which declined -0.71% to the lowest weekly close in two and a half years (1.0940), as the pair has more than 60% of the basket’s volume. The British Pound was also weak as GBP/USD dropped -1.48% to 1.2289 after completing the bearish reversal in the previous week. The Japanese yen’s weakness was not that strong as USD/JPY gained only +0.34% and closed the week below the resistance of 108.00 yens per dollar after testing the support level at 107.00.

Other majors were either flat or stronger than the U.S. dollar. USD/CHF and AUD/USD remained at the same level as in the previous week’s close, while the New Zealand and Canadian dollars were among the strongest major currencies versus the greenback (NZD/USD +0.57% to 0.6296, USD/CAD -0.15% to 1.3244).
Weekly forex technical forecast September 30 - October 4

EUR/USD weekly forecast: Bearish

Euro started the past trading week with a bearish trade versus the U.S. dollar, charting the daily low at 1.0966 on Monday. However, EUR/USD found short-term support and closed above the long-term median line (dashed on the daily chart below). The bulls had a counter-attack, lifting the rate to 1.1024 on Tuesday, but that was the only bullish achievement this past week. The pair accelerated the downtrend from 13-days exponential moving average and closed Thursday below the support trendline, which never happened since March 7. What’s more, the daily close rate of 1.09204 was the lowest since May 11, 2017. Friday’s action triggered some profit-taking and postponed buy-orders slightly above 1.0900, but the daily gain of 20 pips was insignificant.

The technical sentiment suggests a bearish continuation rather than a bullish retracement. Three EMAs with different periods are headed south and placed in the right order to proceed with the downtrend. The 13-days Relative Strength Index is far below the level of 50 but still has room to go before the oversold zone reached. MACD trend indicator was showing a possible bullish retracement as the histogram was positive and lines crossed each other on September 9. However, the opposite bearish crossover occurred on September 24, signalling the selling pressure acceleration.

The sell-highs trading strategy is still reasonable as EUR/USD traditionally gives quite attractive entry levels inside the weekly cycle. EMA13 resistance should be considered as the first level to place short orders. That’s a descending curve thus possible bullish retracement might be limited in the range of 1.0967/82. More pivot points above the current price come at 1.1000 (psychological resistance), 1.1017 (EMA21) and 1.1046 (EMA34). The highest resistance (blue) was tested on September 13, and the bears used that failed attempt to refresh short positions.
Weekly forex technical forecast September 30 - October 4

Gold weekly forecast: Bearish

Although the Ichimoku Cloud is still bullish on the long run as the leading span kept the positive surplus, a deeper bearish short-term retracement is expected for the price of gold. The daily chart below shows a strong sell-signal on September 17 when Ichimoku Conversion and Base Lines crossed each other, suggesting a deeper retracement to the upper band of the cloud.

The bullish rally in the first half of this past week was nothing but fake whipsaw as 21-days Commodity Channel Index had another swing of the bearish divergence, the bulls failed to get the index into the overbought zone, and the price action was limited by the local top of $1535 per ounce. After the price of gold dropped below the Ichimoku Conversion line on Wednesday, and Stochastic RSI performed the bearish crossover, it became clear that the test of Ichimoku Cloud’s upper band is inevitable, which actually happened on Friday (green arrow).

The overall technical sentiment suggests that the price of gold would enter the uncertain zone inside the Ichimoku Cloud, which usually points to a longer-term bearish consolidation. The bottom of the span is coming in the range of $1441/48 for the week ahead, and the likelihood of testing it by the bears is getting higher. CCI and Stochastic RSI confirm that suggestion as both indicators have more room to go south before the momentum saturation is reached.

On the other hand, the psychological round-figure support of $1450.00 could play a role of the defensive barrier for the bulls, who placed postponed buy-stop orders around there. Thus, a bullish rebound is possible on the lower side, and it would be reasonable to take partial profits from fresh short positions. Bullish whipsaws are possible towards $1509.53 and $1520.23 (Ichimoku Conversion and Base Lines resistances). Both pivot points could be considered to implement the sell-highs trading strategy.
Weekly forex technical forecast September 30 - October 4
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