The screenshot below shows compressed 15-minutes timeframe of the price action throughout the past week. Although EUR/USD did not leave the same sideways channel from the previous week, the intraday performance gave several clear trading signals to change the direction. First, the inability of bulls to break through 1.1280 handles caused a bearish divergence on RSI oscillator and started a put-options cycle on Monday. Second, Tuesday brought a reversal signal to start buying call options as RSI charted a bullish divergence and Bollinger Bands %B indicator held above the support level. After testing the upper range of the Bollinger Bands, EUR/USD printed a bounce by the trend, signalling a new call-options rally towards the local resistance at around 1.1240. Another bearish divergence on RSI oscillator caused a short-term put-options swing on Thursday, which ended at oversold levels. An extremely volatile Friday forced binary options traders to stop buying put options for the pair as RSI bounced to oversold territory again, and the BB %B indicator failed to continue the bearish breakthrough.
As a result, EUR/USD finished the trading week slightly above the medium-term support of 1.1200 handle with a potential re-test of the local bottom in the nearest future as RSI is still below the 50% threshold. Therefore, the wait-and-see position is the most reasonable on Monday until a clear buy-signal occurred on RSI and Bollinger Bands indicator. A bullish divergence or a sharp swing toward oversold zone might point to an end of the bearish pressure. In general, the most probable scenario is to continue the sideways action, buying call options at the bottom and put options at the top of the range between 1.1200 and 1.1280. A breakthrough is possible as the bears might accelerate the demand for put options below 1.1180 support.
GOLD: bullish continuation with a deep rebound.
The price of gold had three obvious cycles this past week. First, the sideways consolidation ended on Tuesday as the ADX and DI indicator switched the sentiment to negative on the one-hour timeframe. That signal came right after the Parabolic SAR indicator turned bearish as its dots jumped above the price chart. However, the put-options dominance was short-lived and limited as both indicators turned bullish on Wednesday, causing the second cycle of call options to prevail. Since then, ADX and DI indicator was mainly positive, while Parabolic SAR performed more sensitively, showing several corrections and rebounds. The third cycle showed a deep bearish retracement as the price of gold did not hold gains near the strong resistance of $1450.00 per ounce. As long as the general momentum remains strong, upside risks remain for the medium-term perspective.
The buy-dips trading strategy is preferable for the week ahead. Traders should search for reversal signals by Parabolic SAR and confirmation by ADX and DI. Once the surplus turns negative, a bearish rebound could start, pointing to the lack of bullish momentum. Therefore, it’s recommended to use short-term entries with 8- and 10-hour period to keep buying call options for gold with 60-minutes expiration time. On the other hand, the uptrend could come to an end if the ADX mainline crossed the threshold level from above, and the surplus turned negative. Another doubt about the bullish rally is that the longer-term timeframe has a long shadow on a daily candlestick, pointing to strong resistance from the bears. If the bottom at $1400 per ounce did not hold the bears, then we’d see a long-term reversal and a deep rebound toward $1350. In that case, buying put-options would become more attractive.
USD/CAD: directionless intraday trade with 6 reversals.
USD/CAD was hovering in a tight range between 1.3020 support and 1.3100 resistance, finishing the trading week right in the middle of the range. The hourly chart below shows all of the six price swings happened last week. Every test of horizontal support or resistance levels caused an opposite action, while Stochastic RSI oscillator was pointing to perfect entry moments once it was coming off oversold and overbought levels, and its lines were crossing each other. A similar directionless trade is expected for the week ahead until the pair breaks the range on either side. If a breakthrough happened, USD/CAD should come back to previous support/resistance level before confirming the end of the sideways action. Otherwise, a false signal would turn the rate into the same tight range.
EUR/NZD: Extremely bearish.
The cross-rate charted an impressive bearish rally, declining eight days in a row. The trigger and the trading signal to start buying put options was noticed on July 10 as EUR/NZD finished the bullish retracement, failing to breach double resistance: the upper band of the Ichimoku Cloud and Base Line curve. Furthermore, the span itself performed a bearish cross, pointing to a long-term downtrend continuation. The rate breached the bottom of the cloud last Monday, accelerating the action. With the lack of bullish reversal signals, the nearest target should remain the same as the bears would not stop until the lowest daily close at 1.6310 charted on March 26. Therefore, buying put options for EUR/NZD with one-day expiration period looks attractive in the medium-term perspective.