EUR/USD : Sideways consolidation with a bearish bias
Euro kept declining versus the U.S. dollar at the beginning of the past trading week as the demand for put options from the previous period continued weighing on the exchange rate.
However, things changed on September 3 when the pair reversed the direction of intraday trend (‘1’ on the hourly chart below). Stochastic RSI performed the bullish crossover of its lines below the level of 20 and went out of the oversold territory. The signal was confirmed by 21-hours Commodity Channel Index, which also left the oversold zone (-100). One more confirmation of the bullish reversal came when hourly candlesticks were drawing long downside shadows (2), underlining strong demand for call options at around 1.0926/30. As a result, the pair gave a brilliant reversal signal to start buying call options and traders did not hesitate to take advantage of that.
There was a notable action (3) when EUR/USD had a short-lived bearish consolidation. Stochastic RSI bounced off the overbought territory, but the reversal signal was not confirmed by CCI, which kept showing strong bullish momentum. The uptrend continued after that.
EUR/USD reached the weekly peak above 1.1080 resistance (4) on September 5 and reversed the action. Traders were buying put options as both oscillators confirmed each other in terms of a bearish reversal signal. Since then, the pair was in a tight consolidation range between 1.1021 and 1.1057 (yellow range). The sideways action should continue as longer-term charts show binary options traders’ indecisiveness in the scope of further direction. It’s recommended to wait for a clear signal before starting any trading cycle.
GBP/USD: Bullish reversal
Sterling kept plunging versus the greenback on the back of Brexit uncertainty. GBP/USD tested 1.1960, the level was never seen since January 2017. The downtrend was so strong and fast that nobody was suggesting a complete reversal and sharp bullish rally. However, the British Pound knows how to surprise binary options traders.
The only sign of a change in the technical sentiment came in from a combination of technical indicators consisted of MACD and RSI. The oscillator was leading the action, signalling a possible bullish spike as its value diverged with the price below the oversold threshold, and then went off the oversold zone. MACD confirmed the signal one hour later when its lines crossed each other and the histogram turned positive. The upside swing had an impressive distance of more than 300 pips and lasted 48 hours.
The end of the trading cycle was signalled by the opposite inversion of MACD and RSI indicators. After that, the pair entered consolidation without clear direction. As long as RSI dropped below 50% and MACD lines are about to cross 0, while histogram already turned negative, a deeper bearish retracement is possible. However, buying put options is dangerous as GBP/USD could suddenly reverse and run North in the same manner it happened last week. Therefore, it’s recommended to wait for a bullish signal to start buying call options for the pair.
USD/CAD: Bearish rally
The Canadian dollar finally started to play out the bearish divergence on the daily timeframe. Before USD/CAD started the bearish rally, the pair gave a perfect entry-level above 1.3380 to start buying put options. The decline was sharp and large as USD/CAD dropped more than 200 pips this past week.
That all started one day before the Bank of Canada’s meeting and rate decision, which acted as the fundamental trigger to accelerate the demand for put options. The Bollinger Bands indicator printed several bearish signals when the rate was testing the upper band (red arrows on the hourly chart below). A signal to stop buying put options was noticed when the price did not breach the bottom of the BB range. After a short-lived retracement, the pair continued plunging as the general demand for put options was robust.
Bollinger Bands had several bearish breakthrough signals this past week, suggesting a lower exchange rate for USD/CAD in the near future. Longer-term technical analysis points to the nearest support in the range of 1.3074/29, which should be reached as early as this upcoming week. It’s recommended to keep buying put options on bullish bounces and intraday reversal signals.
USD/JPY: Bullish breakthrough
Dollar-yen was the only currency pair among majors, which supported the greenback’s exchange rate in the binary options market. The Japanese yen was softening across the boar amid risk-on sentiment and additional demand for call options for stock indices worldwide. USD/JPY bounced back to the resistance level of 107.00 handle, preparing the technical chart setup for the bullish breakthrough in the upcoming week.
The most crucial technical event happened on September 4 as USD/JPY breached the Ichimoku Cloud resistance range, and accelerated the uptrend on hourly chart after that. After reaching a local peak of 106.75, the pair bounced down to Ichimoku Base Line, which acted as a strong support level. There was a long downside shadow on hourly candlestick signalling strong demand for call options at around 106.37 (green arrow). Binary options traders were buying call options for the pair until the exchange rate reached the weekly peak at 107.23. 24-hours consolidation did not help call-option buyers to gather momentum, signalling a bearish retracement as USD/JPY breached the brown support curve with hourly close rates.
The Ichimoku Cloud is a technical analysis indicator that defines support and resistance levels, gauges momentum and provides trading signals.
USD/JPY is expected to consolidate around the upper band of the leading span in the range of 106.80/90 with potential downside whipsaws towards 106.50 support. Such a bounce could signal a new uptrend swing, which traders should use to start buying call options. Next significant resistance comes at 107.50 and 108.00 in extension. The overall technical sentiment is bullish as the leading span has a sustainable positive surplus.
GOLD: Bearish reversal
Although the price of gold re-tested the six-year high above $1550 per ounce on the back of strong demand for call options, the yellow metal could face a danger of long-term bearish reversal as the technical sentiment has been changed on the daily timeframe, two consecutive weeks were closed in the red, and the bulls could not convince the market in their ability to keep lifting prices higher. Despite the long upper shadow on the weekly candlestick, gold had finished the trading week with -0.80% loss slightly above $1500 psychological round-figure support ($1506 weekly close rate). If the bears were able to push the price below the static support, then binary options traders could notice the lower price of gold at around $1470/80.
The intraday price action can be divided into two parts as the hourly chart shows. After the yellow consolidation range ($1519/30) was breached on the upper side, and CCI oscillator breached the bullish threshold (green arrow), the price of gold climbed towards the top charted in the previous week. However, the uptrend was not persuasive to start buying call options as oscillators were bouncing up and down, ADX showed a controversial sentiment. When Awesome Oscillator changed the colour of the histogram, buyers of put options entered the market with active trading positions and pushed gold south. ADX indicator changed the colour of the surplus to the red, Awesome Oscillator dropped below zero, CCI had only two hours in bullish territory. The general technical sentiment turned bearish intraday, and it’s worth expecting a lower price of gold next week.