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Aussie Index Tags Resistance, Will it Rally?

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ASX 200 Price Outlook:

  • The ASX 200 has been trapped between 6,200 and 5,800 since early June
  • Previous attacks on resistance situated around 6,200 have proven unsuccessful leading to reversals
  • Thus, the current trading price relative to the nearby technical barriers provides an intriguing landscape for technical traders

ASX 200 Price Forecast: Aussie Index Tags Resistance, Will it Rally?

The Australian ASX 200 has been trapped in a range since early June, fluctuating between resistance around 6,200 and support near 5,800. Despite several attacks on the 6,200 barrier, bullish appetite has seemingly evaporated each time before a bullish continuation can unfold. Now, price has returned to the same area of resistance after an almost unabated rally in October, bolstered by takeaways from the Reserve Bank of Australia’s recent policy meeting.

ASX 200 Price Chart: Daily Time Frame (February 2020 – October 2020)

ASX 200 daily price chart

With a potential rate cut on the table and price at the topside of its longstanding range, the ASX 200 looks as though it could attempt a break out. On the other hand, previous rejections have helped highlight the influence held by the area and its ability to reverse attempts higher. Thus, there are arguments to be made for a bullish break out or an imminent reversal that would see the range remain intact.

ASX 200 Price Chart: 4 – Hour Time Frame (May 2020 – October 2020)

ASX 200 price chart .

As a result, there are two potential strategies that traders could employ when considering exposure in the ASX 200. Should bulls prevail and drive higher, further gains may materialize, effectively creating a break out trade scenario. Under this strategy, levels of invalidation would be set slightly beneath resistance and areas of interest would reside to the topside, possibly around subsequent resistance.

Conversely, a bearish reversal would fall into the realm of a range trading strategy in which levels of invalidation would be set slightly above resistance with areas of interest within the trading range – possibly near the lower bound.

Equities Forecast

Equities Forecast

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While predicting a directional move can be difficult, the juncture at which the ASX 200 rests presents two distinct strategies that can be utilized depending on your bias. Either way, the index is positioned on a knife’s edge and a break – regardless of direction – may be imminent. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX





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Forex

USD/MXN Buckles Below Key Support

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Mexican Peso Technical Price Outlook: USD/MXN Near-term Trade Levels

  • Mexican Peso updated technical trade levels – Daily & Intraday Charts
  • USD/MXN breakdown sets weekly opening-range just below key pivot zone at 21.2316/2942
  • Key near-term support 20.6789 – Bearish invalidation at monthly-open resistance

The US Dollar is down more than 0.4% against the Mexican Peso into the start of the week after breaking below a key pivot zone on Friday. A well-defined descending technical pattern leaves USD/MXN vulnerable to further losses near-term with the immediate focus on a break of the weekly opening-range for guidance. These are the updated targets and invalidation levels that matter on the USD/MXN technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Peso setup and more.

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Mexican Peso Price Chart – USD/MXN Daily

Mexican Peso Price Chart - USD/MXN Daily - Dollar vs Peso Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/MXN on Tradingview

Technical Outlook: In my last Mexican Peso Price Outlook we noted that the USD/MXN sell-off was, “testing a break of a key pivot zone we’ve been tracking at 21.2316/2942 – from a trading standpoint, the risk remains tilted to the downside while within this formation.” Price slipped below this threshold on Friday with the USD/MXN testing this zone as resistance over the past few days.

Daily support objectives remain unchanged at the 1.618% Fibonacci extension of the decline off the June highs at 20.6788 backed by the 78.6% retracement of the yearly range at 20.0752. A pivot / close back above 21.2942 would risk a larger rebound towards trendline resistance with bearish invalidation now lowered to the objective October open at 22.0895.

Mexican Peso Price Chart – USD/MXN 120min

Mexican Peso Price Chart - USD/MXN 120min - Dollar vs Peso Trade Outlook - Technical Forecast

Notes: A closer look at Peso price action shows USD/MXN trading within the confines of an descending pitchfork formation extending off the late-September highs with the pair rebounding off median-line support on Monday. The weekly opening-range is set just below the 21.2316-2942resistance zone and we’re looking for the break to offer guidance. A break lower keeps the focus on the September low at 20.8377 and 20.6788. A topside breach of the weekly range would risk a larger price recovery with such a scenario exposing the 61.8% retracement at 21.5489 and daily slope resistance near ~21.8500.

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Bottom line: The USD/MXN has broken below a key pivot zone but the follow-though looks a bit tired here. Look for topside exhaustion while within this near-term formation with a break lower here keeping the focus objectives into the lower parallels. Ultimately a larger sell-off may offer more favorable opportunities with a breach above the monthly open still needed to shift the broader focus higher again.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Key US / Mexico Data Releases

US / Mexico Data Releases - USD/MXN Economic Calendar - Key Event Risk Ahead

Economic Calendarlatest economic developments and upcoming event risk.

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— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex





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Forex

Gold Price Forecast: XAU Bulls Tempt Breakout

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Gold Price Forecast:

  • Gold prices are pushing above a key resistance level of 1920 today.
  • Gold prices have been in digestion mode for two-and-a-half months, coming in stark contrast to the bullish mania that drove prices from mid-June and through July.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

Gold prices have been in digestion mode for two-and-a-half months now. It might be hard to believe if we go back to early-August, when Gold prices were showing hints of a mania on their way up to fresh all-time-highs. Perhaps what was most remarkable about that move was just how incredibly one-sided it was from late-June and through July. Gold prices took out a number of key resistance levels along the way; but this was a pretty clear example of a trending state in a cyclical market.

That fresh all-time-high soon showed a bearish signal on August 7th. As written in the Gold Technical Forecast for that week, the Friday bar responding to that fresh all-time-high closed as a bearish engulfing pattern; and then the next week brought on a retracement of more than $200 as bulls bailed and prices tried to equalize.

To learn more about bearish engulfing patterns, check out our DailyFX Education section.

Gold Price Daily Chart

Gold Daily Price Chart

Chart prepared by James Stanley; Gold on Tradingview

That retracement found a bit of support at a confluent spot on the chart but, bulls weren’t yet ready to continue the move. As a matter of fact, we still might be in that spot where bulls aren’t yet ready to continue as the past two-and-a-half months have brought on a continued case of digestion in Gold prices.

Gold Forecast

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This digestion has taken on the form of a falling wedge pattern; and given the context, that falling wedge is taking on similar tonalities as a bull flag formation. Falling wedges and bull flags will both often be approached with a bullish aim, looking for buyers to re-take control after digestion of a recent and fresh high.

This also wouldn’t be the first time that Gold prices have went on an extended bout of digestion in this recent bullish cycle: Similar instances happened in February-May of last year; and then again from September-December of last year. Each of those digestion themes took months to reconcile; with bulls eventually winning-out and continuing to drive the topside theme.

To learn more about falling wedges or bull flags, check out our DailyFX Education section.

Gold Price Weekly Chart: Months Long Digestion in Falling Wedges

Gold Weekly Price Chart

Chart prepared by James Stanley; Gold on Tradingview

The big question at this point is whether bulls are taking the reigns again. Price action is testing above the resistance trendline making up the falling wedge formation, and prices are currently holding above a very key price on the chart at 1920. That level was the all-time-high for more than seven years before being taken out by a surging trend in the month of July. It has since caught multiple resistance inflections as this digestion has continued and, may eventually be repurposed for higher-low support when buyers do eventually re-take control of the matter.

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At this point, the line in the sand of interest appears to be around 1933, which is the current monthly high. A breach above that exposes a Fibonacci level at 1943.41; and a test there opens the door for higher-low support around the 1920 level.

Gold bulls should continue to exercise caution, however, until that new monthly high comes into play. A similar situation presented itself a couple of weeks ago – with bulls bursting above 1920 only for prices to fall back into the prior range.

Gold Price Four-Hour Chart

Gold Four Hour Price Chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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Retail Sales Data May Fuel USD/CAD Downtrend

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Canadian Dollar, USD/CAD, CAD/JPY, Bank of Canada, Inflation – Talking Points:

  • Progress in US fiscal aid talks appeared to firm market sentiment during APAC trade.
  • Retail sales and inflation data may dictate the outlook for the Canadian Dollar.
  • USD/CAD poised to extend declines as price tracks within price channel.
  • CAD/JPY eyeing a push to fresh monthly highs.

Asia-Pacific Recap

The haven-associated US Dollar and Japanese Yen continued to lose ground against their major counterparts during the Asian trading session, as progress in US fiscal stimulus negotiations appeared to firm market sentiment.

Gold and silver prices edged higher despite US 10-year Treasuries yields soaring above 80 basis points for the first time since June.

Australia’s ASX 200 index rose 0.12% and Japan’s Nikkei 225 index pushed back above the 23600 mark, as S&P 500 futures continued to trek higher.

Looking ahead, Canadian inflation data for September headlines the economic docket alongside speeches from European Central Bank President Christine Lagarde and Federal Reserve Governor Lael Brainard.

Canadian Dollar Outlook: Retail Sales Data May Fuel USD/CAD Downtrend

Market reaction chart created using TradingView

Retail Sales Data to Dictate CAD

Upcoming retail sales and inflation data may dictate the near-term outlook for the Canadian Dollar, after the Bank of Canada’s Business Outlook Survey showed that “business sentiment has improved but remains weak across all regions [and] businesses expect the pace of the recovery in their sales to slow”.

Surprisingly, despite business sentiment remaining “well below its historical average” and manufacturing sales for the month of August falling 0.6% more than the expected 1.4% decline, the Canadian Dollar has continued to outperform the haven-associated Japanese Yen and US Dollar in recent days.

Of course, this could be down to the recent resiliency seen in oil prices this month, in tandem with the renewed hopes of a pre-election fiscal stimulus package out of the US.

Nonetheless, the cyclically-sensitive currency has erased the losses it took after Tiff Macklem suggested that taking interest rates into negative territory is still a possibility, with the Bank of Canada Governor stating that although the central bank is “not actively discussing negative interest rates at this point”, it is still in “our toolkit and never say never”.

Canadian Dollar Outlook: Retail Sales Data May Fuel USD/CAD Downtrend

Canadian Dollar comparison chart created using TradingView

However, Macklem also voiced that “as much as a bold policy response was needed, it will inevitably make the economy and financial system more vulnerable to economic shocks down the road”, adding that “the bottom line is that the private and public sectors together need to be acutely aware of financial system risks and vulnerabilities as the economy recovers”.

This could indicate that Canadian policymakers are becoming more sensitive to the potential impact of alternative monetary policy measures and may hesitate to ease further in the absence of a notable deterioration in economic data.

With that in mind, the Canadian Dollar may continue to outperform the haven-associated Japanese Yen and US Dollar, if upcoming economic data encourages the Bank of Canada to retains it wait-and-see approach to monetary policy.

Canadian Dollar Outlook: Retail Sales Data May Fuel USD/CAD Downtrend

DailyFX Economic Calendar

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USD/CAD Daily Chart – Descending Channel Guiding Price Lower

From a technical perspective, the USD/CAD exchange rate’s outlook remains skewed to the downside, as price continues to track within the confines of a Descending Channel after failing to break back above confluent resistance at the 21-day moving average (1.3200) and 38.2% Fibonacci (1.3228).

The development of the RSI and MACD indicator hints at swelling bearish momentum, as both oscillators continue to track firmly below their respective midpoints.

With that in mind, a daily close below the October 13 swing-low (1.3099) would probably signal the resumption of the primary uptrend and carve a path for price to test key support at the 50% Fibonacci (1.3039).

Conversely, a reversal higher could be in the offing if the psychologically imposing 1.3100 mark successfully stifles buying pressure, with a break back above the 21-DMA (1.3200) potentially generating a test of Descending Channel resistance and the October 15 swing-high (1.3259).

Canadian Dollar Outlook: Retail Sales Data May Fuel USD/CAD Downtrend

USD/CAD daily chart created using TradingView

CAD/JPY Daily Chart – Eyeing a Push to Fresh Monthly Highs

CAD/JPY rates appear to be gearing up for a push to fresh monthly highs, as price bounces away from the sentiment-defining 200-MA (79.75) and breaks back above resistance at the July high (80.14).

With the RSI strengthening above its neutral midpoint and the MACD indicator travelling comfortably in positive territory, the path of least resistance seems higher.

That being said, given the RSI has yet to snap its downtrend extending from the June extremes and price hasn’t breached the October high (80.60), a near-term pullback is certainly not out of the question.

Nevertheless, a daily close above the monthly high (80.60) would probably generate a more impulsive topside push and potentially bring key resistance at the August high (81.58) into focus.

On the other hand, failure to break to fresh monthly highs may inspire would-be sellers and ignite a short-term pullback towards the Ascending Triangle uptrend, if support at the July high (80.14) gives way.

Canadian Dollar Outlook: Retail Sales Data May Fuel USD/CAD Downtrend

CAD/JPY daily chart created using TradingView

— Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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