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Renko Charts Weekly Trade Opportunities (31 Oct – 4 Nov)

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The markets last week saw the US dollar trading mixed. While USDJPY jumped above 104.00 handle, the dollar was weaker against the euro which saw EURUSD rise over 0.50% on Friday alone. Despite an upbeat GDP report for the third quarter which saw the US economy expand at a rate of 2.9% and beating expectations of a 2.5%, the US dollar failed to capitalize on the gains.

It was late Friday’s news about a new probe into Hillary Clinton’s email scandal that sent the dollar weaker. With just two weeks to go for the US elections the uncertainty continues which could keep the dollar trading volatile into the November 8th general elections.

Besides the data from the US, in the euro zone, the preliminary flash PMI’s showed a possible rebound in economic activity in the region. Markit’s PMI data last week now puts the prospects of a better than expected growth in the third quarter, details of which will be released this week. An upbeat print could diminish the chances of more QE expansion from the ECB which signaled just two weeks ago that a decision on QE could be taken at the December meeting.

Technical Outlook

EURUSD: After prices remained choppy, trading back and forth between 1.0934 and 1.0894, the euro broke out to the upside, closing on Friday at 1.0981. This potentially validates the long position that was mentioned on the forum here. Further upside could see the euro rally to as much as 1.1046 before we can expect a pull back to the breakout near 1.0934. As long as this pullback holds at the support, EURUSD could see further gains to 1.11330. The bullish bias could be invalidated on a close below 1.0894.

USDCHF: The price reversal occurred about two Renko boxes away from the targeted level, as noted in the day trading ideas section on the forum. USDCHF broke down below 0.9907 and extended the declines down to close at 0.98749. In the near term, we can expect a rebound as USDCHF will likely test the breakout level near 0.9907 – 0.9917. As long as the retracement holds out at this level, USDCHF could see further declines in the near term. The downside target remains at 0.9817.

GBPUSD: Price action has been flat within the falling price channel but the consolidation has now moved into a descending wedge pattern. Support has been established at 1.2166 and an upside breakout could trigger further gains in GBPUSD towards 1.2441. There is however a risk of a fake breakout to the upside as we also notice a descending triangle pattern. This puts the downside target to 1.1886 if the support at 1.21660 breaks down. Still, the scope is for a retracement to the upside. Watch for GBPUSD testing 1.24410 in the near term.

AUDUSD: The declines in AUDUSD off 0.7700 saw price falling towards 0.7580. The recent reversal seen in AUDUSD could be limited as we expect a near term declines back to 0.7581 which will mark a retest of the breakout level. Establishing support at 0.7581 could signal further upside towards the next immediate resistance at 0.7626 – 0.7631 region. While AUDUSD remains a long term sell, the short term trend is to the upside.

Fundamental Outlook

The week ahead will see a new month and lot of economic data that will drive the markets. More importantly, the RBA, BoJ, BoE and the FOMC meetings are lined up this week. Overall, no changes to monetar policy is expected at this week’s central bank meetings with the exception of the Federal Reserve which could signal a potential rate hike in December.

This could be a positive for the US dollar, but it would be futile to expect further strengthening of the greenback in second rate hike in a year.

Elsewhere, the BoE is seen holding rates steady which could offer a potential upside to the British pound which has been steadily declining.

The US ISM manufacturing and non-manufacturing PMI’s will be coming up this week, after the FOMC meeting followed by Friday’s payrolls report, all of which gives enough ammo for some good ranges to be established.