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Renko Technical Analysis

Last week saw the OPEC oil meeting resulting in a surprise decision to limit production levels. Although the production cap wasn’t as much as expected, the meeting showed that the oil cartel was taking the steps required to curb production. The markets rallied on the news but soon worries in the banking sector saw the markets step back from taking on too much risk. There were many central bank speakers over the week but it did little to push prices higher.

The final trading week for September concluded with a mixed picture with GBPUSD continuing to remain bearish while gold prices were also seen pulling back. Broadly put, the markets remained mixed and choppy with no medium term trend.

Technical Outlook

XAUUSD: From last week’s analysis, gold prices fell to 1325 and pushed lower. By Friday, gold settled at 1315.50 and it is possible that the near term decline in gold is likely coming to an end. Therefore a near term correction is likely to happen this week. Watch for support at 1311 – 1312 where a reversal can be expected. The bullish divergence to the MACD histogram shows the potential for a reversal back to test the 1334.30 support that was broken but failed to establish as resistance.

EURUSD: EURUSD fell to 1.1180 – 1.1160 support level marking a retest of the breakout from the falling wedge pattern. Prices quickly reversed off this level to close at 1.1233 on Friday. Looking ahead, expect to see another near term decline in EURUSD with a retest back to 1.1187 – 1.1197 support level. Forming a higher low here and a retest will see EURUSD potentially target the current highs at 1.1233 followed by 1.1267.

GBPJPY: GBPJPY is showing the potential for a move to the upside if the currently forming ascending triangle pattern is validated by a breakout above the resistance at 132.118. Watch for potential signs of a reversal at the current level and a confirmation based on a breakout above 132.118 could trigger further gains towards 134 – 135 in the near term. However, the bullish bias can be invalidated if GBPJPY breaks down below the trend line or near 131.00. In this case, the previous lows at 129.920 could be tested again.

EURGBP: The price action in EURGBP has been very bullish with any dips turning into a buying opportunity. However, it is possible for price action to turn bearish for a correction after the break of the rising trend line and forming resistance near 0.8655 – 0.8649 region. A confirmed bearish reversal here on the 10 pip EURGBP renko chart could signal near term declines towards 0.8500 – 0.8489 levels. The MACD histogram is also pointing to a bearish divergence currently validating the downside bias.

Fundamental Outlook

The week ahead is busy with a new month and therefore lots of data. Watch for Monday’s Tankan surveys from Japan which will influence the JPY crosses. Later this week, US payrolls on Friday and ISM manufacturing and non-manufacturing PMI’s will be the main events to watch for. As far as the GBP is concerned, the Markit PMI surveys will play an important role as expectations show short term weakness in the surveys after the index rose strongly in August. In conclusion, expect most of the currencies to remain flat with only short term trading opportunities coming along.

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