Prices Don’t Always Move in a Straight Line: S&P 500, EUR/USD, AUD/USD
Joe Perry October 28, 2020 10:22 PM
US Dollar is higher today on fears of contagion from the coronavirus
Stocks are lower today and the US Dollar is higher today as fears of contagion from the coronavirus and the possibility of more national lockdowns are taking hold (It was just recently released that Germany’s lockdown will begin on Monday and France is preparing a Stay-at-Home order). This may also be some unwinding of long positions heading into the election next week. Yesterday, we discussed how the Yen is considered a flight to safety. The US Dollar is also considered a flight to safety has increased today with the breakdown in stocks.
S&P Futures broke below horizontal support and a descending triangle on Monday. Today, the index broke below the 61.8% Fibonacci retracement level from the lows of September 24th to the highs of October 12th, near 3331.72. The target or the breakdown of a descending triangle is the height of the triangle added to the breakdown point, which is near 3260. Horizontal support also crosses near that level. However, the RSI is in oversold conditions on a 240-minute timeframe and may be getting ready for a bounce. If so, sellers will be looking to enter short positions near resistance at 3355 and near 3400.
Source: Tradingview, City Index, CME
Going back to early September, EUR/USD has been confined to a range between roughly 1.1600 and 1.2000. However, as we mentioned the US Dollar is considered a flight to safety, and as a result is heading higher (EUR/USD lower) within that channel. The pair is currently breaking down from a descending triangle as well, and its target is 1.1700 with support just below at 1.1680. However, the RSI is diverging, and the pair may be ready for a bounce. If so, sellers will be looking to enter short positions near 1.1800.
Source: Tradingview, City Index
After a beat last night for Australian CPI, the Aussie initially went bid. However, as coronavirus fears began to spread around the globe, AUD/USD caved to the pressure and the US Dollar began moving higher (AUD/USD lower). As a result, the pair is looking to push through a descending triangle of its own. The RSI is not yet in oversold territory; however, AUD/USD is already down 100 pips off its highs. The pair may bounce before trying to break though support near .7000. Sellers will be looking to enter short positions near .7100.
Source: Tradingview, City Index
After expanded moves already today in many of the US Dollar pairs, traders may wish to wait for a bounce (or retracement) entering long US Dollar positions (short counter-currencies). However, with coronavirus fears spreading, national lockdowns pending, and US election and Brexit uncertainty, traders need to be nimble and ready for headline risk. Make sure to use proper risk/reward management.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.