The daily chart shows the UK big board came with a few points of printing a fresh multi-month low on Thursday, although subsequent price action has been positive and strengthened that area of support. With this support seemingly in place for the short-term, the cluster of moving averages above continue to crimp price action and suggest a breakout. All three simple moving averages are within 50-55 points of each other and continue to point lower, constricting price action and leading to an imminent break. The three moving averages are clustered between 5,930 and 5,986 with the 38.2% Fib retracement at 5,889 just below. The FTSE will need a fundamental driver to force a breakout of the current technical stranglehold.
Away from the negative fundamental backdrop, the FTSE is also struggling to push higher with its path blocked by a cluster of moving averages which continue to force the indices lower. Add into the mix an important Fibonacci retracement level and multi-month low prints and the FTSE needs a boost of positive sentiment if it is to push higher.
The daily gold chart shows how the 50-day simple moving average (blue line) has acted as upside resistance since mid-September. Gold is currently toying with the 20-dma and if that breaks then initial support will be found around $1,872/0z. ahead of the late-September double low around $1,848/oz.
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So we’re in the final hours of Q3 and the rest of this week brings some high-impact data out of the United States. This could serve to extend the near-term bullish trend in USD or, perhaps, may help to bring bears back into the mix to re-test those two-year-lows that came into play earlier this month.
Tomorrow could be especially pensive as we get both PCE and PMI numbers out of the US. The PCE number will give some insight into inflationary pressure; and the day after brings Non-Farm Payrolls so market participants will get an updated view on the employment picture out of the United States. Collectively, these data outlays can help to re-frame the September outlay that saw a noticeable change-of-pace in both stocks and currencies.
Coming into September the US Dollar was beset by a sell-off that had held since the March spike. Prices in USD pushed down to fresh two-year-lows on the first day of the month, running into a giant area of confluent support. That’s where matters begin to shift, and after a support hold in the first couple of weeks of September, buyers got a bit more active last week in helping the currency to push up to a fresh high.
At this point, the monthly chart shows a not-yet-confirmed bullish engulfing pattern. Such formations will often be approached with the aim of bullish continuation, and when taken with the context of long-term support, this can keep the door open for bullish continuation themes into the Q4 open. For this formation to confirm, today’s price action would need to close above the August open at 93.44.
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Euro is attempting a second weekly advance against the US Dollar after rebounding off confluence support into the close of September. The rally is vulnerable however as EUR/USD approaches the first test of resistance and we’re on the lookout for possible exhaustion on a stretch higher.
USD/JPY rates look poised to extend their trek lower after failing to climb back above confluent resistance at the trend-defining 50-day moving average (106.23) and Schiff Pitchfork parallel.
Although price has recovered significantly since collapsing 2.4% from the monthly high (106.55), the recent topside push appears to have validated the downside break of the uptrend extending from the March low (101.18) and suggests further losses may be afoot.
Moreover, with the RSI continuing to respect the downtrend extending from the June highs and price tracking below the 21-, 50-, 100- and 200-DMAs, the path of least resistance seems to be lower.
Therefore, should USD/JPY remain capped by psychological resistance at the 106.00 level a retest of the 2019 low (104.45) looks on the cards, with a daily close below the September low (104.00) needed to bring the yearly low (101.18) into play.
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