FOREX CHART ANALYSIS OCT 22 - ALL ON USD
USD is still in the spotlight this week. Let's check out the chart analysis as followed:
- The deadline set by House Speaker Nancy Pelosi for the comprehensive stimulus package has passed without a deal, but she says she is optimistic about the stimulus despite noting the faction leader. Senate Republican Mitch McConnell was an obstacle to reaching an agreement before the US election.
- Ms. Pelosi said that an agreement with the Trump administration needs to be made later this week to get a bill passed next weekend, ahead of Election Day.
- Growing confidence in a deal pushed 10-year and 30-year Treasury yields to more than four-month highs and pushed the dollar index to six-week lows.
- EURUSD had a good increase in Wednesday session, thanks in large part to the motivation from the decline of USD. However, the complicated epidemic situation in the EU has caused the common currency to suffer many downside risks, especially the potential consequences for the already fragile economic recovery of the Eurozone.
After the bearish signal when rejected around 106, USD/JPY collapsed quite strongly, penetrating 105 sooner than expected. Breakout of 105 has completely invalidated the previous short-term bullish structure. We will continue to follow this downtrend. Who has the short order continues to hold. You can replenish your position when the price re-tests the 105 conversion zone if there is a signal. The target for this decline is around 104.
The first scenario happened with EUR/USD. The price broke the 1.183 zone and confirmed the continuation of the uptrend. This move causes us to correct the upside channel line. It can also be seen that the amplitude to 1,190 is not much, so the probability of an adjustment is quite high. Furthermore, this price zone converges with the upper boundary of the channel, so buying at this time is no longer suitable. We should wait for clear regressions and then consider it.
GBP/USD had an important change in the last session. It broke through the 1.31 barrier. This again reiterates the head-and-shoulders reversal pattern formed earlier. The initial target for this rally is likely around 1.325 - 1.330. Anyone with a long order should consider moving the Stop Loss because this price range is about to be approached. It is also not excluded the possibility that there will be an adjustment around the above price range, and it can provide an opportunity to add position when the price retests the 1.31 zone or the neckline of the pattern.
We were wise to reduce the risk around 1.31 because the price is correcting quite quickly to the upper boundary of the down channel. We maintain the old strategy: replenish the position when the price breaks below the 1.31 support. In case of noticeable bearish signals around 1.32, sell orders can also be considered.
Our warnings yesterday came true. The bulls reacted quite strongly around 0.70 and even broke through the 0.71 zone. This bullish momentum is doing very well and the correction could easily extend to the upper boundary of the bear market. You should avoid trading now.