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The Technical Breakdown – The Pound Clears Multi-Month Resistance!

Out of all the price action I've distilled in this report though, what especially jump out for me is the breakout in the Sterling index, at last clearing what's proven to be a hugely sticky area of resistance on the way up for months.

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Opportunities in the Forex indices (video below)

To see an expanded version, right-click and select ‘open link in new tab’. The indices show the performance of a currency vs a G8 Forex basket. Indicators are available to use these measures via Tradingview and MT4.

 

There has been a notable resurgence in risk-on dynamics that has resulted in violent gyrations in favor of the Pound, the Aussie and the Kiwi. On the contrary, currencies that tend to perform best in times of risk-off have been bashed, printing sizeable outside candles through the last European session. Out of all the price action I’ve distilled in this report though, what especially jump out for me is the breakout in the Sterling index, at last clearing what’s proven to be a hugely sticky area of resistance on the way up for months.

In my video analysis below I use concepts taught in the brand new Academy website such as momentum, volatility measures and market structures to come up with the daily outlook in the currency market.

EUR INDEX – SHORTS DOMINATE NEAR TERM

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The outlook for the Euro in the short-term is rather bearish as the index regained the downside of its control line (13-ema). What’s most important is the flow dynamics under which it has achieved this retention of the control line. An initial bullish price delivery in Europe was met with a wave of selling creating in the process a bearish outside bar in the 8h chart. This set the stage for the downward pressure we’ve seen following up through the US session. The path of least resistance near term is skewed to the downside.

GBP INDEX – SHAKES WEAK-HANDED BEFORE BREAKOUT

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The Sterling has confirmed a huge technical breakout after, at last, leaving behind what’s proven to be over recent most a very sticky area of resistance. This technical obstacle can now be stared from the rear mirror and that makes me think that dip-buying activity to extend the ongoing rally is the most likely scenario with a projected expansion of 0.4% to the next 100% projection. This price action is a trigger strong enough to qualify as a tradable opportunity to speculate on a long position for a risk reward of 3:1 as my default target.

USD INDEX – SOLD HARD, NEARS SUPPORT

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The US Dollar has been bashed by a sudden shift in sentiment that sent the currency from its weekly highs down violently to make new weekly lows all in the span of 8 hours. The near-term outlook for the currency looks bleak even if the area where the index price has landed makes it a poor proposition to speculate in shorts. The risk reward is simply not there. Patience is warranted until the ebbs and flows result in better dynamics to bet on the USD. It’s time to sit on the fences until further technical developments.

CAD INDEX  – OUT OF LOVE, NO ENTRY TRIGGERS

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After a sharp movement from a multi-month high to the lowest in 2 weeks, the CAD has gone through a minor pullback mainly led by profit-taking and improved risk dynamics. However, the technicals remain notably bearish and as the index approaches back its control line, renewed sell-side opportunities may loom near. Also note, the highlighted purple rectangle constitutes the origin of the demand imbalance that led to the most recent bullish head-fake, hence reinforcing the notion of potential sells around this vicinity.

JPY INDEX – TIGHT RANGE, RISK OF STRENGTH

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The Japanese Yen remains in a phase of tight consolidation. This relatively narrow passage limits the bearish opportunities now that we’ve hit the bottom-side of the existing range. Even if we clear the downside, right underneath we find further support, so for this market to really have my interest, a minimal projected drop of about 0.2% should occur from the current price. If that’s accomplished, it would clear these area of support, which would results in greater volatility to trade the Japanese currency. Until that happens, it’s wait and see.

AUD INDEX – NEXT DESTINATION TOP-SIDE OF RANGE

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The Aussie has been one of the most benefited by the impressive return in risk-on conditions. The printing of a bullish outside candle through the European session places the risk back to a re-emergence of buyers for  campaign that may last all the way until the index returns to the top-side of its broad range (0.8% from top to bottom).

NZD INDEX – THE HOTTEST CURRENCY AT PRICEY LEVELS

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The title says it all. I am overall bullish in the New Zealand Dollar but the levels it trades at makes it a nonviable tradable market until I see a release of the buy-side pressure at least to a pint where the control line (13ema) gets retested and a lager pool of buyers re-group to jump on the bandwagon. Until that happens, exercising patience is warranted.

CHF INDEX – IN TRANSITION TO HIT RANGE SUPPORT

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The logic in the study of range anatomies makes me think that the Swissy is currently in a transition to retest for a third time the bottom-side of its range. This means the risk is skewed to the downside for a move that is projected to be about 0.25-0.3% from the NY close. All technical metrics and the price action (bearish engulfing in Europe) suggests this as a viable outcome.

Education -The Global Prime Academy

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Let me give you a brief background on why we’ve created the Global Prime Academy. The universal praise I received about my trading and content I produce has been incredible. However, clients were frustrated unable to find a structures frame to absorb all this knowledge. Part of these golden nuggets are now going to be encapsulated in easy to follow and digestible lessons.

About the author

Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.