Top Trade Setups in Forex – Assets on a Correction Mode
|On Tuesday, the financial instrument seems to exhibit correction, in the wake of profit-taking in the market. The U.S. stocks encountered a massive selloff, as investors' risk appetite continued to shrink amid the global spreading of China's coronavirus.
The Dow Jones Industrial Average slumped 1031 points (-3.6%) to 27960, the largest point decline in more than two years. The S&P 500 tumbled 111 points (-3.4%) to 3225, and the Nasdaq 100 plunged 367 points (-3.9%) to 9079. Shares in Semiconductors & Semiconductor Equipment (-4.9%), Automobiles & Components (-4.84%) and Energy (-4.74%) sectors lost the most. The eyes will be on the CB Consumer Confidence, which is due to come out during the U.S. session now.
XAU/USD - Profit Taking in Gold Triggers Selloff
On Tuesday, the precious metal gold prices slid as traders reserved profits from a hike to a seven-year top during the preceding session. Whereas the stock market recovered some stability, but increased cases od coronavirus outside of China underpin the bullion's losses.
Gold prices are now trading with the bearish sentiment, so far edged down by 0.2% to $1,657.40. On Monday, the precious metal gold prices rose as much as 2.8%, to test it's highest since January 2013 at $1,688.66.
Save-haven assets, like U.S. government bonds and gold, kept receiving bids. The benchmark 10-year Treasury yield slid from 1.470% Friday to 1.377%, the lowest level since July 2016. And the 30-year yield shed 6.8 basis points to 1.849%. Spot gold marked a day-high of $1,689 an ounce before closing at $1,659, a fresh 7-year high.
The U.S. Treasury Secretary Steven Mnuchin announced that he does not anticipate the coronavirus break to have a major impact on the Phase 1 trade agreement with China, although that could evolve as more information will be accessible in the following weeks.
XAU/USD - Daily Technical Levels
|
Support |
Pivot Point |
Resistance |
|
1643.69 |
1666.54
|
1682.16 |
|
1628.07 |
1705.01 |
|
|
1589.6 |
1743.48 |
XAU/USD - Daily Trade Sentiment
The yellow metal gold has previously filled the massive gap that it placed yesterday during the market open time. The gap came in the wake of the coronavirus outbreak. For now, it's consolidating around 1,645 and is facing immediate support around 1,643 mark. The yellow metal has concluded a shooting star candle on the daily chart, which is suggesting that the buyers are drained, and bears may appearing around the corner.
Gold has achieved 38.2% Fibo retracement at 1,643 mark, and beyond this, we can see a small bullish recovery. However, in the case of bearish violation of 1,643 support, we may notice gold going towards 50% and 61.8% Fibo mark of 1,624 and 1,604.
USD/CAD - Corporate Profits Report Ahead
The Canadian dollar weakened against the greenback as oil prices slumped. USD/CAD advanced 0.5% to 1.3288. Meanwhile, Official data showed that Canada's wholesale trade sales grew 0.9% on month in December (+0.4% estimated). Other commodity-linked currencies were mixed against the greenback. AUD/USD slid 0.3% to 0.6610, while NZD/USD was flat at 0.6342.
On Monday, the Canadian dollar declined to a two-week low versus its U.S dollar in the wake of coronavirus, which got spread outside China. It's increasing expectations that the Bank of Canada could decrease interest rates as early as in the coming week.
Prospects that the bank would lose its monetary policy on March 4 announcement soared to 30% from the forecast of 20% on Friday. Almost a week ago, the market was trading the Canadian dollar with an l0% chance of a rate cut.
On the other hand, crude oil prices dispensed continued downward momentum, as Nymex crude oil futures plunged 3.7% to $51.43 a barrel, and Brent lost 3.8% to $56.30 a barrel which is also weighing on the Canadian dollar prices against the U.S. dollar. For now, let's brace to trade the U.S. Consumer Confidence figures during the U.S. session today.
USD/CAD- Daily Technical Levels
|
Support |
Pivot Point |
Resistance |
|
1.3261 |
1.3285
|
1.3317 |
|
1.3229 |
1.334 |
|
|
1.3174 |
1.3395 |
USD/CAD- Daily Trade Sentiment
On Tuesday, the USD/CAD is trading mostly sideways around 1.3270, holding right above the immediate support mark of 1.3270. The USD/CAD may trade bullish above this support level until the next resistance level of 1.3325.
The RSI and Stochastics are waiting in the buying zone, signifying chances of a bullish bias, while the Stochastics is also staying over 80. Downward crossover of this mark can prolong selling unto 1.3240 and 1.3245.
AUD/USD – Bearish Channel Intact
The AUD/UD is trading with a bearish bias near the multi-year lows of 0.6600 support. The market risk-tone is keeping the Aussie under pressure as the AUD/USD pair is currently trading at 0.6587 and consolidates in the narrow trading range of 0.6587 - 06620.
The greenback stayed light on Tuesday amid forecasts that the Federal Reserve may decrease interest rates this year to control downside influence on the economy produced by China's coronavirus break.
On Friday, the AUD/USD was seen on the bullish track, though the pair started this week with a bearish bias in the wake of a stronger dollar and weaker Aussie. Intensifying worries of coronavirus and its influence on the economy triggered a fresh wind of the global risk-aversion trade, putting weight on perceived riskier currencies, like the Australian dollar.
Traders prefer safe-haven assets, largely due to a surge in the number of coronavirus events outside China, particularly in South Korea and Italy. As per the recent news, the number of coronavirus cases in Italy's Lombardy area expanded from 89 to 150, leaving the country with more than 200 confirmed cases.
Consequently, the investors are parking their funds into safer areas such as the U.S. dollar and gold while selling the Australian dollar.
AUD/USD - Technical Levels
|
Support |
Pivot Point |
Resistance |
|
0.6596 |
0.6687
|
0.6649 |
|
0.6564 |
0.667 |
|
|
0.6511 |
0.6723 |
AUD/USD - Daily Trade Sentiment
On Tuesday, the AUD/USD pair is trading above the double bottom support area of 0.6585. The 50 periods EMA is suggesting a bearish trend in the Aussie. While the RSI and Stochastics are holding in an overbought zone, which may help trigger a bearish trend in the AUD/USD pair.
At the same time, the downward channel, which can be seen on the 4-hour timeframe, has also not yet violated, and it's keeping the AUD/USD prices bearish. A bearish breakout of 0.6585 level can extend selling until 0.6560, while the continuation of the selling trend can extend bearish trend until 0.6530. All the best for the New York session!
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.