Top Trade Setups in Forex - ECB Draghi Set to Testify Before European Parliament!

The U.S. Dollar Index gained 0.2% on the day to 98.51 on Friday. Chinese trade delegations dropped a proposed trip to U.S. farms following U.S. President Donald Trump remarks where he announced he wasn't interested in a "partial deal" with China. Later today, the Markit U.S. Manufacturing PMI for September is expected to be in line with the previous month's reading of 50.3.

The euro slipped 0.2% to $1.1018. Official data showed that the Eurozone’s Consumer Confidence Index climbed to -6.5 in September (vs. -7.0 expected) from -7.1 in August. Later today, the September Markit Eurozone Manufacturing PMI (vs. 47.5 expected) and Services PMI (vs. 53.2 expected) will be released.

 

EUR/USD - Weaker PMI Figures Drives Sharp Sell-off

During the early European session, the single currency Euro is trading at 1.0978, down -0.0039 points and -0.37% for the day. The economic condition of the European Union is continuously suffering and making the Euro weaker. 

The odds of a recession in Italy and Germany is keeping the Euro on knees. Euro started to fell further when last week ECB decided to cut the deposit rates by 0.10% and announced that the QE program. 

ECB is looking to initiate bonds purchases worth of 20 Billion Euro, and it's intended to resume from November 1. The trend of this single currency was bearish, but some other economic events and strong USD made the EUR/USD pair moved in the opposite direction lately. 

On Monday, there were few critical economic events due such as the French, German Flash Services & Manufacturing PMI along with the ECB President Draghi’s speech. The manufacturing and services PMI has disappointed, but the ECB President Draghi speech will help determine the future trend of Euro.  

On Monday, the EUR/USD technical outlook seems pretty bearish, mainly due to the release of worse than expected manufacturing and services PMI figures. 

The EUR/USD is eyeing to target 1.0960 area on the 4-hour timeframe. While the bearish crossover of this level may trigger further bearish trend until 

The MACD and the RSI are trading below the crossover point of 0 and 50 respectively. Both of the indicators are advising strong bearish bias among traders. 

 

EUR/USD - Technical Levels 

Support Resistance 

1.0988 1.106

1.0956 1.11

1.0885 1.1171

Pivot Point 1.1028

 

EUR/USD - Daily Trade Sentiment

The EUR/USD is likely to trade bearish below 1.1020 to target 1.0960 and 1.0930 areas today. Bullish reversal can be seen around 1.0925 area. 

 

USD/JPY - Strong Bearish Technical and Fundamentals  

The USD/JPY pair closed on Friday at 107.554 after placing a low of 107.518. The overall trend of this pair was bearish that day.

This bearish trend was caused by many factors which included an escalated tension between the Middle East, US-China Trade relations, and Federal Reserve’s rate cut. There were mixed sentiments related to USD last week, but the primary factor moving the currency downward could be US-China trade relations.

The pair was affected by the Saudi Oil fields attack at the beginning of last week. Later, the tensions between the US and Iran arose due to the evidence of Iranian involvement in attacks according to the US and Saudi officials. However, they were denied by Tehran, so the tension between Iran & the US went down.

In mid-week, Saudi officials promised that the production would be back online by the end of the month, so this news supported the pair afterward. On Wednesday, the Fed cut its interest rates by 0.25% as expected but didn’t give any certainty over future rate cuts. This uncertainty supported the USD/JPY pair in mid-week as well.

On Thursday, Bank of Japan held its overnight interest rates at -0.1%, the target for 10-yr bond yield at 0% and the asset purchases at 80 trillion yen. BOJ gave a hint at possible action in October about future rate cuts.

And at the end of the week, pair again suffered due to the cancelation of the visit to US farms by Chinese delegates on Friday. The decision by Chinese commissioners despite the ongoing negotiations about a trade agreement between the two countries was unexpected. It created a safe-haven sentiment and made USD weak to move this pair further downward. 

On Friday Donald Trump deployed additional troop and military equipment in Saudi Arabia & UAE after their request to help in security &defense. This news also affected the USD/JPY pair hence making it close on the bearish trend.

In next week the ongoing trend of this pair is likely to be followed as the tensions between US & China trade relations are not going to end soon. The Middle East crisis is still not solved, which can also affect the pair movement.

In coming the first week of October, there is an official Trade negotiation due between US & China. Traders will be looking forward to it as the future of this pair movement depends upon the result of talks. On next Tuesday, there is a speech due to BOJ Governor Kuroda, in which he may give a hint for future rate cuts. Traders will also be looking towards this speech to earn benefits.

 

USD/JPY - Technical Levels

Support Resistance 

107.38 107.89

107.2 108.21

106.7 108.71

Pivot Point 107.71

 

USD/JPY - Daily Trade Sentiment

The USD/JPY is trying to break below a substantial support area of around 107.500. This level is also working as a double bottom, which extended support to the USD/JPY back on September 15.

The RSI and MACD have also crossed below the selling zone, suggesting strong odds of sell-off. The USD/JPY has immediate support at 107.100 while resistance continues to stay at 107.550. The bearish bias is expected in the pair.

 

Gold - XAU/USD - Risk Appetite Drops over Trade War 

Gold closed at $1516.270 after placing a high of $1517.040. In last week, the Gold showed a positive difference of about $34 in higher and lower prices. In other words, we can say that last week was in favor of Gold prices.

On the Closing day of last week, first, there was an update about the cancelation of a visit to US farms in Montana by the Chinese delegation. This news gave an impression to traders that the US and China are far apart on any trade deal. Even though the US and China had an initial agreement of trade deal between them, one statement from Trump could create volatility in the market. 

The cancellation of a visit to US farms from Chinese delegates weakened the Dollar index slightly giving advantage to Gold buyers. Secondly, a headline related to Donald Trump’s statement about deploying more troops to Saudi Arabia and UAE lifted the Gold prices on Friday. After the drone attack on Saudi Oil Fields on September 14, the Saudi and the US officials said that there was evidence of involvement of Iran in those attacks. However, this allegation was denied by Tehran.

A rebel movement named Houthi in Yemen, who have been in a war since 2015 with a Saudi-UAE led coalition, claimed the responsibility of attacks on Saudi Oil Fields. On Friday, a Houthi official said that they would stop aiming missile and drone attacks on Saudi Arabia, but he also cautioned that the continuation of war could lead to dangerous developments.

In response to this, Saudi Arabia and UAE requested the United States to help improve their air & missile defenses. Which was accepted by Donald Trump, and he stated that the US would deploy additional military troops to Saudi Arabia & UAE to enhance their security. Hence, the Gold prices moved upward in consideration of safe-haven possibility.

Apart from these trade tensions and Middle East crisis, last week had another essential factor which raised Gold prices. It was another Interest rate cut of 0.25% by Federal Reserve this year. Further cut by Fed is not satisfied because of no guarantee over such decision was given by Fed Chairman Powell. 

The upcoming week is essential for Gold as it will be showing upward movement in response to trade-war and geopolitical tensions.

 

Gold - XAU/USD - Daily Technical Levels

Support Resistance 

1503.38 1524.19

1490.61 1532.22

1469.81 1553.03

Pivot Point 1511.42

 

XAU/USD - Daily Trade Sentiment

On Friday, gold formed and closed the bullish engulfing candle on the daily timeframe, which is signaling bullish bias among investors. Therefore, we may see the bullish trend in gold this week. Gold's immediate support stays at 1509, and above this, gold has the potential to go after 1522.