Top Trade Setups in Forex – US ISM Manufacturing PMI In Highlights!

The U.S. stocks remained under pressure and completed their worst week since the 2008 financial crisis.The Dow Jones Industrial Average sank 357 points (-1.4%) to 25,409, and the S&P 500 dropped 24 points (-0.8%) to 2,954, while the Nasdaq 100 managed to close 25 points higher (+0.3%) at 8,461.

Stocks pared some losses in the last trading hour on Friday, after U.S. Federal Reserve Chairman Jerome Powell announced that the Federal Reserve bank is "closely monitoring" the coronavirus epidemic, adding: "We will use our instruments and act as suitable to support the economy."

Later in the day, the focus will be on the Bank of England as it will release the number of mortgage approvals in January (68,000 expected) and the M4 money supply.

XAU/USD - Double Bottom Support 

On Monday, the yellow metal gold surged over 1%, recovering losses from a steep slide in the previous session amid the fast-spreading coronavirus and expectations for a rate drop by the U.S. Fed. The precious metal gained over 0.9% to trade above $1,599.15, having surged nearly 1% briefly in the session. 

The buying in gold came in response to the Fed Chair Jerome Powell's comments that the U.S. economy persisted strong, the coronavirus "postured an evolving risk." Whereas, the U.S. central bank is all set to take action if required. Fed Lower interest rates diminish the opportunity cost of owning non-yielding bullion. The Fed fund revealed that traders anticipate a 0.75% point rate taped by the Federal Reserve in its March monetary policy meeting.

The U.S. Commerce Department will report construction spending in January (+0.6% on month expected). The Institute for Supply Management will release its manufacturing index for February (50.5 expected).

XAU/USD - Daily Technical Levels

XAU/USD - Daily Trade Sentiment

Gold prices have dropped dramatically on Friday, examining the support level of 1,562. Nevertheless, on Monday, it's been surging to trade at 1,602, which marks 38.2% Fibonacci retracement level. Extension of a bullish retracement can extend buying until 1,621, but for this, gold needs to break above the 1,607. Whereas, next support lingers around 1,593.

USD/CAD - 50 EMA Test & Reversal 

The USD/CAD edged up 0.1% to 1.3398. Government data showed that Canada's fourth-quarter annualized GDP grew 0.3% on quarter as expected. This week, the eyes will remain on the Bank of Canada to drive further movements in the market. 

So far, the BoC has left the benchmark rate unchanged at 1.75% since October 2018, and traders are also expecting no change in the upcoming meeting. The tone of the rate statement could influence the movement of USD/CAD. Later today, the Institute for Supply Management's Manufacturing Purchasing Managers' Index is expected to fall to 50.5 in February from 50.9 in January, while construction spending in January is expected to increase 0.6% on the month. Also, the final readings of February Markit Manufacturing Purchasing Managers' Index is expected to remain unchanged at 50.8.

Oil prices have not yet located a bottom. U.S. Nymex crude oil futures fell 2.3% to $45.26 a barrel, posting a six-session losing streak involving 15.8%. Brent was down 3.2% to $50.52 a barrel. A drop in crude oil prices has also driven a selling bias of the Canadian dollar. 

USD/CAD - Daily Technical Levels

USD/CAD - Daily Trade Sentiment

The USD/CAD is trading with a mixed bias, having dropped to the resistance to become a support level of 1.3325. This level also extended by the 50 periods EMA which may drive bullish bias in the USD/CAD. 

The closing of the Doji candle, followed by a bullish engulfing pattern, may drive buying in the USD/CAD pair. The commodity currency may find support around 1.3325, and below this, the next support may prevail at 1/3275. On the higher side, the resistance is expected to be seen around 1.3435. Let's stay bullish over 1.3325 today.

AUD/USD – Lowers Low Pattern In-Play

The  AUD/USD bounced to 0.6532. Earlier today, China's Caixin Manufacturing PMI declined to 40.3 in February (46.0 expected) from 51.1 in January.

The AUD/USD and NZD/USD were down 0.9% to 0.6510 and 0.6253, respectively. Over the weekend, official data showed that China's manufacturing PMI sank to 35.7 in February (45.0 expected) from 50.0 in January and non-manufacturing PMI slumped to 29.6 (51.0 expected) from 54.1.

The coronavirus proceeds to grow around the globe, with South Korea (3,736 confirmed cases, 21 deaths), Italy (1,694 cases, 34 deaths), and Iran (978 cases, 54 deaths) seeing the fastest growth in the number of cases. Meanwhile, the U.S. has recorded its first coronavirus death.

Later today, the Institute for Supply Management's Manufacturing Purchasing Managers' Index is expected to fall to 50.5 in February from 50.9 in January, while construction spending in January is expected to increase 0.6% on the month. Also, the final readings of February Markit Manufacturing Purchasing Managers' Index is expected to remain unchanged at 50.8.

On Tuesday, the eyes will remain on the RBA monetary policy statement. With China coronavirus exerting its toll on the Australian markets, there is some obligation on the RBA to cut rates. The bank has kept rates at 0.75% since October, and analysts are anticipated to cut the interest rate from 0.75% to 0.50% in the upcoming meeting. A dovish rate statement could send AUD/USD to down to the ground.

AUD/USD - Technical Levels 

AUD/USD - Daily Trade Sentiment

On Monday, the bearish channel of the AUD/USD proceeds to bring bearish bias as the pair has slipped to 0.6534. At the moment, the AUD/USD pair is forming lowers high, lowers low pattern on the 4-hour timeframe, which may trigger further selling in the AUD/USD pair. 

On the lower side, the AUD/USD pair may find support around 0.6500 and 0.6465, while the immediate resistance is likely to be found around 0.6595. The 50 periods EMA also extends resistance around the same 0.6595 level, which is why it will be a good idea to stay bearish below this level today. 

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