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FX analysis

Global Indices – Are the bulls getting back in the game?

This month the USD has shown some pause while deliberating its next move. Now that Central Banks across the globe are either hinting at, or actively raising rates, the USD could encounter more resistance going forward. The U.S. may also see a flattening of their inflationary data, which could be well received. Even with so much going on, there may still be opportunities across several asset classes which could provide worthwhile returns for both swing and day traders.

Zooming in on the weekly timeframe, there are several important items to take note of: Price is about to break higher than the previous lower high (from the recent downtrend at 28th May) priced at 4,200. This often can indicate a potential change in trend. One could also argue that there is a higher low in place from the 3 bullish candles covering June and July pushing up from 3,750. Finally, price is just over/above the 50 period moving average, which is a key criteria for a bull market.

Should the markets reject these levels by the end of the week, with a lower-closed bearish candle, then it could be more likely that the markets may be preparing for another move lower. However should they close above these levels, then a return to the bull trend could be possible.

On the daily chart below, price action is bullish and trending in a stable fashion, with higher highs and higher lows in price action, which combined with both the MACD and RSI trending higher could support a bullish sentiment.

For swing traders looking for buy signals, any bullish candles that form in the area in and around the 10 and 20 moving averages could feasibly provide an entry above with a stop-loss below. Experienced traders often don’t trust that the markets will be kind to them, and so they may employ a strategy of taking partial profits at a conservative 1st target while allowing a portion of the trade to continue to a 3:1 exit or further - the next major resistance level is approximately 4,550. This approach allows for shorter-term gains, even if the longer-term bearish sentiment returns ahead of schedule.

For Day Traders, looking at the 4-hour chart below could be the next sensible entry timeframe, but there is a red flag here - both the MACD and RSI show bearish divergence, often an indicator a retracement is due. That may be less likely in this case, since price has closed above the highs. In order to be more confident in a move to the upside, traders would also look for the momentum indicators to start trending higher, breaking above the pink levels drawn in here.

At this time, much of the technical evidence could suggest the bulls are in charge for now.


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