U.S. equities edged lower throughout yesterday’s trading. The Dow Jones Industrial Average, however, was able to edge slightly higher by 0.12% to close at 29239.19. The S&P 500 lost 0.65% to close at 3588.84. The tech-heavy Nasdaq Composite retreated 1.1% to close at 10426.19. The risk-off sentiment was driven by comments from BoE governor Andrew Bailey, who said the central bank would end its special support of the gilt market. Governor Bailey urged market participants to unwind positions they may not have the ability to maintain.

The benchmark U.S. 10-year treasury yield continued to edge higher and was last seen trading at 3.947%.

Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion. The bombing from Russia was sparked by the attack on the Crimea bridge last week. Escalating tensions between Russia and Ukraine continue to weigh on investing sentiment and global energy supplies.

On the economic docket, Britain is set to release its GDP figures during today’s European trading session, and the U.S. will release PPI figures during the American trading session today. The FOMC meeting minutes will be released during the latter part of the American trading session today as well.

Main Pairs Movement

The Dollar index gained 0.1% throughout yesterday’s trading. The Dollar has continued to gain traction ahead of the key PPI data release and FOMC meeting minutes release. Markets are now pricing in further tightening of 75 basis points by the Fed as inflation continues to run rampant.

EURUSD gained 0.08% throughout yesterday’s trading. The Euro-Dollar pair was able to maintain its intraday gains despite a broadly stronger Dollar. Economic data releases by the U.S., however, can once again send the pair lower.

Cable lost 0.82% throughout yesterday’s trading. The British Pound dropped as BoE governor Bailey’s comment on pulling back the emergency purchasing of Gilts. Today’s British GDP release will be closely observed.

XAUUSD lost 0.12% throughout yesterday’s trading. The precious metal fared worse against a strong Dollar.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair edged higher on Tuesday, witnessing some recovery momentum and flirted with the 0.968~ 0.974 area despite the dismal mood that dominated financial markets. The pair is now trading at 0.9762, posting a 0.66% gain daily. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the retreating US bond yields exerted bearish pressure on the greenback and lifted the EUR/USD pair higher. The Sentiment remains deteriorated amidst fears that global central bank tightening would slash corporate earnings while dampening the economic outlook, but a scarce macroeconomic calendar and US first-tier events scheduled for later in the week limit further volatility. The Euro, the currency is likely to remain under pressure amid the fierce Russia-Ukraine tussles which raise doubts about the economic health of the old continent.

For the technical aspect, RSI indicator 48 as of writing, suggests that the pair is regaining upside strength as the RSI rose sharply towards 50. As for the Bollinger Bands, the price witnessed fresh buying and crossed above the moving average, therefore the upside traction should persist. In conclusion, we think the market will be bullish as long as the 0.9677 support line holds. Additionally, technical indicators recovered from oversold readings and the case for recovery will be firmer if the pair extends gains above 0.9836.

Resistance:  0.9836, 0.9921, 0.9986

Support: 0.9677, 0.9551

GBPUSD (4-Hour Chart)

The GBP/USD pair surged on Tuesday, regaining upside momentum and refreshed its daily high above the 1.1160 mark in the US session following the outcome of the Bank of England’s gilt purchase operations. At the time of writing, the cable stays in positive territory with a 0.94% gain for the day. The US dollar trims a part of its intraday gains and turns out to be a key factor lending some support to the GBP/USD pair. For the British pound, the Bank of England announced earlier in the day that it intends to purchase index-linked gilts and reiterated that it stands ready to purchase up to 10 billion sterling of gilts each day until the end of the week. The announcement is acting as a tailwind for the GBP/USD pair today. Moreover, the latest news reported that the BoE accepted 1.957 billion sterling of offers in the first purchase operation of index-linked gilts.

For the technical aspect, the RSI indicator is 52 as of writing, suggesting the bullish tilt in the near-term technical outlook as the RSI has risen above 50. As for the Bollinger Bands, the price preserved its upside traction and climbed above the moving average, therefore a continuation of the bullish trend can be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.1220 resistance. A four-hour close above that level could open the door for additional gains and favour the bulls.

Resistance: 1.1220, 1.1366, 1.1476

Support: 1.1023, 1.0797, 1.0392

XAUUSD (4-Hour Chart)

The XAUUSD price trims earlier losses and reclaims above $1680 as of writing, due to high US T-bond yields, alongside a strong US dollar, ahead of crucial US inflation figures to be released on Thursday, which could provide some clues regarding the need for Fed aggressive hikes. Even though yellow metal rebounded drastically, the market sentiment remains deteriorated amid fears that global central bank tightening would slash corporate earnings while dampening the economic outlook. The US 10-year Treasury bond yield is down by four bps but around year-to-date highs of 3.92%. The International Monetary Fund (IMF) cuts its forecast for the next year to 2.7% from 2.9%in July, almost 1% less than in January. Furthermore, the IMF said that the US would extend at 1% next year, unchanged from its previous forecast, but cut its outlook from 2.3% in July to 1.6%, which adds to fears about global growth.

From the technical perspective, the RSI indicator is from 30 to 45 as of writing, indicating a rebound in the near term could be expected till RSI fell back to below 30. As for Bollinger Bands, yellow metal rebounded back to the lower area of bands and kept bullish momentum to test the 20-period moving average of around $1688. If the four-hour chart closed above that level, the bulls could expect to challenge the month-high around $1723.

Resistance: 1688, 1723, 1761

Support: 1661, 1644, 1620

Economic Data

U.S. equities fell for the fourth straight day as growth fears and geopolitical risks weigh on market sentiment. The Dow Jones Industrial Average lost 0.32% to close at 29202.88. The S&P 500 shed 0.75% to close at 3612.39. The tech-heavy Nasdaq Composite dropped 1.04% to close at 100542.1.

Washington’s decision to further restrict China’s access to U.S. technology added sins of slowing chip demand worldwide. Market participants remain cautious ahead of the FOMC meeting minutes and CPI data, scheduled, respectively, to be released during the second half of the U.S. trading session on Wednesday and the U.S. trading session on Thursday.

The benchmark U.S. 10-year treasury yield has soared past 3.9% and was last seen trading at 3.955%.

The upcoming earnings season has been tainted by the relentless rate hikes by the Fed. JPMorgan Chase and Citigroup are among the big banks that will unveil earnings later this week. While economic data releases, so far this year, have brought great volatility to markets, the upcoming earnings season could be another bullet that will drag equities even lower.

Main Pairs Movement

The Dollar Index rose 0.38% throughout yesterday’s trading. Dollar demand resumed as bonds sold off and short-term interest rates soared. Trading at 113.17, the Dollar Index still has room above ahead of the key inflation data release on Thursday.

EURUSD retreated 0.43% throughout yesterday’s trading. The higher demand for the Dollar continues to weigh on the shared currency as market participants brace for another round of tightening by the Fed.

Cable lost 0.34% throughout yesterday’s trading. The British Pound fared worse against the Dollar as market sentiment turns risk off. Market participants will now turn their attention to the British average earnings index, scheduled to be released during today’s European trading session.

Gold slumped 1.5% against the Dollar as market participants for the Dollar outpaced Gold demand. As market participants prepare for another round of Fed tightening, Gold continues to stay on the backfoot as yield expectations rise.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair declined further on Monday, remaining under pressure and extended its decline for a fourth consecutive day near the 0.9680 level amid a risk-off market mood. The pair is now trading at 0.9701, posting a 0.41% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as another solid print from Nonfarm Payrolls last Friday continued to provide further strength for the greenback. The US Federal Reserve (Fed) is likely to maintain the aggressive quantitative tightening as the Nonfarm Payrolls report hinted at healthy job creation, therefore triggering the dismal market mood. For the Euro, the escalation of the geopolitical conflict continued to exert bearish pressure on the EUR/USD pair as Russia launched a massive attack which targeted the energy and communications infrastructure of Ukraine.

For the technical aspect, the RSI indicator is 35 as of writing, suggesting that the downside is more favoured as the RSI stays below the mid-line. As for the Bollinger Bands, the price remained under pressure and moved alongside the lower band, therefore the downside traction should persist. In conclusion, we think the market will be bearish as long as the 0.9735 resistance line holds. Additionally, technical indicators hover near oversold readings and the risk is also skewed to the downside.

Resistance:  0.9735, 0.9836, 0.9921

Support: 0.9664, 0.9551

GBPUSD (4-Hour Chart)

The GBP/USD pair edged lower on Monday, preserving its downside momentum and failing to stage a steady rebound despite the Bank of England announcing new support measures. At the time of writing, the cable stays in negative territory with a 0.44% loss for the day. The reports of Russia launching missile attacks on Kyiv and other cities in response to the Crimea bridge attack over the weekend have weighed on investors’ sentiment, which provided a boost to the US dollar and dragged the GBP/USD pair lower. For the British pound, the Bank of England announced a raft of new measures to smooth market functioning, including raising the limit of its government bond-buying scheme from £5B to £10B per day. But it seems like the additional support measures from BoE failed to lift the cable higher as concerns about the UK government’s fiscal policy and recession fears remained.

For the technical aspect, the RSI indicator is 35 as of writing, suggesting that buyers stay on the sidelines for the time being as the RSI indicator on the four-hour chart stays below 40. As for the Bollinger Bands, the price witnessed consistent selling and continued to drop towards the lower band, therefore a continuation of the bearish trend can be expected. In conclusion, we think the market will be bearish as long as the 1.12200 resistance line holds. On top of that, a steeper decline could be expected if the ongoing slide extends below the 1.0797 support.

Resistance: 1.1220, 1.1366, 1.1476

Support: 1.0797, 1.0649, 1.0392

XAUUSD (4-Hour Chart)

XAUUSD extends last week’s retracement slide from the $1730 mark region and continues losing ground for the fourth successive day on Monday, which tumbled to the $1667 mark as of writing. In the past week, Fed officials reiterated their commitment to bringing inflation to the Fed’s 2% target. On Monday, the Chicago Fed President Charles Evans said that he expected the Federal funds rate (FFR) to end at around 4.5% early in 2023, which FFR now sits at 3.25%, and then to remain around that level for “some time.” He sounds optimistic that the Fed could achieve a soft landing due to Fed projections of the unemployment rate hitting 4.4% by the end of the next year, while the Fed’s inflation measure to fall to 2.8% from August’s 6.2%. In addition, last week’s US Nonfarm Payrolls report figured more than forecast, further justifying Evan’s case for the Fed to continue tightening at a large size. The markets are now pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC policy meeting in November.

From the technical perspective, the RSI indicator was below 30, indicating the yellow metal was going to get into an oversold area. As for the Bollinger Band, the prices were breaking through the lower band and the gap between the upper and lower band was larger, showing that the gold would continue the bearish momentum, and test the lowest since October $1660 mark. Once the price fell below the $1660 mark, the next support would be a two-year low of $1615.

Resistance: 1700, 1725

Support: 1659, 1641, 1615

Economic Data

U.S. equities ended the week with a sharp drop throughout last Friday’s trading. The Dow Jones Industrial Average dropped 630 points to close at 29296.79. The S&P 500 slid 2.8% to close at 3639.66. The tech-heavy Nasdaq composite lost 3.8% to close at 10652.4. U.S. equities fell as the unemployment rate and payrolls jumped above market expectations. U.S. unemployment rate printed 3.5%, beating market expectations of 3.7% as the labour participation rate edged lower to 62.3%. U.S. nonfarm payrolls increased by 263,000 for the month, beating market expectations of 275,000. The upside surprise on the labour market has damped equities outlook as market participants interpreted Friday’s economic data release as favouring further tightening by the Fed.

Average hourly earnings rose 0.3% over the month, in line with market expectations. Further dissecting the jobs report—leisure and hospitality led to gains in hiring as the sector increased by 83,000 jobs. The healthcare sector generated 60,000 positions, while business services and manufacturing contributed 68,000 jobs. Markets are now widely expecting the Fed to continue the pace of its rate hikes with another 75 basis point increase in November.

Main Pairs Movement

The Dollar index rose 0.43% throughout last Friday’s trading. The upside shock of private sector hiring has decimated any notion that the Fed will ease its pace of tightening. A rise in expectations on short-term interest rates aided the Dollar to close the week in positive territory. Market participants will now turn their attention to the U.S. CPI data, which is scheduled to be released on October 13^th.

EURUSD lost 0.52% throughout Friday’s trading. Selling pressure for EURUSD mounted as U.S. job reports were released. A robust U.S. job market has pointed to further interest rate hikes by the Fed.

GBPUSD lost 0.62% throughout Friday’s trading. Cable fell as the U.S. Greenback gained momentum after the release of better-than-expected job reports.

XAUUSD fell 1.04% throughout last Friday’s trading. The precious metal fared worse against the Dollar as bidding for the Greenback returned due to a rise in short-term interest rate expectations.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair declined further on Friday, witnessing some fresh selling and dropped to one-week lows near the 0.9750 level following the release of the US official employment report. The pair is now trading at 0.9806, posting a 0.75% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as the greenback gained upside momentum and climbed to a fresh weekly high after the release of the Nonfarm Payrolls report. The US Nonfarm Payrolls rise by 263,000 in September, which came in better than the market expectation of 250,000 and reaffirmed Fed rate hike bets. The prevalent risk-off mood is also exerting additional pressure on the EUR/USD pair. For the Euro, the data released earlier in the session showed that Germany’s Retail Sales contracted 4.6% YoY in August and Industrial Production dropped 0.8%.

For the technical aspect, RSI indicator 38 figures as of writing, suggests that the sellers remain on the sidelines for the time being as the RSI has been moving sideways. As for the Bollinger Bands, the price remained under pressure and moved alongside the lower band, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair tests the 0.9755 support. Sustained weakness below that support should favour the bears and remain the pair’s bearish view.

Resistance:  0.9836, 0.9921, 0.9986

Support: 0.9755, 0.9664, 0.9551

GBPUSD (4-Hour Chart)

The GBPUSD tumbled on Friday, falling to a level around 1.1100 at the time of writing, as the upbeat US NFP data reaffirms Fed rate hike bets and acts as a tailwind for the bucks. The US dollar reverses an intraday dip and climbs to a fresh weekly high after the headline NFP report showed that the US economy added 263K new jobs in September. The reading marks a notable slowdown from the 315K reported in the previous month, though surpasses consensus estimates for a reading of 250k. Moreover, the US unemployment rate fell to 3.5% during the reported month from 3.7% in August, reaffirming hawkish Fed expectations. This, in turn, remains supportive of elevated US Treasury bond yields and underpins the greenback, which exerts some pressure on the GBP/USD pair. Apart from rising bets for a more aggressive policy tightening by the Fed, the prevalent risk-off mood is seen as another factor benefitting the safe-haven greenback. In the UK zone, the cables are weighed down by concerns about the UK government’s fiscal policy and looming recession risks.

From the technical perspective, the RSI indicator figures 40 as of writing, implying the downside momentum would persist and test the lowest level of 1.1090 since October. As for Bollinger Band, the price broke through the lower band at the moment of NFP data released, then continued wandering in the lower middle area, a signal telling the pounds would probably be bearish for a while.

Resistance: 1.1380, 1.1475, 1.1715

Support: 1.1090, 1.0800, 1.0650, 1.0390

XAUUSD (4-Hour Chart)

The XAUUSD price dropped below the $1,700 figure, in the aftermath of the US jobs report. Before the US Nonfarm Payrolls report was released, the yellow metal meandered around $1710. However, once the headline crossed newswires, gold’s initial reaction slid towards the $1700 region, but the initial move dissipated. As of writing, it rebounded from $1690 to $1702 in a volatile reaction. Data-wise, a report from the US Bureau of Labor Statistics (BLS), showed that the US economy added 263K new jobs, smashing estimations of 250K, while the Unemployment Rate ticked lower to 3.5%, from 3.7% expectations, which would further cement the case for Fed rate hike. US Treasury bond yields pushed to the upside, with the US 10-year Treasury bond yield advancing 3 bps, at 3.865%, while the US Dollar Index, a gauge of the bucks value vs. six currencies, is up 0.28%, at 112.565.

From the technical perspective, the RSI indicator figures 50 as of writing, showing a more stable status, would hover in the range of $1,695 to $1,712. As for Bollinger Band, the price was breaking through the moving average and touching the lower band, indicating that the price might slight rebound and wander in the lower area of Bollinger Band.

Resistance: 1712, 1725, 1740

Support: 1663, 1644, 1620

The US will release several key data items this week, including the inflation data reflected in the Consumer Price Index, the producer price index, and retail sales data. The preliminary consumer sentiment data reported by the University of Michigan and the minutes from the Federal Open Market Committee will also be released.

Meanwhile, the UK will publish its GDP data mid-week.

• UK Gross Domestic Product (12 October)

Gross domestic product in the UK grew 0.2% in July from June, rebounding from a 0.6% fall in the previous month.

Analysts forecast that the economy will grow 0.1% in August.

• US Producer Price Index (12 October) 

US producer prices fell 0.1% in August, following a 0.4% drop in July. According to economists, prices are forecast to remain steady (0%) for September.

• FOMC Meeting Minutes (13 October)

In its September meeting, the Federal Open Market Committee increased the federal funds rate by 75bps (3%-3.25% range). The Fed also projected that interest rates will rise to as high as 4.4% by December 2022 and stay at 4.6% in 2023.

• US Consumer Price Index (13 October)

According to the Bureau of Labour Statistics, the US consumer price index rose 0.1% in August from July. This follows a flat reading in the previous month and is higher than a forecast decline of 0.1%. Analysts expect that September’s CPI will be up by 0.2%.

• US Retail Sales (14 October)

The US retail sales increased by 0.3% in August from July, following a revised 0.4% fall in the previous month. Markets expect retail sales figures to increase by 0.2% in the current month.

• Prelim UoM Consumer Sentiment (14 October)

In September, the University of Michigan’s consumer sentiment index was released to be 58.6, revised from 59.5 in a preliminary figure. The index had been above 58.2 in August and at its highest in five months.

Analysts predict a range of figures for the index, with some believing it will surpass 58.5, while others believe it will fall below that level.

U.S. equities traded lower throughout yesterday’s trading. The Dow Jones Industrial Average slipped 1.15% to close at 29926.94. The S&P 500 dropped 1.02% to close at 3744.52. The tech-heavy Nasdaq Composite edged 0.68% lower to close at 11073.31.

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U.S. initial jobless claims came in at 219K, above market expectations of 190K. The upside surprise of jobless claims sparked a brief rally among equities; however, market participants will now turn their focus on today’s nonfarm payrolls figure and the unemployment rate to better gauge the health of private sector hiring.

In contrast to traditional thinking, worse-than-expected payroll gains and higher-than-expected unemployment rates could be a good signal for equities. A slowdown in private sector hiring could provide proof of the Fed’s tightening efficiency.

The benchmark U.S. 10-year treasury yield rose on Thursday and was last seen trading at 3.821%.

Other key factors that market participants should be aware of are the average hourly earnings figures, which are estimated to increase by 0.3% month over month and 5.1% over the year. A lower figure could indicate the Fed’s tightening showing its effect; conversely, an upside surprise could point to further tightening on the horizon. Recent remarks from Fed officials have reaffirmed the Fed’s stance on its determination on bringing inflation down.

Main Pairs Movement

The Dollar index rose 0.47% throughout yesterday’s trading. The U.S. Greenback extended gains from the 5^th as U.S. treasury yields recovered above 3.8%. Market participants will now turn their focus to today’s nonfarm payrolls and unemployment rate figures to gauge the Fed’s next move.

EURUSD dropped 0.91% throughout yesterday’s trading. Recent hawkish comments from Fed officials have added selling pressure on the Euro-Dollar pair. ECB monetary policy meeting minutes indicated possible tightening by the ECB as members believe inflation to still be rampant in Europe.

Cable retreated 1.45% throughout yesterday’s trading. U.K. PMI figures came in at 52.3, above the market consensus of 49.2.

XAUUSD dropped 0.22% throughout yesterday’s trading. The return of strength for the Dollar acted as a headwind for the non-yielding metal.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair dropped further on Thursday, preserving its downside momentum and declined to fresh daily lows below the 0.9830 level amid a worsening market mood. The pair is now trading at 0.9806, posting a 0.75% loss daily. EUR/USD stays in the negative territory amid a stronger US dollar across the board, as the downbeat US job data and hawkish comments from Fed’s Kashkari on the policy outlook both provided support to the safe-haven greenback. The US Weekly Initial Jobless Claims rise to 219K in the week ending October 1, which came in worse than the market expectation of 200K and exerted bearish pressure on investors’ mood. For the Euro, the downbeat European data continued to weigh on the shared currency as the German Factory Orders declined by 2.4% MoM in August.

For the technical aspect, RSI indicator 43 as of writing, suggests that the downside is more favoured as the RSI declined sharply below the mid-line. As for the Bollinger Bands, the price preserved its downside traction and dropped below the moving average, therefore a continuation of bearish momentum can be expected. In conclusion, we think the market will be bearish as the pair is heading to test the 0.9765 support. A break below that support might open the door for additional losses.

Resistance:  0.9921, 0.9986, 1.0035

Support: 0.9765, 0.9664, 0.9551

GBPUSD (4-Hour Chart)

The GBPUSD plunged on Thursday, two consecutive day losses erased the gains since October. Early Thursday, the Minnesota Fed President Neil Kashkari crossed newswires. He said that there is still a long way from pausing rates, which weigh on the cables. Data-wise, the US Department of Labor reported that unemployment claims increased, a positive sign for the Federal Reserve. Initial Jobless Claims for the week ending on October 1 rose by 219K, higher than the 203K estimated by analysts. The four-week moving average, which smooths volatile week-to-week results, was almost unchanged. According to a survey from the Bank of England on Thursday, business inflation expectations rose to 9.5% in September, and 8.4% in August. In general, even though BOE is expected to keep rates higher, there might be further weakness in the pound, with the UK still seeing falling into recession and CPI inflation expected to peak lower than previously, indicating probably a more dovish size on the hiking rate than Fed.

From the technical perspective, the RSI indicator below 45, showing the downside pressure would persist. As for Bollinger Band, the pricing was breaking through the lower band as of writing, implying that there might be several continuous drops in the following days and tested the lowest level since October around 1.1069.

Resistance: 1.1379, 1.1507, 1.1714

Support: 1.1069, 1.0797, 1.0632

XAUUSD (4-Hour Chart)

The XAUUSD slightly slip to $1711 as of writing, attracting some intraday selling at a higher level amid a modest USD strength. Gold struggles to gain any meaningful traction on Thursday and seesaws between tepid gains/minor losses through the early US session. The US dollar edges higher for the second straight day and looks to build on the overnight bounce from a two-week low, in turn, acts as a headwind for the dollar-denominated gold. The recent hawkish remarks by several Fed officials reinforced market expectations that another supersized 75 bps Fed rate hike move in November, which remains supportive of elevated US Treasury bond yields and continues to underpin the greenback. Investors need to keep eye on the NFP report released on Friday, which will play a critical role in influencing the near-term USD price. Meantime,  the US bond yields and speeches by influential FOMC members will drive the USD demand. The broader market risk sentiment could provide some impetus to the yellow metal.

From the technical perspective,  the RSI indicator below 60, implying a downside momentum would continue, testing the $1700, a psychological level and weekly low.  As for Bollinger Bands, the price is a breakthrough in the 20-period moving average, a signal telling us that bearish traction could persist for a while.

Resistance:  1726, 1765, 1800

Support: 1614, 1644, 1665, 1700

Economic Data

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Being a trader is not an easy job because you need to learn all the strategies necessary to help you make the right decisions on every trading day. One of these is knowing how to predict market turning points. Although the market can shift quickly, predictions will give you a better chance of getting good results for your trade as opposed to going in blind.

A moving average is the superimposed line over a stock’s price action that you see on a line chart. It represents the total closing prices of a security in a specific number of periods divided by the total number of periods. When you’re in trending markets, moving averages can be used as an area of value. 

There are two types of moving averages: Simple Moving Average (SMA) and Exponential Moving Average (EMA). 

Here’s what you need to know about the moving average and how a trader can use it for predicting market turning points:

What is a trend? 

If you want to use moving averages successfully, you need to understand trends first. A trend is essentially the direction in which a price is going. It could be an uptrend, downtrend, or sideways trend, but remember that these prices rarely continue in a straight line due to constant market shifts. This is why you need the moving average to help determine the exact direction where a trend is going.

How do you calculate a moving average?

To calculate a moving average, you need to define a specified period, the most popular of which is the 50-day moving average. Here, you’ll need to add the closing prices for the last 50 days and then divide it by the number of periods, which is 50. If you want to use the same method over the next few trading days, replace the oldest number with the most recent closing price and follow the same calculations.

You can also use the same calculation for weekly prices, monthly prices, intraday prices, and opening prices. This will depend on what you think will guide you in predicting market shifts, so you’ll also know when to buy, hold off, or sell.

How do you use a moving average as entry or exit?

A moving average is a powerful tool for predicting market turning points, which will help you plan your entry and exit strategy wisely. One of the easiest methods traders use is crossing two or more moving averages with a short- and long-term calculation. For instance, if a short-term moving average crosses below or above a long-term moving average, that could be a signal that a trend is gaining strength or if it’s about to reverse.

In most cases, a short position is determined when a short-term average crosses below the long-term average, while a long position is determined when the short-term average crosses above the long-term average.

Finally, there’s support and resistance, which you probably know by now as the downward or upward direction of a trend. How does this relate to the moving average? When you calculate a moving average and plot it on a chart, it could be an early determining factor of a support or resistance level. This will help you decide if you should buy, sell, or sit it out until the market is more favourable to your goals. 

Moving averages can help you make proper trading decisions if you know how to use them right. 

So, learn how to maximize this strategy and other methods for trading with the help of experts, like VT Markets, in a community where you can get useful trading insights.

U.S. equities retreated throughout yesterday’s trading. The Dow Jones Industrial Average lost 0.14% to close at 30273.87. The S&P 500 lost 0.2% to close at 3783.28. The Nasdaq composite slipped 0.25% to close at 11148.64. 

U.S. ADP nonfarm employment change printed 208K, beating estimates of 185K. The ISM non-manufacturing PMI came in at 56.7, lower than market estimates of 56.9. OPEC+ has also announced that it plans to cut oil production by 2 million barrels per day to shore up prices. The weaker-than-expected economic data sparked a sharp drop among equities, but it also limited stock losses as market participants bank on the Fed to slow the pace of tightening.

However, oil production reduced by OPEC+ could make reining in inflation a further challenge.

U.S. 10-year treasury yield climbed back above 3.7%– yields were last seen trading at 3.751%.

Federal Reserve bank of Atlanta president Raphael Bostic said on Wednesday he favoured raising interest rates to 4.5% by the end of the year, implying 125 basis points of tightening. Market participants betting on a dovish pivot from the Fed could be disappointed as current interest rates are rather not considered restrictive, yet, by the Fed.

On the economic docket, the ECB is set to announce its monetary policy meeting minutes during today’s European trading session. The U.S. will release initial jobless claims figures during today’s American trading session.

Main Pairs Movement

The Dollar index surged 1.39% throughout yesterday’s trading. The U.S. Greenback gained traction as economic data came in better than expected. ADP nonfarm employment change showed an upside shock to 208K—indicating a robust private sector; meanwhile, the non-manufacturing PMI printed 56.7, lower than the market consensus of 56.9. Both economic data supported the Dollar.

EURUSD lost 1.05% throughout yesterday’s trading as the Dollar surged. The shared currency fared worse against the Dollar as economic data from the U.S. shows a healthier economy than that of the E.U.

Cable lost 1.28% throughout yesterday’s trading. British PMI came in at 49.1, lower than the market consensus of 49.6.

The Dollar denominated Gold lost 0.58% throughout yesterday’s trading. The precious metal snapped a 6-day winning streak as market mood soured. 

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair tumbled on Wednesday, coming under renewed selling pressure and dropped to a daily low below the 0.9850 mark as speculations of a Fed pivot towards a dovish stance faded. The pair is now trading at 0.9873, posting a 1.13% loss daily. EUR/USD stays in the negative territory amid renewed US dollar strength, as the upbeat US economic data revealed during the day has provided support to the greenback and dragged the EUR/USD pair down. The data published by Automatic Data Processing (ADP) showed on Wednesday that private sector employment in the US rose by 208K in September, which came in better than the market expectation of 200K and showed that the US economy stayed resilient amidst an aggressive tightening cycle by the Fed. For the Euro, the shared currency remained under pressure amid discouraging EU data, as the Services PMIs for the EU and the German both dipped into contraction territory.

For the technical aspect, the RSI indicator is 52 as of writing, suggesting the pair’s bearish outlook in the near term as the RSI retreated sharply from an overbought level. As for the Bollinger Bands, the price witnessed selling pressure and dropped to the moving average, therefore the downside traction should persist. In conclusion, we think the market will be bearish as the pair is heading to test the 0.9816 support. The falling RSI also reflects bear signals.

Resistance:  0.9986, 1.0035, 1.0155

Support: 0.9816, 0.9765, 0.9664

GBPUSD (4-Hour Chart)

The GBPUSD has lost its traction and declined to the level below 1.1300 as of writing after a dramatic rebound since last Tuesday. The souring market mood helps the dollar regather its strength and weighs on the pair ahead of key macroeconomic data releases from the US. The selling pressure surrounding the dollar and the UK government’s decision to step back on massive tax cuts fueled the cable’s rally earlier this week. However, the escalating geopolitical tensions drove investors to seek refuge early Wednesday and the US dollar index managed to earn a portion of Tuesday’s losses. Russia’s ambassador to the US said that the danger of a direct clash between Russia and the west had escalated after the White House’s decision to provide additional military aid to Ukraine. Looking to the future, investors need to keep eye on the ADP Employment Change data, which is forecast to rebound to 200K in September from 132K in August. Fed policymakers are willing to stay on the aggressive tightening path until they see convincing signs of the labour conditions loosening.

From the technical perspective, the RSI indicator figures 50 at the time of writing, indicating a sign of the pairs would wander in a range from 1.1200  to 1.1400.  As for the Bollinger Bands, the price suffered heavy selling pressure around 200-period SMA on the four-hour chart and dropped to the middle area, we think the bearish momentum will extend if breaks through the 100-period SMA, 1.1200 level.

Resistance: 1.1400, 1.1720

Support: 1.1090, 1.1200

XAUUSD (4-Hour Chart)

The XAUUSD plunged on Wednesday, falling to $1707 marks as of writing following a six consecutive day growth. At the moment of writing, gold has tumbled with 1.08% losses for the day, as the US dollar is seeing a sweeping demand amid a risk-off market profile. Hopes for aggressive Fed rate are back on the table after the hawkish RBNZ 50 bps rate increase, fuelling a fresh upswing in the US Treasury yields across the curve, which weighed on the non-yielding yellow metal. Apart from that, escalating geopolitical tensions between Russia and the West are doing little to offer any respite to XAU bulls, as risk-off flows and the dollar demand dominate across the financial market. Investors now await the top-tier US economic releases and Fedspeak for fresh hints on the next Fed rate policy decision.

From the technical perspective, the RSI indicator is below 70 figures as of writing, implying bullish momentum turned weak to a consolidated phase. The bearish 50-Daily Moving Average (DMA) at $1,724 has tempered the gold price rally. A sustained break above the 50 DMA is needed to challenge the September high at $1,735, above which the $1,750 psychological level will come into play. On the other side, the previous critical resistance now supported at $1700 could offer reprieve to buyers, below which the last day’s low of $1,695 could be revisited.

Resistance: 1725, 1735, 1750

Support: 1661, 1694, 1700

Economic Data

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The U.S. stocks market rose for a second straight session on Tuesday as investors hoped that the Federal Reserve may ease its aggressive tightening stance in response to employment data. The S&P 500 climbed 112 points (+2.90%) to 3,790, while the Nasdaq 100 surged 352 points (+2.93%) to 11,582 and the Dow Jones Industrial Average surged 825 points (+2.62%) to 30,316.

In August, the U.S. Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS) reported 10,053 million job openings, a 14-month low and significantly below the projected 11,1 million. In August, factory orders remained unchanged from the previous month, despite a projected 0.3% decline. The yield on the 10-year Treasury bond decreased by 0.4 basis points to 3.635%.

Twitter (TWTR), the social networking platform, surged 22.24% to $52 as Elon Musk plans to proceed with his acquisition of Twitter for the original proposed share price of $54.20. Meanwhile, Tesla (TSLA), the electric-vehicle maker, rose 2.9% to $249.44.

Main Pairs Movement

The Dollar Index dropped 1.27 per cent during yesterday’s session. Tuesday saw the dollar decline versus most major currencies as the yield on the benchmark 10-year U.S. Treasury declined.

During yesterday’s trading, the EURUSD appreciated 1.67 per cent and closed at a new weekly high. As the Euro continues to capitalise on the weaker Dollar, parity is nearly attained.

Cable increased 1.33 per cent during yesterday’s session. The British Pound has extended its winning streak to five days.

XAUUSD finished higher at approximately $1724 per ounce as the yield on the benchmark 10-year U.S. Treasury note decreased and weakened the Dollar.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair advanced on Tuesday, gathering recovery momentum and refreshing its daily high near the parity level. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the recent pullback in the US Treasury bond yields from a multi-year peak has weighed on the safe-haven greenback for the second day of the week.

For the technical aspect, the Stochastic indicator is at an overbought level as of writing, suggesting that slower bulls are potentially in movement as the indicator is starting to bend lower. As for the Bollinger Bands, the price rebounded towards the upper band from the moving average, therefore the upside traction should persist. In conclusion, we think the market will be bullish as the pair is testing the parity level of 1.000 as its resistance level.

Resistance:  1.0000, 1.0015, 1.0040

Support: 0.9955, 0.9925, 0.9880

GBPUSD (4-Hour Chart)

The GBP/USD pair surged on Tuesday, preserving its upside momentum and extending its daily rally towards a fresh 10-day high above 1.14 in the second half of the day amid the UK government’s U-turn on the fiscal plan. At the time of writing, the cable stays in positive territory with a 1.02% gain for the day. For the British pound, reports suggested that British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng would reverse a cut to the 45% rate of income tax for the highest earners, which provided a strong boost to the British pound. UK Finance Minister also confirmed later that they will not go ahead with that fiscal plan.

For the technical aspect, the Stochastic indicator is at the overbought level as of writing, suggesting that slower bulls are potentially in movement as the indicator is starting to bend lower. As for the Bollinger Bands, the price rebounded towards the upper band from the moving average, therefore the upside traction should persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.1475 resistance. A steeper rebound could be expected if the ongoing rally extends above the aforementioned resistance.

Resistance: 1.1475, 1.1535

Support: 1.1410, 1.1350, 1.1290

XAUUSD (4-Hour Chart)

As the US dollar came under bearish pressure amid the retreating US bond yields in early the week, the pair XAU/USD regained upside momentum and extended its rally to fresh multi-week highs above the $1,729 level during the US trading session. XAU/USD is trading at $1,720 at the time of writing, rising 1.60% daily. The sharp decline witnessed in the US Treasury bond yields is acting as a tailwind for the precious metal, as the US Dollar Index is down 1,27% on the day. Meanwhile, the probability of one more 75 basis points Fed rate hike in November has declined toward 50% while investors now waiting for the key US labour market report, which will play a key role in influencing Fed rate hike expectations and provide a fresh directional impetus to gold.

For the technical aspect, Stochastic inside the overbought level with a potential of bending lower, suggesting the pair’s bullish outlook in the near term will continue with a short-term lower movement. For the Bollinger Bands, the price witnessed fresh buying and moved out of the upper band and then back in, therefore a strong continuation of the upside trend could be expected to be slower. In conclusion, we think the market will be bullish as the pair is testing the 1730 resistance. A sustained strength above that level might favour the bull and open the door for additional gains.

Resistance: 1730, 1740, 1750

Support: 1705, 1690

Economic Data