With Donald Trump taking office last Friday, the markets were somewhat subdued. However, we have seen a strong rally in equities and other markets as is typically the case when a new U.S. Presidency begins. Markets will likely reposition this week, as technically speaking, some charts have been setting up for substantial moves. This week, we will discuss some of those markets that look poised to move in the short-term.
EURGBP – Sell rallies, expecting full rotation to low side
The EURGBP has been trending lower after topping out in October 2016. In the chart below, we can see two big reversal areas, notated as ‘event areas’ (areas that lead to a sharp change in trend direction). The market has since experienced a vacuum back up to test these areas recently. There is now a confluence of factors that have come together to support our current bearish view on this market. We can see a band of obvious strong resistance starting up near 0.8850, at the previous event areas, which are now containing the market, and an approximate 50% retrace of the initial swing lower. It all depends on the line in the sand at 0.8850 for sellers; if price is below that containment level, we expect more downside movement. Traders can look to be sell on strength whilst under that 0.8850 level, and we would hold short positions until a strong break or close back above 0.8850. To the downside, targets are near 0.8340 or even lower potentially.
GBPUSD – Sterling/dollar sees renewed buying interest
The GBPUSD appears to have turned mildly bullish (strengthened) last week following a brief test and dip below key support near 1.2100. Keep in mind, this is within the context of an overall down-trending market, however. Whilst this market is trading above key long-term support at that 1.2100 level, traders can look to buy on dips / pull-backs, with a potential target area being the recent highs near 1.2750 area.
S&P500 – S&P500 uptrend continues but we could see a pullback first
The S&P500 has been in a protracted uptrend over recent months, and recently, it has been consolidating (moving sideways) after a nice run higher. U.S. stock markets continue to move higher on optimism over the new Trump Presidency, however recent all-time highs are near-term hurdles that must be cleared for prices to continue pushing higher.
For the S&P500, it is facing resistance at 2277.00 all-time high area and prices must clear that to continue the uptrend. Prices consolidated last week for the third straight week, but whilst above 2227.00 and 2170.00 key support, the buyers remain strongly in control and the multi-year uptrend continues. It might be a good idea to wait for a breakout (above those all-time highs) and close higher before looking for another long entry or we could wait for a more substantial pull-back into the 2227.00 support handle and look to get long there. Either way, this market is strongly biased to the upside and buying the dips remains the strategy of choice.
Crude Oil – Oil remains buoyant
The Crude Oil market continues to look strong in the context of the strong uptrend that is established. The market is in the midst of a sustained upside recovery and is holding above 49.30 key support level. This market is bullish (a potential buy) whilst trading above 49.30. We also see support at 50.80 and whilst prices are above those two levels, our strategy of choice is to look to buy the dips / pull-backs on any temporary weakness, to trade in-line with the overall uptrend from a value / support area.
This article was written by Nial Fuller. Nial is a highly regarded professional trader and author. He is the founder and CEO of Learn To Trade The Market, the world’s foremost trading education resource.