Technical Outlook: Breakouts & Fakeouts

Most G10 currencies struggled for direction as investors braced for another eventful week.

“As the tumbleweed blew across the trading arena, we decided to identify some potential breakout opportunities in the week ahead.”

What is a breakout?

When the price of an asset moves above a resistance level or below a support level. Breakouts are important because they signal the start of a potential trend in the direction of the breach.

What is a fakeout?

A false break above a resistance level or below a support level. Fakeouts can be painful. Nobody likes being on the wrong side of a trade. Prices tend to reverse sharply after the false break higher or lower.

Now the basics have been covered, let’s get cracking!

Dollar eyes 92.10

It’s the same old story for the Dollar.

Bulls are drawing support from the recent rise in U.S. Treasury yields while caution ahead of key central bank meetings is boosting appetite for the safe-haven currency.

The technical outlook remains bullish on the daily charts with bulls eyeing 92.10. A solid breakout above this intraday resistance may open the doors towards 92.50 and 93.00. Should the 91.35 level prove to be unreliable support, the Dollar Index may descend back towards 90.75.

EURUSD trapped below 1.1990?

The chart says it all. Euro bears are in the building and seem to have an appetite for 1.1900 and lower.

There have been consistently lower lows and lower highs while prices remain in a bearish channel. Sustained weakness below 1.1960 could open the doors towards 1.1900 and 1.1835, respectively. A breakout back above 1.1990 could swing open the doors towards 1.2080 and 1.2100.

GBPUSD breakout on the horizon?

Here is a great example of a clean breakout setup on the GBPUSD.

Resistance can be found at 1.4000 and support is seen at 1.3800. A solid breakout below 1.3800 could open the doors towards 1.3750 and 1.3620. Should 1.3800 prove to be reliable support, this may trigger a rebound back towards the 1.4000 level.

Over the past few months, it has felt like the GBPUSD was waiting for a catalyst. This may come in the form of the Bank of England policy meeting on Thursday.

USDJPY wobbles above 109.00

I smell a fakeout on the USDJPY. Prices are struggling to keep above the 109.00 resistance level despite the firmly bullish trend. Are bulls taking a breather before pushing prices higher or is this just a classic case of running on empty and running on fumes?

A move back below 109.00 could signal a decline towards the 108.30 higher low.

Commodity spotlight – Gold

It’s all about the $1730 level when looking at Gold prices.

This is a pivotal level that may determine whether bulls or bears win the tug of war this week!

A solid breakout above $1730 may inspire bulls to march towards $1772. Alternatively, sustained weakness below $1730 is likely to trigger a decline towards $1700 and $1675, respectively. Where the metal concludes this week may be influenced by the Federal Reserve meeting and bond markets.

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Published by

Lukman Otunuga

Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets. Lukman provides in-depth analysis on the global currency and commodity markets and is often quoted by leading international media outlets such as: MarketWatch, CNBC, NASDAQ, Reuters, AFP, The Guardian and Yahoo. Prior to joining FXTM, Lukman spent two years as a research analyst with international currency broker FXCM, where he focused on a technical and fundamental analysis of the global currency, commodity, and stock markets. Lukman was also responsible for leading educational seminars for international and local high net worth individuals, and has published a series of educational articles on forex trading with City A.M. Lukman holds a BSc (hons) degree in Economics from the University of Essex, UK and an MSc in Finance from London School of Business and Finance, where he studied corporate finance, mergers & acquisitions and the role of international financial institutions