Welcome to the first week of the new month. The Asian session did not set the direction and does not give any signals, so we are waiting for Europe and the first trading hours.
The European currency pair with the US dollar remains in a downward trend. The breakout of resistance marked in the picture will only give us the opportunity to look for a place to long positions. I would like to emphasize that we are not fighting the trend and we are not catching lows or highs, hoping that we may succeed. An additional argument that causes the trend to continue are lower and lower lows and highs that regularly form on the chart, filling the trend definition.
Do you remember the analysis from last week? The one in which I assumed the price to fall to support at the end of the gray rectangle. The analysis is still valid if the entry of European capital causes a decline. Recently, looking at the daily range chart, I saw some similarity but tomorrow I will paste because today is a general view of the market. In the event of a further raise, or a correction, and the willingness of investors to increase the price of the currency pair, the possible level of a 50% Fibonacci rise. This is the resistance level so several factors will match.
On the XAUUSD chart, we can see that the price did not break through the resistance that was created during the consolidation. Breaking this level will give us an open path for further gains and stronger rebound, but we have to watch out for “false breaks” and it’s better to enter a smaller position or wait for a correction. Another approach to the resistance level will be positive for us, as each subsequent attempt to break the price through the level increases the chance of breaking the resistance.
The specific direction is hard to tell on the German Index chart as there is a lot of uncertainty. You can see the triangle that was created. At this point, two scenarios are possible. The first is indecision but buyers will be stronger and the trend will continue in the channel creating new highs. The second option is to collect orders in the range being created, without causing a strong price change. Thanks to this, a breakout in either direction will not result in less favorable transactions for large investors. Such too much sales or too much purchases could result in an unprofitable average transaction price, therefore, during consolidation and formation, you can sometimes notice that it is “collecting contracts”. I have marked places worth observing in the painting.