The prior week proved to be chaotic and more after Boston Federal Reserve hinted at possible tightening of monetary policy as the U.S. economy could be overheating. Meanwhile, Canada’s unemployment rate for August rose back up again to 7%.
On a technical level, here are the key areas I will be observing for the week ahead. Trading has been kept to a minimal in order to better observe the market reaction.
Despite the latest three day drop, this pair failed to break below previous lows in the end of August to earlier September. Short sellers have begun slowly covering their shorts. The 0.78~ price level marks a significant supply zone.
We are seeing the slow climb back to the 0.78~ price level. Given the previous two selloffs, this third one will be very interesting. If short sellers resume, but are unable to create a movement as large, if not larger, than the previous two sell pressure rebounding from this supply zone, we can expect this level to break through very soon. Over on the daily time frame, this would provide an indication of an upwards breakout buying opportunity.
Over on the 4-hour time frame, we currently observe the two potential support zones. They historically represented significant turning points and will hold the higher probabilities of holding.