Technical View for 1st September: GBP/USD Eyes Space South of $1.16; EUR/USD Maintains Support off Parity

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

With the month of August in the rear-view mirror, down 1.6 per cent, the EUR/USD currency pair trades lower 11.60 per cent, year to date. Wednesday, however, witnessed price rally 0.5 per cent, strengthening its position north of parity ($1.00).

The H1 timeframe has price movement closing in on the underside of $1.01, a psychological base complemented by Quasimodo support-turned resistance at $1.0108 and a 100% Fibonacci projection at $1.0114—a bearish AB=CD pattern that also brings the 1.618% Fibonacci extension to the table at $1.0108.

Any downside attempts on the H1 chart, of course, has $1.00 arranged as a reasonable support target. Also joining the aforementioned H1 resistances is prime resistance on the H4 chart at $1.0125-1.0105, which happens to accommodate a 100% Fibonacci projection from $1.0105.

Although H4 and H1 resistances echo strong confluence, the bigger picture demonstrates scope to navigate higher levels. Following a rebound from weekly support in the form of a 1.272% Fibonacci projection at $0.9925 (alternate AB=CD bullish formation) and daily support coming in at $0.9919 (aided by a bounce seen from the relative strength index [RSI] trendline resistance-turned support ahead of oversold space), weekly resistance serves as the next upside target at $1.0298.

However, while room to advance is indeed present on the higher timeframes, price action on the weekly timeframe has been entrenched within an unmistakable primary bear trend since pencilling in a top in early 2021 with heavy-handed pullbacks in short supply.

Technical Expectation:

H4 prime resistance from $1.0125-1.0105, together with H1 resistance between $1.0114 and $1.01, offers a robust technical ceiling that’s bolstered by the currency pair’s downtrend. Sellers from the noted resistances, nonetheless, are likely to adopt a watchful stance and pursue additional confirmation prior to pulling the trigger, due to weekly and daily price rebounding from respective supports.

AUD/USD:

It was largely another risk-off session on Wednesday, despite major US equity indexes staging a modest comeback. The Australian dollar finished the day off best levels against the US dollar, which, technically speaking (as I noted in previous reports) should not raise many eyebrows.

Due to the somewhat lacklustre movement in recent trading, technical structure remains unchanged on the weekly and daily timeframes, therefore the following should serve as a reminder of where I currently stand (italics):

The currency pair has reflected a primary bear trend since forging a top from $0.8007 (22nd Feb high [2021]), action currently suggesting a drop back into weekly support between $0.6632 and $0.6763, constructed from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. You will also note that the daily price is respecting the lower side of resistance at $0.6901 and on the verge of venturing south of a head and shoulders top pattern neckline, drawn from the low $0.6869.

Further adding to this bearish vibe is the daily chart’s relative strength index (RSI) rejecting the underside of the 50.00 centreline. Consequently, daily trendline resistance-turned support, drawn from the high $0.7661, could soon welcome price action, followed closely by support at $0.6678.

Prime support on the H4 scale at $0.6774-0.6815 (houses a 100% Fibonacci projection at $0.6789 and a deep 78.6% Fibonacci retracement at 0.6780, as well as being arranged just north of H4 Quasimodo support at $0.6761) is seen a touch south of current price, holding the $0.68 psychological figure from the H1 timeframe. Yet, in order to reach the said supports, H1 Quasimodo resistance-turned support at $0.6843—tested heading into US hours on Wednesday following a decisive rejection of $0.69 in Asia—must be dethroned.

Technical Expectation:

Weekly, daily, and H4 timeframes, hint that bears are likely to continue to control sentiment for the time being. This, as communicated in previous research, opens the door for a break of H1 Quasimodo resistance-turned support at $0.6843, with short-term selling perhaps unfolding towards $0.68 and H4 prime support at $0.6774-0.6815.

USD/JPY:

It was another muted session on Wednesday for USD/JPY. This leaves price action in much the same spot as it was heading into Wednesday’s session. As a result, much of the following analysis will echo similar thoughts as recent writing (italics).

While the weekly timeframe’s price action is busy cementing position north of support at ¥137.23—inching towards forging a fresh multi-year pinnacle with scope to climb as far north as weekly resistance from ¥146.79—daily resistance at ¥139.55 could ‘throw a spanner in the works’ for buyers. Should we overthrow the aforementioned resistance, this sends a robust signal that buyers are still in the driving seat (in line with the current primary bull trend), and will likely want to explore higher territory.

Interestingly, the daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August. Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

As evident from the H4 timeframe, nearby resistance is featured in the form of a 1.618% Fibonacci projection at ¥140.15, and support demands attention from ¥137.45, closely followed by support at ¥135.58. Realised from the H1 timeframe, recent flow established a bullish flag between ¥139 and ¥138.26, a pattern that experienced a breach to the upside on Tuesday. This indicates a break of ¥139 and at least a potential run at ¥140, with the bullish flag’s profit objective set at ¥141.63 (blue arrows).

Technical Expectation:

All four timeframes suggest a break of ¥139, though traders are urged to pencil in the possibility of turbulence from daily resistance at ¥139.55. Should we clear the noted level, ¥140 represents a reasonable upside objective in the near term.

GBP/USD:

Downside risks for sterling remain elevated and the technical framework also subscribes to a bearish position.

Longer-term technical price action shines the spotlight on the pandemic low of $1.1410, following a retest of weekly resistance at $1.2263. Pair this with the primary bear trend since early 2021, I see little technical evidence suggesting a bullish revival just yet.

A similar vibe is seen from the daily timeframe; limited support is visible until $1.1410 and the unit is seen reacting to the underside of trendline resistance, extended from the high $1.3639. According to the daily chart’s relative strength index (RSI), the indicator stepped into oversold territory, a move shifting attention to support at 15.91.

The H4 timeframe offers straightforward price structure; after a pip-perfect rejection of resistance at $1.1760, the pair appears poised to continue tunnelling southbound until support at $1.1531. On the H1 timeframe, the unit is kissing the upper edge of $1.16, threatening to probe space beneath the psychological value and make its way to H4 support pencilled in above at $1.1531.

Technical Expectation:

This is a market for sellers, according to the current technical (and fundamental) picture.

The pandemic low of $1.1410 remains in the line of fire for sellers on the bigger picture, giving bears some space to work with which implies any rallies are likely to be viewed as selling opportunities.

Shorter term, a break under $1.16 would likely be recognised as a bearish breakout opportunity, in line with the prevailing downtrend, targeting at least H4 support from $1.1531.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for 31st August

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

It was another relatively optimistic day for EUR/USD on Tuesday, extending Monday’s mild recovery gains by 0.4 per cent. Surprisingly, markets witnessed an advance in US consumer confidence to 103.2, effortlessly surpassing July’s downwardly revised 95.3 reading. Job openings in the US also recorded a slight uptick, topping 11.2 million in July. This appears to be an improvement in the US economy, yet major US equity indexes sold off. Meanwhile, the US Dollar Index is ‘holding its own’, consequently weighing on euro demand.

Technically, as noted in previous writing, price action on the weekly timeframe has been entrenched within an unmistakable primary bear trend since pencilling in a top in early 2021 with heavy-handed pullbacks in short supply. Resistance falls in at $1.0298 on the weekly scale, with resistance on the daily chart formed by way of a trendline resistance, taken from the high $1.1495.

The currency pair, however, has managed to regain some poise after shaking hands with weekly support in the form of a 1.272% Fibonacci projection at $0.9925 last week (alternate AB=CD bullish formation) and daily support coming in at $0.9919 (aided by a bounce seen from the relative strength index [RSI] trendline resistance-turned support ahead of oversold space).

Yet, whether the aforementioned supports are sufficient to withstand bearish forces in the weeks to come is difficult to estimate in light of the current trend.

We remain pretty much unchanged on the H4 scale, centred around prime resistance at $1.0125-1.0105 and a bearish pennant (forged between $1.0122 and $1.0195) pattern’s profit objective at $0.9928.

Closer analysis of price action shows the currency pair forging support from parity ($1.00), though resistance at $1.0046 is putting up a fight. North of the aforesaid level, $1.01 (and Quasimodo support-turned resistance at $1.0108) calls for attention, while tumbling under $1.00 propels $0.99 back into the frame.

Technical Expectation:

The lack of demand from weekly and daily supports at $0.9925 and $0.9919, along with the pair’s downtrend, portends a break of the noted supports and could shift attention to daily Quasimodo support at $0.9668. This implies a break of $1.00 on the H1 to the downside, therefore a bearish scenario could emerge from the following resistances: $1.0046 on the H1, $1.01 also on the H1, and H4 prime resistance coming in from $1.0125-1.0105.

AUD/USD:

Upbeat US economic data, a reasonably robust USD, and downbeat risk sentiment pressured the Australian dollar lower against its US counterpart Tuesday. Technically, AUD/USD selling should not surprise.

The currency pair has reflected a primary bear trend since forging a top from $0.8007 (22nd Feb high [2021]), action currently suggesting a drop back into weekly support between $0.6632 and $0.6763, constructed from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. You will also note that the daily timeframe is respecting the lower side of resistance at $0.6901 and on the verge of venturing south of a head and shoulders top pattern neckline, drawn from the low $0.6869.

Further adding to this bearish vibe is the daily chart’s relative strength index (RSI) rejecting the underside of the 50.00 centreline. Therefore, trendline resistance-turned support, drawn from the high $0.7661, could soon welcome price action, followed closely by support at $0.6678.

Near term, H1 is on the doorstep of Quasimodo resistance-turned support at $0.6843 and a break shines light on $0.68 which happens to be set within H4 prime support at $0.6774-0.6815 (houses a 100% Fibonacci projection at $0.6789 and a deep 78.6% Fibonacci retracement at 0.6780, as well as being arranged just north of H4 Quasimodo support at $0.6761).

Technical Expectation:

Daily flow holding resistance at $0.6901, price threatening to breach the daily head and shoulders top pattern neckline, along with an active primary bear trend, emphasises a bearish stance. This opens the door for a break of H1 Quasimodo resistance-turned support at $0.6843, with short-term selling perhaps unfolding towards $0.68 and H4 prime support at $0.6774-0.6815.

USD/JPY:

Amidst a clear phase of risk aversion, USD/JPY wrapped up Tuesday directionless, albeit refreshing a six-week pinnacle at ¥139.08.

While the weekly timeframe’s price action is busy cementing position north of support at ¥137.23—inching towards forging a fresh multi-year pinnacle with scope to climb as far north as weekly resistance from ¥146.79—daily resistance at ¥139.55 could ‘throw a spanner in the works’ for buyers.

Should we overthrow the aforementioned resistance, this sends a robust signal that buyers are still in the driving seat, in line with the current primary bull trend, and will likely want to explore higher territory.

I had the following to say regarding the daily timeframe’s relative strength index (RSI) in previous writing (italics):

Interestingly, the daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August.

Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

As evident from the H4 timeframe, nearby resistance is featured in the form of a 1.618% Fibonacci projection at ¥140.15, and support demands attention from ¥137.45, closely followed by support at ¥135.58.

Realised from the H1 timeframe, recent flow established a bullish flag between ¥139 and ¥138.26, a pattern that experienced a breach to the upside in US trading yesterday. This indicates a break of ¥139 and at least a potential run at ¥140, with the bullish flag’s profit objective set at ¥141.63 (blue arrows).

Technical Expectation:

All four timeframes suggest a break of ¥139, though traders are urged to pencil in the possibility of some turbulence from daily resistance at ¥139.55. Should we clear the noted level, ¥140 represents a reasonable upside objective in the near term.

GBP/USD:

The British pound ended another day in negative territory versus the US dollar amid fears of a long-scale recession in the UK as soaring energy costs grip the nation. Adding to this, according to a Bloomberg report, Goldman Sachs warned inflation could top 22 per cent next year.

$1.1958 offers resistance on the weekly timeframe—a recently punctured level of support—pointing to a potential test of the pandemic low of $1.1410. This, together with the primary bear trend since early 2021, places sellers in control for the time being.

Out of the daily timeframe, support at $1.1655 and $1.1683 are being tested: two 100% Fibonacci projection levels. Clearance of these barriers, technically speaking, provides an early cue that we are on our way to visit the pandemic low. The daily chart also shows that the unit has been trading beneath its 200-day simple moving average since August 2021 (currently trading around $1.2815). Additionally, the relative strength index (RSI) is on the verge of dropping in on oversold territory.

Against the backdrop of higher timeframe flow, H4 and H1 charts both greeted resistance at $1.1760 (14th July Low) and $1,1746 (a Quasimodo support-turned resistance), respectively. H4 space shows we have ample room to drill into deeper ground until hitting support around $1.1531, while the H1 chart casts light on possible support emerging from $1.16.

Technical Expectation:

From a longer-term perspective, if daily price crosses beneath the 100% Fibonacci projection levels at $1.1683 and $1.1655, this places the pandemic low of $1.1410 in the line of fire for sellers. Shorter term, room is seen to approach $1.16 on the H1 scale, therefore a retest of $1.17 to form resistance could be enough to draw bearish attention.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Weekly Technical Market Insight: Week Ending 2nd September 2022

Charts: Trading View

(Italics: Previous Analysis)

US Dollar Index:

Month to date, the US dollar, measured by the US Dollar Index, is higher by 2.8 per cent. Quite remarkably, aside from May, the US dollar has chalked up successive monthly gains in every other month this year, adding 13.0 percent, year to date. The final full week of trading in August is now in the rear-view mirror and the Dollar Index finished 0.7 per cent in the green.

Visible from the daily timeframe, familiar resistance between 109.14 and 108.58 (made up of a 1.272% Fibonacci projection, a 1.618% Fibonacci expansion, and a Quasimodo resistance level) entered the frame last week. Given the lacklustre bearish presence from the noted zone, manoeuvring higher this week could call on additional resistance by way of a Quasimodo support-turned resistance formation at 110.69.

Nevertheless, a drop from current price levels—aided by early negative divergence from the relative strength index (RSI) on both monthly and daily charts—unearths a daily acceleration trendline support (drawn from the low 95.17) and a 50-day simple moving average, trading around 106.45.

Trend studies on the monthly and daily timeframes continue to favour buyers which portends a break of the current daily resistance, as well as prime resistance on the monthly scale from 109.77-104.96. As aired in recent weekly technical writing, aside from a 7-year range (forming a pennant chart pattern [considered a continuation signal], taken from 103.82 and 88.25), monthly movement has been higher since early 2008.

This is reinforced by the uptrend visible on the daily timeframe, exhibiting well-defined upward action since price made contact with support from 89.69 in May 2021. The upside bias is also shown through the 50-day simple moving average crossing above the 200-day simple moving average (current: 100.68) in August 2021 (‘Golden Cross’).

Technical Expectation:

According to chart studies, technical evidence supporting buyers continues to surpass the chart’s bearish features.

As a result, a break of daily resistance might be seen between 109.14 and 108.58 this week. This may trigger breakout buying, dethroning the monthly timeframe’s prime resistance at 109.77-104.96 for daily price to eventually greet Quasimodo support-turned resistance around 110.69.

EUR/USD:

Month to date, Europe’s common currency is 2.6 per cent lower against its US counterpart, fashioned by way of two consecutive weekly bearish candles. Last week concluded 0.7 per cent lower for the EUR/USD, following the prior week’s one-sided fall of more than 2.0 per cent.

The currency pair, however, did manage to regain some poise after shaking hands with weekly support in the form of a 1.272% Fibonacci projection at $0.9925 last week (alternate AB=CD bullish formation), yet whether this will be sufficient to withstand bearish forces in the weeks to come is difficult to estimate in light of the current trend.

I noted the following in my previous weekly report in respect to the trend (italics):

Price action on the weekly timeframe has been entrenched within an unmistakable primary bear trend since pencilling in a top in early 2021 with heavy-handed pullbacks in short supply.

The above, thrown together with the recent pullback touching gloves with resistance at $1.0298 on the weekly chart, sets the currency pair up for another leg lower, perhaps eventually pulling weekly flow south of $0.9925. Weekly support from $0.9606 warrants attention should $0.9925 cede ground.

Unfortunately, the outlook from the daily timeframe is not much brighter. Friday ended in the shape of what’s known as a shooting star candlestick formation after a mid-week rebound from nearby support at $0.9919 (note that in order for this bearish candle pattern to be valid, an up move must be present which is not the case here).

Although scope to establish a pullback is evident on both the weekly and daily timeframes (to at least weekly resistance at $1.0298), weekly and daily supports echo a vulnerable position, with daily Quasimodo support set to greet price movement at $0.9668 in the event of a break lower this week.

The story on the H4 timeframe remains centred around prime resistance at $1.0125-1.0105 and a bearish pennant (forged between $1.0122 and $1.0195) pattern’s profit objective at $0.9928. Shorter-term flow on the H1 chart spiked to a high just under $1.01 (and Quasimodo support-turned resistance at $1.0108) before muscularly rotating south and recapturing parity ($1.00) to the downside.

Trendline resistance-turned support, extended from the high $1.0364, was subsequently tested heading into the close. Dropping under here is likely to revive selling towards the $0.99 region in early trading this week.

Technical Expectation:

Overall, the picture for EUR/USD remains bearish, according to technical studies.

The lack of demand from weekly and daily supports at $0.9925 and $0.9919 (viewed through candle action), along with the pair’s clear downtrend, portends a break of the noted supports this week. As underlined above, a break of the aforesaid support levels shifts attention to daily Quasimodo support at $0.9668.

Short term, rupturing current H1 trendline support provides an early cue of a potential bearish scenario, tipping price in the direction of $0.99 on the H1 and $0.9928 on the H4.

AUD/USD:

Despite July’s hammer candlestick formation—frequently accepted as a bullish signal—AUD/USD is on track to conclude August on the ropes. Efforts to recover from the prior week’s 3.5 per cent one-sided decline rapidly drew to a close on Friday last week, leaving the currency pair considerably off best levels.

Consequently, as I noted in the previous weekly technical briefing, support between $0.6632 and $0.6763 is back on the radar for the weekly timeframe, constructed from a 100% Fibonacci projection, horizontal price support, and a 50% retracement.

I also noted the following with respect to the trend direction in recent writing (italics):

Siding with the recent bout of selling is the currency pair’s trend: reflecting a primary bear trend since $0.8007 (22nd Feb high [2021]). The monthly timeframe has also portrayed a longer-term downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among chartists. Downside from the 2021 February top, therefore, might be seen as a move to explore lower over the coming weeks/months.

The outlook on the daily timeframe offers an interesting technical picture, yet not one that really improves the currency pair’s position. Friday’s candle engulfed Thursday’s upside, offering traders a bearish outside reversal candle. Note that I would have preferred to see a decisive up move form before recognising such a candle pattern. Nevertheless, recent movement places a bold question mark on current support at $0.6901.

Adding to the bearish vibe, the pair remains under its 200-day simple moving average at $0.7130, alongside a brewing head and shoulders top pattern (price has yet to puncture the neckline, drawn from the low $0.6869). Assuming buyers lack fuel above $0.6901, this swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678.

Interestingly, the daily chart’s relative strength index (RSI) is testing the 50.00 centreline (resistance). Until we decisively breach this value, this timeframe (according to the indicator) reflects negative momentum.

Prime resistance on the H4 timeframe at $0.7004-0.6972, although having its upper boundary clipped on Friday, welcomed sellers and pulled price action back into the walls of H4 supply-turned demand at $0.6901-0.6862. This signals that sellers are perhaps gearing up for a push towards prime support at $0.6774-0.6815 (arranged just north of Quasimodo support at $0.6761).

Addressing the H1 timeframe, you’ll note the unit slipped under $0.69 on Friday after crossing swords with the widely watched $0.70 figure (missing a 1.272% Fibonacci projection at $0.7017 by an inch). Should bearish players continue to occupy space under $0.69 this week, Quasimodo support from $0.6862 is visible, closely followed by a Quasimodo resistance-turned support level from $0.6843. Reclaiming space above $0.69, on the other hand, could watch price zero in on the $0.6973-0.6963 prime resistance.

Technical Expectation:

Technically, price action reflects a bearish stance, both long term and also in the short term.

The modest close beneath daily support at $0.6901, the room to manoeuvre lower on the daily and weekly timeframes (to at least daily trendline support), the primary bear trend, and the H1 timeframe crossing under $0.69, technically, places H4 supply-turned demand at $0.6901-0.6862 under pressure this week.

With the above, a short-term bearish scene could emerge beneath $0.69, action that might have traders pursue at least H1 Quasimodo support at $0.6862 and H1 Quasimodo resistance-turned support at $0.6843. If a daily close forms under the head and shoulders top pattern’s neckline, of course, further selling is in the offing.

USD/JPY:

Following the prior week’s spirited advance, rallying 2.5 per cent, recent trading observed additional gains which consequently placed resistance on the weekly timeframe at ¥137.23 under attack. This followed the beginning of August adopting a dip-buying phase from the weekly timeframe’s decision point at ¥126.40-131.30, in a market that’s been trending higher since early 2021: a primary bull trend. This is further reinforced by the monthly timeframe’s trend, higher since bottoming in late 2011.

Meanwhile on the daily timeframe, following the rebound from supply-turned demand at ¥131.93-131.10 in early August (an area glued to the upper boundary of the weekly decision point), Quasimodo support-turned resistance at ¥139.55 is in the firing line this week.

I noted the following in the previous weekly technical briefing (italics):

Supporting trend direction, price has been trading north of the 200-day simple moving average since February 2021. Additionally, the SMA has pointed higher since April 2021: another widely used trend-following technique. Interestingly, the daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August.

Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

The H4 ascending support-turned resistance, taken from the low ¥134.27, remains a clear talking point at the moment, a base rejecting upside attempts last week. Below, support is seen at ¥135.58, joined closely with a 38.2% Fibonacci retracement at ¥134.94 and a 50.0% retracement value from ¥134.72. Above, a 1.272% Fibonacci projection and a deep 88.6% Fibonacci retracement at ¥138.35ish will demand attention should further buying play out this week, as suggested on the higher timeframes.

Realised from the H1 timeframe, Friday came within reach of ¥136 and trendline support, taken from the low ¥131.73, and subsequently reclaimed ¥137+ status. ¥138, therefore, delivers a reasonable upside objective, though before buyers change gears, a retest of ¥137 could be seen with a whipsaw possibly unfolding into H1 prime support coming in at ¥136.38-136.77.

Technical Expectation:

Weekly resistance from ¥137.23 appears to be hanging by a thread. Couple this with scope to advance on the daily timeframe to ¥139.55 and the primary bull trend, buyers appear to have the upper hand as the market looks to step into September.

Should price form a pullback in early trading this week, chart studies indicate a whipsaw beneath ¥137 on the H1 could be seen, and a whipsaw into H1 prime support from ¥136.38-136.77 enough to perhaps entice buying interest to target ¥138.

GBP/USD:

It was another disappointing week for sterling. Versus the US dollar, GBP/USD is 3.6 per cent lower, month to date, following last week’s 0.75 per cent slump that refreshed 2022 lows. The downside bias is unlikely to surprise technicians, particularly those who focus on trend direction and basic support and resistance.

$1.1958 exiting the fight as support in mid-August on the weekly timeframe uncovers the pandemic low of $1.1410. This, together with the primary bear trend since early 2021, places sellers in the driving seat for the time being. Adding to current trend direction on the weekly scale, the monthly timeframe shows the overall long-term downtrend has been soft since late 2007 tops at $2.1161.

From the daily timeframe, Friday’s bearish outside reversal candle (one which engulfed four previous daily candles) shines the technical spotlight on support at $1.1655 and $1.1683: two 100% Fibonacci projection levels. The daily chart also shows that the unit has been trading beneath its 200-day simple moving average since August 2021 (currently trading around $1.2832). Additionally, the relative strength index (RSI) is on the verge of dropping in on oversold territory.

Addressing both the H4 and H1 timeframes, H4 manoeuvred beneath 14th July low at $1.1760 on Friday and H1 price secured ground beneath $1.18 along with the decision point at $1.1744-1.1784, following a test of $1.19. This week has $1.17 calling to be tested on the H1 and H4 Quasimodo support at $1.1698.

Technical Expectation:

Longer term, GBP/USD remains bearish until at least the daily timeframe’s 100% Fibonacci projection levels at $1.1683 and $1.1655.

Short term, in line with the bigger picture, shows sellers likely have control until reaching at least $1.17 and H4 Quasimodo support at $1.1698. Thus, should a retest of $1.18 play out (or 14th July low at $1.1760) as resistance, sellers could be drawn to this level.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for 26th August

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Currency markets, once again, echoed a subdued vibe on Thursday, with all eyes on the Jackson Hole Symposium. Global equities were largely bid, alongside procyclical currencies, such as the Australian dollar and the New Zealand dollar. Europe’s common currency concluded the session off best levels against its US counterpart, forming a clear-cut upper candle shadow on the daily timeframe.

Forming in line with the primary bear trend (seen on the weekly timeframe since 2021), medium-term technical studies show nearby weekly support in the shape of a 1.272% Fibonacci projection at $0.9925 (alternate AB=CD bullish formation), a daily support coming in from $0.9919 is in a vulnerable position.

I have also seen the daily chart’s relative strength index (RSI) level off after rebounding from indicator trendline resistance-turned-support (drawn from the high 58.91), situated just ahead of oversold territory.

Noted in previous analysis, if the weekly timeframe steps under $0.9925, limited (obvious) support is not visible until $0.9606, while the daily timeframe’s downside support target rests at $0.9668 (Quasimodo support).

Out of the H4 timeframe, price movement attempted to secure ground north of Quasimodo support-turned resistance at $0.9998, yet failed at $1.0033. The bearish pennant pattern’s profit objective drawn at $0.9928 remains key support on the H4 scale for the time being.

As evident on the H1 timeframe, sellers stepped into the fight from trendline resistance, drawn from the high at $1.0364, accompanied by a 100% Fibonacci projection at $1.0028 and a 38.2% Fibonacci retracement at $1.0016. Note that the 100% Fibonacci projection represents an AB=CD bearish pattern, strategically positioned above parity ($1.00) to facilitate a stop-run.

Technical Expectation:

Long term, things are not looking too great for the EUR/USD as weekly and daily timeframes threaten to breach support at $0.9925 and $0.9919, respectively. This—coupled with the H4 showing room to approach $0.9928 support—could have H1 flow drop back in on the $0.99 psychological figure.

AUD/USD:

Up 1.5 per cent on the week, it was a positive session for AUD/USD on Thursday as bids defend support on the daily timeframe from $0.6901.

I wrote the following in regards to the situation on the daily and weekly timeframes in previous reports (italics):

Buyers gaining ground here shines the technical spotlight on the 200-day simple moving average, currently circling $0.7132 (accompanied by a 50.0% retracement value at $0.7167 and a 78.6% Fibonacci retracement at $0.7156). Assuming buyers lack fuel above $0.6901, this swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678. Interestingly, the daily chart’s relative strength index (RSI) is testing the 50.00 centreline (resistance). Until we decisively breach this value, this timeframe (according to the indicator) reflects negative momentum.

The weekly timeframe’s support likely remains on the radar for longer-term players between $0.6632 and $0.6763, built from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. This follow’s last week’s 3.5 per cent tumble, in a market that’s been entrenched within a primary bear trend since $0.8007 (22nd Feb high [2021]).

In terms of where I stand on the H4 timeframe, prime resistance at $0.7004-0.6972 welcomed price action on Thursday which, as you can see, held into the closing bell. Rotating south from here is questionable, having noted the daily timeframe demonstrating scope to approach the 200-day simple moving average. This implies a break of $0.7004-0.6972 and possible test of the resistance area from $0.7062-0.7031.

Lower, the H1 timeframe shows price rebounding from support at $0.6961 after rejecting a 100% Fibonacci projection at $0.6987 (an AB=CD bearish pattern). The widely watched $0.70 base calls to the upside, with a break subsequently opening the door to resistance coming in at $0.7032.

Technical Expectation:

Daily flow recovering from support at $0.6901 and room to advance, as well as the H1 rebounding from support at $0.6961, places the currency pair in a favourable setting to continue climbing to potentially take aim at $0.70. This means the unit is likely to topple H4 prime resistance at $0.7004-0.6972.

USD/JPY:

USD/JPY movement adopted a modest bearish phase on Thursday after H1 price failed to dethrone ¥137. Interestingly, from a harmonic perspective, a 100% Fibonacci projection resides beneath at ¥136.04, complemented by a 1.618% Fibonacci extension at ¥135.92, the ¥136 psychological figure and a trendline support, pencilled in from the low ¥131.73.

What’s also interesting is the H4 timeframe; the unit is in the progress of reaching for support at ¥135.58, followed by a 100% Fibonacci projection from ¥135.30. Note that just below here we have a 38.2% Fibonacci retracement at ¥134.94 and a 50.0% retracement value from ¥134.72. This follows an earlier rejection from a H4 ascending support-turned resistance, taken from the low ¥134.27 (sheltered under a 1.272% Fibonacci projection and a deep 88.6% Fibonacci retracement at ¥138.34).

Analysis drawn from the weekly and daily timeframes echo a similar tone put forward in previous reports (italics):

From the weekly timeframe, resistance remains a key talking point at ¥137.23, in a market that’s emphasised a dominant primary bull trend since 2021. The weekly decision point from ¥126.40-131.30 is also a worthwhile note in the event sellers make a show on this timeframe.

Technical studies on the daily chart has price chalking up a range after an earlier defence formed from supply-turned demand at ¥131.93-131.10. Quasimodo support-turned resistance at ¥139.55 serves as the next upside target. The daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August.

Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

Technical Expectation:

Short term, ¥136 is likely to be monitored on the H1 scale, should sellers continue pushing. Given the round number’s confluence (see above), a bounce from here may take shape. However, traders are urged to pencil in the possibility of dipping lower to test H4 support from ¥135.58 and neighbouring 100% Fibonacci projection at ¥135.30, as let’s remember we’re coming from weekly resistance at ¥137.32.

Ultimately, though, ¥136 and ¥135.58 are key supports, positioned in line with the primary bull trend.

GBP/USD:

GBP/USD eked out modest gains on Thursday, albeit enough to yank H1 price from its decision point at $1.1744-1.1784 to close above $1.18. This decision point was strategically positioned beneath $1.18 to welcome a bid into sell-stop flow just beneath the psychological number (stop-run). Continued interest to the upside on the H1 scale casts light on the $1.19 figure, closely sheltered by a 100% Fibonacci projection at $1.1916 (an AB=CD bearish pattern).

H4, daily and weekly timeframes, thanks to a lack of recent movement, display limited change. Therefore, the following text is taken from previous reports as the technical structure remains valid as we head into Friday’s session (italics).

The H4 timeframe is retesting the spirit of support in the form of 14th July low at $1.1760. Above calls on Quasimodo support-turned resistance at $1.1925, together with prime resistance at $1.1978-1.1954. On the daily timeframe, GBP/USD put in a bottom just ahead of daily support between $1.1655 and $1.1683 (two 100% Fibonacci projection ratios). In terms of the daily chart’s relative strength index (RSI), we can see that the indicator has marginally bottomed ahead of oversold.

$1.1958 remains a key resistance level to be mindful of on the weekly timeframe, following last week’s dominant push lower. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. And, as I wrote in recent analysis, the breach of $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

Technical Expectation:

Longer term, GBP/USD remains bearish until at least the daily timeframe’s 100% Fibonacci projection levels at $1.1683 and $1.1655.

Short term, assuming H1 price maintains position north of $1.18, a pullback to the area made up of H4 resistance at $1.1925 and $1.19 on the H1 (and the H1 100% Fibonacci projection at $1.1916) could be on the table, an area with enough technical confluence to perhaps garner bearish attention, in line with the downside bias seen on the bigger picture.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for 25th August: Focus Turns to Jackson Hole

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

It was a subdued session for EUR/USD—as well as other major currency pairs—on Wednesday as investors brace for the beginning of the Jackson Hole Symposium, held for three days. We also look forward to the US Q2 GDP print today, although it is expected to remain unchanged at -0.9 per cent.

The technical environment on the bigger picture remains toying with support: weekly support in the shape of a 1.272% Fibonacci projection at $0.9925 (alternate AB=CD bullish formation), a daily support coming in from $0.9919, and the daily chart’s relative strength index (RSI) shaking hands with indicator trendline resistance-turned-support (drawn from the high 58.91), situated just ahead of oversold territory.

While the noted supports offer technical confluence, direction in this market continues to favour sellers. The currency pair has chalked up a dominant primary bear trend since pencilling in a top around $1.2350 in early 2021. Secondary trends, as you can see, have been short-lived, though provided willing sellers ample opportunity to get involved. If the weekly timeframe steps under $0.9925, limited (obvious) support is not visible until $0.9606, while the daily timeframe’s downside support target rests at $0.9668 (Quasimodo support).

Meanwhile on the H4 timeframe, buyers and sellers are seen battling for position between H4 Quasimodo support-turned resistance at $0.9998 and the bearish pennant pattern’s profit objective drawn at $0.9928. Drilling lower to the H1 timeframe, however, price has discovered willing sellers at the lower side of parity ($1.00), with $0.99 still calling for attention as support, and H1 resistance seen above at $1.0046. This is the lowest the euro has been against the US dollar since 2002, and now the euro is WORTH LESS than the US dollar.

Technical Expectation:

I noted the following in Wednesday’s technical briefing, and given the lacklustre performance on Wednesday, the analysis remains valid heading into Thursday’ sessions (italics):

It’s an interesting situation for the EUR/USD currently. On the one hand, the currency pair has been entrenched within a dominantly bearish downtrend since the beginning of 2021, yet on the other hand, support emerged from weekly, daily and H4 timeframes and, for now, has offered a floor to work with.

I feel attention, therefore, will be directed to $1.00 on the H1 scale. As highlighted above, price on the H1 chart is retesting the underside of the noted psychological figure. Sellers defending this number places a question mark on the higher timeframe supports and essentially trades in line with the overall downtrend (and could be viewed as a bearish cue back to $0.99). A break above $1.00, nonetheless, signals bullish strength and reinforces current support structure, opening the door to short-term breakout buying opportunities towards H1 resistance at $1.0046.

AUD/USD:

The Australian dollar eked out modest losses against the buck on Wednesday, yet doing little in the way of damage to higher timeframe technical structure.

The daily timeframe’s support at $0.6901 continues to welcome price movement as buyers and sellers square off for position.

I noted the following in Wednesday’s report regarding the daily and weekly structure (italics):

Buyers gaining ground here shines the technical spotlight on the 200-day simple moving average, currently circling $0.7133 (accompanied by a 50.0% retracement value at $0.7167 and a 78.6% Fibonacci retracement at $0.7156). Assuming buyers lack fuel above $0.6901, this swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678.

Interestingly, the daily chart’s relative strength index (RSI) is testing space just under the 50.00 centreline (resistance). Until we breach this value, this timeframe (according to the indicator) reflects negative momentum.

The weekly timeframe’s support likely remains on the radar for longer-term players between $0.6632 and $0.6763, built from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. This follow’s last week’s 3.5 per cent tumble, in a market that’s been entrenched within a primary bear trend since $0.8007 (22nd Feb high [2021]).

Leaving prime resistance at $0.7004-0.6972 unchallenged on the H4 chart, supply-turned demand at $0.6901-0.6862 is under pressure once again. Overthrowing the aforementioned demand zone unearths prime support from $0.6774-0.6815. From the H1 timeframe, price reclaimed $0.69+ territory during the early hours of US trading on Wednesday; resistance is seen between Quasimodo resistance at $0.6961 and resistance from $0.6947. Assuming a lack of grip above $0.69, dropping to Quasimodo resistance-turned support at $0.6843 could unfold.

Technical Expectation:

With the overall trend facing southbound (in spite of daily price climbing above resistance at $0.6901) and the H4 supply-turned demand at $0.6901-0.6862 echoing weakness (the recent rebound from here failed to reach H4 prime resistance at $0.7004-0.6972), this places a bold question mark on buyers holding ground north of $0.69 on the H1 timeframe.

As a result, a close back under $0.69 could be viewed as a cue to begin seeking bearish scenarios.

USD/JPY:

A mild bout of dip-buying materialised on Wednesday amid rising US Treasury yields—benchmark 10-year yield cemented position above 3.0 per cent following a low of 2.516 per cent in early August.

Volatility has clearly hit the decline button as traders await the beginning of Jackson Hole. Consequently, analysis drawn from the weekly and daily timeframes echo a similar tone as Wednesday’s report (italics):

From the weekly timeframe, resistance remains a key talking point at ¥137.23, in a market that’s emphasised a dominant primary bull trend since 2021. The weekly decision point from ¥126.40-131.30 is also a worthwhile note in the event sellers make a show on this timeframe.

Technical studies on the daily chart has price chalking up a range after an earlier defence formed from supply-turned demand at ¥131.93-131.10. Quasimodo support-turned resistance at ¥139.55 serves as the next upside target. I also noted the following in Monday’s weekly technical briefing in terms of the relative strength index (RSI) (italics):

The daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August. Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

H4 ascending support-turned resistance, taken from the low ¥134.27, is likely still on the radar for many traders after price failed to connect with neighbouring support at ¥135.58, closely shadowed by a 38.2% Fibonacci retracement at ¥134.94 and a 50.0% retracement value from ¥134.72.

The H1 timeframe deserves notice; price is seen attempting to find some acceptance above ¥137 after forging a low just ahead of ¥136 (in the shape of a hammer candle pattern). Is ¥138 on the table now?

Technical Expectation:

Weekly resistance at ¥137.23 and the H4 ascending support-turned resistance should be noted. However, whether the aforesaid levels are sufficient to hold back buyers is difficult to estimate. We are not only dealing with a dominant uptrend (the rebound from the weekly decision point was clearly a location buyers entered into a dip-buying phase), the daily timeframe also demonstrates scope to push for ¥139.55 and the H1 is threatening to hold ¥137 as support.

Are we looking at a run higher from ¥137 to ¥138 is the question.

GBP/USD:

It was a sluggish session for sterling on Wednesday, gently grinding lower against its US counterpart and reclaiming a portion of Tuesday’s upside. Limited change is evident on the bigger picture, as you would imagine, though the H4 timeframe is retesting the spirit of support in the form of 14th July low at $1.1760.

The H1 timeframe is also currently working with a decision point at $1.1744-1.1784 after manoeuvring (whipsawing) beneath $1.18. As of writing, however, buyers are unwilling to commit and hold things above $1.18.

The higher timeframe picture, taken from recent writing (italics):

GBP/USD put in a bottom just ahead of daily support between $1.1655 and $1.1683 (two 100% Fibonacci projection ratios). In terms of the daily chart’s relative strength index (RSI), we can see that the indicator has marginally bottomed ahead of oversold.

$1.1958 remains a key resistance level to be mindful of on the weekly timeframe, following last week’s dominant push lower. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. And, as I wrote in recent analysis, the breach of $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

Technical Expectation:

Longer term, GBP/USD remains bearish until at least the daily timeframe’s 100% Fibonacci projection levels at $1.1683 and $1.1655.

Short term, assuming H1 price maintains position south of $1.18, could see the currency pair take aim at $1.17, in line with the bigger picture’s direction. However, this would involve engulfing $1.1760 on the H4.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for 24th August

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Against the US dollar, Europe’s shared currency received some much-needed impetus in early US hours on Tuesday as the US private sector activity contracted again in August. The S&P Global Flash US Composite PMIs showed the services reading recorded a 44.1 print, following July’s 47.3. The survey’s manufacturing side, however, registered 51.3—modest expansion—though lower than July’s 52.2.

Technically speaking, the recovery should not be a surprise. I noted the following in Tuesday’s technical briefing (italics):

Support on the weekly, daily, and H4 timeframes ($0.9925, $0.9919, $0.9928) are likely to concern sellers and may be an area the charts witness a bout of profit taking.

The support on the weekly timeframe is in the shape of a 1.272% Fibonacci projection, while the daily timeframe’s support is considered ‘traditional’ support, and the H4 timeframe represents a bearish pennant pattern’s profit objective. You will also note that the daily chart’s relative strength index (RSI) shows the indicator rebounded from an indicator trendline resistance-turned-support level (drawn from the high 58.91), situated just ahead of oversold territory.

H4 Quasimodo support-turned resistance consequently entered the frame on Tuesday at $0.9998, aligned with the H1 timeframe’s price action chewing on the lower side of parity ($1.00). Should H1 price manage to find grip north of $1.00, H1 resistance at $1.0046 warrants consideration, alongside trendline resistance, drawn from the high $1.0364.

Technical Expectation:

It’s an interesting situation for the EUR/USD currently. On the one hand, the currency pair has been entrenched within a dominantly bearish downtrend (a primary bear trend) since the beginning of 2021, yet on the other hand, support emerged from weekly, daily and H4 timeframes and, for now, has offered a floor to work with.

I feel attention, therefore, will be directed to $1.00 on the H1 scale. As highlighted above, price on the H1 chart is retesting the underside of the noted psychological figure. Sellers defending this number places a question mark on the higher timeframe supports and essentially trades in line with the overall downtrend (and could be viewed as a bearish cue back to $0.99). A break above $1.00, nonetheless, signals bullish strength and reinforces current support structure, opening the door to short-term breakout buying opportunities towards H1 resistance at $1.0046.

AUD/USD:

US trading on Tuesday observed a healthy AUD/USD bid, bolstered by USD softness thanks to a contraction in US private sector activity.

Most notably is the daily timeframe’s movement clearing offers around resistance at $0.6901 and perhaps paving the way for further upside towards the 200-day simple moving average, currently circling $0.7135 (accompanied by a 50.0% retracement value at $0.7167 and a 78.6% Fibonacci retracement at $0.7156).

Assuming buyers lack fuel above $0.6901, this swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678. Interestingly, the daily chart’s relative strength index (RSI) is testing the mettle of the 50.00 centreline (resistance). Until we breach this value, this timeframe, according to the indicator, reflects negative momentum.

Limited change is seen on the weekly timeframe; therefore, the following text serves as a reminder of where I left things in Tuesday’s technical briefing (italics):

The weekly timeframe’s support likely remains on the radar for longer-term players between $0.6632 and $0.6763, built from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. This follow’s last week’s 3.5 per cent tumble, in a market that’s been entrenched within a primary bear trend since $0.8007 (22nd Feb high [2021]).

Out of the H4 timeframe, supply-turned demand at $0.6901-0.6862 stood firm (despite a number of downside attempts) and shows price is now on the verge of shaking hands with prime resistance at $0.7004-0.6972. Closer analysis on the H1 timeframe, on the other hand, has price responding to Quasimodo resistance at $0.6961 and resistance from $0.6947 in the shape of a shooting star candle pattern. Area above here throws light on $0.70; respecting the aforesaid resistances, nonetheless, projects a possible retest of $0.69.

Technical Expectation:

With the overall trend facing southbound (in spite of daily price climbing above resistance at $0.6901), the H4 prime resistance at $0.7004-0.6972 is likely to create interest among sellers if tested. Yet, if sellers continue to defend H1 resistance between $0.6961 and $0.6947, a dip back to $0.69 is not out of the question.

USD/JPY:

Following Tuesday’s bleak US data, the US dollar plunged versus the Japanese yen. This guided USD/JPY through ¥137 and a H1 acceleration trendline support, drawn from the low ¥132.56, to cross swords with ¥136. Reclaiming space south of the aforementioned psychological figure unearths H1 trendline support, pencilled in from the low ¥131.73.

Higher up, H4 ascending support-turned resistance, taken from the low ¥134.27, served well as a rising resistance barrier. H4 support is subsequently calling for attention at ¥135.58, closely shadowed by a 38.2% Fibonacci retracement at ¥134.94 and a 50.0% retracement value from ¥134.72. Should we eventually clear the noted ascending resistance, however, this highlights a 1.272% Fibonacci projection at ¥138.36 and a deep 88.6% Fibonacci retracement at ¥138.34.

From the weekly timeframe, resistance remains a key talking point at ¥137.23, in a market that’s emphasised a dominant primary bull trend since 2021. The weekly decision point from ¥126.40-131.30 is also a worthwhile note in the event sellers make a show on this timeframe.

Technical studies on the daily chart has price chalking up a bearish outside reversal; this follows five consecutive bullish sessions after an earlier defence formed from supply-turned demand at ¥131.93-131.10. While the daily bearish outside reversal has taken shape at weekly resistance (¥137.23), room to manoeuvre higher on the daily timeframe to Quasimodo support-turned resistance at ¥139.55 is evident.

I also noted the following in Monday’s weekly technical briefing in terms of the relative strength index (RSI) (italics):

The daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August. Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

Technical Expectation:

Weekly resistance at ¥137.23, the H4 ascending support-turned resistance recently welcoming sellers, and the daily timeframe’s bearish outside reversal informs traders that bears may look to control things further, particularly if H1 price dips under ¥136. This unlocks the door to at least the H1 trendline support, drawn from the low ¥131.73.

However, it is important to remember where we are in terms of trend studies. With the trend facing higher since 2021, any bearish showing could be short-lived as trend traders may view down moves as opportunities to buy the dip.

GBP/USD:

Snapping a four-day bearish phase, sterling made a comeback on Tuesday against the US dollar and established a daily bullish outside reversal candle. Influenced largely by dismal US economic data pressuring the buck lower, GBP/USD put in a bottom just ahead of daily support between $1.1655 and $1.1683 (two 100% Fibonacci projection ratios). In terms of where I stand on the daily chart’s relative strength index (RSI), we can see that the indicator has marginally bottomed ahead of oversold.

$1.1958 remains a key resistance level to be mindful of on the weekly timeframe, following last week’s dominant push lower. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. And, as I wrote in recent analysis, the breach of $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

The $1.1760 14th July low did a good job of holding back sellers on Tuesday on the H4 timeframe, with the test forming a hammer candlestick pattern. Quasimodo support-turned resistance at $1.1925 and prime resistance from $1.1978-1.1954 remains upside objectives on the H4 scale. The upside move on Tuesday also produced a H1 decision point at $1.1744-1.1784. Note that we can also see that price recaptured $1.18 and appears to have left $1.19 unchallenged, as we’re now on the verge of retesting $1.18 as possible support.

Technical Expectation:

Longer term, GBP/USD remains bearish until at least the daily timeframe’s 100% Fibonacci projection levels at $1.1683 and $1.1655. Short term, however, room to move higher on the H4 and H1 timeframes is visible to $1.19 and H4 Quasimodo support-turned resistance from $1.1925. Therefore, buyers could take control from $1.18 if retested on the H1 scale, supported by the H1 decision point at $1.1744-1.1784.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

23rd August: Technical View Ahead of Eurozone, UK and US PMIs

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

The European common currency extended losses on Monday, refreshing a two-decade low against a broadly stronger US dollar. Technically, I cannot say I am surprised by the drop; the higher timeframes emphasised clear weakness amid a lack of support and a decisive downtrend since early 2021.

I noted the following in Monday’s weekly technical briefing (italics):

The clear downtrend, the weekly resistance at $1.0298, the daily resistance at $1.0377, the daily trendline resistance (taken from the high $1.1495), the H4 bearish pennant pattern ($1.0122 and $1.0195), together with room to move lower on the aforementioned timeframes, signals sellers have the upper hand this week.

Consequent to Monday’s bearish forces, weekly and daily price are on the doorsteps of notable support at $0.9925 (a 1.272% Fibonacci projection) and $0.9919, respectively. Furthermore, the relative strength index (RSI) on the daily scale shows the indicator cementing position under the 50.00 centreline, placing the value within touching distance of oversold territory, together with an indicator trendline resistance-turned-support level (drawn from the high 58.91) and indicator support coming in from 21.87.

Against the backdrop of higher timeframe structure, H4 price is shaking hands with the bearish pennant pattern’s profit objective at $0.9928 after walloping its way under Quasimodo support at $0.9998 (now a marked resistance level). However, based on the H1 timeframe, scope to approach $0.99 is on the table following the break of parity—a move widely talked about in financial news.

Technical Expectation:

Support on the weekly, daily, and H4 timeframes ($0.9925, $0.9919, $0.9928) are likely to concern sellers and may be an area the charts witness a bout of profit taking. Nevertheless, the reality is that a H1 close south of $0.99 could trigger additional technical selling and place a question mark on the said higher timeframe supports.

AUD/USD:

Monday witnessed the Australian dollar finish the day off best levels versus the US dollar, amid sour risk sentiment that underpinned the safe-haven buck.

The weekly timeframe’s support likely remains on the radar for longer-term players between $0.6632 and $0.6763, built from a 100% Fibonacci projection, horizontal price support, and a 50% retracement. This follow’s last week’s 3.5 per cent tumble, in a market that’s been entrenched within a primary bear trend since $0.8007 (22nd Feb high [2021]).

From the daily timeframe, the technical framework remains pretty much unchanged (italics):

Adding to the bearish vibe, the daily timeframe has price action dipping a toe beneath $0.6901 (and retesting the level on Monday as resistance). Splitting the aforesaid support swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678. Further weakness is also communicated by the relative strength index (RSI) elbowing under the 50.00 centreline, action informing market participants that average losses exceed average gains: negative momentum.

Shorter term, H4 price action, albeit attempting to hold the area earlier in the session, is seen chewing on the lower boundary of supply-turned demand at $0.6901-0.6862. This, as I underlined in Monday’s technical briefing, signals sellers are gearing up for a push towards prime support at $0.6774-0.6815 (arranged just north of Quasimodo support at $0.6761). However, I still believe it is worth noting that before sellers change gears, a pullback to prime resistance from $0.7004-0.6972 might be on the table.

The London session on Monday, as you can see, staged the beginnings of a rather impressive whipsaw north of $0.69 on the H1, with US traders subsequently selling into any buy-stops tripped above the psychological figure. Quasimodo resistance-turned support warrants attention at $0.6843 to the downside, and a break casts light on $0.68 (aligns closely with the daily timeframe’s trendline support noted above).

Technical Expectation:

I noted the following in Monday’s technical briefing, which remains valid heading into Tuesday’s sessions (italics):

Technically, price action reflects a bearish stance, both long term and also in the short term. The close beneath daily support at $0.6901, the room to manoeuvre lower on the daily and weekly timeframes (to at least daily trendline support), and the H4 timeframe stabbing the lower limit of demand at $0.6901-0.6862 says this is a market in favour of sellers.

The whipsaw above $0.69 was clearly sufficient to spur further selling, a move that may inspire a test of at least the H1 timeframe’s Quasimodo resistance-turned support at $0.6843, and perhaps $0.68.

USD/JPY:

USD/JPY continued to flex its financial muscle on Monday, extending gains for a fifth consecutive day amid a rise in US Treasury yields and a broad USD bid.

Seeing room to manoeuvre higher on the daily timeframe to Quasimodo support-turned resistance at ¥139.55, alongside a dominant primary bull trend since 2021, informs market participants that weekly resistance drawn from ¥137.23 is unlikely to offer a similar ceiling as it did in mid-July. Therefore, overthrowing the said weekly resistance is a scenario likely in many technical traders’ playbooks, perhaps taking aim at ¥139.55.

I also noted the following in Monday’s weekly technical briefing in terms of the relative strength index (RSI) (italics):

Interestingly, the daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August. Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

Addressing the H4 chart, ascending support-turned resistance, taken from the low ¥134.27, is being tested, as I write. Clearing the aforementioned line highlights a 1.272% Fibonacci projection at ¥138.36 and a deep 88.6% Fibonacci retracement at ¥138.34. Based on the H1 timeframe, although not to-the-pip, ¥137 delivered a technical floor of support on Monday, action unearthing a potential rally to ¥138.

Technical Expectation:

Buyers are in control for the time being, with little sign of slowing according to chart studies.

The room to climb higher on the daily timeframe to ¥139.55 and the H1 rebounding from ¥137, together with the clear uptrend, places a question mark on weekly resistance at ¥137.23 and the H4 ascending resistance. As a result, buyers could stage another push higher, targeting ¥138 (H1), the H4 Fibonacci ratios around ¥138.55ish (modest Fibonacci cluster), and daily resistance from ¥139.55.

GBP/USD:

Sterling fell to lows not seen since March 2020 against the US dollar on Monday, moves triggered by robust demand for the safe-haven US dollar as well as fears of an economic slowdown in the UK amid soaring energy costs and nationwide strikes.

In terms of the technical setting on the weekly and daily timeframes, I noted the following in Monday’s technical briefing (italics):

$1.1958 is likely out of the fight on the weekly timeframe as a support, hence its mark as resistance. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. Breaking $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

Addressing the daily timeframe, we can see that price movement has been trading beneath its 200-day simple moving average since August 2021. The currency pair, alongside the relative strength index (RSI) dropping below the 50.00 centreline, closed the week within striking distance of two 100% Fibonacci projection levels at $1.1683 and $1.1655. Note that the RSI may actually step into oversold space this week, potentially targeting indicator support as far south as 15.91.

Quasimodo support on the H4 timeframe greeted the currency pair at $1.1806 on Friday but stood little chance on Monday amid the bearish onslaught. Price is now seen crossing swords with the $1.1760 14th July low. Readers may recall I wrote the following regarding lower timeframe price structure (italics):

Short term, we are at support on both H4 and H1 timeframes. If H1 climbs above Quasimodo support-turned resistance at $1.1826, this signals a pullback is potentially on the cards to $1.19 (followed by H4 Quasimodo support-turned resistance at $1.1925) and consequently opens the door to a short-term bullish scenario. However, cracking beneath $1.18 indicates breakout selling towards $1.17.

As evident from the H1 timeframe, price failed to find any acceptance north of $1.1826 on Monday and subsequently tunnelled through $1.18, which, as communicated above, paves the way for a test of $1.17.

Technical Expectation:

Longer term, as noted in recent analysis, GBP/USD is technically exposed to further weakness this week until at least the daily timeframe’s 100% Fibonacci projection levels at $1.1683 and $1.1655.

Short term, I see limited support stopping the currency pair from attempting to voyage lower and attack bids around $1.17. Thus, a retest at $1.18 today could see sellers enter the fight.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Weekly Technical Market Insight: Week Ending 26th August 2022

Charts: Trading View

(Italics: Previous Analysis)

US Dollar Index:

The US dollar—measured by way of the US Dollar Index—staged an impressive rally last week, adding more than 2.0 per cent and recording its largest one-week advance since March 2020.

Following a test of an ‘acceleration’ trendline support on the daily chart a week prior (drawn from the low 95.17), and last week’s advance, the daily candles are on the verge of shaking hands with familiar resistance between 109.14 and 108.58 (made up of a 1.272% Fibonacci projection, a 1.618% Fibonacci expansion, and a Quasimodo resistance level).

Note that the rebound from the said trendline support was backed by the daily timeframe’s relative strength index (RSI) recoiling from support between 40.00 and 50.00, an area delivering an oversold region since August 2021 (common in uptrends).

Trend studies on the monthly and daily timeframes also continue to favour buyers which portends a break of the current daily resistance. As aired in recent weekly technical writing, aside from a 7-year range (forming a pennant chart pattern [considered a continuation signal], taken from 103.82 and 88.25), monthly movement has been higher since early 2008. This is reinforced by the uptrend visible on the daily timeframe, exhibiting well-defined upward action since price made contact with support from 89.69 in May 2021.

The upside bias is also shown through the 50-day simple moving average (current: 106.07) crossing above the 200-day simple moving average (current: 100.36) in August 2021 (‘Golden Cross’).

Bearish elements to consider are the monthly timeframe showing prime resistance at 109.77-104.96, together with the monthly RSI demonstrating the possibility of negative divergence within overbought status. Furthermore, we must take on board the nearby daily resistance underlined above.

Technical Expectation:

According to chart studies, technical evidence supporting buyers surpasses the chart’s bearish features. As a result, a break of daily resistance might be seen between 109.14 and 108.58 this week. This may trigger breakout buying and, ultimately, dethrone the monthly timeframe’s prime resistance at 109.77-104.96.

EUR/USD:

Shedding 2.1 per cent, Europe’s single currency finished the week at session lows versus the US dollar. Technically, the downside move is unlikely to surprise chartists with an eye for trend direction and support and resistance.

Price action on the weekly timeframe has been entrenched within an unmistakable primary bear trend since pencilling in a top in early 2021 with heavy-handed pullbacks in short supply. This, thrown together with the recent pullback touching gloves with resistance at $1.0298 on the weekly scale, set the currency pair up for another leg lower, with scope to strike a 1.272% Fibonacci projection at $0.9925 this week.

The test of weekly resistance was accompanied by neighbouring resistance on the daily timeframe at $1.0377 and a trendline resistance, drawn from the high $1.1495. Daily support calls for attention at $0.9919—plotted a touch south of weekly support at $0.9925. Those who follow the relative strength index (RSI) will note the indicator is cementing position under the 50.00 centreline, and oversold territory is in reach, together with an indicator trendline resistance-turned-support level and indicator support coming in from 21.87.

Lacklustre trading seen on Tuesday and Wednesday established a bearish pennant pattern on the H4 scale, forged between $1.0122 and $1.0195. The tail end of the week subsequently saw price breakout south, taking on support at $1.0125 (now a marked resistance level), with technical eyes likely directed towards Quasimodo support at $0.9998, followed by the bearish pennant’s profit objective at $0.9928.

A closer reading of price movement on the H1 timeframe turns the technical spotlight in the direction of parity ($1.00), a level many traders will talk about this week, particularly if the currency pair finds sellers south of H1 resistance at $1.0046. Below $1.00 focusses on the 1.618% Fibonacci expansion at $0.9972. Terrain above $1.0046, though, could have the unit retest $1.01 and maybe cross swords with a H1 Quasimodo support-turned resistance at $1.0108.

Technical Expectation:

The clear downtrend, the weekly resistance at $1.0298, the daily resistance at $1.0377, the daily trendline resistance, the H4 bearish pennant pattern, together with room to move lower on the aforementioned timeframes, signals sellers have the upper hand this week. Consequently, any rally will likely be viewed as a bearish opportunity, targeting $1.00 on the H1 chart, the H4 Quasimodo support at $0.9998, the H1 1.618% Fibonacci expansion at $0.9972, and then, with a little oomph, weekly and daily supports at $0.9925 and $0.9919, respectively.

AUD/USD:

It was a bad week for procyclical currencies, such as the New Zealand dollar, the Canadian dollar, and the Australian dollar. AUD/USD plunged 3.5 per cent, reclaiming the prior week’s upside and registered its worst week of trading since September 2021. Consequently, support between $0.6632 and $0.6763 is back on the radar for the weekly timeframe, constructed from a 100% Fibonacci projection, horizontal price support, and a 50% retracement.

Siding with the recent bout of selling is the currency pair’s trend: reflecting a primary downtrend since $0.8007 (22nd Feb high [2021]). The monthly timeframe has portrayed a downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among chartists. Downside from the 2021 February top, therefore, might be seen as a move to explore lower over the coming weeks/months.

Adding to the bearish vibe, the daily timeframe has price action dipping a toe beneath $0.6901, perhaps shaping resistance this week. Splitting the aforesaid support swings the pendulum in favour of reaching trendline resistance-turned support, drawn from the high $0.7661, as well as support at $0.6678. Further weakness is also communicated by the relative strength index (RSI) elbowing under the 50.00 centreline, action informing market participants that average losses exceed average gains: negative momentum.

Addressing studies on the H4 timeframe, we can see price action clipped the lower boundary of supply-turned demand at $0.6901-0.6862 on Friday, signalling sellers are gearing up for a push towards prime support at $0.6774-0.6815 (arranged just north of Quasimodo support at $0.6761). However, before sellers change gears, a pullback to prime resistance from $0.7004-0.6972 might be on the table.

In terms of where I stand on the H1 scale, $0.69 stood little chance on Friday in spite of efforts to hold the psychological base in Asia. The level ceded ground mid-way through the London session, giving way to a retest heading into US trading hours, which, as you can see, managed to hold into the closing bell.

Located closely with trendline resistance, etched from the high $0.7123, $0.69 offers moderate confluence (resistance) to work with in early trading this week. Quasimodo resistance-turned support warrants attention at $0.6843, and a break casts light on $0.68 (aligns closely with the daily timeframe’s trendline support noted above).

Technical Expectation:

Technically, price action reflects a bearish stance, both long term and also in the short term. The close beneath daily support at $0.6901, the room to manoeuvre lower on the daily and weekly timeframes (to at least daily trendline support), and the H4 timeframe stabbing the lower limit of demand at $0.6901-0.6862 says this is a market in favour of sellers.

As with any downward facing market, however, pullbacks occur and can present opportunities to jump aboard. Short-term resistance is offered around $0.69, joined by H1 trendline resistance and, of course, daily resistance at $0.6901. Failing to hold here demonstrates willingness to stage a deeper pullback to H1 resistance at $0.6947, sheltered just under prime resistance on the H4 at $0.7004-0.6972.

USD/JPY:

Shaped by way of four back-to-back daily bullish candles, USD/JPY flexed its muscle last week and rallied 2.5 per cent. The beginning of August witnessed dip-buying emerge from the weekly timeframe’s decision point at ¥126.40-131.30, leading to a retest of resistance coming in at ¥137.23 in recent trading. Overthrowing the said resistance is certainly a scenario likely in many technical traders’ playbooks this week, in light of the prevailing uptrend.

The currency pair has exhibited a healthy upside bias since the beginning of 2021 and forms what many technicians will recognise as a primary bull trend. This is further reinforced by the monthly timeframe’s trend, higher since bottoming in late 2011.

The bullish climate is also reflected on the daily timeframe; price rebounded from supply-turned demand at ¥131.93-131.10, an area glued to the upper boundary of a weekly decision point. Quasimodo support-turned resistance at ¥139.55, therefore, is now in the firing line this week. Supporting trend direction, price has been trading north of the 200-day simple moving average since February 2021. Additionally, the SMA has pointed higher since April 2021: another widely used trend-following technique.

Interestingly, the daily timeframe’s relative strength index (RSI) ventured above its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence at the beginning of August. Dethroning the 50.00 base adds weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum). Upside targets are seen at the indicator trendline resistance, etched from the high 87.44, and indicator resistance at 87.52.

While the trend favours bulls, with room to navigate higher on the daily scale, the weekly resistance at ¥137.23 and the H4 timeframe’s AB=CD bearish pattern at ¥136.95 (a 100% Fibonacci projection) is visible confluence. Combine this with the H4 ascending support-turned resistance, taken from the low ¥134.27, and we have relatively impressive resistance in early trading this week.

Note that the H4 timeframe’s reaction from the AB=CD region moulded a shooting star candlestick pattern, considered a bearish signal. Assuming a response here this week, harmonic traders tend to take aim at 38.2% and 61.8% Fibonacci retracements, derived from legs A-D of the AB=CD formation.

Meanwhile on the H1 timeframe, ¥137 commanded attention ahead of the close on Friday, assisted by a Quasimodo resistance from ¥137.15. Above, eyes will be on ¥138; below features ¥136 and an acceleration trendline support, drawn from the low ¥132.56.

Technical Expectation:

Although we are looking at a market that remains entrenched within a dominant uptrend, a retracement is perhaps brewing. Evidence supporting bears in early trading this week consists of the following: weekly resistance at ¥137.23, the H4 AB=CD bearish pattern at ¥136.95 (and H4 ascending trendline resistance), and the ¥137 figure on the H1 (backed by H1 Quasimodo resistance).

While the above may deliver enough to tempt a bearish scenario, whether it will be sufficient to encourage prolonged selling is questionable. I say this because of not only the current uptrend, but also due to the daily timeframe demonstrating scope to climb to ¥139.55.

For that reason, bears could show early in the week and trade short term, though longer term is in favour of the bulls.

GBP/USD:

Following three weeks of tentative price action, a sharp slump in the pound erupted last week that saw the GBP/USD tumble 2.5 per cent and settle on the doorstep of a six-week low from $1.1760.

$1.1958 is likely out of the fight on the weekly timeframe as a support, hence it’s marked as resistance heading into the week. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. Breaking $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

I noted the following in regards to the trend in my previous weekly technical briefing (italics):

Trend direction has been bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.

Addressing the daily timeframe, we can see that price movement has been trading beneath its 200-day simple moving average since August 2021. The currency pair, alongside the relative strength index (RSI) dropping below the 50.00 centreline, closed the week within striking distance of two 100% Fibonacci projection levels at $1.1683 and $1.1655. Note that the RSI may actually step into oversold space this week, potentially targeting indicator support as far south as 15.91.

Price action on the H4 timeframe ended the week at an interesting juncture. Quasimodo support greeted the currency pair at $1.1806, a level complemented by a Fibonacci cluster between $1.1803 and $1.1821. While this offers reasonably strong confluence, the higher timeframes project further selling and could, therefore, draw price towards the $1.1760 low. Overhead, nonetheless, sees Quasimodo support-turned resistance at $1.1925 and prime resistance at $1.1978-1.1954.

$1.18 made a show late in the day on Friday on the H1 scale. Quasimodo support-turned resistance also put in an appearance at $1.1826. If the unit managed to reclaim the aforementioned level, follow-through buying appears reasonable to $1.19. Though breaking $1.18, as the higher timeframes suggest, shows limited support until $1.17.

Technical Expectation:

Longer term, GBP/USD is technically exposed to further weakness this week until at least the daily timeframe’s two 100% Fibonacci projection levels at $1.1683 and $1.1655.

Short term, we are at support on both H4 and H1 timeframes. If H1 climbs above Quasimodo support-turned resistance at $1.1826, this signals a pullback is potentially on the cards to $1.19 (followed by H4 Quasimodo support-turned resistance at $1.1925) and consequently opens the door to a short-term bullish scenario. However, cracking beneath $1.18 indicates breakout selling towards $1.17.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for 18th August 2022: Dollar Bid Weighing on Peers

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

From a technical perspective, chart studies indicate additional selling could materialise.

The weekly and daily timeframe’s longer-term structure remains unchanged. As a result, the following text serves as a reminder of where I left the bigger picture in recent writing (italics):

The weekly timeframe shows price action rejecting resistance at $1.0298, in a market decisively trending south since 2021. Many chartists will label this movement a primary bear trend, with pullbacks few and far between. Combine this with daily flow topping a whisker south of resistance at $1.0377 (and intersecting trendline resistance, drawn from the high $1.1495), and scope to explore as far south as the weekly timeframe’s 1.272% Fibonacci projection at $0.9925 and daily support from $0.9919, EUR/USD is a bearish market. In terms of where I stand on the daily chart’s relative strength index (RSI), we are south of the 50.00 centreline (negative momentum), further supporting softening demand for the euro.

Lackluster trading of late has seen buyers and sellers establish a potential bearish pennant pattern on the H4 scale, forged between $1.0122 and $1.0195. Note also that we have neighbouring support fixed just south of the formation at $1.0125. Should a breakout north emerge, resistance at $1.0279 is visible, coupled with an ascending support-turned-resistance level, pencilled in from the low $0.9952.

A closer examination of price action on the H1 timeframe has the unit circling beneath $1.02. The surrounding timeframes indicate we might continue to work under the aforementioned round number, targeting H1 Quasimodo support at $1.0108 (and $1.01), yet traders are encouraged to pencil in the possibility of a break above $1.02 and subsequent moves toward resistance at $1.0275.

Technical Expectation:

The clear downtrend, the weekly resistance at $1.0298, the daily resistance at $1.0377, the daily trendline resistance, and the possible H4 bearish pennant pattern signals sellers still have the upper hand.

As a result, a break of the lower side of the H4 pennant pattern could form to take on H4 support at $1.0125, pointing to at least the H1 Quasimodo support at $1.0108.

C:\Users\AHill\Desktop\EURUSD FPMARKETS.png

AUD/USD:

The risk-sensitive Australian dollar was on the ropes on Wednesday, weighed by a lower-than-expected labour price index reading, a clear risk-off tone and upbeat year-over-year US retail sales for July, which ultimately reinforced the buck.

Hopes of holding above support on the weekly timeframe at $0.6996 were dashed amid the one-sided decline yesterday, swaying emphasis in the direction of weekly support between $0.6632 and $0.6763. Lower, price movement on the daily timeframe is on the doorstep of support from $0.6901; splitting the aforesaid support swings the pendulum in favour of reaching support at $0.6678. The recent downside follows a near-test of the 200-day simple moving average at $0.7144.

Moving across to the lower timeframes, H4 is on the verge of shaking hands with the supply-turned-demand area at $0.6901-0.6862. Note that the upper edge of this area represents the daily timeframe’s support ($0.6901). Submerging the aforementioned H4 demand highlights space to approach Quasimodo supports at $0.6761 and $0.6710, respectively.

In terms of where I stand on the H1 scale, $0.69 calls for attention to the downside and resistance is at $0.6947. You will note that $0.69 boasts strong support from the upper edge of the H4 demand, together with daily support ($0.6901). Climbing above resistance shows limited resistance until $0.70 and trendline resistance, extended from the high $0.7123.

Technical Expectation:

Attention is centred on $0.69 at the moment. A H1 rejection demonstrates bullish curiosity from the H4 demand at $0.6901-0.6862, and daily support at $0.6901. A break lower, on the other hand, places a question mark on the noted areas and unlocks the gate to continuation selling opportunities.

C:\Users\AHill\Desktop\AUDUSD FPMARKETS.png

USD/JPY:

It was another positive session for USD/JPY on Wednesday, adding 0.5 per cent.

Higher timeframe technical structure remains unchanged (italics):

According to the weekly and daily timeframes, technical evidence suggests further buying. The daily timeframe responded well to supply-turned demand at ¥131.93-131.10, with a decisive push likely to throw light on Quasimodo support-turned resistance at ¥139.55. Note that ¥131.93-131.10 is an area that is glued to the upper boundary of a weekly decision point coming in at ¥126.40-131.30 with weekly resistance plotted at ¥137.23, set below the noted daily resistance.

As I said in previous writing, until the weekly decision point at ¥126.40-131.30 is overthrown, I do not expect to see much call for USD/JPY shorts. A break of the daily timeframe’s supply-turned demand at ¥131.93-131.10, however, would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.

But for now, buyers remain in the driving seat.

The H4 timeframe is watching the AB=CD bearish pattern at ¥136.95 (a 100% Fibonacci projection), accompanied by a 78.6% Fibonacci retracement at ¥137.48, an ascending support-turned resistance, taken from the low ¥134.27, and trendline resistance, drawn from the high ¥139.38. On the H1 timeframe, prime resistance at ¥136.21-135.87 is overhead, with any downside attempts likely to take aim at ¥134 and trendline support, etched from the low ¥131.73.

Technical Expectation:

Given the space to move higher on the weekly and daily timeframes, a test of the H4 AB=CD bearish pattern at ¥136.95 could be seen. Before buyers attempt to trade higher, however, a retest of ¥134 on the H1 timeframe may unfold to attract buyers to target the H4 pattern.

C:\Users\AHill\Desktop\USDJPY FPMARKETS.png

GBP/USD:

In the 12 months to July, UK inflation clocked an eye-watering 10.1 per cent, climbing from 9.4 per cent in June, according to the Office for National Statistics on Wednesday. Short-dated gilt yields rallied in response to the latest inflation figures, amid heightened expectations that the Bank of England (BoE) will continue to aggressively increase its Bank Rate to stem soaring consumer prices.

Sterling immediately spiked to a high of $1.2142 against the US dollar following the inflation data, rallying to within a whisker of H1 trendline resistance (drawn from the high $1.2277) before declining throughout European and US trading. This directed the currency pair through $1.21 to within a stone’s throw of the widely watched $1.20 psychological figure.

Price action on the weekly timeframe echoes a vulnerable setting around support at $1.1958, in a market trending lower since 2021. Interest to the upside casts light on weekly resistance at $1.2719 while clearing $1.1958 unearths the pandemic low of $1.1410. However, in order to navigate south, daily flow must confront (and engulf) trendline resistance-turned support, taken from the high $1.3639, as well as the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056).

Technical Expectation:

GBP/USD is technically exposed.

Short-term action indicates at least a test of $.20, while snapping under this level could trigger breakout selling and draw price towards H4 support at $1.1933 which shares a close connection with the daily timeframe’s trendline support.

C:\Users\AHill\Desktop\GBPUSD FPMARKETS.png

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View Ahead of UK Inflation Data (17th August 2022)

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Europe’s single currency echoed a somewhat lacklustre vibe against its US counterpart on Tuesday, consolidating around Monday’s low of $1.0154.

The weekly timeframe shows price action rejecting resistance at $1.0298, in a market decisively trending south since 2021. Many chartists will label this movement a primary bear trend, with pullbacks few and far between. Combine this with daily flow topping a whisker south of resistance at $1.0377 (and intersecting trendline resistance, drawn from the high $1.1495), and scope to explore as far south as the weekly timeframe’s 1.272% Fibonacci projection at $0.9925 and daily support from $0.9919, EUR/USD remains a bearish market on the bigger picture.

In terms of where I stand on the daily chart’s relative strength index (RSI), we are comfortably south of the 50.00 centreline (negative momentum), further supporting softening demand for the euro.

The H4 timeframe, in support of the downside bias, shows price tunnelled through trendline support, drawn from the low $0.9952, and shook hands with support at $1.0125. While the latter has stood its ground, a breach shines the technical spotlight on Quasimodo support from $0.9998. A closer reading of price action on the H1 chart demonstrates the currency pair recently connected with trendline resistance (extended from the high $1.0364), missing $1.02 by a hair. Downside support falls in at $1.0108 (Quasimodo formation) and $1.01.

Technical Expectation:

The clear downtrend, the weekly resistance at $1.0298, the daily resistance at $1.0377, the daily trendline resistance, the break of H4 trendline support, and the H1 currently testing trendline resistance indicates sellers have the upper hand.

As a result, sellers rupturing H4 support at $1.0125 could be in offing, targeting at least the H1 Quasimodo support at $1.0108 and the $1.01 figure.

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AUD/USD:

The Australian dollar lost ground versus the US dollar for a second consecutive session on Tuesday, comfortably cementing its position beneath the 200-day simple moving average at $0.7145 on the daily timeframe (blending with a 50% retracement at $0.7167 and a deep 78.6% Fibonacci retracement at $0.7156). While I do see room for the currency pair to extend losses to daily support at $0.6901, in a market trending lower since early 2021, the weekly timeframe’s price action is testing support from $0.6996 following last week’s break.

Across the page, H4 has buyers and sellers squaring off around the underside of a resistance area at $0.7062-0.7031. If we continue to defend the noted area, the technical pendulum swings in favour of reaching supply-turned demand at $0.6901-0.6862. Nevertheless, in order to achieve lower prices on the H4, this involves the H1 dropping under $0.70, a move possibly aided by neighbouring H1 resistance at $0.7032. 10th August low from $0.6947 calls for attention beneath $0.70, and a break re-opens the risk of a return to $0.69.

Technical Expectation:

Weekly support from $0.6996 will be a concern for sellers in this market, as will the $0.70 figure delivering possible support on the H1.

Consequently, sellers—backed by room to move lower on the daily and H4 timeframes—will likely want to see a H1 close under $0.70 before committing, with many perhaps taking aim at the $0.6947 10th August low.

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USD/JPY:

USD/JPY bulls came out swinging on Tuesday, underpinned amid healthy US Treasury yields.

According to the weekly and daily timeframes, technical evidence suggests further buying. The daily timeframe responded well to supply-turned demand at ¥131.93-131.10, with a decisive push likely to throw light on Quasimodo support-turned resistance at ¥139.55. Note that ¥131.93-131.10 is an area that is glued to the upper boundary of a weekly decision point coming in at ¥126.40-131.30 with weekly resistance plotted at ¥137.23, set below the noted daily resistance.

As I said in previous writing, until the weekly decision point at ¥126.40-131.30 is overthrown, I do not expect to see much call for USD/JPY shorts. A break of the daily timeframe’s supply-turned demand at ¥131.93-131.10, however, would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.

But for now, buyers remain in the driving seat.

As for the H4 timeframe, the 50% retracement ratio at ¥134.90 is overhead; a break places an AB=CD bearish pattern in view at ¥136.95 (a 100% Fibonacci projection), accompanied by a 78.6% Fibonacci retracement at ¥137.48 and an ascending support-turned resistance, taken from the low ¥134.27. Nonetheless, on the H1 timeframe, after running above ¥134, we see the unit testing prime resistance at ¥134.88-134.33—in particular a Quasimodo support-turned resistance at ¥134.61.

Technical Expectation:

H1 prime resistance from ¥134.88-134.33 is likely to interest sellers, particularly if the currency pair moves back under ¥134.

With that being said, the higher timeframes (weekly and daily charts) show room to move higher, therefore sellers in this market will likely adopt strict trade-management rules should they pull the trigger.

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GBP/USD:

Ahead of today’s UK inflation data, sterling ended Tuesday modestly higher versus the US dollar.

Technically, I see limited change on the bigger picture (weekly and daily charts), therefore, here’s where I left things in recent writing (italics):

Price remains testing long-term weekly support at $1.1958. This is a level that has had a question mark on it as its positioned in a market trending lower since 2021. Interest to the upside casts light on weekly resistance at $1.2719.

The weekly support level is reinforced on the daily timeframe after daily price retested (and held) trendline resistance-turned support, taken from the high $1.3639, with the chart also demonstrating space to rally until reaching a decision point at $1.2605-1.2465.

Right now, therefore, higher timeframe structure is in favour of buyers.

The H4 timeframe’s price action has the currency pair rebounding from the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This locates the pattern’s take-profit level from $1.2335 back in the frame.

From the H1 timeframe, we can see the currency pair came within the range of $1.20 (and a trendline resistance-turned support, taken from the high $1.2293). Venturing above $1.21 is likely to see the pair attempt to target $1.22.

Technical Expectation:

According to the four charts analysed, buyers are likely to remain in command.

A decisive H1 close above $1.21 is likely enough to tempt breakout buying towards $1.22, in light of the space seen to move north on the weekly, daily, and H4 timeframes.

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DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

August 12th 2022: Technical View Ahead of UK GDP Data

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Against a basket of six international currencies, the US dollar continued to explore lower territory on Thursday. Risk events saw US weekly unemployment claims come in largely as expected at 262,000, while the Producer Price Index (PPI) fell 0.5 per cent in July versus 1.1 per cent in June.

EUR/USD moderately extended gains on Thursday and has resistance at $1.0377 in the headlights right now, which happens to intersect with trendline resistance, extended from the high $1.1495. This is a key level as defending the lower side of these barriers implies the break above weekly resistance coming in at $1.0298 could be short lived.

Ultimately, the trend—facing south since early 2021—favours sellers emerging from $1.0377. In terms of where I stand on the daily chart’s relative strength index (RSI), we are now comfortably north of the 50.00 centreline (positive momentum), opening the possibility of testing indicator resistance from 63.66.

Across the page on the H4 and H1 charts, price is seen connecting with H4 Quasimodo support-turned resistance at $1.0354. Support at $1.0279 made a show in recent trading and provided a platform for short-term buyers to work with. Nearby, we also have trendline support seen, pencilled in from the low $0.9952. Journeying above current resistance (and engulfing daily resistance at $1.0377), prime resistance is seen from $1.0535-1.0505.

The area of resistance between $1.0376 and $1.0356 on the H1 timeframe, made up of two Fibonacci projection levels (1.272% and 1.618%), also made an appearance on Thursday as it houses the current H4 resistance within. This follows an earlier rebound from support drawn from between a Quasimodo resistance-turned support at $1.0275 and $1.03.

Technical Expectation:

The clear downtrend, the daily resistance at $1.0377, the daily trendline resistance, the H4 Quasimodo support-turned resistance at $1.0354, and the H1 resistance between $1.0376 and $1.0356 is likely sufficient technical evidence to tempt a bearish scenario unfolding in this market.

To convince sellers, however, they will likely require at least a H1 close under $1.0275, action perhaps clearing the path to the H4 trendline support and the $1.02 figure on the H1 scale.

 

AUD/USD:

The Australian dollar gained versus a broadly softer US dollar on Thursday, comfortably aligning AUD/USD within a stone’s throw of the 200-day simple moving average at $0.7151. Blending with a 50% retracement at $0.7167 and a deep 78.6% Fibonacci retracement at $0.7156, this technical ceiling may contain sufficient fuel to hinder further buying (note that moving averages can [and often do] deliver dynamic support and resistance as price commonly reverts to its mean).

Up nearly 3.0 per cent week to date, however, the currency pair is on the verge of forging a close above resistance from $0.6996 on the weekly timeframe. As noted in previous writing, assuming a dominant finish to the week, weekly price invites an approach to as far north as prime resistance coming in at $0.7849-0.7599. This follows a rebound from weekly support between $0.6632 and $0.6764.

From a shorter-term perspective, H4 price came within touching distance of retesting supply-turned demand at $0.7062-0.7031 before rallying. H4 Quasimodo support-turned resistance is seen at $0.7148. On the H1 chart, price is shaking hands with Quasimodo resistance at $0.7129 (set just beneath the H4 Quasimodo base), with support standing close at $0.71. If we venture under the aforementioned round number, H1 Quasimodo resistance-turned support calls for attention at $0.7032.

Technical Expectation:

Daily resistance made up between a 200-day simple moving average and Fibonacci ratios (50% is not a Fib number) at around $0.7160ish is likely to act as a magnet to price and ultimately pull H1 price above Quasimodo resistance at $0.7129 to test the H4 Quasimodo support-turned resistance at $0.7148.

This means should we see a retest of $0.71 on the H1 scale as support, buyers could potentially step in.

USD/JPY:

Following Wednesday’s one-sided decline, Thursday attempted to navigate area to the downside, though ended the session considerably off worst levels after touching gloves with supply-turned demand at ¥131.93-131.10 on the daily scale. Note that this is an area that is glued to the upper boundary of a weekly decision point coming in at ¥126.40-131.30. Overhead on the bigger picture, weekly resistance is seen at ¥137.23, with a break here pointing to daily Quasimodo support-turned resistance at ¥139.55.

As I said in Thursday’s technical briefing, until the weekly decision point at ¥126.40-131.30 is overthrown, I do not expect to see much call for USD/JPY shorts, technically speaking. A break of the daily timeframe’s supply-turned demand at ¥131.93-131.10, however, would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.

I do not really have anything to add on the H4 timeframe right now as structure is relatively distant. Nevertheless, on the H1 scale, price is currently testing ¥133 and the H1 Quasimodo support-turned resistance at ¥133.11. This follows the push from ¥132. If we move north of ¥133, then traders are likely to zero in on ¥134 and neighbouring prime resistance at ¥134.88-134.33.

Technical Expectation:

Given the pair has tested the daily timeframe’s supply-turned demand area at ¥131.93-131.10, which shares a connection with the upper boundary of the weekly chart’s decision point at ¥126.40-131.30, a ¥133 break to the upside should not surprise. This may also trigger breakout buying towards ¥134. However, it is at this point I see a potential whipsaw of this number into H1 prime resistance at ¥134.88-134.33 which could have short-term sellers make a show.

GBP/USD:

Ahead of UK GDP data, sterling ended Thursday largely unmoved, remaining within the upper boundary of Wednesday’s range ($1.2277) and mildly fading session highs of $1.2249.

Therefore, here is where I left the charts on the weekly and daily timeframes in Thursday’s technical briefing (italics):

Kicking things off from the weekly timeframe, Wednesday’s performance may instil some confidence in bids from long-term weekly support at $1.1958. This is a level that has had a question mark on it as its positioned in a market trending lower since 2021. Continued interest to the upside casts light on weekly resistance at $1.2719.

The recent bid is further reinforced on the daily timeframe after daily price retested (and held) trendline resistance-turned support, taken from the high $1.3639, with the chart also demonstrating space to rally until reaching a decision point at $1.2605-1.2465.

Right now, therefore, higher timeframe structure is in favour of buyers.

The H4 timeframe’s price action also remains unchanged (italics):

Thanks to recent buying, we have seen the currency pair rebound from the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This locates the pattern’s take-profit level from $1.2335 back in the frame.

From the H1 timeframe, we can see the currency pair is attempting to hold off $1.22 in the form of support. I do not see much in the way of resistance on this timeframe until the $1.23 region, though a break of $1.22 could send price back to $1.21.

Technical Expectation:

According to the four charts analysed, buyers are likely to remain in command.

The retest of $1.22 on the H1 timeframe, therefore, could offer buyers a platform to work with, targeting $1.23, and then the H4 timeframe’s pattern (inverted H&S) profit objective at $1.2335.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

August 11th 2022: Technical View Following Lower-Than-Forecast US CPI

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Broad-based USD weakness emerged on Wednesday following weaker-than-expected inflation out of the US. Fed funds futures traders are consequently pricing in a less aggressive rate hike for 21st September Fed meeting. According to the US Dollar Index—USD value against six international currencies— the buck plunged 1.2 per cent (its largest single-day decline since late 2020) and underpinned Europe’s single currency.

EUR/USD received a much-needed tailwind, placing resistance at $1.0298 on the weekly timeframe under pressure. A decisive close north of the aforementioned resistance may eventually see the currency pair knocking on the door of weekly resistance at $1.0778: a previous Quasimodo support level. This is reinforced by the daily timeframe’s relative strength index (RSI) venturing above its 50.00 centreline, a move informing market participants that average gains are now exceeding average losses (positive momentum on the daily chart).

However, potential headwinds remain by way of a pivotal downtrend (primary bear trend) since 2021, and neighbouring resistance at $1.0377 on the daily timeframe, which happens to intersect with trendline resistance, extended from the high $1.1495.

Against the backdrop of the higher timeframes, price flow on the H4 chart shook hands with Quasimodo support-turned resistance at $1.0354. Support warrants attention at $1.0279, closely shadowed by a trendline support, pencilled in from the low $0.9952. Should the unit cross above current resistance (and take on daily resistance at $1.0377), prime resistance is seen from $1.0535-1.0505.

A closer reading of price action on the H1 timeframe has the currency pair rejecting an area of resistance between $1.0376 and $1.0356, made up of two Fibonacci projection levels (1.272% and 1.618%). Territory below draws attention to $1.03 and a Quasimodo resistance-turned support at $1.0275.

Technical Expectation:

While EUR/USD printed strong performance on Wednesday, considerable resistance remains overhead, and we continue to trade within a downtrend. As such, the near-test of daily resistance at $1.0377, and test of H4 Quasimodo support-turned resistance at $1.0354 as well as H1 resistance ($1.0376-1.0356) could be enough to hinder further buying.

If we test support on the H1 timeframe between $1.0275 and $1.03 (houses H4 support at $1.0279) and hold, this could be a sign that the pair is looking to take things higher. But whether a rebound from the supports would be enough to draw bullish attention is difficult to estimate, knowing where price is on the bigger picture.

Though a break of the said H1 supports implies a move back to $1.02 and opens the door to a bearish scenario.

 

AUD/USD:

AUD/USD bulls entered an offensive phase on Wednesday amid US CPI-inspired softness and a clear risk-on environment that tends to favour the risk-sensitive Australian dollar.

Up nearly 3.0 per cent week to date, the currency pair is on the verge of forging a close above resistance from $0.6996. Assuming a dominant finish to the week, weekly price invites an approach to as far north as prime resistance coming in at $0.7849-0.7599. This follows a rebound from weekly support between $0.6632 and $0.6764.

Although the recent outperformance may incite breakout buying, the daily timeframe is within reach of touching resistance in the form of a 50% retracement at $0.7167 and the 200-day simple moving average, currently circling $0.7152 (note that moving averages can [and often do] deliver dynamic support and resistance as price commonly reverts to its mean).

Addressing the H4 timeframe shows supply-turned demand resides at $0.7062-0.7031, with scope to extend gains until Quasimodo support-turned resistance at $0.7148. There is also a deep 78.6% Fibonacci retracement present here at $0.7154. Lower on the curve, H1 price is in the process of consuming offers around $0.71, action perhaps clearing upside to Quasimodo resistance at $0.7129.

Technical Expectation:

All four timeframes indicate buyers have the upper hand. The question is where will sellers attempt to put in an appearance? Breakout buyers above $0.71 are likely to take aim at H1 Quasimodo resistance at $0.7129, followed by H4 Quasimodo support-turned resistance at $0.7148 and then daily resistance (50% retracement) at $0.7167.

USD/JPY:

Buyers took a back seat on Wednesday as the USD/JPY plunged nearly 2.0 per cent after softer-than-anticipated US inflation data. Overall, though, this does little to affect the underlying trend in this market, dominantly higher since 2021.

With that being said, the rejection from weekly resistance at ¥137.23 in mid-July may concern current longs given it is the largest correction since the uptrend started. Until the weekly decision point at ¥126.40-131.30 is overthrown, however, I do not expect to see much call for USD/JPY shorts, technically speaking.

Examining price action on the daily timeframe has the unit within a stone’s throw of supply-turned demand at ¥131.93-131.10. This is an area that has delivered a floor of support since 16th June, and a break would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.

Since 5th August, the currency pair had echoed a tentative tone around the 50% retracement at ¥134.90 until yesterday. A one-sided decline unfolded from the level and bearish forces appears to have prepared the ground for a run at Quasimodo resistance-turned support at ¥146.79. From the H1 timeframe, buyers stepped in ahead of ¥132 and now appear poised to reconnect with ¥133 and the neighbouring Quasimodo support-turned resistance level at ¥133.11. Above, ¥134 is visible as is the ¥134.88-134.33 prime resistance.

Technical Expectation:

Given the pair has yet to test either the daily timeframe’s supply-turned demand area at ¥131.93-131.10, H4 Quasimodo resistance-turned support at ¥130.58, or ¥132 on the H1 timeframe, short-term sellers will likely be watching ¥133 to form resistance, bolstered by H1 Quasimodo support-turned resistance at ¥133.11.

GBP/USD:

It was a good day for sterling, rallying 1.2 percent against its US counterpart following lower-than-forecast US inflation data.

Kicking things off from the weekly timeframe, Wednesday’s performance may instil some confidence in bids from long-term weekly support at $1.1958. This is a level that has had a question mark on it as its positioned in a market trending lower since 2021. Continued interest to the upside casts light on weekly resistance at $1.2719.

The recent bid is further reinforced on the daily timeframe after daily price retested (and held) trendline resistance-turned support, taken from the high $1.3639, with the chart also demonstrating space to rally until reaching a decision point at $1.2605-1.2465.

Right now, therefore, higher timeframe structure is in favour of buyers.

Thanks to recent buying, we have also seen the currency pair rebound from the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This locates the pattern’s take-profit level from $1.2335 back in the frame.

In terms of where I stand on the H1 chart at the moment, you will note the candles manoeuvred above $1.22 and swiftly retested the level as support. I do not see much in the way of resistance on this timeframe until the $1.23 region.

Technical Expectation:

According to the four charts analysed, buyers are likely to remain in command.

Another retest of $1.22 on the H1 timeframe, therefore, could offer buyers a platform to work with, targeting $1.23, and then the H4 timeframe’s pattern (inverted H&S) profit objective at $1.2335.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

August 10th 2022: Technical View Ahead of US Inflation Data

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

News flow remained light on Tuesday as investors await the release of today’s US inflation figures following last week’s hotter-than-anticipated US employment data. Overall, it was a soft day for the US dollar consequently underpinning Europe’s shared currency.

The weekly timeframe’s price action, as noted in recent technical briefings, came within a whisker of clipping resistance at $1.0298 in recent weeks. Knowing this market has been entrenched within a decisive downtrend (primary bear trend) since 2021, weekly price nibbling at resistance is a key technical event.

Couple this with the daily timeframe testing a ‘local’ trendline resistance, extended from the high $1.0774, together with the relative strength index (RSI) still nipping at the lower side of the 50.00 centreline, sellers appear to have the upper hand for the time being.

The H4 timeframe has price action working with a decision point at $1.0276-1.0235. You may recall from previous analysis that I highlighted the consolidation zone on the H4 chart between the noted decision point and support coming in at $1.0125. Additional levels to be mindful of are Quasimodo support from $0.9998 and a Quasimodo support-turned resistance at $1.0354.

Price action out of the H1 timeframe is on the verge of retesting $1.02 following yesterday’s session high at $1.0248. Failure to welcome buyers from $1.02 will likely see Quasimodo support at $1.0150 call for attention. Upstream, nevertheless, shines the technical spotlight on Quasimodo resistance from $1.0275, a base accompanied by a 100% Fibonacci projection at $1.0274 and a 1.272% Fibonacci extension at $1.0284.

Technical Expectation:

Weekly, daily and H4 timeframes favour sellers in terms of trend and technical structures. As a result, a downside breach of $1.02 on the H1 timeframe may be viewed as a bearish scenario, targeting H1 Quasimodo support from $1.0150. Alternatively, a break to fresh short-term highs could see H1 Quasimodo resistance make a show at $1.0275. Reinforced by Fibonacci confluence, this area might also appeal to sellers.

AUD/USD:

Similar to EUR/USD, the AUD/USD currency pair exhibited narrow trading on Tuesday. You may recall from recent writing that I underlined the currency pair has been chewing at the lower side of weekly resistance from $0.6996 since the end of July. While this follows a rebound from weekly support between $0.6632 and $0.6764, traders are encouraged to note the trend direction favours sellers (definitively lower since early 2021).

On top of this, the daily timeframe throws light on neighbouring resistance at $0.7039— accompanied by a 38.2% Fibonacci retracement at $0.7051 and a nearby prime resistance at $0.7104-0.7080. However, seeing that daily support from $0.6901 has stood its ground and the daily chart’s relative strength index (RSI) remains off its 50.00 centreline (positive momentum), we have mixed signals on the bigger picture right now.

Given the lacklustre movement we’ve seen, the following text remains valid (taken from Tuesday’s technical briefing):

In previous research, I did note that a drop under daily support, and the daily chart’s relative strength index (RSI) voyaging under the 50.00 area (negative momentum), would add weight to the weekly timeframe’s resistance. Though for now that has yet to come to fruition.

Supply-turned demand at $0.6901-0.6862 on the H4 timeframe served well on Monday, elevating the unit to within a stone’s throw of prime resistance at $0.7062-0.7031. The daily prime resistance just above here at $0.7104-0.7080 will likely draw attention should price dethrone $0.7062-0.7031.

Lower on the curve, buyers and sellers are squaring off around $0.70, a widely watched psychological level. Overhead, the lower edge of the H4 prime resistance is marked at $0.7031, which happens to form a Quasimodo resistance level (left shoulder seen at the black arrow). The $0.6898-0.6914 prime support calls for attention to the downside on the H1 scale, merging with the $0.69 figure.

Technical Expectation:

Between daily resistance at $0.7039 and weekly resistance at $0.6996 is an area sellers could respond to on the bigger picture. The daily prime resistance at $0.7104-0.7080 is also a key watch should buyers overstretch at the noted resistance area.

More immediate, of course, is the $0.70 figure (H1) and its connection with weekly resistance at $0.6996. Therefore, this may also be a location we see sellers show themselves from.

USD/JPY:

It was another monotonous session also for USD/JPY on Tuesday, leaving us with the same technical structure as we had heading into Tuesday’s sessions. Therefore, much of the following text will echo thoughts put forward in recent analysis.

From the weekly timeframe, action staged an impressive comeback from a decision point at ¥126.40-131.30 and firmly placed resistance at ¥137.23 back in the frame. Should the aforementioned level cede ground, in line with the primary bull trend (since 2021), fresh 24-month peaks will likely be recorded and Quasimodo resistance at ¥146.79 is noted.

Supply-turned demand at ¥131.93-131.10 on the daily timeframe, which happens to be glued to the upper side of the weekly decision point, put in an appearance last week. Resistance is seen at ¥139.55: Quasimodo support-turned resistance that came within a whisker of putting in an appearance in mid-July. Interestingly, the daily timeframe’s relative strength index (RSI) has now reconnected with the lower side of its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence.

Dethroning the 50.00 level would add weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum).

H4 trendline resistance, drawn from the high ¥138.88, however, has marginally given up its ground and could now offer support. An ascending support-turned resistance is seen to the upside (taken from the low ¥134.27), which is joined closely with a 78.6% Fibonacci retracement at ¥137.48. Quasimodo resistance-turned support at ¥130.58, however, is positioned lower.

Finally, on the H1 timeframe, price appears set to revisit ¥134 and the nearby Quasimodo resistance-turned support at ¥134.14. A rebound from the aforesaid levels could send price as far north as prime resistance at ¥136.21-135.87 and perhaps reconnect with ¥137.

Technical Expectation:

The weekly and daily timeframes show buyers may strive to make contact with weekly resistance at ¥137.23. As such, the break of the current H4 trendline resistance might fuel further buying, drawing H1 price to prime resistance at ¥136.21-135.87.

GBP/USD:

Aside from price action on the H1 timeframe touching gloves with trendline resistance, extended from the high $1.2293, and guiding the currency pair south of $1.21, it was another quiet session on Tuesday, largely ending off best levels. Follow-through selling on the H1 scale could see the unit retest $1.20.

Higher up, I see limited change, therefore much of the following text is taken from previous analysis.

Price action is still finding it troublesome to garner much of a floor from the daily timeframe’s trendline resistance-turned support, taken from the high $1.3639. Visible alongside the daily chart’s relative strength index (RSI) venturing below its 50.00 centreline (negative momentum), any upside from the aforementioned trendline support is likely to be feeble.

Couple this with the weekly timeframe’s support level at $1.1958 failing to ignite much bullish pressure in recent weeks, in addition to the trend facing south since the early months of 2021, sterling clearly echoes a strong bearish vibe.

Across the page on the H4 timeframe, H4 action did manage to discover some support from the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This follows a near-test of the pattern’s take-profit level from $1.2335 last week. However, in light of the soft support observed on the higher timeframes, traders are urged to pencil in support at $1.1933 in the event we pursue deeper water.

Technical Expectation:

According to the four charts analysed, sellers appear to have the upper hand right now. Consequently, H1 price cementing position south of $1.21 is a reasonable scenario, targeting the $1.20 region.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for August 9th 2022

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

It was a relatively subdued session for EUR/USD on Monday, weighed by a light economic calendar. The technical landscape remains unchanged on the weekly, daily and H4 timeframes, therefore for those charts the following analysis will serve as a reminder:

Out of the weekly timeframe, the currency pair managed to come within a whisker of resistance at $1.0298 last week, a level boasting technical relevance since the year 2000. The near test of resistance, together with the EUR/USD trading lower since the beginning of 2021 (primary bear trend), highlights a potential sell-on-rally scenario over the coming weeks.

Resistance at $1.0377 on the daily timeframe continues to draw attention as not only is it located nearby the weekly resistance level, it dovetails with daily trendline resistance, extended from the high $1.1495. The daily chart’s relative strength index (RSI) is also still nibbling at the lower side of the 50.00 centreline, following a break/retest of trendline resistance, drawn from the high 58.91.

The H4 timeframe is working between a decision point at $1.0276-1.0235 and support coming in at $1.0125, fashioning a range since 19th July. Additional levels to be mindful of are Quasimodo support from $0.9998 and a Quasimodo support-turned resistance at $1.0354.

For those who read Monday’s weekly technical briefing you may recall the following points (italics):

Knowing that weekly price continues to touch gloves with space nearby resistance at $1.0298, in a market trending lower since 2021, a whipsaw north of $1.02 on the H1 into prime resistance at $1.0236-1.0207 should not surprise.

As a result, a H1 bearish close under $1.02 after testing the H1 prime zone could be sufficient to prompt a bearish scenario to take on H4 support at $1.0125 and test the $1.01 region on the H1 scale this week.

As evident from the H1 chart, price has whipsawed above $1.02 and tested the H1 prime resistance area at $1.0236-1.0207, as well as the smaller prime resistance resting inside at $1.0231-1.0220. Should price cement some form of position under $1.02 today, H1 Quasimodo support warrants attention at $1.0150 as an initial downside objective, followed by H4 support coming in at $1.0125.

Technical Expectation:

According to chart studies, H1 price is expected to close below $1.02 with further selling likely on the table until at least H1 Quasimodo support from $1.0150.

AUD/USD:

Amid lower US Treasury yields across all maturities and moderately soft demand for the greenback, the Australian dollar finished Monday higher by 1.0 per cent.

While the somewhat spirited start to the week was underpinned by support on the daily timeframe from $0.6901, buyers have their work cut out for them. In addition to trending lower since early 2021, weekly resistance welcomed price movement on Monday at $0.6996, which happens to boast historical meaning since 2020. On top of this, the daily timeframe throws light on neighbouring resistance at $0.7039— accompanied by a 38.2% Fibonacci retracement at $0.7051 and a nearby prime resistance at $0.7104-0.7080.

In previous research, I did note that a drop under daily support, and the daily chart’s relative strength index (RSI) voyaging under the 50.00 area (negative momentum), would add weight to the weekly timeframe’s resistance. Though for now that has yet to come to fruition.

Supply-turned demand at $0.6901-0.6862 on the H4 timeframe served well on Monday, elevating the unit to within a stone’s throw of prime resistance at $0.7062-0.7031. The daily prime resistance just above here at $0.7104-0.7080 will likely draw attention should price dethrone $0.7062-0.7031.

Lower on the curve, buyers and sellers are squaring off at $0.70, a widely watched psychological level. Overhead, the lower edge of the H4 prime resistance is marked at $0.7031, which happens to form a Quasimodo resistance level (left shoulder seen at the black arrow). The $0.6898-0.6914 prime support calls for attention to the downside on the H1 scale, merging with the $0.69 figure.

Technical Expectation:

Between daily resistance at $0.7039 and weekly resistance at $0.6996 is an area sellers could respond to on the bigger picture. The daily prime resistance at $0.7104-0.7080 is also a key watch should buyers overstretch at the noted resistance area.

More immediate, of course, is the $0.70 figure (H1) and its connection with weekly resistance at $0.6996. Therefore, this may also be a location we see sellers show themselves from.

USD/JPY:

Monday witnessed moderate losses for the USD/JPY currency pair, influenced by a feeble USD and a drop in US Treasury yields.

From the weekly timeframe, action staged an impressive comeback from a decision point at ¥126.40-131.30 and firmly placed resistance at ¥137.23 back in the frame. Should the aforementioned level cede ground, in line with the primary bull trend (since 2021), fresh 24-month peaks will likely be recorded and Quasimodo resistance at ¥146.79 is noted.

In terms of the daily timeframe, here’s where I left this chart in Monday’s weekly technical briefing (italics):

Supply-turned demand at ¥131.93-131.10 on the daily timeframe, which happens to be glued to the upper side of the weekly decision point, put in an appearance last week. Resistance is seen at ¥139.55: Quasimodo support-turned resistance that came within a whisker of putting in an appearance in mid-July. Interestingly, the daily timeframe’s relative strength index (RSI) has now reconnected with the lower side of its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence. Dethroning the 50.00 level would add weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum).

Trendline resistance, drawn from the high ¥138.88, remains in play on the H4 scale. Albeit experiencing a mild breach, sellers appear to be warming to the descending line. Assuming a break, an ascending support-turned resistance is seen (taken from the low ¥134.27), which is joined closely with a 78.6% Fibonacci retracement at ¥137.48. Quasimodo resistance-turned support at ¥130.58, however, is seen lower.

Finally, on the H1 timeframe, price appears set to revisit ¥134 and the nearby Quasimodo resistance-turned support at ¥134.14. A rebound from the aforesaid levels could send price as far north as prime resistance at ¥136.21-135.87 and perhaps even reconnect with ¥137.

Technical Expectation:

The weekly and daily timeframes show buyers may strive to make contact with weekly resistance at ¥137.23. As such, the reaction seen from the current H4 trendline resistance may steady from ¥134 on the H1 as dip-buyers enter the market, in line with the higher timeframe’s direction.

GBP/USD:

The British pound wrapped up Monday off best levels against the US dollar, unable to garner much of a floor from the daily timeframe’s trendline resistance-turned support, taken from the high $1.3639. Visible alongside the daily chart’s relative strength index (RSI) venturing below its 50.00 centreline (negative momentum), any upside from the aforementioned trendline support is likely to be feeble.

Couple this with the weekly timeframe’s support level at $1.1958 failing to ignite much bullish pressure in recent weeks, in addition to the trend facing south since the early months of 2021, sterling clearly echoes a strong bearish vibe.

Across the page on the H4 timeframe, H4 action did manage to discover some support from the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This follows a near-test of the pattern’s take-profit level from $1.2335 last week. However, in light of the soft support observed on the higher timeframes, traders are urged to pencil in support at $1.1933 in the event we pursue deeper water.

Meanwhile on the H1 timeframe, a rather decisive whipsaw above $1.21 was seen on Monday, movement missing trendline resistance, drawn from the high $1.2293, by only a handful of pips. Attention is now directed back towards $1.20.

Technical Expectation:

According to the four charts analysed, sellers appear to have the upper hand right now. Consequently, H1 price cementing position south of $1.21 is a reasonable scenario, targeting the $1.20 region.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Weekly Technical Market Insight: Week Ending 12th August 2022

Charts: Trading View

(Italics: Previous Analysis)

US Dollar Index:

Snapping a two-week correction, the US dollar—according to the US Dollar Index—staged a spirited recovery last week and added 0.7 per cent.

Upside interest initially developed following a retest of the 50-day simple moving average at 105.28 (moving averages can [and often do] deliver dynamic support and resistance as price frequently reverts to its mean) on Tuesday. Friday witnessed the buck extend recovery gains amid hotter-than-expected US payrolls data for July, action fuelling the possibility of larger near-term interest rate increases at upcoming Fed meetings. US unemployment fell from 3.6 per cent to 3.5 per cent, matching lows formed ahead of the Covid-19 pandemic in 2020.

Trend studies continue to favour buyers. Here’s where I left the previous weekly briefing in terms of trend direction (italics):

Unquestionably, trend on the monthly and daily timeframes is north. Aside from a 7-year range (forming a pennant chart pattern, taken from 103.82 and 88.25), monthly movement has been higher since early 2008. This is reinforced by the uptrend visible on the daily timeframe, exhibiting well-defined upward action since price made contact with support from 89.69 in May 2021.

The upside bias is also shown through the 50-day simple moving average crossing above the 200-day simple moving average (current: 99.75) in August 2021 (‘Golden Cross’).

As you can see, price action on the monthly timeframe broke out of the long-term pennant formation (considered a continuation signal). Additionally, I see the daily timeframe’s relative strength index (RSI) shaking hands with support between 40.00 and 50.00, an area delivering an oversold region since August 2021 (common in uptrends).

You may recall that I underlined a handful of potentially bearish elements to consider in recent writing, which remain relevant this week (italics):

The monthly timeframe remains within the walls of prime resistance at 109.77-104.96, together with the RSI demonstrating early negative divergence within overbought status (note that the weekly timeframe also shows negative divergence). Furthermore, daily resistance between 109.14 and 108.58 (made up of a 1.272% Fibonacci projection, a 1.618% Fibonacci expansion, and a Quasimodo resistance level) remains a potential obstacle.

Technical Expectation:

According to chart studies, technical evidence supporting buyers surpasses the chart’s bearish features.

The current uptrend, coupled with dip-buying unfolding from the 50-day simple moving average at 105.28 last week, as well as monthly price completing a bullish pennant formation (rupturing its upper side) and the daily timeframe’s RSI shaking hands with support at 40.00-50.00, favours buying over the coming weeks/months (possibly with enough oomph to refresh multi-decade highs).

EUR/USD:

Europe’s shared currency wrapped up the week 0.5 per cent lower versus the US dollar, echoing another tentative week of trading. Notably, though, price action on the weekly timeframe did manage to cross swords with space around resistance at $1.0298, a level boasting technical relevance since the year 2000. The resistance test, together with the EUR/USD trading lower since the beginning of 2021, highlights a potential sell-on-rally scenario over the coming weeks.

In the context of trend, I added the following in my previous weekly briefing (italics):

Establishing a series of lower lows and lower highs, the general direction in this market reflects a primary bear trend, with prolonged pullbacks (or sometimes referred to as ‘secondary trends’) in short supply. Additionally, the monthly timeframe has been to the downside since topping in April 2008. On the assumption that sellers remain in command, the weekly timeframe’s next downside objective rests at a 1.272% Fibonacci projection from $0.9925.

Resistance at $1.0377 on the daily timeframe continues to draw attention as not only is it located nearby the weekly resistance level, it dovetails with daily trendline resistance, extended from the high $1.1495. The weekly timeframe’s non-committal tone is also shown on the daily chart through a clear range between $1.0276 and $1.0100.

Further analysis on the daily chart shows the relative strength index (RSI) attempting to hold south of the 50.00 centreline (negative momentum), following a rebound from oversold space in mid-July. Still, you will note that the indicator recently crossed above trendline resistance (drawn from the high 58.91) and retested the breached barrier at the end of July.

The recent rangebound performance is also observed on the H4 timeframe, fluctuating between a decision point at $1.0276-1.0235 and support coming in at $1.0125. Additional levels to be mindful of this week are Quasimodo support from $0.9998 and a Quasimodo support-turned resistance at $1.0354.

A closer examination of price action on the H1 timeframe shines the spotlight on $1.02, and two prime resistance zones sheltering the psychological level at $1.0236-1.0207 and $1.0231-1.0220. Lower, eyes are likely drawn to the $1.0147 3rd August low, the $1.0114 28th July low, and $1.01 which happens to share chart space with Quasimodo support from $1.0108.

Technical Expectation:

Knowing that weekly price continues to touch gloves with space nearby resistance at $1.0298, in a market trending lower since 2021, a whipsaw north of $1.02 on the H1 into prime resistance at $1.0236-1.0207 should not surprise.

As a result, a H1 bearish close under $1.02 after testing the H1 prime zone could be sufficient to prompt a bearish scenario to take on H4 support at $1.0125 and test the $1.01 region on the H1 scale this week.

AUD/USD:

Against the US dollar, the Australian dollar finished the week 1.1 per cent lower. By way of an outside candle reversal (range high/lows), price action on the weekly timeframe confronted resistance from $0.6996 (backed by strong historical significance since 2020).

This follows a two-week recovery from support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement), a move which many perhaps suspect is the beginning of a dip-buying theme after the one-sided advance from pandemic lows (19th March 2020). Overall trend direction, however, argues that this may not be a dip-buying market and additional selling could be on the table. I noted the following in previous analysis (italics):

Siding with the current weekly resistance is the currency pair’s trend: reflecting a primary downtrend since $0.8007 (22nd Feb high [2021]). The monthly timeframe has also portrayed a downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among chartists. Downside from the 2021 February top, therefore, might be seen as a move to explore lower over the coming weeks/months.

Meanwhile on the daily timeframe, price action acknowledged resistance at $0.7039 (sited just south of prime resistance at $0.7104-0.7080) at the beginning of last week (accompanied by a 38.2% Fibonacci retracement at $0.7051), bolstering the current weekly resistance level. A drop under daily support at $0.6901, and the daily chart’s relative strength index (RSI) voyaging under the 50.00 area (negative momentum), would add weight to the weekly timeframe’s bearish outside reversal.

Supply-turned demand at $0.6901-0.6862 entered the fight at the latter half of the week on the H4 timeframe, a base that not only has its upper edge fortified by daily support ($0.6901), but one that’s withstood numerous downside attempts since 21st July. If we do cross under $0.6901-0.6862, as suggested by the weekly timeframe, I have noted the possibility of creating a H4 harmonic bat pattern around $0.6724.

Should the unit reach this far south, it could also serve as a reasonable support target (for any shorts taken on the break of $0.6901-0.6862) as the pattern is within the weekly support area underlined above between $0.6632 and $0.6764.

The AUD/USD, fuelled by upbeat US employment data, plunged on Friday and price whipsawed through $0.69 to form a low a touch north of H1 Quasimodo resistance-turned support at $0.6861. Overhead, H1 trendline resistance is seen, taken from the high $0.7047, closely followed by prime resistance at $0.6976-0.6965.

Technical Expectation:

Knowing the currency pair is working within a primary bear trend, a daily close below support at $0.6901 (which should include H4 supply turned demand at $0.6901-0.6862) is likely to motivate a bearish scene based on the weekly timeframe’s bearish outside reversal from resistance at $0.6996.

Consequently, H1 players will likely be watching for a close below $0.69 as an early signal of selling strength this week which may lead to a break of H1 Quasimodo resistance-turned support at $0.6861 to run for at least $0.68.

USD/JPY:

It was a good week for the USD/JPY currency pair, rallying 1.4 per cent and clawing back a large portion of the two-week correction from weekly resistance at ¥137.23. Based on the underlying trend fashioning dominant up moves since 2021 (primary bull trend), and weekly price challenging the upper boundary of a decision point at ¥126.40-131.30, last week’s recovery should not shock most technical analysts.

Follow-through buying over the coming weeks could overthrow current resistance, a move not only likely to refresh 24-month peaks but also one that throws light on weekly Quasimodo resistance at ¥146.79.

Supply-turned demand at ¥131.93-131.10 on the daily timeframe, which happens to be glued to the upper side of the weekly decision point, put in an appearance last week. Resistance is seen at ¥139.55: Quasimodo support-turned resistance that came within a whisker of putting in an appearance in mid-July. Interestingly, the daily timeframe’s relative strength index (RSI) has now reconnected with the lower side of its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence.

Dethroning the 50.00 level this week would add weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum).

From the perspective of the H4 timeframe, the week concluded by crossing paths with a trendline resistance, extended from the high ¥138.88. This follows a rebound from Quasimodo resistance-turned support earlier in the week at ¥130.58. Upstream, an ascending support-turned resistance is seen (drawn from the low ¥134.27) merging with a 100% Fibonacci projection from ¥136.65. Note that many ‘harmonic traders’ will acknowledge the 100% Fibonacci ratio as an AB=CD bearish pattern that’s accompanied by a 200% Fibonacci extension.

Shorter-term action on the H1 timeframe, nevertheless, demonstrates scope to travel higher this week to test prime resistance at ¥136.21-135.87 and perhaps reconnect with ¥137. Below, traders will note a Quasimodo resistance-turned support at ¥134.14 and the ¥134 figure.

Technical Expectation:

The weekly and daily timeframes show buyers may strive to make contact with weekly resistance at ¥137.23 this week. Yet, before buyers attempt to make a show, sellers could reject H4 trendline resistance and force a retest of ¥134 on the H1 scale.

H1 prime resistance at ¥136.21-135.87 may trigger a mild reaction if tested, though it is unlikely to be anything to write home about as the area between weekly resistance at ¥137.23 and ¥137 on the H1 offers more technical appeal.

GBP/USD:

Sterling wrapped up the week on the ropes versus the US dollar (-0.9 per cent), sending a message to market participants that support on the weekly timeframe at $1.1958 is perhaps hanging by a thread. This is not a surprise as GBP/USD has chalked up an unmistakable primary bear trend since early 2021. Breaking $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

I noted the following in regards to the trend in my previous weekly technical briefing (italics):

Trend direction has been bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.

Addressing the daily timeframe, we can see that price movement closed the week out retesting a trendline resistance-turned support, taken from the high $1.3639. However, with the relative strength index (RSI) venturing below its 50.00 centreline (negative momentum), this signals price could indeed venture beneath trendline support and zero in on the two 100% Fibonacci projection levels at $1.1683 and $1.1655.

Against the backdrop of the bigger picture, H4 left the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) profit objective at $1.2335 unchallenged in recent trading, topping around $1.2295 and falling to retest the pattern’s neckline (from the high $1.2056). Below is familiar support at $1.1933.

Finally, the H1 timeframe has price action on the doorstep of reaching the lower side of $1.21. This comes after a near-test of the widely watched $1.20 figure and a reaction from support between $1.1998 and $1.2027 (made up of Fibonacci ratios and the 50.0% retracement). Trendline resistance, drawn from the high $1.2293, is likely to be watched closely in the event of a $1.21 breach this week.

Technical Expectation:

For weekly and daily timeframes, it’s all about the daily trendline resistance-turned support. Defending the descending line could mean buyers are willing to hold their ground north of weekly support at $1.1958, yet a downside move beneath the trendline support encourages a bearish phase and places a question mark on current weekly support.

Defending the lower side of $1.21 on the H1 scale in early trading this week might be viewed as an early sign of bearish strength which may lead to a daily close under the daily chart’s trendline support. Alternatively, a H1 close above the psychological level may be seen as buyer intent and imply further buying is likely to unfold from the daily level.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for August 5th 2022: NFP Eyed

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

The US dollar, according to the US Dollar Index, echoed a downbeat tone on Thursday ahead of the eagerly awaited US jobs figures today. In terms of risk events, US weekly unemployment claims came in largely as expected at 260,000.

EUR/USD finished the day higher by 0.6 per cent, movement throwing light on resistance at $1.0377 on the daily timeframe. Technicians will note the level intersects with trendline resistance, extended from the high $1.1495. Interestingly, though, the daily chart’s RSI is nibbling at the lower side of the 50.00 centreline; a break north of here indicates positive momentum and could fuel a (price) pop to $1.0377.

Ultimately, however, the trend is decisively lower. Visible from the weekly timeframe, the currency pair has been lower since the beginning of 2021. Resistance on the weekly timeframe at $1.0298 also came within a whisker of welcoming price action this week; currently, weekly flow is shaped in the form of a doji indecision candle (which could be a sign that buyers have exhausted their efforts and sellers may soon control things).

On the assumption that sellers remain in command, the weekly timeframe’s next downside objective rests at a 1.272% Fibonacci projection from $0.9925.

The decision point at $1.0276-1.0235 remains centre of attention on the H4 chart as does support coming in at $1.0125. As buyers strengthen their grip, the decision point is in a vulnerable position and perhaps tilting towards a test of the H4 Quasimodo support-turned resistance at $1.0354.

Lower on the curve, H1 price is now exploring territory above $1.02, opening the door to a test of Quasimodo resistance at $1.0275 (complemented by an 88.6% Fibonacci retracement at $1.0274, a 1.618% Fibonacci projection at $1.0282, a trendline support-turned resistance, taken from the low $1.0114, as well as the nearby $1.03 figure).

Technical Expectation:

With weekly price testing the lower AREA of resistance at $1.0298, in a market trending lower since 2021, and the H4 timeframe testing a decision point at $1.0276-1.0235 (albeit vulnerable), H1 selling might unfold between $1.03 and Quasimodo resistance at $1.0275 if tested.

AUD/USD:

The Australian dollar eked out modest gains against its US counterpart on Thursday, following Wednesday’s (near) to-the-pip retest of support at $0.6901 on the daily timeframe. As you can see, price action on the daily timeframe demonstrates room to approach familiar resistance at $0.7039 (accompanied by a 38.2% Fibonacci retracement at $0.7051). Note that north of here we also have the 200-day simple moving average circling around $0.7162.

Price action on the weekly timeframe continues to engage resistance at $0.6996. This follows a recovery from support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement). Siding with the current weekly resistance, nonetheless, is trend direction: reflected a primary downtrend since $0.8007 (22nd Feb high [2021]).

Out of the H4 timeframe, prime resistance at $0.7062-0.7031 (arranged just above weekly resistance at $0.6996 and houses daily resistance at $0.7039) and supply-turned demand at $0.6901-0.6862 continue to play a central role. Areas beyond the two noted zones are prime resistance at $0.7103-0.7081 and prime support at $0.6773-0.6812 (though I would like to see price engulf the current prime resistance [$0.7062-0.7031] before validating the prime support).

From the H1 timeframe, the $0.6898-0.6913 prime support zone is a key downside base to be aware of, an area sharing chart space with $0.69 and Quasimodo support coming in from $0.6893. Overhead, resistance calls for attention around the widely watched $0.70 figure, followed by the lower limit of H4 prime resistance at $0.7031.

Technical Expectation:

Between daily resistance at $0.7039 and weekly resistance at $0.6996, coupled with the currency pair’s downtrend, the aforementioned resistance zone could be somewhere the charts welcome a bearish scenario, targeting a break of daily support at $0.6901.

From the H4 timeframe, trading higher than prime resistance at $0.7103-0.7081 is questionable in light of the bigger picture at the moment. So, a test of this area might serve as a platform for sellers to work with. More near term, $0.70 offers resistance on the H1 timeframe, yet traders are urged to pencil in the possibility of a whipsaw here to the lower side of the H4 prime resistance at $0.7031.

USD/JPY:

Driven by the theme of modestly weak US Treasury yields and softening demand for the greenback, the USD/JPY snapped a two-day bullish phase from supply-turned demand at ¥131.93-131.10. However, this is an area that is not only glued to the upper edge of a weekly decision point at ¥126.40-131.30, it is also a point the charts saw buyers step in and retest on 16th June. Resistance targets on the bigger picture are seen at ¥137.23 on the weekly scale, closely shadowed by daily Quasimodo support-turned resistance at ¥139.55.

Also of note on the higher timeframes, the primary bull trend remains in full swing: printing dominant up moves since 2021. As such, the two-week correction from weekly resistance at ¥137.23 and recent retest of the weekly decision point at ¥126.40-131.30 could simply be a dip-buying scenario we are seeing play out. One final feature worth underlining is the daily chart’s relative strength index (RSI) seen shaking hands with resistance at 50.00-40.00.

A decision point from ¥134.70-134.20 has been an area I have been monitoring since the late July test which resulted in a significant nose dive to Quasimodo resistance-turned support at ¥130.58. As you can see, this area greeted price once again in recent trading and sellers put in an appearance.

Addressing the H1 timeframe, you will note that price retested ¥133 on Thursday after a brief spell north of ¥134. My main focus remains on prime resistance calling at ¥135.31-134.86, though we may not reach this far north this week. Territory beneath ¥133 shows limited support until ¥132.

Technical Expectation:

Knowing the weekly timeframe is testing a decision point at ¥126.40-131.30 that holds a daily supply-turned demand zone at ¥131.93-131.10, in a market trending higher since 2021, buyers could be gearing up to refresh multi-decade highs.

Taking into account the higher timeframes, movement on the lower timeframes could see H1 price defend support from ¥133, despite H4 action rejecting a decision point at ¥134.70-134.20. Ultimately, a sizeable move from ¥133 may eventually fuel a break of ¥134 to test at least H1 prime resistance from ¥135.31-134.86.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Weekly Technical Market Insight: Week Ending 5th April 2022

Charts: Trading View

(Italics: Previous Analysis)

US Dollar Index:

It was another lousy week for the US dollar, shedding 0.7 per cent against a basket of six major currencies, including the euro. Despite two successive weeks of downside for the US Dollar Index, the greenback finished July higher by 1.0 per cent, though considerably off best levels that moulded a monthly shooting star candlestick pattern [bearish signal]).

Unquestionably, trend direction on the monthly and daily timeframes is north. Aside from a 7-year range (forming a pennant chart pattern, taken from 103.82 and 88.25), monthly movement has been higher since early 2008. This is reinforced by the uptrend visible on the daily timeframe, exhibiting well-defined upward movement since price made contact with support from 89.69 in May 2021.

The upside bias is also shown through the 50-day simple moving average (current: 104.85) crossing above the 200-day simple moving average (current: 99.44) in August 2021 (‘Golden Cross’).

Supporting the noted uptrends, of course, is price action on the monthly timeframe breaking out of the long-term pennant formation—considered a continuation signal. Additionally, I see the daily timeframe’s relative strength index (RSI) shaking hands with support between 40.00 and 50.00, an area delivering a temporary oversold region since August 2021 (common in uptrends).

On the other side of the technical fence, the bearish side deserves notice. The monthly timeframe remains within the walls of prime resistance at 109.77-104.96, together with the RSI demonstrating early negative divergence within overbought status (note that the weekly timeframe also shows negative divergence).

Furthermore, on the daily timeframe, resistance structure recently made a show between 109.14 and 108.58, made up of a 1.272% Fibonacci projection, a 1.618% Fibonacci expansion, and a Quasimodo resistance level. Downside targets on the daily scale fall in at the 50-day simple moving average, followed closely by an ‘acceleration trendline support’, taken from the low 95.17.

Technical Expectation:

Technically, monthly prime resistance at 109.77-104.96, RSI negative divergences across the higher timeframes, and daily resistance between 109.14 and 108.58 has provoked a bearish development in recent weeks. The current uptrend, however, places a question mark on a bearish narrative.

Consequently, dip-buying is still likely to be in the minds of many this week (and for good reason, given the trend), perhaps eyeing the area between the daily timeframe’s 50-day simple moving average and the acceleration trendline support’.

It will only be if a decisive breach of the said daily support zone occurs will sellers possibly gain sufficient conviction to commit and maybe target the upper edge of the monthly timeframe’s pennant pattern around 102.30ish.

EUR/USD:

Europe’s shared currency ended another month on the ropes against the US dollar, down 2.5 per cent. Out of the last seven months, six months witnessed losses for the EUR/USD.

Visible from the weekly timeframe, the currency pair has been lower since the beginning of 2021. Establishing a series of lower lows and lower highs, the general direction in this market reflects a primary bear trend, with prolonged pullbacks (or sometimes referred to as ‘secondary trends’) in short supply.

Additionally, the monthly timeframe has been to the downside since topping in April 2008. Resistance on the weekly timeframe resides at $1.0298 and might call for attention this week. On the assumption that sellers remain in command, the weekly timeframe’s next downside objective rests at a 1.272% Fibonacci projection from $0.9925.

Strengthening $1.0298 on the weekly scale is resistance on the daily timeframe at $1.0377 and neighbouring trendline resistance, extended from the high $1.1495. Further analysis on the daily chart shows the relative strength index (RSI) holding south of the 50.00 centreline (negative momentum), following a rebound from oversold space in mid-July. However, you will note that the indicator crossed above trendline resistance, drawn from the high 58.91, suggesting an invasion of 50.00.

The H4 decision point at $1.0276-1.0235 has been a major focal point since 19th July. As you can see, though, sellers have offered a non-committal tone, therefore traders are urged to pencil in the possibility of an approach to H4 Quasimodo support-turned resistance at $1.0354.

Heading lower this week, on the other hand, swings the pendulum in favour of challenging Quasimodo support at $0.9998 and also potentially shaking hands with a 1.618% Fibonacci projection at $0.9926 (‘alternate’ AB=CD bullish pattern taken from $1.0786).

Early London hours on Friday watched H1 price voyage above $1.02 and cross swords with a 100% Fibonacci projection at $1.0252 (an AB=CD bearish formation according to harmonic traders), which is nestled under a deep 88.6% Fibonacci retracement at $1.0257. Despite a brief spell under $1.02, the currency pair ended north of the number into the close. Below $1.02, eyes are likely to still be on Quasimodo support from $1.0108 and $1.01.

Technical Expectation:

I still see substantial resistance on the bigger picture (weekly and daily timeframes) between $1.0377 (daily) and $1.0298 (weekly), which could be tested this week. This—coupled with the distinct downtrend—suggests sellers likely have the upper hand going forward. This also indicates the weekly timeframe’s $0.9925 Fibonacci support, joined by the daily support from $0.9919, may make a show in the coming weeks.

From a shorter-term perspective, the higher timeframe resistance zone might mean the H1 price may touch gloves with $1.03 this week before sellers attempt to make a show. As such, Friday’s close north of $1.02 on the H1 could foreshadow a run through the H1 Fibonacci resistance ($1.0252) to $1.03ish.

AUD/USD:

July watched the AUD/USD dip as far south as $0.6681 and subsequently recover by 307 pips to $0.6988 to end the month positive, and shape what many traders will consider a monthly hammer candlestick pattern—a bullish signal.

The weekly timeframe welcomed support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement) as we transitioned into July, with mid-month trading pulling out a weekly hammer candlestick pattern.

As you can see, two weeks of buying unfolded following this candle pattern, leading the currency pair to resistance at $0.6996. Yet, in spite of the end-of-month recovery, trend direction remains on the side of sellers: this market has reflected a downtrend since $0.8007 (22nd Feb high [2021]).

Adding to the trend studies, here’s some research from the previous weekly technical insight (italics):

The monthly timeframe has portrayed a downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among chartists. Downside from the 2021 February top (a primary bear trend), therefore, is potentially seen as a move to explore lower over the coming weeks/months.

Friday, according to the daily chart, delivered a long-legged doji indecision candle (with a slight edge to the bulls I might add). This, together with weekly price addressing resistance at $0.6996, and daily flow on the doorstep of a support-turned resistance level from $0.7039 (complemented by a 38.2% Fibonacci retracement at $0.7051) implies that sentiment has changed and a downside move may be in the offing this week. Daily support at $0.6901, therefore, could admit defeat and unearth daily support at $0.6678.

H4 prime resistance at $0.7062-0.7031 (arranged just above weekly resistance at $0.6996) poured cold water on any upside attempt on Friday and produced a shooting star candlestick pattern (bearish signal). A low was later formed ahead of supply-turned demand at $0.6901-0.6862 during US hours. Areas beyond the two noted zones to be aware of this week are prime resistance at $0.7103-0.7081 and prime support at $0.6773-0.6812 (though I would like to see price engulf the current prime resistance [$0.7062-0.7031] before validating the prime support).

Shorter-term action shows H1 price closing in on the lower side of the widely watched $0.70 figure, accompanied by a nearby Quasimodo resistance at $0.7014 (note also that I have the lower edge of H4 prime resistance marked at $0.7031). Lower, technicians will likely be drawn to the lows set around $0.6912 (yellow), closely shadowed by $0.69 and Quasimodo support at $0.6893.

Technical Expectation:

Between daily resistance at $0.7039 and weekly resistance at $0.6996, coupled with the currency pair’s downtrend, the aforementioned resistance zone could be somewhere the charts welcome a bearish scenario this week, targeting a break of daily support at $0.6901.

From the H4 timeframe, trading higher than prime resistance at $0.7103-0.7081 is questionable, in light of the bigger picture at the moment. So, a test of this area might serve as a platform for sellers to work with. More near term, nevertheless, H1 resistance between $0.7014 and $0.70 may call for attention in early trading this week, as it’s bolstered by weekly resistance at $0.6996.

USD/JPY:

Despite recording a high of ¥139.39, the currency pair’s highest level since September 1998, the USD/JPY closed July on the ropes and erased nearly 2.0 per cent. Needless to say, though, the primary bull trend remains in full swing, printing dominant up moves since 2021. As such, the two-week correction from weekly resistance at ¥137.23 could just simply be a dip in which longs will eventually buy into. However, as I wrote in previous writing, two words come to mind when looking at the weekly timeframe: limited support. Weekly support is not visible until ¥125.54; thus, according to this chart, further selling may be on the table in the coming weeks.

Out of the daily timeframe, nonetheless, supply-turned demand at ¥131.93-131.10 is nearby this week. Daily resistance is seen at ¥139.55: a Quasimodo support-turned resistance level that came within a whisker of putting in an appearance in mid-July. Interestingly, the daily timeframe’s relative strength index (RSI) has now overthrown indicator support between 40.00 and 50.00, an area serving as a ‘temporary’ oversold zone since May 2021 (common in strongly trending environments). This adds weight to the lack of support in this market right now and indicates oversold space could be tested this week which is likely to align with a test of ¥131.93-131.10 underlined above.

Support on the H4 timeframe developed from between an 88.6% Fibonacci retracement at ¥132.44 and a 50.0% retracement at ¥132.87 on Friday which opened the door for a test of a decision point from ¥134.70-134.20. North of here, attention shifts to trendline resistance, taken from the high ¥138.88, which is complemented by an ascending support-turned resistance, drawn from the low ¥134.27.

Below current support, Quasimodo resistance-turned support is at ¥131.25. Near-term focus on the H1 timeframe, however, centres on ¥134 and ¥133. Outside of these levels, prime resistance warrants consideration at ¥135.31-134.86 and prime support falls in at ¥132.10-132.34.

Technical Expectation:

The daily timeframe’s supply-turned demand at ¥131.93-131.10 will be closely monitored this week. Knowing there’s scope to navigate south on the weekly timeframe to support at ¥125.54, prospective dip-buyers (those looking to join the current uptrend) will likely want to view some form of bottoming formation develop from the daily demand zone before pulling the trigger.

The bigger picture might imply further downside from the H4 decision point at ¥134.70-134.20 to test H4 Quasimodo resistance-turned support at ¥131.25 (set within daily demand) before buyers attempt to make a show. By extension, this may also witness H1 drop beneath ¥133 and unlock a short-term bearish scene that surpasses H1 prime support at ¥132.10-132.34 to test at least ¥132: the upper edge of the daily demand zone (¥131.93), which is another location buyers might obviously attempt to make a show from.

GBP/USD:

The technical picture remains interesting on the GBP/USD and largely favours the bulls for the time being.

The month of July for the currency pair concluded unchanged, despite ranging between $1.2245 and $1.1760 which consequently fashioned a monthly dragonfly doji candlestick formation. Support on the weekly timeframe was certainly a talking point in July at $1.1958 as price staged an end-of-month recovery from the base.

Continued interest to the upside calls on a possible approach to weekly resistance at $1.2719. Breaking $1.1958 reopens the risk of a return to the pandemic low of $1.1410.

Here’s where I left the previous weekly research in terms of trend direction (italics):

Trend direction has been unmistakably bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.

While a downtrend is in play, price action on the daily timeframe saw buyers strengthen their grip around trendline resistance (taken from the high $1.3639) and modestly engulf the descending line and retest it as support on Friday. If buyers maintain a position north of the trendline, a decision point is seen at $1.2605-1.2465. Chartists will also acknowledge the relative strength index (RSI) ventured above its 50.00 centreline (positive momentum).

Additional support can be seen on the H4 timeframe:

The inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) had its neckline breached on 25th July, taken from the high $1.2056. The H4 close above the neckline has likely drawn pattern traders in long; the pattern’s take-profit objective is seen at $1.2335. Aiding a bullish perspective from the H4 chart, of course, is supply-turned demand at $1.2126-1.2098.

From the H1 timeframe, Friday sharply recovered from a Fibonacci cluster between $1.2059 and $1.2072, fixed just north of a trendline support, extended from the low $1.1760. Price ended the day within touching distance of $1.22, with a break of this level shining the technical spotlight on supply from $1.2284-1.2260.

Technical Expectation:

Despite the downtrend, the weekly, daily and H4 timeframes indicate strength on the side of buyers this week: price recovering from weekly support at $1.1958, daily price overrunning trendline resistance, and H4 price on the verge of reaching for an inverted head and shoulders pattern’s take-profit objective at $1.2335.

With the above taken into account, a H1 price close above $1.22, targeting at least H1 supply at $1.2284-1.2260, should not surprise.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only.

To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View Ahead of the Latest Eurozone Inflation (July 29th 2022)

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

The US dollar pared earlier upside on Thursday, following weak growth data out of the US—GDP contracted for two consecutive quarters and meets the requirement of a ‘technical recession’. In spite of this, US equities finished the session in positive territory. This is perhaps due to the recent Fed movement, which had the Fed Chairman Jerome Powell say that ‘at some point, it will be appropriate to slow down’, indicating a lower probability of large hikes at future meetings.

The technical scene on the EUR/USD, nevertheless, remains largely unchanged on the bigger picture.

Here’s where I left the charts on the weekly timeframe:

The risk of further depreciation for the euro remains, according to the technical landscape. Aside from an unequivocal downside bias since the beginning of 2021 on the weekly timeframe (primary bear trend), an additional headwind on the weekly scale is resistance at $1.0298. On the assumption that sellers remain in command, the weekly timeframe’s next downside objective rests at a 1.272% Fibonacci projection from $0.9925.

Meanwhile on the daily timeframe, buyers and sellers continue to square off around support at $1.0182. A bid could draw the currency pair in the direction of resistance at $1.0377 (arranged just above weekly resistance at $1.0298), while sellers assuming control unlocks the door to support coming in at $0.9919. Further notes on the daily chart, of course, shows the relative strength index (RSI) levelling off south of the 50.00 centreline, movement that indicates negative momentum.

From the H4 timeframe, the decision point at $1.0276-1.0235 has been front and centre since 19th July. Booking further losses in this market swings the pendulum in favour of challenging Quasimodo support at $0.9998 and also potentially shaking hands with a 1.618% Fibonacci projection at $0.9926 (alternate AB=CD bullish pattern taken from $1.0786).

A closer reading of price action on the H1 timeframe reveals the unit is trading within a descending channel, taken from $1.0278 and $1.0130. Additional technical observations are $1.01 and $1.02, as well as Quasimodo support and resistance at $1.0108 and $1.0221, respectively.

Technical Expectation:

Technically, the long-term picture faces south.

Short term, nonetheless, draw attention to H1 resistance between $1.0221 and $1.02 and H1 support between $1.01 and $1.0108.

AUD/USD:

The risk-sensitive Australian dollar wrapped up Thursday lower against the US dollar, though remains positive, week to date.

Despite Thursday’s decline, prime resistance on the H4 timeframe continues to call for attention at $0.7062-0.7031. This is an area that’s strategically positioned north of the widely watched $0.70 psychological figure on the H1 timeframe, which happened to welcome sellers in recent trading. Any further downside from this point throws light on $0.69 and neighbouring H1 Quasimodo support at $0.6893.

Analysis based on the weekly and daily timeframes remains unchanged. The following text has been acquired from previous research (italics):

The weekly timeframe boasts support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement), an area weekly price action greeted in early July in the shape of a hammer candlestick formation (bullish signal). Interestingly, resistance-turned support on the daily timeframe at $0.6901 was tested this week and, as you can see, has held ground for the time being.

Daily resistance coming in at $0.7039 is seen overhead as an obvious upside objective, complemented by a 38.2% Fibonacci retracement ratio at $0.7051.

Technical Expectation:

Whipsawing north of $0.70 on the H1 to H4 prime resistance at $0.7062-0.7031 is still a setup the charts may see playout, particularly in response to Thursday’s subdued $0.70 reaction. A bearish scenario is also in line with the overall downtrend. It’s also worth taking into account that the H4 prime resistance shares space with daily resistance around the $0.7050ish region.

USD/JPY:

As US Treasury yields fell across the curve, the US dollar followed suit and hauled the USD/JPY to deeper water on Thursday. Following an almost picture-perfect whipsaw north of the ¥137 figure on the H1 chart on Wednesday—action that witnessed a wave of selling emerge from H1 supply coming in at ¥137.57-137.30—recent intraday flow is seen nibbling at the lower side of a H1 Quasimodo support-turned resistance level from ¥134.71.

Is this enough to draw short-term flow towards ¥134? The H1 chart seems to think so, as does the H4 chart: displaying scope to drop as far south as a support area coming in between ¥132.87 and ¥133.60.

Looking across to the bigger picture, two words come to mind: limited support. Despite the currency pair still emphasising a decisive uptrend (a pronounced primary bull trend underscoring strength since 2021), recent days had price test resistance on the weekly timeframe at ¥137.23, delivering a healthy bearish rotation that snapped a seven-week bullish phase. Whether this will be enough to wave in additional selling to weekly support from ¥125.54 is unlikely.

Out of the daily timeframe, nonetheless, supply-turned demand at ¥131.93-131.10 is likely to call for attention should sellers change gears and explore deeper terrain. Daily resistance is seen at ¥139.55: a Quasimodo support-turned resistance level.

Interestingly, the daily timeframe’s relative strength index (RSI) appears poised to overthrow indicator support between 40.00 and 50.00, an area serving as a ‘temporary’ oversold zone since May 2021 (common in strongly trending environments). This adds weight to the lack of support in this market right now.

Technical Expectation:

Short term, chart studies suggest a dip to at least support between the upper edge of H4 support at ¥133.60 and ¥134 on the H1. As a result, we may see sellers emerge from between ¥135 and H1 Quasimodo support-turned resistance from ¥134.71.

GBP/USD:

The technical picture is interesting on the GBP/USD right now.

Addressing the weekly timeframe, support drawn from $1.1958 welcomed price action in recent weeks and, as you can see, has underpinned a bid. Weekly resistance from $1.2719 is seen as the next upside objective. Yet, additional GBP buying is questionable in view of the current downtrend and the daily timeframe’s trendline resistance being tested, taken from the high $1.3639, and therefore could be a technical point we see sellers surface from.

In support of the push from weekly support, however, the daily timeframe’s relative strength index (RSI) is seen voyaging above its 50.00 centreline (positive momentum).

In terms of the H4 timeframe, the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) had its neckline breached on 25th July, taken from the high $1.2056. The H4 close above the neckline has likely drawn pattern traders in long; the pattern’s take-profit objective is seen at $1.2335.

Aiding a bullish perspective from the H4 chart, of course, is supply-turned demand at $1.2126-1.2098. From the H1 timeframe, we can see price attempting to bottom north of the $1.21 figure. Overhead casts light to $1.22, while a drop under $1.21 shows trendline support, extended from the low $1.1760.

Technical Expectation:

This is a tricky market, technically speaking.

On one side, I see a clear downtrend and daily price shaking hands with trendline resistance.

On the other side, I see weekly support coming in at $1.1958 and the H4 on the verge of reaching for an inverted head and shoulders pattern’s take-profit objective at $1.2335.

Ultimately, sellers are likely holding the stronger hand here, in light of the long-term downtrend, though sellers are unlikely to commit until H1 price closes south of $1.21.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View Ahead of FOMC (July 27th 2022)

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

Europe’s single currency came under fire on Tuesday versus a broadly stronger US dollar amidst news that Russia will further cut gas supplies to the EU, together with the IMF slashing growth estimates. In other news, US consumer confidence took another hit, falling to 95.7 in July—its third monthly decline.

The risk of further depreciation for the euro remains, according to the technical landscape. Aside from an unequivocal downside bias since the beginning of 2021 on the weekly timeframe (primary bear trend), an additional headwind on the weekly scale is resistance at $1.0298. On the assumption that sellers remain in command, the weekly timeframe’s next downside objective rests at a 1.272% Fibonacci projection from $0.9925.

Meanwhile on the daily timeframe, support at $1.0182 suffered a breach, as expected. I noted the following in Tuesday’s technical briefing (italics):

Daily support from $1.0182 is unlikely to maintain its presence. In light of weekly, daily and H4 resistance seen between $1.0377 and $1.0298, as well as a decisive downtrend, I feel this will be too much opposition for bulls.

Further observations on the daily chart, of course, shows the relative strength index (RSI) levelling off south of the 50.00 centreline, movement that indicates negative momentum.

Technical action out of the H4 timeframe reveals sellers eventually regained consciousness from the decision point at $1.0276-1.0235. Booking further losses in this market swings the pendulum in favour of surpassing Quasimodo support at $0.9998 and shaking hands with a 1.618% Fibonacci projection at $0.9926 (alternate AB=CD bullish pattern taken from $1.0786).

A closer reading of price action on the H1 timeframe has the currency pair exploring territory beneath a week-long consolidation between $1.0270-1.0155. $1.01 is consequently within striking distance, with a break unearthing support from $1.0046 and parity ($1.00) once again.

Technical Expectation:

Technically, price action favours sellers. As a result, tunnelling through $1.01 on the H1 timeframe could be recognised as a bearish (breakout) cue to take aim at H1 support from $1.0046, followed by parity.

AUD/USD:

Tuesday invited losses for the Australian dollar against its US counterpart, influenced by a risk-off environment that tends to weigh on risk-sensitive currencies, such as the New Zealand dollar, Canadian dollar, and Aussie dollar. The technical outlook, nevertheless, remains unchanged despite the AUD/USD finishing Tuesday off best levels.

As a reminder, the weekly timeframe boasts support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement), an area weekly price action greeted in early July in the shape of a hammer candlestick formation (bullish signal).

Interestingly, resistance-turned support on the daily timeframe at $0.6901 was tested this week and, as you can see, has held ground for the time being. Daily resistance coming in at $0.7039 is seen overhead as an obvious upside objective, complemented by a 38.2% Fibonacci retracement ratio at $0.7051.

Against the backdrop of higher timeframes, scope to push higher from the H4 timeframe’s supply-turned demand from $0.6901-0.6862 to H4 prime resistance at $0.7062-0.7031 remains active, despite Tuesday erasing a portion of gains. This is strengthened by the H1 timeframe’s current trendline support, extended from the low $0.6681, with room to reach for at least the $0.70 psychological figure: a widely watched ceiling for this currency pair.

Technical Expectation:

In similar fashion to Tuesday’s technical briefing, a whipsaw above $0.70 on the H1 to H4 prime resistance at $0.7062-0.7031 could be a setup the charts see play out to attract bearish players into the market, in line with the overall downtrend.

However, if the H1 trendline support cedes ground, this could be an early cue we’re headed back to $0.69 (and daily support from $0.6901). The break of trendline support, therefore, may unlock the door for a short-term bearish scenario.

USD/JPY:

It was a muted session for the USD/JPY on Tuesday as investors echo an indecisive tone ahead of today’s eagerly awaited FOMC rate decision (widely expected to increase rates by 75 basis points).

Recapping Tuesday’s technical briefing (below is repeat analysis due to lacklustre movement), this currency pair remains in a decisive uptrend. According to the weekly timeframe, a pronounced primary bull trend continues to grace the chart, underscoring strength since 2021.

However, in recent days, resistance on the weekly timeframe at ¥137.23 made a show and delivered a healthy bearish rotation that snapped a seven-week bullish phase. Whether this will be enough to wave in additional selling to as far south as weekly support from ¥125.54 is unlikely.

Out of the daily timeframe, nonetheless, supply-turned demand at ¥131.93-131.10 is likely to call for attention should sellers change gears and explore deeper waters. Daily resistance is seen at ¥139.55: a Quasimodo support-turned resistance level. As per the daily timeframe’s relative strength index (RSI), the popular momentum gauge has touched gloves with indicator support between 40.00 and 50.00, an area serving as a ‘temporary’ oversold zone since May 2021 (common in strongly trending environments).

The H4 timeframe reveals price rebounded from what’s often referred to as a Fibonacci cluster between ¥135.40 and ¥135.64. Within this area, technicians will note that we have a 1.618% Fibonacci projection (or an ‘alternate’ AB=CD bullish pattern). Many traders following the AB=CD formation will, therefore, likely pencil in the 38.2% and 61.8% Fibonacci retracement ratios at ¥137.03 and ¥137.92, respectively.

Meanwhile on the H1 timeframe, Quasimodo support-turned resistance at ¥136.72 is being tested, with a break unmasking ¥137 and a 100% Fibonacci projection at ¥136.93 (an equivalent AB=CD bearish pattern). Also of technical relevance is supply at ¥137.57-137.30.

Technical Expectation:

The combination of ¥137 and the 100% Fibonacci projection at ¥136.93 on the H1 timeframe, coupled with the H4 timeframe’s 38.2% Fibonacci retracement at ¥137.03 (first upside objective based on the H4 alternate AB=CD bullish pattern), could motivate sellers if tested. Nevertheless, knowing that we have H1 supply prowling above the said resistances at ¥137.57-137.30, a whipsaw above ¥137 resistance to test this supply should not surprise before sellers attempt to make an entrance.

GBP/USD:

Amidst resurging safe-haven demand for the US dollar, pound sterling finished mixed on Tuesday.

The blend of the widely watched $1.20 figure and the H1 timeframe’s trendline support, taken from the low $1.1760, delivered a floor on Tuesday as we crossed into US hours. This followed a H1 double-top ahead of $1.21. Therefore, continued interest to the upside might have buyers zero in on $1.21. Territory under $1.20 points to $1.19 given a lack of obvious H1 support.

Moving up the ladder, H4 price action, aside from a modest dip lower on Tuesday, is largely unchanged. Therefore, here’s a reminder of where I left the H4 chart in Tuesday’s technical briefing (italics):

Addressing the H4 timeframe, chart pattern enthusiasts will recognise the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890), joined by a neckline taken from the high $1.2056. As you can see from the H4 chart, buyers and sellers are squaring off around the aforementioned neckline and appear prepared to nudge higher.

While the H4 close above the neckline has likely drawn pattern traders in long, the H4 decision point at $1.2126-1.2098 must be taken into account. Should we overrun this area, then the pattern’s take-profit objective is seen at $1.2335.

Similar to the H4 chart, weekly and daily technical structure also remains unaffected by recent price movement. As such, the following text is taken from previous analysis (italics):

Through the lens of a technical trader, price crossed swords with weekly support at $1.1958 in recent weeks and, despite a dip to a low of $1.1760, the base has survived for now. Yet, additional GBP buying is questionable in view of the current downtrend.

Trend direction has been unmistakably bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.

Reduced support is evident until the 100% Fibonacci projection ratio at $1.1683 on the daily timeframe. Overhead directs focus to trendline resistance, taken from the high $1.3639, and therefore could be a technical point we see sellers surface from in the event of a push higher. In conjunction with the weekly chart’s bearish vibe, the daily timeframe’s relative strength index (RSI) is seen testing resistance around its 50.00 centreline.

Technical Expectation:

Longer-term technical studies show the rebound from weekly support at $1.1958 may encounter conflict at the daily timeframe’s trendline resistance. This might also hinder H4 head and shoulders traders long on the basis of the recent neckline breach as the daily trendline resistance is fixed beneath the pattern’s profit objective at $1.2335.

Overall, then, my attention remains on the daily trendline resistance around $1.2175, suggesting a bullish breakout north of $1.21 may be in the offing before sellers attempt to make a show from the daily descending line.

However, adding to the above analysis, should I see a H1 trendline support breach, this indicates sellers could take control and target at least $1.19.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Technical View for July 26th 2022 as Markets Look Ahead to Wednesday’s FOMC

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

It was a mixed day for equities, echoing a cautious vibe ahead of Wednesday’s interest rate decision out of the US Federal Reserve. It was also a subdued session for EUR/USD, finishing by way of a daily doji indecision candle.

Technically, the currency pair continues to test the spirit of support on the daily timeframe from $1.0182, though faces rigid headwinds in weekly resistance at $1.0298, closely followed by daily resistance at $1.0377. Also weighing on buyers, of course, is trend. Visible from the weekly timeframe, EUR/USD has been lower since the beginning of 2021. Establishing a series of lower lows and lower highs, the general direction in this market reflects a primary bear trend, with prolonged pullbacks (or sometimes referred to as ‘secondary trends’) in short supply.

Across the page on the H4 and H1 timeframes, the H4 decision point at $1.0276-1.0235—albeit standing its ground—remains vulnerable. It’s essentially open to a whipsaw to weekly resistance mentioned above at $1.0298 and (with some oomph) H4 Quasimodo support-turned resistance from $1.0354. The H1 timeframe has been somewhat monotonous since 19th July, rangebound between $1.0270-1.0155. Outside of the consolidation throws light on $1.03 and $1.01.

Technical Expectation:

Daily support from $1.0182 is unlikely to maintain its presence. In light of weekly, daily and H4 resistance seen between $1.0377 and $1.0298, as well as a decisive downtrend, I feel this will be too much opposition for bulls. As a result, a whipsaw above the upper edge of the H1 range ($1.0270) to test $1.03 could be action that draws bearish attention, having seen this psychological level merge closely with weekly resistance from $1.0298.

AUD/USD:

The Australian dollar outperformed against the US dollar on Monday, adding 0.5 per cent after a near-to-the-pip retest of support on the daily timeframe at $0.6901. Daily resistance coming in at $0.7039 is seen overhead as an obvious upside objective, complemented by a 38.2% Fibonacci retracement ratio at $0.7051.

Buyers are reinforced by the weekly timeframe’s support area between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement). In addition to this, I also see scope to push higher from the H4 timeframe’s supply-turned demand from $0.6901-0.6862 to H4 prime resistance at $0.7062-0.7031, together with the H1 timeframe targeting the $0.70 psychological figure.

In terms of trend studies, direction continues to favour sellers and therefore we may observe a bearish scenario unfold from the daily resistance around $0.7050, which happens to share space with the H4 prime resistance at $0.7062-0.7031.

Technical Expectation:

Given the above technical studies, a whipsaw above $0.70 on the H1 to H4 prime resistance at $0.7062-0.7031 could be a setup the charts see play out to attract bearish players into the market, in line with the overall downtrend.

USD/JPY:

USD/JPY bulls made a comeback on Monday, advancing by 0.5 per cent on the session. Broadening policy divergence continues to underpin this currency pair in the long term. However, in recent days resistance on the weekly timeframe coming in at ¥137.23 made a show and delivered a healthy bearish rotation that snapped a seven-week bullish phase. Whether this will be enough to wave in additional selling to as far south as weekly support from ¥125.54 is unlikely.

Out of the daily timeframe, nonetheless, supply-turned demand at ¥131.93-131.10 is likely to call for attention should sellers change gears and explore deeper waters. Daily resistance is seen at ¥139.55: a Quasimodo support-turned resistance level. According to the daily timeframe’s relative strength index (RSI), the popular momentum gauge has touched gloves with indicator support between 40.00 and 50.00, an area serving as a ‘temporary’ oversold zone since May 2021 (common in strongly trending environments).

The H4 timeframe reveals price rebounded from what’s often referred to as a Fibonacci cluster between ¥135.40 and ¥135.64. Within this area, technicians will note that we have a 1.618% Fibonacci projection (or an ‘alternate’ AB=CD bullish pattern). Many traders following the AB=CD formation will, therefore, likely pencil in the 38.2% and 61.8% Fibonacci retracement ratios at ¥137.03 and ¥137.92, respectively.

Meanwhile on the H1 timeframe, Quasimodo support-turned resistance at ¥136.72 is being tested, with a break unmasking ¥137 and a 100% Fibonacci projection at ¥136.93 (an equivalent AB=CD bearish pattern). Also of technical relevance is supply at ¥137.57-137.30.

Technical Expectation:

The combination of ¥137 and the 100% Fibonacci projection at ¥136.93 on the H1 timeframe, coupled with the H4 timeframe’s 38.2% Fibonacci retracement at ¥137.03 (first upside objective based on the H4 alternate AB=CD bullish pattern), could motivate sellers if tested. Nevertheless, knowing that we have H1 supply prowling above the said resistances at ¥137.57-137.30, a whipsaw above ¥137 resistance to test this supply should not surprise before sellers attempt to make an entrance.

GBP/USD:

Sterling kicked off the week in the green against its US counterpart on Monday, notching up a third consecutive positive close. Through the lens of a technical trader, price crossed swords with weekly support at $1.1958 in recent weeks and, despite a dip to a low of $1.1760, the base has survived for now. Yet, additional GBP buying is questionable in view of the current downtrend.

Here’s where I left the previous research in terms of trend direction (italics):

Trend direction has been unmistakably bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.

From the daily timeframe, here’s where I currently stand:

Reduced support is evident until the 100% Fibonacci projection ratio at $1.1683. Overhead directs focus to trendline resistance, taken from the high $1.3639, and therefore could be a technical point we see sellers surface from in the event of a push higher. In conjunction with the weekly chart’s bearish vibe, the daily timeframe’s relative strength index (RSI) is seen testing resistance around its 50.00 centreline.

Addressing the H4 timeframe, chart pattern enthusiasts will recognise the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890), joined by a neckline taken from the high $1.2056. As you can see from the H4 chart, buyers and sellers are squaring off around the aforementioned neckline and appear prepared to nudge higher. While today’s H4 close above the neckline has likely drawn pattern traders in long, the H4 decision point at $1.2126-1.2098 must be taken into account. Should we overrun this area, then the pattern’s take-profit objective is seen at $1.2335.

Finally, from the H1 timeframe, the unit is on the verge of approaching the lower side of $1.21, set within the H4 timeframe’s prime resistance area. Below $1.21 casts light on the widely watched $1.20 figure, a psychological level closely sharing chart space with a trendline support, extended from the low $1.1760.

Technical Expectation:

Longer-term technical studies show the rebound from weekly support at $1.1958 may encounter conflict at the daily timeframe’s trendline resistance. This may also hinder H4 head and shoulders traders long on the basis of the recent neckline breach as the daily trendline resistance is fixed beneath the pattern’s profit objective at $1.2335.

Overall, then, my attention remains on the daily trendline resistance around $1.2182, suggesting a bullish breakout north of $1.21 could be in the offing before sellers attempt to make a show from the daily descending line.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material.

Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.