January 18th 2022: Technical Position Ahead of Tuesday’s Session

Charts: Trading View

(Italics: Previous Analysis Due to Limited Price Change)

EUR/USD:

Weekly timeframe:

Long-standing resistance from $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing last week. Downstream, familiar support resides at $1.1237-1.1281. Made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237, this area, as you can see, delivered a floor heading into the close of 2021. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation (extended D leg).

Strengthening the aforementioned resistance area, the pair took out 2nd November low (2020) at $1.1603 in late September (2021), suggesting a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s primary downtrend since mid-2008.

Daily timeframe:

Technical observations on the daily timeframe reveal the currency pair forming a potential whipsaw above a 7-month trendline resistance, extended from the high $1.2254. Note also that price movement established a bearish engulfing candle (a reversal pattern in which focus is directed to the real candle body rather than upper and lower shadows). Should bearish follow-through emerge, Quasimodo support offers an obvious target at $1.1213.

Momentum studies, derived through the relative strength index (RSI), shows the indicator spun lower ahead of resistance at 63.66 and is threatening a move back to the 50.00 centreline.

Trend on this scale has been lower since June 2021.

H4 timeframe:

Fibonacci resistance between $1.1506 and $1.1476 served this market well at the tail end of last week, welcoming a one-sided decline on Friday and throwing light on support at $1.1382, closely followed by a decision point at $1.1354-1.1379. Harmonic traders (much like the weekly timeframe) will acknowledge that the 1.272% Fibonacci projection at $1.1476 forming the lower side of the noted resistance is commonly referred to as an ‘alternate’ AB=CD formation (extended D leg).

What also gave credibility to the Fibonacci resistance (underlined in previous writing) is the area overlapping the lower edge of weekly resistance from $1.1473-1.1583.

The technical framework on this chart, therefore, shines light on a possible test of support at $1.1382 and neighbouring decision point at $1.1354-1.1379.

H1 timeframe:

Thin US holiday trading on Monday witnessed Europe’s single currency slip beneath trendline support, drawn from the low $1.1285, and shake hands with $1.14. Despite the psychological figure arranging a modest floor heading into US hours, the currency pair is tipped for additional underperformance (according to higher timeframe structure).

Having noted $1.14 offering support, protective stop-loss orders will be present south of the number (sell-stops). Additionally, a break lower may encourage breakout selling (additional sell-stops). With that being the case, a whipsaw to prime support at $1.1360-1.1383 (houses demand within at $1.1363-1.1375 and shares a connection with H4 support and the decision point) could arise as larger short-term players attempt to take advantage of the stop run.

The technical picture drawn out of the relative strength index (RSI) reveals bullish divergence, with the indicator’s value tipped to perhaps join the lower side of the 50.00 centreline.

Observed Technical Levels:

While weekly, daily and H4 timeframes display scope to navigate lower, short-term flow (H1) highlights the possibility of a whipsaw through $1.14 to prime support at $1.1360-1.1383. A rebound from here, followed by a subsequent H1 price close above $1.14 is likely to pull in an intraday bullish move higher.

Though do remain aware that a trade long is counter to higher timeframe direction, therefore the move north could be short-lived.

AUD/USD:

Weekly timeframe:

Prime support at $0.6968-0.7242 continues to play a crucial role on the weekly timeframe. Bulls, as you can see, embraced a modestly bullish stance into the close of 2021. 2022, on the other hand, has been undecided so far. Should buyers continue pressing higher, resistance is formed at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.

Since mid-Feb 2021, a modest downside bias has been seen. This followed higher prices since pandemic lows of $0.5506 (March 2020). However, it is important to note that from the monthly timeframe the unit has been entrenched within a large-scale downtrend from mid-2011.

Daily timeframe:

Resistance—made up of a 61.8% Fibonacci retracement at $0.7340, a 100% Fibonacci projection at $0.7315, an ascending resistance, drawn from the low $0.7106, trendline resistance, drawn from the high $0.7891, and the 200-day simple moving average at $0.7421—came within a pip of making an entrance last week and finished the week by way of a shooting star candle (bearish configuration).

Aside from the $0.7130 low (7th January) and the $0.7082 (20th December [2021]) low, obvious support at $0.7021 calls for attention.

The relative strength index (RSI) continues to circle the 50.00 centreline. $0.7421-0.7315 sellers, therefore, will likely be watching for the indicator to secure position beneath the 50.00 neighbourhood, movement that informs market participants that average losses exceed average gains.

H4 timeframe:

Prime resistance drawn from $0.7323-0.7308 received price action late last week. Thursday’s response and Friday’s additional softness manoeuvred through support at $0.7250 (now a marked resistance level). The $0.7169-0.7187 demand is next in the line of fire for sellers, with Quasimodo support residing a touch below at $0.7146.

H1 timeframe:

Despite joining hands with the $0.72 figure, Monday’s holiday-induced session had price action congregate between two merging trendlines ($0.7223 and $0.7196) to form a potential pennant formation (continuation pattern). Should the unit breakout to the downside and take on $0.72, Quasimodo support calls for attention at $0.7168 (set a pip beneath H4 demand at $0.7169-0.7187), followed by demand at $0.7126-0.7141.

Any upside attempts on this timeframe unlocks resistance at $0.7273.

The relative strength index (RSI) is seen within striking distance of the lower side of the 50.00 centreline, following movement out of oversold territory.

Observed Technical Levels:

The H1 timeframe’s potential pennant pattern is likely to welcome a bearish breakout, to which traders will observe price dip beneath $0.72. While H1 traders will likely target Quasimodo support at $0.7168, H4 demand at $0.7169-0.7187 could prove troublesome. Therefore, $0.72 breakout sellers are urged to adopt a cautious stance south of the round number.

USD/JPY:

Weekly timeframe:

After touching gloves with a 1.272% Fibonacci projection from ¥116.09 in the shape of a shooting star and refreshing multi-year pinnacles, USD/JPY tumbled 1.2 percent last week. While a modest recovery developed in recent trading, the path of least resistance remains to the downside towards support at ¥112.16.

In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61. In consideration of the trend, a dip-buying theme from ¥112.16 is a reasonable assumption.

Daily timeframe:

Friday pencilled in a hammer pattern and, despite being void of an obvious technical floor, attracted a bullish following on Monday. Upstream has Quasimodo resistance to target at ¥116.33, whereas downstream shines light on demand at ¥112.66-112.07, tailed closely by a decision point from ¥111.18-111.79 and the 200-day simple moving average at ¥111.35.

In terms of the relative strength index (RSI), support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May) remains active.

Much like the weekly timeframe, trend on the daily scale points to the upside.

H4 timeframe:

After clipping the lower edge of a decision point at ¥113.54-113.78 (leaving Quasimodo support at ¥113.22 unchallenged) last week, subsequent price movement climbed to within a stone’s throw from Quasimodo support-turned resistance at ¥114.71.

North of ¥114.71 is trendline resistance, taken from the high ¥116.35, and the decision point from ¥115.49-115.24.

H1 timeframe:

Early London hours watched price action retest support at ¥114.32 on Monday and produce a hammer pattern (bullish signal). This led the currency pair higher and directs attention to Quasimodo support-turned resistance at ¥114.83 and the ¥115 figure. Technicians will note that ¥114.83 converges closely with the H4 timeframe’s Quasimodo support-turned resistance at ¥114.71.

RSI (relative strength index) analysis shows moderate bearish divergence forming on the doorstep of overbought space. This informs traders that average losses are beginning to exceed average gains on this timeframe over a 14-period calculation: negative momentum.

Observed Technical Levels:

Both weekly and daily timeframes display room to work lower until connecting with daily demand at ¥112.66-112.07. As a result, between H4 Quasimodo support-turned resistance at ¥114.71 and H1 Quasimodo support-turned resistance at ¥114.83, sellers could be drawn to this area (some traders are likely to include the ¥115 figure in this resistance zone).

GBP/USD:

Weekly timeframe:

The current 4-week bid—initiated ahead of the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes)—continues to echo a muscular tone, in line with the weekly timeframe’s current uptrend since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.

Nevertheless, ‘consumed supply’ (blue area) is nearby between $1.4001 and $1.3830. Considering this, candle action may be guided as far north as resistance from $1.4371-1.4156 in the coming weeks.

Daily timeframe:

Counter to the weekly timeframe is the daily timeframe bonding with the lower side of the 200-day simple moving average at $1.3733 last week. Thursday assembled a shooting star candle formation (bearish signal) and Friday sailed to a low of $1.3653 with Monday extending the retracement slide.

Observed support falls in at $1.3602, aided by neighbouring trendline resistance-turned support, taken from the high $1.4250.

The relative strength index (RSI) recorded overbought conditions in line with price testing the noted SMA and has since exited the area. This is considered by many technicians a sign upside momentum is beginning to slow in which bears could take the wheel.

H4 timeframe:

Following the near-test of supply from $1.3782-1.3758 and a deep 88.6% Fibonacci retracement at $1.3758 last week, price dipped beneath trendline support, drawn from the low $1.3173, and a Quasimodo resistance-turned support at $1.3668 (now marked resistance).

You will note that although the aforesaid supports have been absorbed, a nearby decision point at $1.3622-1.3646 made its way into the spotlight. Below the decision point, aside from a number of ‘local’ lows, demand is at $1.3428-1.3444.

H1 timeframe:

Monday’s subdued setting, brought on by a lack of tier-1 data and a bank holiday in the US, left behind a dip into demand from $1.3628-1.3643 (underpinned by support at $1.3627 and placed within the H4 decision point at $1.3622-1.3646).

Below the noted demand and support, the $1.36 figure is visible, accompanied by demand from $1.3580-1.3600.

In terms of the relative strength index (RSI), the value formed bullish divergence out of oversold territory yesterday, a move telling short-term traders that downside momentum is currently slowing.

Observed Technical Levels: 

The daily timeframe connecting with the 200-day simple moving average at $1.3733 brings light to support at $1.3602. With this being the case, further losses could emerge on the H1 scale until $1.36, though this entails overthrowing noted H4 structure (and H1 demand at $1.3628-1.3643 and H1 support from $1.3627).

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