July 20th 2021: Souring Risk Appetite Provides Dollar Boost; DXY Refreshes Multi-Month Peaks

Charts: Trading View


Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.5 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests.

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped).

Any upside attempts, a breakout above the current wedge pattern, reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance, extended from the low 29.54. Resistance is also close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Technical Structure Unchanged from Previous Analysis.

Aside from June’s downside bias, technical areas to be mindful of are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1893, plotted south of a 38.2% Fib retracement at $1.1912.

H1 timeframe:

Europe’s single currency refreshed monthly lows against the greenback on Monday. US Treasury yields plummeted amidst increased demand for safe-haven assets, elevating the US dollar, the Swiss franc and Japanese yen.

Technically, heading into early US hours, EUR/USD staged a recovery and whipsawed through $1.18 offers, a psychological barrier dovetailing with the 100-period simple moving average.

Noting short-term flow residing south of $1.18, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen uniting with H4 Quasimodo support underlined above at $1.1749.

Those who study price momentum will note the relative strength index (RSI) dipped a toe under the 50.00 centreline on Monday after fading 61.00.

Observed levels:

From the monthly timeframe, support at 1.1857-1.1352 is in play. In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern.

Short-term flow is centred on a possible sell-off towards the H1 timeframe’s Fibonacci structure between $1.1745 and $1.1748, joined by H4 Quasimodo support from $1.1749.


Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following June’s 3.0 percent decline, July recently elbowed through support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Month to date, July is down 2.3 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

The risk-sensitive Australian dollar fell sharply versus the US dollar on Monday, weighed on the back of risk aversion amidst concerns surrounding the spread of the Delta variant spread.

Supply-turned demand at $0.7453-0.7384 was overthrown, consequently exposing support at $0.7204. This may be interpreted as a warning sign of further weakness. Also of technical importance is the unit trading below its 200-day simple moving average at $0.7581, a dynamic value sheltered below resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

Momentum studies, according to the relative strength index (RSI), shows oversold conditions in this market. However, in light of the sustained downside bias since early May, oversold readings are likely to remain common for the time being, and between 50.00 and 40.00 standing in as overbought signals.

H4 timeframe:

Monday’s decline swept through Quasimodo support at $0.7364—a level now serving as resistance beneath supply at $0.7390-0.7371. Space to the downside throws light on Fibonacci studies between $0.7293 and $0.7315. Note that within this area we have a 100% Fib projection at $0.7313, a level harmonic traders will recognise as an AB=CD bullish formation. Yet, a buy from here involves going against current bias, potentially diminishing the pattern’s appeal.

H1 timeframe:

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

As evident from the chart, supply at $0.7450-0.7436 welcomed sellers on Friday and guided the currency pair under $0.74, as expected.

Having price action maintain a bearish theme beneath $0.74, the currency pair is on the doorstep of $0.73, a level residing within Fibonacci support on the H4 scale between $0.7293 and $0.7315.

As you would expect, the relative strength index (RSI) is crawling along the indicator’s oversold threshold, clinging to support at 27.02. In similar fashion to the daily timeframe’s RSI condition, between 50.00 and 40.00 traders are likely expecting this area to serve as temporary oversold space on the H1 scale.

Observed levels:

Chart studies indicate sellers have the upper hand.

Monthly support at $0.7394 is poised to step aside; daily price steamrolled through supply-turned demand at $0.7453-0.7384, and H4 and H1 timeframes exhibit scope to shake hands with the $0.73ish neighbourhood.

The above suggests a retest at H4 resistance from $0.7364 (and possible whipsaw into H4 supply at 0.7390-0.7371) could draw a bearish scenario, targeting $0.73 on the H1.


Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66. Although April finished lower by 1.3 percent and snapped a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, however, July trades 1.5 percent in the red and is on track to chalk up a bearish outside reversal.

Daily timeframe:

Absence of well-defined support until supply-turned demand at ¥107.58-106.85—an area sharing chart space with the 200-day simple moving average at 106.92—opens the risk of further selling. This follows early July tunnelling through trendline support (taken from the low 102.59).

Trend studies, despite the trendline support breach early July, reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51 last week, and finished Monday just ahead of 40.00.

H4 timeframe:

Latest out of the H4 chart reveals price stabbed into the walls of demand coming from ¥109.02-109.20, a move enticing short-term recovery gains into the close.

Trendline resistance, extended from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09, could enter the frame.

H1 timeframe:

Spinning higher north of ¥109 as we transitioned into US trading on Monday lands Tuesday within a stone’s throw from resistance at ¥109.61, followed closely by supply at ¥109.83-109.71. The noted supply is considered an important zone, having it been within this base a decision was made to channel lower yesterday.

The picture from the relative strength index (RSI) shows the value rebounded from oversold in recent hours, missing support by a whisker at 18.76. Crossing above the 50.00 centreline informs traders that average gains exceed average losses: strengthening to the upside.

Observed levels:

Monthly flow is on the verge of revisiting descending resistance-turned support, pulled from the high ¥118.66. This is inline with the daily timeframe’s technical landscape, suggesting weakness until supply-turned demand at ¥107.58-106.85.

In terms of the short-term picture, H1 supply at ¥109.83-109.71 is likely a key watch. Whipsawing through H1 resistance at ¥109.61 into the aforesaid supply unlocks a possible bearish scene, in line with the higher timeframe direction.


Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 1.1 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Sterling slumped to levels not seen since February against the US dollar on Monday as risk aversion took centre stage.

Price closed beneath the 200-period simple moving average, circling $1.3692, and is on the verge of crossing swords with Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641).

Trend on this chart has been somewhat rangebound since late February. As for momentum studies, the relative strength index (RSI) is pencilling in bullish divergence, informing traders of strengthening momentum.

H4 timeframe:

Monday trading on the ropes directed the currency pair beneath Quasimodo support at $1.3712 (now serving resistance) to highlight a 100% Fib projection at $1.3640 and a 1.618% Fib extension at $1.3613. Harmonic traders will acknowledge the Fibonacci formation represents an AB=CD bullish configuration.

H1 timeframe:

Despite modest defence, $1.37 was brushed aside in early US Monday, a move which led price to lows ahead of support at $1.3652 (set above the H4 timeframe’s 100% Fib projection at $1.3640).

According to the relative strength index (RSI), bullish divergence is in the initial stages of forming. Confirmation of the divergence signal is movement above resistance at 36.98.

Observed levels:

Between Quasimodo support at $1.3609 and the 38.2% Fib retracement at $1.3641 on the daily timeframe, this is a floor that may draw bullish attention if tested. What’s interesting is the H4 100% Fib projection at $1.3640 and H1 support from $1.3652 aligns closely with the daily levels.


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