Depositphotos_8486583_s-2019 (1)

Weekly Technical Market Insight: Week Ending July 2nd 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Taking a chunk out of the prior week’s strong-willed advance, buyers took a back seat last week, guiding the US dollar index (ticker: DXY) 0.6 percent lower.

Versus a basket of six foreign currencies—including Europe’s single currency—the DXY finished the final full week of June fading two-month peaks (92.41). Interestingly, though, the unit discovered a modest floor ahead of the 200-day simple moving average (91.48), and support coming in from 91.36. Candlestick enthusiasts will also note Friday concluded in the shape of an average hammer pattern, albeit absent of space to the left of the formation.

North of 92.41 unearths the 93.43 31st March high, clouded by Quasimodo resistance from 93.90. Bringing down 91.36 this week, on the other hand, exposes demand at 90.32-90.70. Technically, this area exhibits strength. Having witnessed the zone form prior to breaching 91.36 to the upside, the area informs chartists a decision point developed within 90.32-90.70, echoing potential resilience. This means efforts to defend the zone should not surprise if tested.

In terms of trend, the DXY has been underwater since topping in early 2020—defined through lower lows and lower highs (black arrows). However, a longer-term bullish revival could be on the cards if the 94.74 25th September high is overrun (blue arrow). Additionally, some technicians note the recent price close above the 200-day simple moving average as bullish. Prior to crossing swords with 94.74, price must confront the 93.43 31st March high emphasised above and Quasimodo resistance from 93.90.

Interestingly, momentum studies out of the Relative Strength Index (RSI) revealed the indicator’s value pulled back from 73.00 last week—a resistance not seen since March 2020—and exited overbought space. Indicator support resides at 55.67, secured north of the 50.00 centreline, both of which may enter the fray.

  • The DXY voyaging above the 200-day simple moving average and resistance at 91.36 mid-way through June directs the technical spotlight towards these levels this week, delivering possible support. Dip-buyers, therefore, could make an entrance and refresh highs as we enter July. Should the aforementioned supports fail to stir a bullish scenario, demand at 90.32-90.70 is in sight.

EUR/USD:

Monthly timeframe:

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

As we look to close the books on the month of June, EUR/USD is down 2.4 percent and on track to snap a two-month bullish phase.

Reclaiming May’s gains and chipping into April’s upside, the currency pair is touching gloves with familiar support at $1.1857-1.1352. Upstream is focused on 2021 peaks at $1.2349; additional enthusiasm may welcome ascending resistance (prior support [$1.1641]).

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

Daily timeframe:

Technical framework unchanged from previous research.

Mid-week trading observed thin movement, with each successive candle finishing off best levels, echoing what many will recognise as shooting star patterns.

Quasimodo support at $1.1836 and the 200-day simple moving average at $1.1994 commands attention on the daily scale. $1.2148-1.2092 supply entertains territory north of the SMA; another Quasimodo support falls in around $1.1688 should sellers tunnel under $1.1836.

Underpinning gains, the RSI pencilled in hidden bullish divergence (commonly forms a trend continuation signal that, in this case, suggests upside strength) last week. 51.36 delivers reasonably substantial resistance in the event momentum gains traction to the upside.

As for trend, the currency pair has exhibited a consolidation phase since 2021, following healthy gains in 2020.

H4 timeframe:

Resistance at $1.1937 occupied the market’s curiosity last week, holding position into the close despite numerous upside attempts.

North of $1.1937, supply at $1.2006-1.1983 is noted, a zone sharing space with resistance at $1.1990, a 38.2% Fib retracement value at the same level, and a neighbouring 38.2% Fib retracement from $1.2007.

The lack of selling interest derived from $1.1937 points to a test of $1.2006-1.1983 this week.

What’s technically interesting is the 200-day simple moving average highlighted above on the daily timeframe at $1.1994 intersects with the aforesaid H4 supply area.

H1 timeframe:

$1.1924 served as support last week, withstanding numerous downside attempts. The week’s action also introduced demand at $1.1895-1.1911—an important decision point encompassing $1.19—and the 100-period simple moving average, circling $1.1929.

The widely watched $1.20 figure continues to call for attention higher up on the curve, aligning closely with supply at $1.1999-1.1991.

According to the RSI, the value wrapped up the week shaking hands with support at 43.54, following an earlier dip from overbought.

Observed levels:

Long term:

Acknowledging the monthly timeframe coming from support at $1.1857-1.1352, the 200-day simple moving average at $1.1994 is perhaps sensitive to a break higher this week, a move that might unwrap daily supply at $1.2148-1.2092.

Short term:

As underlined in Friday’s technical briefing, H1 holds support at $1.1924—reinforced by demand at $1.1895-1.1911—and H4 resistance from $1.1937 appears on the verge of stepping aside. Chart studies, therefore, indicate a bullish scenario could develop, targeting H4 supply from $1.2006-1.1983.

As a result, the blue zone between $1,895 and $1.1924 on the H1 is an area buyers may emerge from this week.

AUD/USD:

Monthly timeframe:

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

Since the beginning of 2021, buyers and sellers have been squaring off south of trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082.

Support is featured at $0.7394. Additional downside pressure brings light to demand at $0.7029-0.6664 (prior supply).

June is currently down by 1.8 percent.

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

Daily timeframe:

The daily chart found itself tentatively above the 200-day simple moving average at $0.7556 last week, shining the technical spotlight on resistance at $0.7626. You will note a $0.7626 break uncovers Quasimodo resistance at $0.7816.

Supply-turned demand at $0.7453-0.7384 seeks attention to the downside, collaborating with a collection of Fibonacci studies and monthly support mentioned above at $0.7394.

In terms of trend, 2020 was a good year for AUD/USD, though 2021 recently turned sour.

The RSI exited oversold territory this week, and ended the session drifting within reach of the 50.00 centreline.

H4 timeframe:

Buyers strengthened their grip Friday, mustering sufficient oomph to dethrone resistance at $0.7588 and retest the latter as support heading into the week’s end.

Bids defending $0.7588 this week identifies additional resistance between $0.7660 and $0.7635, achieved through Fibonacci studies (blue).

H1 timeframe:

As you can see, Friday addressed a harmonic bat pattern’s potential reversal zone (PRZ) between $0.7626 and $0.7600, and intrigued mild selling heading into the US session.

Downside targets rest at the 38.2% Fib retracement at $0.7564, Quasimodo support at $0.7546, and a 61.8% Fib retracement at $0.7530 (both Fib levels are derived from the bat pattern’s AB=CD legs [$0.7477-$0.7617]).

Regarding the RSI’s value, we ended Friday slightly under the 50.00 centreline. Focus is also on resistance plotted within overbought at 72.21, and support situated within oversold at 19.30.

Observed levels:

Long term:

Daily supply-turned demand at $0.7453-0.7384, blending with monthly support at $0.7394, is likely to receive attention.

Nearby, however, daily resistance at $0.7626 and the 200-day simple moving average at $0.7556 (which could serve as support) must be noted this week.

Short term:

The H1 timeframe’s harmonic bat pattern’s potential reversal zone (PRZ) between $0.7626 and $0.7600 elbowing into the spotlight Friday may unwrap an intraday bearish theme early week, targeting $0.7564, $0.7546, and $0.7530. Yet, to achieve lower levels this involves brushing aside H4 support at $0.7588.

Should $0.7588 bids fail to budge, additional resistance to be mindful of is H4 Fib resistance (blue) between $0.7660 and $0.7635, intersecting with H1 resistance from $0.7646, and located just north of daily resistance at $0.7626.

USD/JPY:

Monthly timeframe:

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

Following January’s bullish engulfing candle and February’s outperformance, 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 the three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, currently trading higher by 1.1 percent.

Daily timeframe:

Underpinned by trendline support, taken from the low ¥102.59, the upper boundary of long-term resistance at ¥110.94-110.29 finished the week under pressure. Consequently, supply at ¥111.88-111.20 putting in an appearance should not surprise.

Trend studies reveal the pair has been trending higher since the beginning of the year.

The RSI has stepped higher since May, confined within the walls of an ascending channel between 58.82 and 47.51.

H4 timeframe:

As you can see, the tail end of the week witnessed price refresh 2021 tops at ¥111.12 and print a moderate retracement.

To the downside, two trendline supports are seen, extended from lows of ¥107.48 and ¥108.56, together with Quasimodo support at ¥109.80 and a number of Fibonacci studies between ¥109.74 and ¥109.92 (blue).

Interest to the upside this week, nevertheless, throws light on Quasimodo resistance from ¥111.57.

H1 timeframe:

Since Thursday registered fresh 2021 highs, price worked with a descending channel formation between ¥111.12 and ¥110.69. Note also the 100-period simple moving average entered the channel on Friday, finishing the session at ¥110.74.

Support to be mindful of this week, aside from the aforementioned channel support, is between ¥110.22 and ¥110.33 (a combination of Fibonacci studies and structure support).

Out of the RSI, we can see the indicator recoiled from oversold territory on Friday—missing indicator support by a whisker at 18.76—though failed to find approval north of the 50.00 centreline.

Observed levels:

Long term:

The long-term monthly chart is in the process of taking hold of descending resistance-turned possible support, placing a question mark on daily resistance at ¥110.94-110.29 and, ultimately, throwing light on daily supply from ¥111.88-111.20 this week.

Short term:

Both H4 and H1 charts exhibit scope to extend the end-of-week retracement.

H1 support is present between ¥110.22 and ¥110.33 and could welcome dip-buying this week. Failure to hold, however, means a test of H4 support between ¥109.74 and ¥109.92 may be on the cards before buyers attempt to make a show (in line with higher timeframe technical projections).

GBP/USD:

Monthly timeframe:

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

Following December’s 2.5 percent advance, movement stirring major trendline resistance, taken from the high $2.1161, May extended recovery gains, adding 2.8 percent.

June, however, has so far disappointed, down 2.4 percent and overturning a large portion of May’s work, albeit recording fresh YTD peaks at $1.4250.

Despite the trendline breach (which could serve as support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way (April high 2018).

Daily timeframe:

After muscling its way through support at $1.4003 mid-June, GBP/USD discovered support off $1.3806 at the beginning of the week, confirmed by an RSI hidden bullish divergence signal (typically observed as a continuation signal within a trend). This unmasked a mild pullback, movement coming within striking distance of retesting $1.4003 as resistance.

Space below $1.3806 is deprived of support until a Quasimodo formation at $1.3609, a level braced by the 200-day simple moving average at $1.3613.

H4 timeframe:

Mid-week trading had price action bond with resistance between $1.4007 and $1.3994, swinging the pendulum in favour of sellers heading into the second half of the week. Brushing aside last Tuesday’s low at $1.3860 this week places a 78.6% Fib retracement value at $1.3794 in the firing line, aided by neighbouring Quasimodo support at $1.3761.

H1 timeframe:

Focus on the H1 shifted to support between $1.3830 and $1.3851 (blue) on Friday. Making up the area is a combination of structure support and Fibonacci studies, including a 100% projection which many will identify as an AB=CD configuration. According to Scott Carney in his book: Harmonic Trading, Carney states a B-C retracement boasts an associated B-C projection of 2.0 (although many other books state this projection is in fact a Fib extension).

Tucked under last Tuesday’s low at $1.3860, $1.3830-1.3851 is well placed to facilitate a stop-run beneath $1.3860 this week, with bulls perhaps taking aim at $1.39.

With reference to the RSI, end-of-week trading introduced a bottom around 35.00. Dipping into oversold terrain, therefore, is not out of the question, perhaps targeting support at 25.67.

Observed levels:

Long term:

Attention is on daily support and resistance at $1.3806 and $1.4003, respectively.

Short term:

Interestingly, H4 support between $1.3761 and $1.3794 shares a close connection with daily support at $1.3806. Though before reaching H4 support, short-term flow on the H1 chart suggests support between $1.3830 and $1.3851 deserves notice, an area perhaps reinforcing moves back to at least $1.39.

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.