Currency

May 7th 2021: Dollar Index Travels South of 91.00 Ahead of US Jobs Data

Charts: Trading View

EUR/USD:

Monthly timeframe:

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

Following a three-month retracement, demand at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close.

April upside throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of 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 also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

The US dollar echoed a soft tone on Thursday, with the US dollar index (ticker: DXY) piercing 91.00.

Europe’s shared currency, holding the largest weighting within the DXY, benefited from the USD’s downfall, leaving the 200-day simple moving average at 1.1942 unchallenged. The recent ascent tips the scale in favour of a Quasimodo resistance test at 1.2169.

As aired in recent technical briefings, the currency pair has been entrenched within an uptrend since early 2020, movement that many traders will likely refer to as a primary trend on this timeframe.

The RSI—in conjunction with yesterday’s price advance—chalked up a recovery from support at 51.36.

H4 timeframe:

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

Wednesday’s decline, as evident from the H4 scale, had EUR/USD shake hands with support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converge). For the moment, buyers have welcomed the area, yet to add bullish conviction traders are likely watching for either a break of yesterday’s high at 1.2026 or a bullish candlestick configuration to form.

As shown from the H4 chart, EUR/USD bulls entered an offensive phase from the 1.1971/1.1990 support zone on Thursday and scaled to highs at 1.2071. Monday’s tops around 1.2075 echo possible resistance, with subsequent buying potentially setting the technical stage for an approach to resistance drawn from 1.2108.

H1 timeframe:

Thursday’s technical research noted the following (italics):

As evident from the H1 chart, 1.20 did indeed embrace a mild whipsaw on Wednesday, allowing support at 1.1989 to enter the fray. However, upside attempts have been somewhat lacklustre thus far, unable to pencil in a fresh higher high and reach H1 resistance at 1.2035.

As you can see, though, Thursday brushed aside both the 100-period simple moving average and resistance at 1.2035, consequently shining light on supply at 1.2091-1.2077 and the 1.21 figure located above.

RSI movement, following a brief spike into overbought space, settled around 66.00ish. Note recent action left RSI resistance untapped at 78.97.

Observed levels:

With monthly price eyeballing higher terrain, in addition to daily flow displaying scope to approach Quasimodo resistance at 1.2169, H4 action may overpower Monday’s peak at 1.2075 today and perhaps clear the river north to resistance pinned at 1.2108.

The above analysis, therefore, could reinforce a 1.2035 support retest on the H1 scale, targeting H1 supply at 1.2091-1.2077 and the 1.21 figure (which aligns closely with H4 resistance mentioned above at 1.2108).

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 battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

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:

Technical structure unchanged from previous analysis.

AUD/USD remained on the front foot on Thursday, extending Wednesday’s recovery gains and throwing light on resistance from 0.7817. Note the currency pair has been consolidating beneath this level since mid-April.

February’s low at 0.7563 remains a level to be mindful of to the downside, followed closely by trendline resistance-turned support, extended from the high 0.8007, and the 200-day simple moving average at 0.7470.

Rupturing 0.7817 resistance, nevertheless, unbolts the door for an approach to supply at 0.8045-0.7985.

The RSI value continues to hug trendline support-turned resistance, extended from the low 36.55, though has so far been unable to influence a bearish presence south of the 50.00 centreline. Consequently, traders are urged to pencil in the possibility of a move north to test trendline resistance, drawn from the high 80.12.

H4 timeframe:

Partly modified from previous analysis.

Thursday’s bullish extension, elevated on the back of a waning greenback and technical buying out of 0.7696-0.7715 demand, positions price action within a stone’s throw from Quasimodo resistance at 0.7800.

Also of technical relevance is the currency pair has been carving out a consolidation between the 0.7800 Quasimodo resistance and the aforesaid demand area since April 20th.

H1 timeframe:

Thursday’s upside unseated resistance at 0.7752 and, in recent hours, also overthrew Quasimodo resistance at 0.7777 (both now labelled supports).

The 0.78 psychological level is positioned directly above, a level serving as resistance since April 20th. What’s also technically interesting is this barrier represents Quasimodo resistance on the H4, and is located just south of daily resistance at 0.7817.

The RSI formed a mild peak ahead of overbought in recent hours, with any downside from here likely to approach trendline support, drawn from the low 24.50.

Observed levels:

Daily, H4 and H1 timeframes reveal price could make its way to at least the 0.78 region today—possibly even testing daily resistance at 0.7817.

This exposes H1 support at 0.7777 (previous Quasimodo resistance) as a possible base short-term dip-buyers may be drawn to today should a test unfold, targeting 0.78/0.7817.

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 marginally 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, the pair is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Analysis largely unchanged.

Despite the monthly timeframe chalking up possible supportive structure, the daily timeframe has price engaging supply at 109.97-109.18.

Trendline support, extended from the low 102.59, serves as a downside target south of current supply; a bullish showing, on the other hand, casts light towards longer-term supply at 110.94-110.29, stationed under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator, although ending last week above the 50.00 centreline (a sign of trend strength), is seen testing resistance at 57.00.

H4 timeframe:

61.8% Fib resistance at 109.60—located under supply at 109.97-109.72 (an area positioned within the upper range of daily supply at 109.97-109.18)—capped upside at the beginning of the week and led the unit to support at 108.99.

Although 108.99 serves as a floor for the time being, bullish curiosity appears thin which may eventually call for moves to support at 108.50.

Technically speaking, 108.50 deserves notice, as the base brings with it a 1.618 Fib expansion at 108.36, a 1.272% Fib projection at 108.48, and demand from 108.20-108.43.

H1 timeframe:

Supply at 109.52-109.39 has proved an effective base, beating back bullish attempts since Tuesday. Sellers, as you can see, shifted gears on Thursday and sliced through the 100-period simple moving average to test the mettle of 109 (dovetails with H4 support at 108.99).

Navigating through 109 bids today manoeuvres Quasimodo support into the line of fire at 108.80, with a break uncovering demand pencilled in at 108.57-108.46 (houses H4 support at 108.50).

The technical position out of the RSI indicator reveals the value circling the 40.00ish range, threatening a dip into oversold waters (support resides at 18.76).

Observed levels:

The 109 figure on the H1, aligning with H4 support plotted at 108.99, may entice additional bullish flow today, targeting H1 supply at 109.52-109.39.

Defeating 109 support, on the other hand, could, given daily price is engaging supply at 109.97-109.18, guide short-term flow on the H1 to Quasimodo support at 108.80. This would trigger breakout sells beneath not only 109, but also H4 support at 108.99, therefore moves to 108.50 H4 support (H1 demand at 108.57-108.46) would likely be on the table as well.

GBP/USD:

Monthly timeframe:

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

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Analysis largely unchanged.

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Any downside from this base throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

However, should buyers regain consciousness and brush aside current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value recently dipped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14. As you can see, the aforementioned trendline is holding for the time being.

As for the price trend, GBP/USD has been trending higher since early 2020, despite the two-month retracement.

H4 timeframe:

Thursday had the Bank of England (BoE) announce a slowdown in bond-buying, but stated this should not be interpreted as a change in the stance of monetary policy.

A reading of price action on the H4 timeframe, however, reveals GBP/USD continued to cling to the underside of resistance from 1.3919 on Thursday, forming what candlestick traders refer to as a long-legged doji pattern. North of here, we have 1.3976 tops, along with Quasimodo resistance at 1.4007.

Demand at 1.3809-1.3832 is seen to the downside. Below the aforesaid demand brings attention to Quasimodo support at 1.3750, which happens to align with a 1.272% Fib projection at 1.3746 and a 78.6% Fib level at 1.3739 (Fib cluster).

H1 timeframe:

The combination of resistance at 1.3929 and the 1.39 figure has clearly appealed to sellers this week.

Below the aforesaid resistance zone—and the nearby 100-period simple moving average—analysts will likely be eyeing the 1.38 figure (joined by a 61.8% Fib level and a 100% Fib projection at 1.3789).

Above the resistance zone, however, potentially sets the technical stage for a run to tops noted on the H4 scale at 1.3976, as well as the 1.40 figure (housed between H1 Fibonacci resistance at 1.4013-1.3988).

Observed levels:

The combination of H4 resistance at 1.3919, the 1.39 figure on the H1, as well as H1 resistance at 1.3929, could be sufficient to pull H1 under the 100-period simple moving average to test at least H4 demand from 1.3809-1.3832.

Alternatively, movement above 1.3929 on the H1 paves the way for a short-term bullish scenario to H1 Fibonacci resistance at 1.4013-1.3988 (note this area holds H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003).

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