Dollar and euro bank notes on the table

Weekly Technical Market Insight: 3rd – 7th May 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

The US dollar, according to the US dollar index (DXY), marched north last week, adding 0.5 percent and snapping a three-week losing streak. The bulk of the weekly ascent emerged on Friday, inspired amidst healthy data on personal income and spending in March, in addition to a positive Chicago PMI print—the highest reading in decades.

The technical framework reveals Friday’s spirited advance—formed just north of trendline support, taken from the low 89.20—elevated the DXY to within touching distance of resistance at 91.36, a prior Quasimodo support level.

Interestingly, the 200-day simple moving average circles above the aforesaid resistance level at 91.98. Additional upside this week, therefore, could have USD bulls confront the SMA (note that moving averages frequently deliver dynamic support and resistance).

Long-term trend studies show the USD has been underwater since topping ahead of 103.00 in March 2020—many analysts likely refer to this downward movement as a primary trend on the daily scale. Also worth highlighting is the 93.43 31st March peak, and subsequent slide in April, which echoes seller strength within the downtrend.

Meanwhile, as measured by the RSI indicator, momentum recently gathered traction to the upside after discovering a bottom ahead of oversold settings. The value settled the week within close proximity of the 50.00 centreline, yet a break here may uncover resistance at 55.67.

  • Despite Friday’s bold moves, the space between the 200-day simple moving average at 91.98 and resistance from 91.36 delivers a potential ceiling to be mindful of this week, strengthened on the back of a clear-cut downtrend since early 2020.

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 breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

A combination of month-end flows and Friday’s healthy USD bid watched Europe’s shared currency decline 0.8 percent against the buck, and finish around session lows.

Leaving Quasimodo resistance at 1.2169 unchallenged, EUR/USD bears have the 200-day simple moving average on the radar this week (1.1935). Technical analysts will note moving averages have a tendency to deliver dynamic support and resistance when tested.

Upside momentum levelled off in the latter part of last week—topping within a whisker of RSI overbought territory—withdrawing back to the 55.00ish range. RSI support at 46.23, therefore, deserves attention this week.

Despite the 2021 retracement, trend studies reveal 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.

H4 timeframe:

Friday’s one-sided decline landed candle action within a stone’s throw from support at 1.1990. Technical elements also bring light to a Fibonacci cluster between 1.1971 and 1.1986—a defined area on a price chart where Fib retracement levels converge.

Overthrowing the aforesaid Fib cluster this week unearths additional support at 1.1937 (aligns closely with the 200-day simple moving average on the daily scale at 1.1935), while a rotation to the upside exposes resistance at 1.2108.

H1 timeframe:

The euro found itself on the backfoot against the greenback heading into US hours on Friday, establishing a supply at 1.2091-1.2077 and dethroning demand coming in from 1.2049-1.2061.

Technically speaking, this could have EUR/USD bump heads with the key figure 1.20 early week.

While the round number is likely a watched base in this market, traders are urged to pencil in the possibility of a whipsaw through the level. Orders are likely to crowd this area, welcoming movement known as a stop run. Bids, assuming heavyweight orders, from both H1 support at 1.1989 (prior Quasimodo resistance) and H4 support between 1.1971 and 1.1990, therefore may welcome the stops (sell orders) beneath 1.20.

In terms of the RSI indicator, the value voyaged deep into oversold territory and came within striking distance of support at 13.07.

Observed levels:

Long term:

April showing some life out of monthly demand from 1.1857-1.1352 reinforces a possible retest (dip-buying scenario) of the 200-day simple moving average at 1.1935 this week.

Short term:

H4 structure reveals support resides between 1.1971 and 1.1990. A test of this area ignites a potential stop run through the 1.20 figure on the H1 timeframe—movement that could motivate a bullish presence back to at least 1.2050ish.

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.

April ended the month higher by 1.5 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:

Resistance at 0.7817, as you can see, welcomed sellers in the second half of last week, with Friday exacerbating losses amid healthy USD demand and declines observed in major US equity benchmarks (the Australian dollar often reacts to risk moves). Down by 0.7 percent at the close, further downside this week shines the technical spotlight on February’s low at 0.7563.

RSI movement elbowed through trendline support, extended from the low 36.55, as well as nudging marginally under the 50.00 centreline, which suggests increased downside momentum could be on the cards.

H4 timeframe:

Since mid-April, AUD/USD has been busy forging a consolidation between 0.7696-0.7715 demand and Quasimodo resistance at 0.7800.

What’s technically interesting is the unit concluded the week within the walls of the aforementioned demand, shaped by way of a hammer candle pattern (bullish signal). Should price rupture the noted base this week, trendline support, taken from the low 0.7531, and a Fibonacci cluster between 0.7657 and 0.7672, is seen lying in wait.

H1 timeframe:

Bearish forces modestly surpassed 0.77 on Friday and shook hands with a 1.272% Fib projection at 0.7697 (plotted ahead of familiar demand at 0.7679-0.7695). Leaving behind a moderate hammer candle pattern, you will note follow-through buying emerged into the close.

Beneath 0.7679-0.7695, support at 0.7668 is seen (previous Quasimodo resistance), while demand-turned supply at 0.7725-0.7737 is visible overhead, closely followed by resistance at 0.7752.

In conjunction with Friday’s 0.77 test, RSI action dipped a toe in oversold waters and challenged support at 19.40. The RSI value, albeit mildly reacting from the aforesaid support, remained within oversold terrain at the close.

Observed levels:

Long term:

Daily resistance at 0.7817 holding firm last week reflects a bearish climate and, given the room to manoeuvre lower to February’s low at 0.7563 on the daily scale, additional bearish flow may be in the offing this week.

Short term:

0.77 highlighting support Friday—along with H4 action forming a hammer candle pattern within demand at 0.7696-0.7715—could have short-term bulls climb to H1 supply at 0.7725-0.7737 early week.

Alternatively, elbowing through 0.77 and neighbouring H1 demand at 0.7679-0.7695 to test H1 support at 0.7668 (conveniently housed within the H4 Fib cluster at 0.7657-0.7672) could also attract bullish focus.

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:

107.58-106.85 demand—joined by a 38.2% Fib level at 107.73 and trendline support, extended from the low 102.59—sparked decisive recovery gains last week, with enough force to lift the currency pair to supply pinned at 109.97-109.18.

Further outperformance this week casts light towards longer-term supply at 110.94-110.29, stationed just under another supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021, therefore the recent recovery could be the beginning of a dip-buying scenario.

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

H4 timeframe:

Mid-week trading witnessed support pinned at 108.50 and neighbouring demand from 108.20-108.43 (the decision point to climb 108.50) make a show, which consequently motivated a bullish wave in the second half of the week.

Having navigated through resistance at 108.99 on Friday (now labelled support), an acceleration to the upside shines light on a 61.8% Fib level at 109.60, sheltered beneath supply at 109.97-109.72.

H1 timeframe:

In line with the RSI oscillator marginally exiting overbought space, price action entered into a narrow range heading into US hours on Friday.

The technical framework shifts focus to Quasimodo resistance at 109.44, while a bearish stance draws attention to 109 and trendline support, etched from the low 107.64. Traders will also note that unseating 109.44 perhaps paves the way north to resistance at 109.95 and the 110 figure.

Observed levels:

Long term:

Monthly flow testing descending resistance-turned possible support places a question mark on daily supply at 109.97-109.18 this week. For that reason, bearish action from the aforesaid supply may be short-lived.

Short term:

H1 Quasimodo resistance at 109.44, although the base could trigger mild bearish interest, is likely to surrender, according to chart studies. Not only do we have monthly price showing signs of supportive structure, the H4 scale displays scope to advance at least to the 61.8% Fib level at 109.60 and nearby supply at 109.97-109.72.

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:

Resistance at 1.4003 has proved a stubborn hurdle since March, capping upside attempts on multiple occasions. Friday’s 0.9 percent decline, as you can see, throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609.

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

From the RSI indicator, the value dropped from 58.20 peaks and crossed swords with trendline support, pencilled in from the low 36.14.

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

H4 timeframe:

Friday’s single-sided decline plummeted into 1.3809-1.3832 demand and clipped the lower side of the base. This brings notice 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:

Friday ran through a number of key supports, including a trendline formation, extended from the low 1.3668, and cemented a mild bottom a few pips north of the 1.38 figure. Territory south of the aforementioned round number opens chart space to Quasimodo support at 1.3752—plotted just north of the H4 Quasimodo at 1.3750.

RSI support at 12.22, located deep within oversold space, made an appearance on Friday. It’s important to note that although the value responded from the said support, the indicator remained within oversold into the closing bell.

Observed levels:

Long term:

Despite recent hesitation within February’s range, the monthly timeframe shows a trendline resistance breach occurred late 2020. Should the 1.4376 top be engulfed, longer-term buying may become a key theme in this market.

Daily areas to watch this week are Quasimodo support at 1.3609 and resistance at 1.4003

Short term:

H4 demand at 1.3809-1.3832 taking on a mild breach Friday suggests buyers are likely to remain on the ropes in early trade this week, targeting H4 Quasimodo support at 1.3750 and associated Fib studies around 1.3744.

By the same token, therefore, H1 sellers could tunnel through 1.38 and make a run for Quasimodo support at 1.3752.

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