AUD/USD Forex Technical Analysis – Close Over .7330 Forms Potentially Bullish Closing Price Reversal Bottom

The Australian Dollar is trading higher late in the session on Wednesday, putting it in a position to post a dramatic closing price reversal bottom. The move does not change the trend to up, but it does shake out some of the weaker shorts who were looking for a bigger payday following this week’s steep sell-off.

At 18:40 GMT, the AUD/USD is trading .7356, up 0.0026 or +0.36%. This is up from an intraday low of .7286.

The Aussie, seen as a liquid proxy for risk appetite, fell to its lowest level since November 2020 before the selling pressure dried up, and short-covering and speculative buying triggered a rebound rally strong enough to turn the AUD/USD higher for the session.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7290 will signal a resumption of the downtrend. A move through .7503 will change the main trend to up.

The first upside target is the long-term Fibonacci level at .7379.

The short-term range is .7503 to .7290. Its retracement zone at .7397 to .7422 is the next upside target area. Since the main trend is down, sellers are likely to come in on a test of these areas.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD into the close on Wednesday will be determined by trader reaction to .7330.

Bullish Scenario

A sustained move over .7330 will indicate the presence of buyers. If this move is able to create enough upside momentum then look for a surge over the intraday high at .7360. This is followed by a long-term Fib level at .7379, a short-term 50% level at .7397 and a short-term Fib level at .7422.

Bearish Scenario

A sustained move under .7330 will signal the presence of sellers. The first downside target is .7325, followed by the intraday low at .7290. If this level fails as support then look for the selling to possibly extend into the November 19, 2020 bottom at .7255.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Looking for Support

The Australian dollar has initially fallen during the course of the trading session again on Wednesday, as the 0.73 level continues to offer a little bit of a battlefield between the buyers and sellers. We have dipped below there initially, only to turn back around and show signs of life again. With this being the case, the market is likely to see a lot of noisy behavior, and I certainly think at this point in time we are getting a bit oversold. A bit of a bounce makes quite a bit of sense, but I do not think that the trend can change quite yet.

AUD/USD Video 22.07.21

Breaking the bottom of the candlestick would of course be very negative, as it would open up the possibility of a drop towards the 0.70 level. That would be a very negative turn of events, as it would show that we are looking at more of a “risk off” type of world. The Australians continue to lock themselves down, so it does make a certain amount of sense that the Aussie dollar gets hit as a result.

Nonetheless, we may have gotten a little overextended, so I look at rallies as an opportunity to start selling again, at least until we break above the 0.75 level which I consider to be the “ceiling” in the market right now. I would expect choppy and volatile trading, but I still am looking for signs of exhaustion to start shorting again. It is also worth noting that the so-called “death cross” is getting ready to happen, when the 50 day EMA crosses below the 200 day EMA.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast – Impact of Lockdowns Underlined as Aussie Retail Sales Slump

The Australian and New Zealand Dollars are trading mixed on Wednesday with the Kiwi posting a modest gain and the Aussie clawing back earlier losses. The New Zealand Dollar is rebounding after touching its lowest level since November 19 the previous session. Meanwhile, the Australian Dollar is trying to bounce back after hitting its lowest price since November 24 earlier in the session.

At 09:22 GMT, the AUD/USD is trading .7315, down 0.0015 or -0.20% and the NZD/USD is at .6924, up 0.0005 or +0.07%.

Fundamentally, the inexorable spread of the Delta variant has shut more of the Australian economy while undermining risk sentiment globally. Technically, traders are saying a break through long-term support levels encouraged shorting by black box and algorithmic funds that follow trends.

Technical factors also drove the New Zealand Dollar into a multi-month low on Tuesday, offsetting the recent bullishness fueled by investor bets for an earlier-than-expected rate hike by the Reserve Bank of New Zealand (RBNZ).

Richard Franulovich, Westpac’s head of FX strategy summed up the price action this way, “Near term, the rising third wave of global case COVID cases/heightened fear of the delta variant and the increasingly severe lockdowns across Australia, all point to the risks of an extension down towards .7200/25 over the next few weeks.”

New Lockdowns Already Impacting Australia’s Economy

The dire impact of lockdowns was underlined on Wednesday by data showing retail sales slumped 1.8% in June, three times the decline expected by traders.

Reuters said an even worse result was expected this month given more than half the population were now shut in, fueling speculation the Reserve Bank of Australia (RBA) would have to reconsider its plan to taper bond purchases from September.

Traders Adjust Chances of RBNZ August Rate Hike

The main reason for the weakness in the New Zealand Dollar is traders making adjustments to the chances of a rate hike by the RBNZ in August. According to overnight index swaps, the spread of the Delta variant globally had seen the market pare back the chance of an August hike from the RBNZ to 62%, from around 90% last week.

“NZD is highly sensitive to changes in the global growth outlook,” noted analysts at CBA.

“The risk is the downward reassessment of the global recovery continues to shift market expectations for RBNZ rate hikes, pushing NZD/USD below our forecasts.”

Daily Forecast

Technical factors helped take the AUD/USD and NZD/USD to multi-month lows, and technical factors could help trigger a near-term short-covering rally due to extremely oversold conditions. However, this is only a guess, not a sure thing since bearish fundamentals are behind the selling pressure.

Without a support base in place in either the Aussie or Kiwi, we can’t call a bottom yet. Furthermore, until the fears of the COVID breakout subside, traders are likely to be in the “sell the rally mode.”

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves Growth Concerns and the Dollar in Focus

Earlier in the Day:

It was a busy start to the day on the economic calendar this morning. The Japanese Yen and the Aussie Dollar were in action in the early hours.

For the Japanese Yen

Trade data was in focus this morning and drew plenty of interest ahead of the start of the Olympic Games.

According to figures released by the  Ministry of Finance, Japan’s trade balance rose from a ¥189.4bn deficit to a ¥383.2bn surplus. Economists had forecast a surplus of ¥400bn.

  • Exports were up 48.6% year-on-year in June, down marginally from a 49.6% rise in May.
    • To the U.S, exports surged by 85.5%, with exports to Western Europe up 50.0%.
    • Exports to China increased by 27.7% year-on-year.
  • Imports increased by 32.7% in June, year-on-year. In May, imports had been up by 27.9%.

In response to the numbers, the Japanese Yen moved from ¥109.920 to ¥109.896 against the Dollar. At the time of writing, the Japanese Yen was down by 0.04% to ¥109.890 against the U.S Dollar.

For the Aussie Dollar

All-important retail sales figures were also in focus this morning.

In June, retail sales fell by 1.8%, month-on-month, according to prelim figures. In May, retail sales had risen by 0.4%.

According to the ABS,

  • Food retailing (+1.5%) was the only industry to see a rise in June.
  • By state, Victoria (-3.5%) and New South Wales (-2.0%) led the decline, with both states imposing stay-at-home orders for part of the month.

The Aussie Dollar moved from $0.73296 to $0.73220 upon release of the numbers. At the time of writing, the Aussie Dollar was down by 0.15% to $0.7319.

Elsewhere

At the time of writing, the Kiwi Dollar was flat at $0.69180.

The Day Ahead

For the EUR

It’s another quiet day ahead on the economic data front. There are no major stats to provide the EUR with direction.

The lack of stats will leave industrial production figures from Italy and COVID-19 news in focus.

At the time of writing, the EUR was down by 0.05% to $1.1775.

For the Pound

It’s another particularly quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus. While the government has removed restrictions, a further spike in new cases could further derail market optimism near-term.

At the time of writing, the Pound was down by 0.04% to $1.3622.

Across the Pond

It’s a quiet day ahead on the economic calendar. There are no major stats to provide the Greenback with direction in what has been a quiet start to the week.

The lack of stats will leave market risk sentiment as the key driver near-term.

At the time of writing, the Dollar Spot Index was up by 0.03% to 92.999.

For the Loonie

It’s also quiet day ahead on the economic calendar, with economic data limited to housing sector numbers.

We don’t expect the numbers to influence, however, leaving crude oil inventories and market risk sentiment as key drivers.

At the time of writing, the Loonie was down by 0.08% to C$1.2692 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

 

July 21st 2021: Safe-Haven Bid Elevates Dollar Index to Three-Month Highs

Charts: Trading View

EUR/USD:

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 0.6 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 (around 40.00), 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 remain at Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1890, plotted south of a 38.2% Fib retracement at $1.1906.

H1 timeframe:

Stationed just south of the 100-period simple moving average ($1.1806), $1.18 has proven robust resistance in recent trading, aided by the US dollar index (ticker: DXY) refreshing multi-month highs as the market remains cautious regarding the spread of the Delta variant. This also weighed on risk-sensitive currencies, such as the Australian dollar and New Zealand dollar.

As stated in previous writing, 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.

Observed levels:

In light of recent price movement, the technical outlook remains unchanged.

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.

AUD/USD:

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 2.2 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 staged a modest recovery off multi-month lows against the US dollar on Tuesday, finishing the session largely unmoved.

Resistance calls for attention at $0.7453-0.7384, whereas any downside interest shifts focus to support at $0.7204. That is assuming Fibonacci bids—the 1.272% Fib projection at $0.7273—is overthrown.

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

According to the relative strength index (RSI), oversold conditions remain. In light of sustained selling since early May, oversold readings are likely to remain, and between 50.00 and 40.00 could stand in as overbought signals.

H4 timeframe:

A closer reading from the H4 scale reveals the currency pair shook hands with interesting Fibonacci structure between $0.7293 and $0.7315. Note that within this area, a 100% Fib projection at $0.7313 exists, a level harmonic traders will recognise as an AB=CD bullish formation.

Bulls occupying position out of current Fibonacci support directs focus to resistance at $0.7364, closely shadowed by supply at $0.7390-0.7371.

H1 timeframe:

Interestingly, the technical landscape on the H1 scale has short-term action easing off $0.73, initially establishing what’s known as a hammer candle pattern—bullish cue. Further buying has Quasimodo resistance at $0.7347 to target, with subsequent bullish intent beyond here perhaps taking aim at $0.74 and the 100-period simple moving average around $0.7395.

The relative strength index (RSI), finding a floor off support at 27.02, is within striking distance of connecting with the 50.00 centreline. Moves north of the latter signal momentum gaining to the upside: average gains surpassing average losses.

Observed levels:

Knowing monthly price dropped through support at $0.7394, as well as daily flow exhibiting scope to approach at least a 1.272% Fib projection at $0.7273, any upside from $0.73 on the H1 and from Fibonacci structure between $0.7293 and $0.7315 on the H4 may be limited.

With that being said, this market echoes a sell-on-rally scenario, with sellers possibly targeting H1 Quasimodo resistance at $0.7347 as a base to work with. Alternatively, H4 resistance from $0.7364 (and a possible whipsaw into H4 supply at 0.7390-0.7371) could draw a bearish scenario.

USD/JPY:

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 1.1 percent in the red and is on track to chalk up a bearish outside reversal.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Tuesday observed the US dollar recover ground against the Japanese yen, lifted amid improved risk sentiment and higher US Treasury yields. Despite this, absence of 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 from a technical standpoint. 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 Tuesday just ahead of 40.00.

H4 timeframe:

The latest advance—extending recovery gains out of demand coming from ¥109.02-109.20—shines light on trendline resistance, drawn from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09.

H1 timeframe:

Supply at ¥109.83-109.71 was a noted area in Tuesday’s analysis (considered an important zone, having it been within this base a decision was made to channel lower), which, as you can see, entertained a short-term bearish tone heading into London yesterday. Although triggering a 40-pip decline, bulls entered an offensive phase going into US trading and dethroned the aforementioned supply as well as the 100-period simple moving average at ¥109.83.

As of writing, you will note ¥109.83-109.71 is being retested as demand, a touch south of ¥110 and Quasimodo resistance coming in at ¥110.22.

From the relative strength index (RSI), the value is engaging with space above the 50.00 centreline and threatening moves into overbought, possibly targeting resistance at 78.38.

Observed levels:

Between H1 Quasimodo resistance at ¥110.22 and ¥110 (note that inside of this area intersects with H4 Quasimodo resistance at ¥110.09 and H4 trendline resistance) is a zone we may see sellers welcome today if tested.

This area is in line with daily and monthly timeframes showing space to move lower.

GBP/USD:

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 1.5 percent lower.

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

Daily timeframe:

Recording a fourth successive daily loss on Tuesday, cable cemented position south of the 200-period simple moving average, circling $1.3695, and challenged Quasimodo support at $1.3609. Technicians may also note the daily scale recently elbowed under a double-top neckline at $1.3670 (double top formed between 24th Feb high at $1.4241 and June 1st high at $1.4250).

Trend on this chart has been somewhat rangebound since late February. Though continuation moves to the downside beyond Quasimodo support at $1.3609 could trigger a bearish vibe.

As for momentum studies, the relative strength index (RSI) is pencilling in bullish divergence, informing traders of strengthening momentum.

H4 timeframe:

Out of the H4 chart, we are seeing the currency pair cross paths with 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. What’s also technically interesting is daily Quasimodo support at $1.3609 connecting with the H4 levels.

H1 timeframe:

The modest $1.36 recovery seen into the close Tuesday, alongside the relative strength index (RSI) exiting oversold territory and breaching 39.68 indicator resistance, throws light on a possible run back to $1.37.

Observed levels:

Daily Quasimodo support at $1.3609, the $1.36 figure on the H1 and Fibonacci structure on the H4 between $1.3613 and $1.3640 may interest buyers in this market, at least until reaching $1.37. Do be aware that the 200-day simple moving average aligns closely with the round number at $1.3695, and therefore could be a location sellers make an entrance to take advantage of possible bearish flow below the daily timeframe’s double-top neckline at $1.3670.

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AUD/USD Price Forecast – Australian Dollar Continues to Slump

The Australian dollar initially tried to rally during the course of the trading session on Tuesday but then fell apart to reach down towards the 0.73 level again. That being said, the market is likely to continue to push to the downside due to the fact that the Australian economy is locked down, and of course we have seen quite a few signs that the Chinese economy itself is starting to slow down. If that is going to be the case, then it does make quite a bit of sense that we would see the Aussie selloff as a result. That being said, it is not necessarily going to go straight down, but it is obvious that there will be continued pressure.

AUD/USD Video 21.07.21

At this point, I like the idea of short-term pullbacks that show signs of weakness as an opportunity to get short yet again. With that being the case, I think that the overall US dollar strength continues to be a major driver of where we go next, and as a result I will be looking for an opportunity to drive this pair down to the 0.70 level.

That is the next large, round, psychologically significant figure, and it does make quite a bit of sense that we would try to get down to that area. To the upside, the 0.75 handle continues to be a major ceiling in the market, and it certainly looks as if we are going to continue to see a lot of negativity. All things being equal, we are also getting close to forming a major “death cross”, and that of course is a longer-term negative signal as well.

For a look at all of today’s economic events, check out our economic calendar.

RBA Minutes Put the Aussie Dollar in Focus ahead of German Wholesale Inflation Numbers

Earlier in the Day:

It was a busier start to the day on the economic calendar this morning. The Japanese Yen was in action in the early hours. On the monetary policy front, the RBA meeting minutes and the PBoC loan prime rates decision will also be in focus later this morning.

For the Japanese Yen

Inflation drew interest in the early hours of this morning.

According to the Ministry of Internal Affairs and Communication, inflationary pressures returned in June. Consumer prices rose by 0.2% year-on-year, reversing a 0.1% decline from May. Economists had forecast for consumer prices to hold steady.

The core annual rate of inflation ticked up from 0.1% to 0.2%, which came in ahead of a forecasted 0.1%.

In response to the numbers, the Japanese Yen moved from ¥109.507 to ¥109.539 against the Greenback. At the time of writing, the Japanese Yen was down by 0.11% to ¥109.552 against the U.S Dollar.

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.04% to $0.7341, with the Kiwi Dollar down by 0.13% to $0.6935.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. German wholesale inflation figures will be in focus, with little else for the markets to consider.

As the markets continue to monitor inflationary pressures, a further pickup in wholesale inflationary pressures would drive EUR support.

While the FED has talked of a willingness to allow inflation to go hotter for longer, the ECB has simply lifted its inflation target to 2%. Ahead of Thursday’s press conference, we can therefore expect EUR sensitivity to the numbers.

Away from the economic calendar, however, the continued global rise in new COVID-19 cases remains a negative.

At the time of writing, the EUR was down by 0.07% to $1.1792.

For the Pound

It’s another quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

The lack of stats will continue to leave COVID-19 in focus, which has become a major area of interest for the markets.

At the time of writing, the Pound was down by 0.03% to $1.3671.

Across the Pond

It’s a relatively quiet day ahead on the economic calendar. Housing sector data for June will be out later in the day.

We don’t expect the numbers to influence the Dollar or the broader market, however.

On Monday, the Dollar Spot Index rose by 0.22% to sensitivity 92.891.

For the Loonie

It’s also quiet day ahead on the economic calendar, with no material stats to provide the Loonie with direction.

A lack of stats will continue to leave market risk sentiment as the key driver on the day.

At the time of writing, the Loonie was up by 0.02% to C$1.2748 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

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

Charts: Trading View

EUR/USD:

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.

AUD/USD:

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.

USD/JPY:

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.

GBP/USD:

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.

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.

 

AUD/USD Price Forecast – Australian Dollar Plunges

The Australian dollar has plunged early during the Monday session as we continue to see a lot of weakness coming out of Australia, for a multitude of reasons. To begin with, Australia is one of the few major economies that continues to lock itself down, as both Sydney and Melbourne have been closed due to the Delta variant of the coronavirus. Nonetheless, we also have to pay close attention to the fact that the Chinese economy is slowing down, and of course Australia is highly sensitive to that. Furthermore, we also have a bit of a minor trade war between Australia and China, so quite frankly Australia is probably one of my least favorite places out of all of the major economies right now.

AUD/USD Video 20.07.21

Looking at the technical analysis, there really is not much to keep this market from falling towards the 0.70 level underneath, which is where the next major round figure is. This does not necessarily mean that it is going to get there overnight, but I do think that we eventually find the Australian dollar reaching towards that level. Clearly, we have broken below the 0.75 handle decisively, and that is now going to be a major resistance barrier on the way back up.

Furthermore, we are getting very close to forming the so-called “death cross” when the 50 day EMA closes below the 200 day EMA, currently sitting just above that 0.75 handle as well. Ultimately, this is a pair that I will continue to sell on rallies for the foreseeable future, but if we suddenly get a major shift in risk appetite, I would not hesitate to go in the other direction.

For a look at all of today’s economic events, check out our economic calendar.

Monday Redness

We start a new week with a decline in major indices. The SP500 dropped and is aiming for the target of 4250.

The DAX, is aiming for the support level of 14800 after breaking a major uptrend line.

Gold is suffering from a stronger USD.

Oil broke the neckline of a head and shoulders pattern and is aiming lower.

The same with the EURUSD, here the potential drop can be huge.

The GBPUSD also broke a major support that is coming from the double top formation.

The EURNZD is waiting for a breakout from the symmetric triangle.

The GBPCHF is moving sideways inside of a rectangle pattern.

The AUDUSD broke the 23,6% Fibonacci and is aiming for the 38,2%, this is a very clean bearish setup.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – .7372 Potential Trigger Point for Acceleration to Downside

The Australian Dollar is trading lower at the start of the new week, hitting it lowest level since December 7 earlier in the session. The risk-sensitive Aussie is being pressured as daily COVID variant infections surge from the United States and Europe to Asia with the global seven-day average of new cases each day reaching over a half a million for the first time since May.

At 05:05 GMT, the AUD/USD is trading .7387, down 0.0009 or -0.12%.

“The market is really trading on the uncertainty in the air around COVID,” National Australia Bank senior currency strategist Rodrigo Catril said on the bank’s morning podcast.

“That is the dominant factor,” he said, though adding a surprise fall in U.S. consumer sentiment had also unsettled investors.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the December 7, 2020 main bottom at .7372 will reaffirm the downtrend. A trade through .7503 will change the main trend to up.

The AUD/USD is currently testing the lower end of a long-term retracement zone. Its Fibonacci level is .7379. The 50% level comes in at .7499.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Monday is likely to be determined by trader reaction to .7396.

Bearish Scenario

A sustained move under .7396 will indicate the presence of sellers. The first downside targets are the Fib level at .7379 and the main bottom at .7372.

The early price action suggest buyers are coming in on the first test of this potential support area. If .7372 fails, however, then look for the selling to possibly extend into the November 30 main bottom at .7339. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over .7396 will signal the presence of buyers. This could create the momentum needed to challenge a pivot at .7438. Sellers could come in on the first test of this level. Overtaking it, however, could trigger a surge into a resistance cluster at .7499 to .7503.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves Central Bank Chatter and COVID-19 in Focus

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar this morning. There were no material stats to provide the majors with direction in the early hours.

The lack of stats left the markets to consider COVID-19 news updates from the weekend and plans to combat the pandemic.

For the Majors

At the time of writing, the Japanese Yen was up by 0.18% to ¥109.870 against the U.S Dollar, while the Aussie Dollar was down by 0.24% to $0.7383. The Kiwi Dollar was down by 0.17% to $0.6987.

The Day Ahead

For the EUR

It’s a quiet day ahead on the economic data front. There are no material stats to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of COVID-19 news updates, as the Delta variant continues to push new cases northwards.

At the time of writing, the EUR was flat at $1.1806.

For the Pound

It’s also a quiet day ahead on the economic calendar, with no major stats from the UK to consider later today.

On the monetary policy front, BoE member Haskel is due to speak late in the day. Expect any views on the economic outlook, COVID-19, or monetary policy to influence.

Away from the economic calendar, COVID-19 news updates will also need monitoring. Any announcement by the UK government to delay removing existing restrictions would test support for the Pound.

At the time of writing, the Pound was down by 0.05% to $1.3760.

Across the Pond

It’s a particularly quiet day ahead on the economic calendar.

There are no major stats to provide the Dollar and the broader markets with direction later in the day.

The lack of stats will leave the Dollar in the hands of FOMC member chatter and COVID-19 news.

At the time of writing, the Dollar Spot Index was up by 0.02% to 92.705.

For the Loonie

It’s also quiet day ahead on the economic data front. There are no material stats to provide the Loonie with direction.

A lack of stats will leave market risk sentiment as the key driver on the day.

At the time of writing, the Loonie was down by 0.11% to C$1.2627 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Rates and Currencies Act like They are From Different Planets

The 10-year yield slipped four basis points on the week to 1.32%. The yield has risen in three of the past 15 weeks. It is tough to argue that it is a fluke. While it is holding above the 200-day moving average (~1.25%), the 30-year yield has spent the last two sessions below its 200-day moving average (~1.975). The implied yield of the December Eurodollar futures fell five basis points last week and is off near 15 bp over the past five weeks.

The dollar rose against all the major currencies but the Japanese yen, which eked out a negligible gain. The combination of economic data and central bank statement (and an end to asset purchases) spurred the market to price in an RBNZ rate hike as early as next month (August 17). Still, the Kiwi finished slightly lower on the week. Still, it joined the yen and Swiss franc, whose central banks are widely expected to be among the laggards in adjusting monetary policy, to be the only currencies that have risen here in July against the US dollar.

Perversely, the other two high-income countries in the front of the queue to adjust policy, Norway and Canada, have the poorest performing currencies this month (~-2.80% and -1.70%, respectively).

Dollar Index

The Dollar Index rose by about 0.6% last week. Still, it is up less than 0.30% in July after rising 2.9% in June. In recent days, it has held below the three-month high set on July 7, near 92.85. The MACD is slowly declining, while the Slow Stochastic has pulled back from overbought territory but is threatening to cross higher. The year’s high was set at the end of March near 93.45. A break of that March high would have bullish implications and it least signal at test on the 94.40-94.50 area. On the other hand, a move below 91.55 would suggest a high may be in place.

Euro

The euro fell to new three-month lows last week, slightly above $1.1770. The single currency has spent the last three sessions within the range set on July 13 (~$1.1770-$1.1875). Immediate resistance is seen in the $1.1840-$1.1850 area. Ahead of the ECB meeting on July 22, the risk is on the downside as the market prepares for a dovish forward guidance adjustment in light of its new symmetrical 2% inflation target. The MACD has not confirmed last week’s lows. The Slow Stochastic edged out of oversold territory but has moved sideways in the second half of last week. A convincing low does not appear to place, and the next important support area is seen closer to $1.17.

Japanese Yen

After matching a five-day high on July 14 (~JPY110.70), the dollar reversed lower, arguably with the drag of falling yields, and finished below the previous session’s low. The outside down day saw follow-through dollar selling the following day, but good bids were seen around JPY109.70. The greenback recovered a bit ahead of the week, as yields edged higher and settled slightly above JPY110.05.

Although the MACD and Slow Stochastic appear to be poised to turn higher, they haven’t yet. The correlation between US 10-year yield and oil prices over the past 30-day is near the highest since March 2019 (~0.52, rolling 30-day correlation of differences). A move above JPY110.85 could see the dollar rested the month and year high around JPY111.65. Below the JPY109.50 area, support is seen ahead of JPY109.00.

British Pound

Strong inflation and consumption figures spurred hawkish rhetoric from a couple of BOE officials and firmer short-term UK rates, but sterling still fell around 0.95% against the US dollar and lost about 0.35% against the euro. Indeed it posted a weekly close below $1.38 for the first time since April. Sterling closed poorly, and although it held above the recent lows in the $1.3730-$1.3740 area, it looks weak.

The cap near $1.39 looks stronger than support, and the 200-day moving average may beckon (~$1.3695). The Slow Stochastic has cycled to the middle of the range without a strong recovery in prices, and it looks to be poised to level out. The MACD moved gently off its lows but could turn down again.

Canadian Dollar

What a miserable two-week stretch for the Canadian dollar. It has fallen in eight of the ten sessions and has fallen by 2% over this run. The data has been firm, and the Bank of Canada did take another step toward slowing its bond purchases. The greenback covered the week’s range in two days. There were buyers for it on the pullback after the Bank of Canada’s announcement near CAD1.2425, and the following day it was flirting with the upper Bollinger Band (~CAD1.2610) and the 200-day moving average around (~CAD1.2625).

Above there, the CAD1.2700 marks the halfway point of the US dollar’s sell-off since last November’s election, but there appears to be little chart resistance ahead of the CAD1.2740-CAD1.2750 area. The MACD is stretched but continues to move higher. The Slow Stochastic has flatlined below last month’s high.

Australian Dollar

With a little more than a quarter of the population having received a single vaccine and a longer and tighter lockdown in parts of the country, the economic prospects have dimmed. They offer a stark contrast with New Zealand. The Australian dollar was sold to new lows for the year ahead of the weekend, as it slipped below $0.7400. We have recognized the risk of a move to $0.7380, which would complete the retracement (61.8%) of the rally since the US election last year. Below there may not be much support for another half of a cent. The MACD has is nearly a horizontal line in the trough, while the Slow Stochastic is moving sideways a little above the low set earlier this month.

Mexican Peso

The US dollar set the week’s range on July 13 (~MXN19.8150-MXN20.0820). It finished the week near the lower end of the range, but this represented only a small loss for the greenback (<0.15%). Still, it is the third decline in the past four weeks. The JP Morgan Emerging Market currency index eked out a minor gain last week (0.1%) to end a two-week decline. Although the peso is the only LATAM currency to rise so far here in July (0.4%), it was a poor performer last week in the region.

The Brazilian real came back into favor rising 2.8%, the Peruvian sol rose 1.6%, and the Colombian peso rose slightly more than 0.6%. The Chilean peso lost the most in the region (~1.25%) despite the central bank hiking rates and suggesting it may be the first of several. The momentum indicators are mixed. Broad sideways trading seems like the most likely near-term scenario. The MXN19.75 area offers support below MXN19.80.

Chinese Yuan

The yuan was virtually unchanged against the dollar last week, finishing slightly below CNY6.48. It leaves it off by about 0.33% here in July and up by nearly 0.75% year-to-date. Three-month implied volatility settled June a little above 5%. It began last week above 5% and finished at its lowest level since March 2020 (~3.93%).

The lower end of the near-term dollar range appears around CNY6.45, but it looks poised to test the upper-end that comes in around CNY6.49. The greenback has not traded above CNY6.50 for about three months. Although the firmness of June economic data shows the quarter ending on an upbeat, the PBOC does not appear to be in a hurry to ease policy further. The 10-year onshore yield fell to fell to 2.92% on July 13, its lowest in a year.

The low currency volatility and the non-correlation of the bond market to other major bond markets attract foreign asset managers. Year-to-date, the US 10-year yield has risen 40 bp, the German Bund by 22 bp, the British Gilt 43 bp, and the Chinese bond yield is off almost 20 bp.

This article was written by Marc Chandler, MarctoMarket.

The Week Ahead – COVID-19 , Economic Data, and the ECB in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 32 stats in focus in the week ending 23rd July. In the week prior, 66 stats had also been in focus.

For the Dollar:

On Thursday, jobless claims will draw plenty of attention.

At the end of the week, prelim private sector PMIs for July will also be in focus.

Expect the services PMI and the initial jobless claim figure to be the key numbers of the week.

In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687.

For the EUR:

It’s a relatively busy week on the economic data front.

Late in the week, business and consumer confidence figures will be in focus. With the ECB looking for consumption to fuel the economic recovery, the numbers will influence.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will also be in focus.

The markets will be looking for any economic speed bumps following disappointing stats from Germany recently.

On the monetary policy front, the ECB is also in action on Thursday. With the policy revamp and some uncertainty over the economic outlook, it should be an interesting press conference…

For the week, the EUR fell by 0.59% to $1.1806.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

CBI industrial trend orders will draw interest on Thursday.

At the end of the week, however, private sector PMI and retail sales figures will be the key stats of the week.

A pickup in spending and service sector activity would deliver the Pound with strong support.

The Pound ended the week down by 0.96% to $1.3767.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

House price figures are due out along with retail sales data.

Expect the retail sales figures to be key on Friday. With economic data on the lighter side, crude oil prices and market risk sentiment will also influence in the week.

The Loonie ended the week down 1.33% to C$1.2613 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Retail sales figures are due out on Wednesday. With consumer spending key to a sustainable economic recovery, Wednesday’s stats will draw plenty of interest.

On the monetary policy front, the RBA monetary policy meeting minutes are due out on Tuesday.

Following the RBNZ’s surprise move last week, any talk of a tightening of monetary policy would give the Aussie Dollar a boost.

The Aussie Dollar ended the week down by 1.16% to $0.7401.

For the Kiwi Dollar:

It’s a particularly quiet week ahead, with no major stats to provide the Kiwi with direction.

A lack of stats will leave the Kiwi in the hands of market risk sentiment in the week.

The Kiwi Dollar ended the week up by 0.19% to $0.6999.

For the Japanese Yen:

Inflation and trade data on Tuesday will be the only stats of the week. Expect the trade data to garner the greatest interest.

On Wednesday, the BoJ’s monetary policy meeting minutes are due out for the June meeting. We don’t expect the dated minutes to have a material impact on the Yen, however.

The Japanese Yen rose by 0.06% to ¥110.070 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

In the week, the PBoC is in action, though the markets are expecting loan prime rates to be left unchanged.

The Chinese Yuan ended the week flat at CNY6.4792 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

Weekly Technical Market Insight 19th – 23rd July 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

In the face of the prior week’s shooting star—a candlestick formation frequently interpreted as a bearish signal—dollar bulls went on the offensive last week and added 0.7 percent.

According to the US dollar index (ticker: DXY), additional recovery gains shine the technical spotlight on the 93.44 31st March high, established alongside a 100% Fib projection and neighbouring Quasimodo resistance from 93.90. Lower on the curve, the widely watched 200-day simple moving average is on the radar (91.37), grouped with substantial support at 90.64-91.40.

Trend studies reveal the greenback has echoed a recovery phase since the beginning of 2021, following a sizeable decline during 2020. After realising support at 89.34 (a level displaying historical significance), this has motivated a bullish defence, up +3.0 percent year to date.

Although comfortable north of the 200-day simple moving average, which many technicians acknowledge as bullish suggestion, a longer-term trend change is recognised above the 94.74 25th September (2020) high (blue arrow). By the same token, beyond the 89.21 6th January low (red arrow), chart studies suggest an extension to the 2020 downtrend.

The relative strength index (RSI), a popular gauge of momentum, is content above support at 55.67 (a level with clear history dating as far back as April 2020). This demonstrates that momentum remains to the upside, despite exiting overbought territory and moulding bearish divergence heading into July.

  • Sellers making an entrance this week and clearing near-term bids reveals limited support until 90.64-91.40. Ultimately, a daily close below 6th July low at 92.00 could stir a bearish scene. Continued interest higher up, on the other hand, has the 93.44 31st March high in focus, closely followed by Quasimodo resistance at 93.90 and a 100% Fib projection.

EUR/USD:

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:

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 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:

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

Fibonacci studies reveal a 61.8% Fib retracement at $1.1896, plotted south of a 38.2% Fib retracement at $1.1917.

H1 timeframe:

In light of Friday’s lacklustre performance, the unit remained toying with $1.18. Thus, for those who read Friday’s technical briefing you may recall the following (italics):

A closer reading of price action on the H1 chart reveals that while short-term flow shakes hands with $1.18, Fibonacci structure resides on both sides of the market—commonly referred to as Fibonacci clusters.

Upstream, a 100% Fib projection at $1.1878, a 1.272% Fib expansion at $1.1880 and a 1.618% Fib extension at $1.1886 is visible, plotted just south of demand-turned supply from $1.1895-1.1911.

Downriver, 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 dovetailing with H4 Quasimodo support underlined above at $1.1749.

The relative strength index (RSI) is attempting to climb the 50.00 centreline, which if successful implies momentum could strengthen and take aim at overbought conditions.

Observed levels:

Long term:

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:

Short-term flow is centred on the H1 timeframe’s Fibonacci structure this week: between $1.1886 and $1.1878 for resistance and between $1.1745 and $1.1748 for support.

The $1.18 figure is currently offering a floor, though attracts limited convergence with additional technical tools. Traders may, nonetheless, feel the round number is fragile due to the unit trending lower since June.

AUD/USD:

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’s candle knocked on the door of support at $0.7394 last week. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

Month to date, July is down 1.4 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:

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% extension at $0.7424—is in a tight corner right now. However, recognising monthly support inhabits the lower range of the demand at $0.7394, and directly below the area we also have a 61.8% daily Fib retracement at $0.7379, buyers could make a show.

Territory above demand points to the 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.

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence. What this shows traders is from mid-June, the currency pair reflected less downside momentum.

H4 timeframe:

The 100% Fib projection at $0.7427 and a nearby 1.13% BC Fib extension at $0.7423, despite delivering support since 8th July, was moved aside Friday amidst a light USD bid.

Sellers securing position south of the latter shifts focus to Quasimodo support drawn at $0.7364.

H1 timeframe:

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

Immediate flow directs attention to the engulf of demand at $0.7416-0.7431. Not only has the move unlocked the $0.74 region as possible support, neighbouring supply from $0.7450-0.7436—the decision point to venture lower—is on the radar.

The report also went on to observe that the big figure $0.74 may also interest traders, having seen the level arranged above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, action which could welcome buyers into the market.

As evident from the chart, supply at $0.7450-0.7436 (currently positioned under the 100-period simple moving average at $0.7453) welcomed sellers on Friday and guided the currency pair under $0.74.

With regards to the relative strength index (RSI), the value is back on the doorstep of oversold after failing to find acceptance above the 50.00 centreline.

Observed levels:

Long term:

Monthly support at $0.7394 making an arrival, a level housed within the lower range of daily supply-turned demand at $0.7453-0.7384, might prompt a bullish scenario.

An AUD/USD bid emerging this week has the 200-day simple moving average ($0.7581) to target, followed by daily resistance at $0.7626.

Short term:

The combination of monthly support at $0.7394, daily supply-turned demand at $0.7453-0.7384, and $0.74 on the H1, may interest buyers in early trade.

Closing above H1 supply at $0.7450-0.7436 and the 100-period simple moving average at $0.7453 is likely to encourage further upside to the $0.75 neighbourhood.

USD/JPY:

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, July trades 1.0 percent in the red.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The technical picture from the daily chart shows price languishing below trendline support-turned resistance (taken from the low 102.59), an ascending line mingling with long-term resistance at ¥111.88-111.20.

Brushing aside July 8th low at $109.53 potentially sets the technical stage for additional weakness to ¥107.58-106.85: supply-turned demand.

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, and finished the week sub-50.00: the indicator’s centreline. This informs traders that average losses exceed average gains, therefore traders are likely to monitor the indicator closely below 50.00 for further deterioration.

H4 timeframe:

Technical elements on the H4 scale to be aware of this week are supply coming in at ¥110.99-110.80, an area accommodating a 100% Fib projection at ¥110.90 and a 61.8% Fib retracement value from ¥110.85. Harmonic traders will note the 100% Fib projection denotes an AB=CD bearish configuration.

Chart space below seats familiar Fibonacci support between ¥109.48 and ¥109.70 in sight, a zone pinned above demand at ¥109.02-109.20.

H1 timeframe:

Heading into the early hours of London Friday, bullish forces overwhelmed ¥110 offers and addressed a 61.8% Fib retracement value from ¥110.32 before withdrawing to within striking distance of ¥110 into the close. Also technically noteworthy is supply between ¥110.54-110.41 and ¥110.50-110.35, and a 1.618% Fib projection at ¥110.37.

Unwinding below ¥110 this week reasons Quasimodo support at ¥109.61 could enter the fold (enclosed within the parapets of the H4 timeframe’s Fib support mentioned above between ¥109.48 and ¥109.70), assuming lows at ¥109.74 give way.

The relative strength index (RSI) levelled off a touch under overbought Friday as price clipped the 61.8% Fib ¥110.32. Interestingly, the indicator’s value stepped through the 50.00 centreline into the close, signifying further downside momentum. Indicator support set within oversold at 18.76, therefore, is in view.

Observed levels:

Long term:

Monthly action encourages a bullish outlook, following April’s retest of descending resistance-turned support, pulled from the high ¥118.66. This is somewhat clouded by the daily timeframe trekking through trendline support, drawn from ¥102.59.

The above implies a retracement as far south as supply-turned demand from ¥107.58-106.85, prior to monthly bulls taking the reins.

Short term:

¥110 is a key watch early hours this week.

A H1 close below ¥110 hints at a bearish theme to H1 Quasimodo support at ¥109.61. A ¥110 retest in the form of resistance, therefore, may appeal to any bearish interest.

Retesting and defending ¥110, on the other hand, sets up price to knock on the door of H1 supply between ¥110.54-110.41 and ¥110.50-110.35.

GBP/USD:

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 0.5 percent lower.

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

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The tail end of the week watched sterling slip versus the buck, fashioning two back-to-back bearish candles. This informs chartists that Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) could be thrown in the mix this week.

Overhead, resistance at $1.4003 remains centre stage—a level displaying commitment since March of this year.

Momentum studies, according to the popular relative strength index (RSI), recently came within a whisker of the 50.00 centreline and concluded the week under 40.00. With that, traders are urged to monitor for a possible oversold signal this week.

H4 timeframe:

Since the beginning of July, buyers and sellers have been carving out a consolidation between the 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3909, and familiar Quasimodo support present at $1.3761.

Areas outside the noted range casts light on supply from $1.3986-1.3958 and a resistance zone at $1.4027-1.3998, while lower on the curve, Quasimodo support can be found at $1.3712, which may be challenged this week if the end-of-week test at $1.3761 stands aside.

H1 timeframe:

Bids thinned at $1.38 during US trading on Friday, following an earlier test at the underside of the 100-period simple moving average at $1.3839.

Subsequent flow witnessed sellers strengthen their grip, boosted on the back of a USD bid and technical breakout selling.

$1.3750 is a level of note, drawing support since early July. Fibonacci traders will also acknowledge the level shares chart space closely with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744.

Downside momentum also pulled the relative strength index (RSI) to within touching distance of oversold territory at the week’s end. Should the value turn from oversold, bullish divergence might develop, a signal showing strengthening momentum.

Observed levels:

Long term:

Should buyers continue to take a back seat on the daily timeframe this week, Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) deserves notice.

Yet an upside move would shift attention back to daily resistance at $1.4003.

Short term:

Although the H4 timeframe has price dipping a toe in waters south of Quasimodo support at $1.3761, the $1.3750 support on the H1, joined together with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744, could form a floor early week, potentially stirring a pullback to $1.38ish.

A H1 close below $1.3750, nonetheless, brings light to a short-term bearish play, targeting Quasimodo support on the H4 at $1.3712, closely shadowed by the $1.37 figure (H1).

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.

The Weekly Wrap – The Greenback Comes out on Top as U.S Inflation Spikes

The Stats

It was a busier week on the economic calendar, in the week ending 16th July.

A total of 66 stats were monitored, which was up from 42 stats in the week prior.

Of the 66 stats, 34 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There were 9 stats that were in line with forecasts in the week.

Looking at the numbers, 32 of the stats reflected an upward trend from previous figures. Of the remaining 34 stats, 32 reflected a deterioration from previous.

For the Greenback, economic data continued to deliver Dollar support. The upside came in spite of FED Chair Powell delivering dovish testimony in the week. In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687. In the previous week, the Dollar had fallen by 0.13% to 92.102.

Out of the U.S

Inflation figures drove support for the Greenback early in the week.

The annual rate of inflation accelerated from 5.0% to 5.4% in June, with the core annual rate of inflation picking up from 3.8% to 4.5%.

Wholesale inflationary pressures were also on the rise, with the producer price index increasing by 1.0% in June. In May, the index had risen by 0.7%.

In the 2nd half of the week, jobless claims, retail sales, and consumer sentiment were in focus.

It was a mixed set of numbers for the Dollar.

In the week ending 9th July, initial jobless claims fell from 386k to 360k.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

While the jobless claims and retail sales figures were positive, consumer sentiment waned in July.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8. Economists had forecast a rise to 86.0.

Manufacturing sector data from Philly and NY State, industrial production, and business inventories were also out but had a muted impact on the markets.

On the monetary policy front, FED Chair Powell delivered 2 days of testimony to lawmakers. Powell talked of the FED’s willingness to let inflation run hotter in order to avoid the mistake of tightening policy too soon. The FED Chair’s assurances had limited impact on the Greenback, however.

In the equity markets, the NASDAQ slid by 1.87%, with the Dow and the S&P500 ending the week down by 0.52% and by 0.97% respectively.

Out of the UK

It was busier week. Mid-week, inflation figures delivered Pound support, with the UK’s annual rate of inflation picking up from 2.1% to 2.5%.

On Thursday, employment figures were also positive for the Pound.

In June, claimant counts slid by 114.8k, following a 92.6k decline in May.

The unemployment rate saw an increase from 4.7% to 4.8% in May, though this is likely to fall back following the June claim figures.

While the stats were positive for the Pound, uncertainty over the impact of the Delta variant on the economy lingered.

In the week, the Pound fell by 0.96% to end the week at $1.3767. In the week prior, the Pound had risen by 0.56% to $1.3901.

The FTSE100 ended the week down by 1.60%, following a 0.02% loss from the previous week.

Out of the Eurozone

It was another busy week.

Industrial production and trade data for the Eurozone were in focus along with finalized inflation figures for June.

For the Eurozone, industrial production fell by 1.0%, reversing a 0.6% rise from April.

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

Following a shift in the ECB’s policy on price stability, however, the inflation figures had limited impact.

The Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

For the week, the EUR fell by 0.59% to $1.1806. In the week prior, the EUR had risen by 0.09% to $1.1876.

The CAC40 fell by 1.06%, with the DAX30 and the EuroStoxx600 ending the week down by 0.94% and by 0.64% respectively.

For the Loonie

Monetary policy was the main area of focus in the week.

While holding monetary policy unchanged on Wednesday, the BoC revised down growth forecasts, weighing on the Loonie. The BoC revised its 2021 growth forecast down from 6.5% to 6.0%. While revised down for 2021, the BoC revised its growth forecast for 2022 up from 3.7% to 4.6%.

In spite of the downward revision to this year’s growth forecast, the BoC announced that it would reduce its weekly bond purchases from $3bn to $2bn, citing a strengthening in the economic recovery…

Stats in the week included manufacturing sales, ADP employment change, and wholesale sales figures.

While having limited impact on the Loonie, the stats were skewed to the negative.

Also weighing on the Loonie were falling crude oil prices in the week.

In the week ending 16th July, the Loonie slid by 1.33% to C$1.2613. In the week prior, the Loonie had fallen by 1.01% to C$1.2447.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 16th July, the Aussie Dollar slid by 1.16% to $0.0.7401, while the Kiwi Dollar rose by 0.19% to $0.6999.

For the Aussie Dollar

It was a busier week, with consumer confidence and employment figures in focus.

The stats were skewed to the positive, though had a limited impact on the Aussie Dollar.

In July, the Westpac Consumer Confidence Index rose by 1.5% to $108.8. The survey was carried out before the rollout measures announced on 9th July.

Employment figures also impressed, with a 51.6k jump in full employment following a 97.5k increase in May. As a result of the further increase in hiring, the unemployment rate fell from 5.1% to 4.9% in June.

While the stats were positive for the Aussie Dollar, new COVID-19 restrictions weighed on the Aussie in the week.

For the Kiwi Dollar

It was a busy week.

Early in the week, electronic card retail sales and business confidence figures delivered mixed results.

In June, card retail spending increased by a further 0.9%, following a 1.7% rise in May.

Business confidence waned, however, with the NAB Business Confidence Index falling from 20.0 to 11.0.

By contrast, economic data in the 2nd half of the week impressed.

In June, the Business PMI rose from 58.6 to 60.7, with inflation accelerating in the 2nd quarter.

The annual rate of inflation accelerated from 1.5% to 3.3%, with consume prices up 1.3% in the quarter.

While the stats influenced, the RBNZ monetary policy decision on Wednesday was key.

Catching the markets off-guard, the RBNZ agreed to end the additional asset purchases under the LSAP programme by 23rd July.

For the Japanese Yen

It was another relatively busy week.

Early in the week, machinery orders provided some comfort, with orders up 7.8% in May.

Industrial production figures disappointed, however, with production falling by 6.5% in May.

Tertiary industry figures were also week, with the index falling by 2.7% in May.

At the end of the week, the Bank of Japan was also in focus but failed to deliver any surprises.

The Japanese Yen rose by 0.06% to ¥110.07 against the U.S Dollar. In the week prior, the Yen had risen by 0.82% to ¥110.140.

Out of China

It was a big week on the economic data front.

Early in the week, trade data for June was in focus ahead of 2nd quarter GDP numbers on Thursday.

While trade data impressed, with exports up 32.2%, GDP numbers disappointed in the week.

Year-on-year, the Chinese economy expanded by 7.9%, which was down from 18.3% in the 1st quarter. Quarter-on-quarter, the economy expanded by 1.3%, which was up from 0.6% growth in the 1st quarter, however.

Other stats at the end of the week included fixed asset investment, industrial production, and retail sales data.

The full set of numbers were softer in June than back in May, adding further pressure on riskier assets.

In the week ending 16th July, the Chinese Yuan ended the week flat at CNY6.4792. In the week prior, the Yuan had fallen by 0.09% to CNY6.4790.

The CSI300 and the Hang Seng ended the week up by 0.50% and by 2.41% respectively.

AUD/USD Weekly Price Forecast – Australian Dollar Continues to Look Very Weak

The Australian dollar has failed a bit during the course of the week, as we could not break above the 0.75 handle. That being said, the market is going to be interesting to pay attention to as Australia continues to lock itself down. The lockdown has spread from Sydney to Melbourne, and the way the Australians are going they will find an excuse to lock down the rest of the country given enough time. At this point, I think the Australian dollar is primed to drop down to the 0.70 level, especially if we can break down below the 0.74 level.

AUD/USD Video 19.07.21

If we break down below there, I suspect that the momentum will pick up to the downside, and it will probably be more or less a risk event type of situation. It certainly looks as if the US dollar is picking up momentum, as the US Dollar Index continues to threaten a breakout to the upside. It will be interesting to see how this plays out, because we are currently knocking on the door of a breakdown, and not only would I continue to be short of the Aussie dollar at that point, but I would be looking for opportunities to continue to add to this position.

If you look at the price action of the Australian dollar over the last several months, you can see clearly it has not quite acted bullish, so this move should not be a huge surprise at this point in time. While so many people were screaming about the US dollar falling drastically, it appears the smart money has been picking it up.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Continues to Look Very Threatened

The Australian dollar initially tried to rally during Asian trading on Friday, but as you can see has given back quite a bit of the gains. By doing so, it suggests that the market is probably going to break down again, and if we can break below the 0.74 level, I will be adding to an already short position in this pair. As you can see, the 50 day EMA is reaching towards the 200 day EMA to form the so-called “death cross” that some longer-term traders pay close attention to.

AUD/USD Video 19.07.21

We have also formed a significant “H pattern” if you weeks ago, but still looks very likely to be important. That being said, the market is more than likely going to continue to see more of a “fade the rallies” type of situation, and once we break down below the 0.74 level, I think that we will see the Australian dollar fall much quicker again, as it will be a breaking of significant support. At that point in time, I would anticipate that the market is more than likely going to see an acceleration in momentum, as we continue to grind towards the 0.70 level.

As Australia continues to lock areas of the country down, this can do no good for the economy. It has been New South Wales initially, but now Melbourne is also being locked down for the same Covid reasons. With that being the case, I just do not see how the Aussie picks up any momentum anytime soon, especially as the US dollar itself has seen significant buying pressure against multiple currencies over the last several weeks.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Major Decision for Bulls on Test of .7379 – .7372

The Australian Dollar is inching higher early Friday on profit-taking ahead of the weekend, following a steep sell-off the previous session. The currency was under pressure despite dovish commentary from Federal Reserve Chairman Jerome Powell earlier in the week. Lockdowns in the country’s two most populous cities are weighing on the Aussie as well as demand for riskier currencies.

At 05:21 GMT, the AUD/USD is trading .7436, up 0.0014 or +0.19%.

According to Reuters, the state of Victoria was ordered into a five-day lockdown on Thursday following a spike in COVID-19 infections, joining Sydney as they battle an outbreak of the highly contagious Delta variant.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through .7410 will signal a resumption of the downtrend with the December 7, 2020 main bottom at .7372 the next likely target. A trade through .7503 will change the main trend to up.

The AUD/USD is currently trading inside a major retracement zone at .7499 to .7379. This zone is controlling the longer-term direction of the Forex pair.

The minor range is .7410 to .7503. The AUD/USD is currently trading on the weak side of its 50% level at .7457.

The short-term range is .7599 to .7410. Its retracement zone at .7505 to .7527 is resistance.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD on Friday is likely to be determined by trader reaction to .7422.

Bearish Scenario

A sustained move under .7422 will indicate the presence of sellers. The first downside target is the main bottom at .7410. If this fails then look for the selling to extend into the long-term Fibonacci level at .7379, followed by the main bottom at .7372.

Taking out .7372 could trigger a plunge into the November 30, 2020 main bottom at .7339.

Bullish Scenario

A sustained move over .7422 will signal the presence of buyers. The first upside target is the minor pivot at .7457. Since the main trend is down, sellers could come in on the first test of this level.

Overtaking .7457 will indicate the buying is getting stronger with potential upside targets coming in at .7499. .7503, .7505 and .7527.

For a look at all of today’s economic events, check out our economic calendar.

July 16th 2021: DXY Comfortable North of 92.00; AUD/USD Observing H1 Supply

Charts: Trading View

EUR/USD:

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 witnessed 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 the spotlight on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

July currently 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.

The US dollar—according to the US dollar index—recovered some lost ground on Thursday, following Fed Chair Powell on Wednesday stating he’s confident recent inflation is associated with post-pandemic growth and will fade.

Technically, EUR/USD structure remains unchanged as the pair continues to work with a reasonably narrow range between $1.1880 and $1.1776. Quasimodo support at $1.1688 calls to the downside, while any upside attempts perhaps 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.

The relative strength index (RSI) worked its way out of oversold territory in recent sessions and is on the door step of the 50.00 centreline. Crossing north informs traders that average gains exceed average losses, and momentum is to the upside.

H4 timeframe:

Since the beginning of July, price has been carving out a descending channel, drawn from $1.1895 and $1.1781. External areas to be mindful of are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

H1 timeframe:

A closer reading of price action on the H1 chart reveals that while short-term flow shakes hands with $1.18, Fibonacci structure resides on both sides of the market—commonly referred to as Fibonacci clusters.

Upstream, a 100% Fib projection at $1.1878, a 1.272% Fib expansion at $1.1880 and a 1.618% Fib extension at $1.1886 is visible, just south of demand-turned supply from $1.1895-1.1911.

Downriver, 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 dovetailing with H4 Quasimodo support mentioned above at $1.1749.

As for the relative strength index (RSI), the value stepped below the 50.00 centreline on Thursday, showing average losses exceed average gains for now. Oversold territory could, therefore, be on the cards today.

Observed levels:

According to charts studies, attention is on the H1 timeframe’s Fibonacci structure: between $1.1886 and $1.1878 for resistance and between $1.1745 and $1.1748 for support. The $1.18 figure boasts limited convergence with additional technical tools, aside from the market perhaps viewing this angle as feeble due to the unit trending lower since June.

AUD/USD:

Monthly timeframe:

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

June’s 3.0 percent decline lands July in reach of support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

July is currently down 1.1 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:

Technical Structure Unchanged from Previous Analysis.

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% Fib extension at $0.7424—remains in the picture, despite the lacklustre bullish vibe. What’s interesting is this area houses monthly support underlined above at $0.7394.

Territory above demand shines light on the 200-day simple moving average at $0.7579, a dynamic value sheltered south of resistance from $0.7626.

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

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence. What this shows traders is from mid-June, the currency pair reflected less downside momentum.

H4 timeframe:

AUD/USD largely overlooked better-than-expected Aussie employment data early hours Thursday, as the US dollar climbed higher across the board. Also in the spotlight again was Fed Chair Powell backing up his recent comments to continue supporting the economy in spite of higher inflation.

From a technical viewpoint, the currency pair is on the verge of dethroning a 100% Fib projection at $0.7427 and a nearby 1.13% BC Fib extension at $0.7423, movement throwing light on Quasimodo support drawn at $0.7364.

H1 timeframe:

Immediate flow directs attention to the engulf of demand at $0.7416-0.7431. Not only has the move unlocked the $0.74 region as a possible support, neighbouring supply from $0.7450-0.7436—the decision point to venture lower—is on the radar.

The relative strength index (RSI) defending oversold space underpins a potential test of $0.7450-0.7436 today, targeting at least $0.74.

Observed levels:

As highlighted on the H1 chart, a test of supply at $0.7450-0.7436 is in sight, with $0.74 targeted short term.

The big figure $0.74 may also interest traders, having seen the level arranged above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, action which could welcome buyers into the market.

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, 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, higher by 1.4 percent.

July trades 1.2 percent in the red.

Daily timeframe:

Leaving the lower belly of trendline support-turned resistance (taken from the low 102.59) unchallenged, the US dollar extended Wednesday’s downside presence on Thursday. Despite the US dollar index outperforming, USD/JPY was weighed by increased selling in US Treasury yields amidst the risk-averse setting.

Brushing aside last Thursday’s low at $109.53 potentially sets the technical stage for further weakness to as far south as ¥107.58-106.85: supply-turned demand.

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

In terms of the relative strength index (RSI), the value rotated south ahead of the lower side of a recently breached ascending channel between 58.82 and 47.51, encouraging moves through the 50.00 centreline. Traders, therefore, will likely be monitoring this indicator for further weakness beneath 50.00, possibly headed for oversold waters.

H4 timeframe:

Trendline support-turned resistance, taken from the low ¥108.56, served sellers well early Wednesday, delivering energetic downside. Thursday’s bearish extension finished within a stone’s throw from familiar Fibonacci support between ¥109.48 and ¥109.70.

Ground south of Fib support has demand at ¥109.02-109.20 in the line of fire.

H1 timeframe:

Late Wednesday tunnelled below ¥110, underpinning a retest scenario on Thursday, which, as you can see, welcomed fresh selling. Sustained pressure to the downside urges traders to take note of two Quasimodo support levels at ¥109.37 and ¥109.61.

North of ¥110, above the 100-period simple moving average around ¥110.21, supply is seen between ¥110.54-110.41 and ¥110.50-110.35.

The relative strength index (RSI) failed to find acceptance above the 50.00 centreline yesterday, with the value retreating to 40.00 by the session’s end. Indicator support set within oversold at 18.76, therefore, is in view.

Observed levels:

H1 Quasimodo support at ¥109.61 could draw bullish curiosity if challenged, a level bolstered by Fibonacci support between ¥109.48 and ¥109.70 on the H4 scale.

Though having recently witnessed both daily and H4 timeframes cut through trendline supports, sellers may still have the upper hand and push towards H1 Quasimodo support at ¥109.37 and H4 demand from ¥109.02-109.20.

GBP/USD:

Monthly timeframe:

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

Since February, GBP/USD 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, which could serve as support if retested.

July is currently unchanged.

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

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since the beginning of July, sterling has exhibited a narrow range versus the US dollar between $1.3901 and $1.3740.

Resistance at $1.4003 remains centre stage—a level displaying commitment since March of this year.

Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3686) is in the spotlight.

The relative strength index (RSI) continues to inch higher, yet reluctant to cross swords with the 50.00 centreline. Movement above here—showing average gains exceed average losses and momentum is therefore to the upside—could fuel a test of price resistance underlined above at $1.4003.

H4 timeframe:

The 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3909 continues to deliver resistance on the H4 scale. Space higher up on the curve casts light on supply from $1.3986-1.3958 and a resistance zone at $1.4027-1.3998.

Lower, familiar Quasimodo support is present at $1.3761, a level assisting buyers this month—located just north of another layer of Quasimodo support at $1.3712.

H1 timeframe:

Quasimodo resistance at $1.3910, together with a 100% Fib projection at $1.3909 (H4), a 1.13% Fib extension at $1.3918, and the $1.39 level, has served this timeframe well as a ceiling since 9th July. Area above points to resistance at $1.3935.

Equally interesting is $1.38—joined by a 61.8% Fib level at $1.3804—furnishing the chart with support since mid-July. Technical eyes will note the 100-period simple moving average circling between the two aforesaid areas at $1.3856.

Sub $1.38 unlocks support around $1.3750.

View from the relative strength index (RSI) shows the indicator in the process of forming what appears to be a symmetrical triangle between 76.87 and 24.82.

Observed levels:

Price is hovering nearby $1.38 on the H1 scale. Despite the base holding back sellers in recent days, and aligning with a 61.8% Fib at $1.3804, the level brings little to the table in terms of confluence. With that being said, the unit slicing through $1.38 should not surprise, with follow-through action perhaps taking aim at $1.3750 on the H1, a level partnering with H4 Quasimodo support at $1.3761.

Of course, H1 traders will also likely be keeping a close eye on resistance between $1.3918 and $1.39, given its connection with H4 Fibs at $1.3898 and $1.3909.

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