April 7th 2020: Risk-On Rally Bolsters AUD Ahead of RBA

April 7th 2020: Risk-On Rally Bolsters AUD Ahead of RBA

EUR/USD:

Monthly timeframe:

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

March, evident from the monthly chart, left behind a long-legged doji indecision candle, with extremes crossing paths with heavyweight demand-turned supply at 1.1857/1.1352 and demand at 1.0488/1.0912.

As we head into the early stages of April, the technical foundation has price rangebound between the two aforementioned price structures; notably, however, April’s candle is currently 2% lower, testing the upper boundary of 1.0488/1.0912.

The primary downtrend remains in motion, trading lower since 2008 and exhibiting clear lower peaks and troughs.

Daily timeframe:

Partially altered from previous analysis –

Europe’s single currency recorded its sixth consecutive losing day against the greenback Monday, extending its position south of its 200-day SMA and demand at 1.0925/1.0864.

Monday’s close, according to chart structure, may have liberated sellers, providing a basis for price to address demand at 1.0526/1.0638, an area extended from March 2017.

H4 timeframe:

Brought forward from previous analysis –

Recent movement on the H4 timeframe left behind a possible 5-wave structure, based on Elliot Wave Theory. Traditional definition of a motive wave is a 5-wave move in the same direction as the trend of one larger degree. Both the daily and monthly timeframe are entrenched within downtrends at present. The 5-wave sequence, going on the basis wave 1 will equate to wave 5, given wave 3 is extended, could see support develop ahead of demand at 1.0602/1.0630 with Elliot Wave technicians possibly expecting an ABC correction thereafter.

In addition, wave 4 may terminate around newly formed supply at 1.0867/1.0839. In the event we violate this area and approach supply at 1.1044/1.0966, expect sellers to potentially make a show here.

H1 timeframe:

EUR/USD Monday yielded little in terms of market movement, seesawing around the 1.08 vicinity.

Price, therefore, remains compressing within the walls of a descending channel pattern from 1.0926 and 1.1144, with 1.0850 offering possible resistance in the event of moves higher today. Demand-turned supply at 1.0889/1.0937 also remains a feature on this timeframe (aligns closely with the 100-period SMA and the 1.09 RN), while demand south of 1.08 is limited until reaching possible support off 1.07.

Structures of Interest:

April has price trading within monthly demand at 1.0488/1.0912, suggesting a recovery could be on the cards. Conversely, daily price is seen eyeing lower levels, with demand at 1.0526/1.0638 in sight.

Intraday flow, based on the H1 timeframe, is offering little in terms of notable market structure at the moment. Despite this, traders will be watching 1.08 closely for signs of buyer/seller intent today. A decisive H1 close higher could take things to 1.0850 while a close lower has 1.07 in sight.

AUD/USD:

Monthly timeframe:

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

Overwhelmed by the effects of the coronavirus pandemic, the month of March scored seventeen-year lows at 0.5506 ahead of demand pencilled in from 0.5219/0.5426, before staging an impressive recovery. The recovery move reclaimed more than 60% of the month’s losses, consequently drawing the pair to within reasonably close proximity of supply fixed at 0.7029/0.6664, intersecting with a long-term trendline resistance (1.0582).

April, however, currently trades lower by 2.40%.

With reference to the market’s primary trend, a downtrend has been present since mid-2011.

Daily timeframe:

Alongside a mild recovery ahead of oversold territory on the RSI indicator, flow on the daily timeframe snapped a four-day losing streak Monday and reclaimed last Thursday and Friday’s losses. In case of further upside, last Tuesday’s high offers possible resistance at 0.6213, tailed by demand-turned supply at 0.6330/0.6245.

Failure to push higher, however, could eventually pave the way lower towards demand at 0.5710/0.5767, as well as nearby support from 0.5563.

H4 timeframe:

Partially altered from previous analysis –

A moderate supply-turned demand area at 0.6029/0.5964 welcomed price action in the later stages of last week, holding by way of an ‘indecision’ candle Thursday and pencilling in an ‘inverted hammer’ pattern late Friday – interpreted as a bullish signal.

Monday observed a stronger-than-expected recovery, with the foundation for a climb to 0.6314/0.6235 still potentially in the pipeline, comprised of a support-turned resistance at 0.6314, a 161.8% Fib ext. level at 0.6273 and a 61.8% Fib retracement at 0.6235 (yellow oval).

A break beneath 0.6029/0.5964, on the other hand, has demand at 0.5737/0.5825 on the radar.

H1 timeframe:

With global equities closing on strong footing, AUD/USD benefitted on the back of the risk-on theme Monday. Price action firmed through the 100-period SMA and grasped the 0.61 neighbourhood into the closing stages of the session. Note the initial test formed a ‘shooting star’ candlestick formation – considered a bearish signal at peaks – and threw the RSI indicator into overbought terrain.

Further recovery gains today will see price journey through 0.61, with 0.62 likely on the hit list for breakout buyers.

Structures of Interest:

Monthly price exhibits scope for a run lower over the coming weeks; however, a test at supply from 0.7029/0.6664 is certainly not out of the question. Daily flow recovered from demand at 0.5926/0.6062, with the possibility of further buying materialising.

H4 Supply-turned demand at 0.6029/0.5964 also held ground, housed within the walls of the current daily zone. This coupled with a lacklustre reaction off 0.61 suggests buyers have the upper hand here – we may see moves higher emerge today.

Breakout buyers north of 0.61 will, as underlined above, likely target 0.62. Moves beyond here has the underside of the H4 resistance zone to target at 0.6235 and then the underside of the daily demand-turned supply at 0.6330/0.6245.

USD/JPY:

Monthly timeframe:

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

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern between 118.66/104.62.

The month of March concluded by way of a long-legged doji candlestick pattern, ranging between 111.71/101.18, with extremes piercing the outer limits of the aforementioned descending triangle formation.

Areas outside of the noted pattern can be seen at supply from 126.10/122.66 and a demand base coming in at 96.41/100.81.

Daily timeframe:

Alongside the RSI indicator firming through its 50.00 value, price movement overthrew the 200-day SMA value Monday, currently circulating around 108.32.

Active supply is limited until we near the 111.30 region along with familiar supply at 112.64/112.10, according to local price action.

H4 timeframe:

Recent upside lifted USD/JPY to supply at 109.71/109.20 yesterday, which intersects with a 50.0% retracement level at 109.30. Beyond here we don’t see much stopping price from reaching 111.30, as aired on the daily timeframe, whereas a rejection, aside from the possibility of support emerging off 108.72 (blue arrow), has demand at 106.75/107.22 to target.

H1 timeframe:

Demand for the safe-haven Japanese yen diminished Monday as markets entered a risk-on environment. Early London witnessed USD/JPY takeover 109 and, in US hours, retest the latter as support, bolstered by a supply-turned demand base at 108.90/108.62.

While price is contained within an ascending channel pattern between 107.82/108.67, upside appears relatively clear to 110, which boasts reasonably sound history as an S/R base.

Structures of Interest:

Having noted daily price crossing above its 200-day SMA, monthly action also showing room to explore higher ground and H1 flow retesting 109 as support with scope to press higher, H4 supply at 109.71/109.20 may give way today.

With the above taken into account, we may see further buying off 109 today, with the possibility of filling the current H1 ascending channel formation.

GBP/USD:

Monthly timeframe:

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

Although March saw lows not seen since the 1980s, ahead of a 127.2% Fib ext. level at 1.1297, price staged an impressive recovery and regained approximately 80% of the month’s losses.

Support at 1.1904/1.2235 remains relevant in April, despite recent moves to lows. Nearby resistance can be seen in the form of a trendline formation (1.7191).

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008.

Daily timeframe:

Partially altered from previous analysis –

Supply at 1.2509/1.2372 proved itself valid in the later stages of the session last week, after the majority of the week formed hesitant candles. Friday, as you can see, stepped lower in the form of a near-full-bodied bearish candle, testing the upper parapet of demand coming in from 1.2212/1.2075.

Monday and early Asia Tuesday saw action remain around the upper boundary of the said demand.

The RSI indicator, however, recently crossed beneath 50.00 after reaching peaks of 55.00.

H4 timeframe:

Friday had GBP/USD greet demand at 1.2147/1.2257, an area that contained downside on March 30.

Technically, early Asia is in the process of forming a hammer candlestick formation out of the said demand, which according to general interpretation, is considered a bullish signal. Note also the current demand base is reinforced by a supply-turned demand at 1.2136/1.2049.

H1 timeframe:

Recent hours saw sterling underperform on news that PM Johnson had been hospitalised and recently taken to intensive care. GBP/USD rushed sell-stops south of 1.22 and tested demand at 1.2121/1.2173, with an approach formed by way of a 5-wave sequence, based on wave 1 equating to wave 5, given a wave 3 extension.

The RSI indicator is seen bottoming ahead of oversold levels and producing a bullish divergence signal.

Structures of Interest:

Monthly support at 1.1904/1.2235 recently entered the mix, as did daily demand at 1.2212/1.2075, therefore a pop higher might be in store this week.

H1 demand at 1.2121/1.2173 (fixed between current H4 demand and supply-turned demand at 1.2147/1.2257 and 1.2136/1.2049), coupled with an approach formed in the fashion of a wave 5 completion on the H1, has sparked intraday buying of the said demand base. Traders who managed to jump aboard this move (noted in Monday’s analysis) are likely looking for a H1 close to form above 1.22, with the expectation of a run then to 1.23.

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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.

 

 

 

 

 

 

 

 

 

 

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