April 8th 2020: US Dollar Index Tests Waters South of 100.00 Ahead of FOMC

April 8th 2020: US Dollar Index Tests Waters South of 100.00 Ahead of FOMC

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 its extremes crossing paths with heavyweight demand-turned supply at 1.1857/1.1352 and demand at 1.0488/1.0912.

As we head into April, the technical foundation has price rangebound between the two aforementioned price structures; notably, however, April’s candle is currently 1% 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 –

Tuesday observed a stronger-than-expected advance, snapping a six-day losing streak. Concluding the session a touch off best levels at 1.0926, this could encourage additional buying today, with the 200-day SMA at 1.1066 seen as the next logical upside target on this timeframe.

With respect to structure north of the noted SMA value, supply at 1.1239/1.1179, along with trendline resistance (1.0879), is seen, while to the downside we have demand at 1.0925/1.0864.

H4 timeframe:

The view from the H4 timeframe shows price action closing in on a supply zone from 1.1044/1.0966 after overturning resistance at 1.0831. Also deserving notice is the 50.0% retracement seen at 1.0954.

H1 timeframe:

London hours conquered the 100-period SMA on the H1 timeframe Tuesday, and shortly after retested the base as support in the shape of a hammer candlestick signal. Further upside unfolded mid-way through London, breaching 1.09 and crossing paths with supply at 1.0949/1.0915. A break of the said area may see supply at 1.1033/1.0982 come under fire, reinforced by the widely watched 1.10 figure.

Technical studies also show the RSI indicator exiting overbought territory off peaks at 79.00.

Structures of Interest:

While the current H1 supply could of course hold ground today and send prices back to the 1.0850ish band, the upper supply coming in at 1.1033/1.0982 boasts more of an appeal, from a technical point of view: it resides within H4 supply at 1.1044/1.0966 and houses 1.10.

Therefore, in the event of a push higher today, 1.1033/1.0982 will likely serve as a base to cover longs and also as a platform for bearish themes.

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).

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

Daily timeframe:

Parallel with the RSI indicator approaching 50.00, Tuesday extended Monday’s recovery out of demand at 0.5926/0.6062. Last Tuesday’s high offers possible resistance at 0.6213, tailed by demand-turned supply at 0.6330/0.6245.

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. Monday observed a stronger-than-expected recovery, with Tuesday following through in a similar manner.

The foundation for a climb to 0.6314/0.6235 is 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).

H1 timeframe:

The upward lift Tuesday came about on a combination of a waning US dollar and the RBA leaving policy settings unchanged. The central bank pledged that if conditions continue to improve, it is likely smaller and less frequent purchases of government bonds will be required.

As of current price we are fading the underside of the 0.62 handle as the RSI indicator rotates from overbought space. Technical studies on the H1 timeframe also show a potential AB=CD bearish pattern which completes a few points north of supply at 0.6325/0.6275 (orange).

Structures of Interest:

The completion of the H1 AB=CD bearish pattern holds strong confluence. Not only does it connect closely with H1 supply, this area envelopes the top edge of the current H4 resistance zone between 0.6314/0.6235 and resides within 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:

Partially altered from previous analysis –

Reclaiming a little more than 50% of Monday’s advance, Tuesday watched price action snap a three-day winning streak and underscore the possibility of a revisit to the 200-day SMA value, currently circulating around the 108.32ish region.

Active supply, according to chart studies, appears limited until nearing the 111.30 region, along with familiar supply at 112.64/112.10.

H4 timeframe:

Supply at 109.71/109.20, coupled with a 50.0% retracement level at 109.30, made its debut in recent movement. This has seen the H4 candles address 108.72 (blue arrow – March 31 high).

Based on candlestick analysis, sellers appear to have the upper hand right now, with price action not printing much to the upside.

H1 timeframe:

The supply-turned demand base at 108.90/108.62 continues to stand ground, in spite of selling pressure out of H4 supply mentioned above at 109.71/109.20 and the possibility of a pop lower on the daily timeframe to retest the 200-day SMA at 108.32. What’s interesting, however, is the 100-period SMA on the H1 timeframe currently merges with the 200-day SMA.

Structures of Interest:

The combination of the 200-day SMA around 108.32 and the 100-period SMA on the H1 timeframe at 108.38, if tested, could offer support in this market today. Also note, the said SMA values are positioned close by a 38.2% Fib retracement level at 108.44.

A test of the SMA values, nevertheless, entail violating the current H1 supply-turned demand base at 108.90/108.62.

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 and demand coming in from 1.2212/1.2075 remain dominant fixtures on this timeframe right now. Outside of this area we have a demand-turned supply formed at 1.2649/1.2799 which aligns with a 200-day SMA value at 26491, whereas a breach lower could have candles test the 1.15 neighbourhood: trendline supports.

The RSI indicator continues to hover around its mid-way point at 50.00.

H4 timeframe:

Following the formation of a hammer candlestick pattern, price staged a reasonably impressive recovery out of familiar demand at 1.2147/1.2257, set on top of a supply-turned demand at 1.2136/1.2049.

Additional bullish sentiment could haul price to supply fixed at 1.2622/1.2517, which merges with a 61.8% Fib retracement level at 1.2499.

H1 timeframe:

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.

This, coupled with the higher timeframes testing demand, lifted sterling higher, challenging waters north of 1.23 and closing above the 100-period SMA during yesterday’s session.

Structures of Interest:

Traders long from 1.22 concluded Tuesday on a strong footing, with risk perhaps reduced to breakeven and partial profits banked.

Buyers north of 1.23 are likely nervous – entering long into a daily supply at 1.2509/1.2372 usually has enough clout to halt upside. However, this does not mean we cannot trade higher given we are coming off monthly support at 1.1904/1.2235 as well as H4 price showing room to press higher.

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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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