EUR/USD:

Monthly timeframe:

Outlook brought forward from previous analysis –

Despite a healthy attempt at recovery from demand at 1.0488/1.0912 in October 2019 – a particularly noteworthy area given the momentum derived from its base – EUR/USD failed to sustain gains, and had the unit retesting its upper boundary last week. Price, however, as you can see, is beginning to tunnel its way deeper into the range.

Although down 2.56% on the month and in-line with the primary downtrend, which has been lower since 2008, we cannot rule out the possibility of fresh upside attempts from current demand.

Additional structure worth noting on the monthly timeframe is demand-turned supply at 1.1857/1.1352, a long-term trendline resistance (1.6038) and a reasonably ‘fresh’ demand area coming in at 0.9581/1.0221. Note this area has history dating back as far as 2003.

Daily timeframe:

Partially altered outlook from previous analysis –

Since retesting supply at 1.1117/1.1078, the unit has retained a strong underlying offer, consuming a demand zone at 1.1001/1.0946, dethroning the 1.0879 October 1^st low and recently bottoming a point north of demand at 1.0680/1.0781. This area, formed April 2017, houses a 127.2% Fibonacci ext. point within at 1.0724.

The RSI is also seen recovering from channel support, but still remains within oversold waters at 24.79.

H4 timeframe:

Wednesday witnessed the pair pencil in a bottom a few points ahead of demand drawn from 1.0738/1.0774, snapping a five-day losing streak. Supply lies close by at 1.0838/1.0823 (yellow), glued to the lower boundary of a larger demand-turned supply at 1.0832/1.0877. The yellow zone marks a decision point to press lower, though was tested shortly after forming – the 1.0825 high.

H1 timeframe:

In recent hours, Europe’s shared currency eased back above the 1.08 handle against the buck, revisiting the 50-day SMA around 1.0808. Supply is seen at 1.0837/1.0824 (essentially the same area as H4 supply), followed by another base of supply at 1.0869/1.0858. Both areas have already been tested, therefore sellers could be weakened here.

On the data front Wednesday:

The Producer Price Index for final demand advanced 0.5 percent in January, seasonally adjusted, the US Bureau of Labour Statistics reported. Prices for final demand less foods, energy, and trade services advanced 0.4 percent in January, the largest increase since a 0.4-percent rise in April 2019. Both metrics beat expectations.

According to the Census Bureau, Privately‐owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,551,000. This is 9.2 percent (±2.1 percent) above the revised December rate of 1,420,000 and is 17.9 percent (±1.3 percent) above the January 2019 rate of 1,316,000.

The FOMC’s January meeting minutes were in line with expectations, and the market’s reaction was muted.

Direction:

Longer term, we came within a point of testing demand on the daily timeframe at 1.0680/1.0781, confirmed by RSI denoting oversold conditions. There’s room for H4 price to push higher until reaching supply at 1.0838/1.0823, while H1 recently reclaimed 1.08+ status.

While there’s not much room to manoeuvre to the upside, intraday longs may try their hand today, given daily demand. Rather than entering at current price, the better entry, according to our chart studies, is at a retest off 1.08, preferably before reaching H1 supply at 1.0837/1.0824.

AUD/USD:

Monthly timeframe:

Outlook brought forward from previous analysis –

Demand at 0.6358/0.6839 remains in the fight, yet struggling to chalk up anything meaningful to the upside. An eventual break of the said demand zone has another layer of demand close by at 0.6094/0.5866, while a recovery could lead to trend line support-turned resistance (0.4776) making an appearance, followed by supply at 0.8303/0.8082.

Currently, the pair trades -0.20% on the month.

Daily timeframe:

Partially altered outlook from previous analysis –

After marginally stabbing through support at 0.6670, the pair pencilled in a three-day bullish phase. Price, nonetheless, failed to sustain gains past last Wednesday’s high at 0.6750, leaving a trendline support-turned resistance level (0.7393) unopposed.

As of current movement, we are testing support at 0.6670.

The RSI, for those who follow indicators, recently emerged from oversold territory, though appears poised to reconnect with oversold values once again.

H4 timeframe:

Since the beginning of last week, AUD/USD carved out a consolidation between supply drawn from 0.6761/0.6741 and a demand area coming in at 0.6699/0.6715. Recent selling saw the said demand’s lower edge shattered, followed up with a retest on Tuesday that held ground Wednesday.

Limited support seen until we tackle the 0.6662 February 7^th low on this timeframe, but we know from the daily timeframe, support at 0.6670 is in motion and capping downside.

H1 timeframe:

In Wednesday’s analysis, the research team highlighted 0.6707/0.6715, a demand-turned supply zone, as a particularly interesting area. Fibonacci studies (127.2% ext. and a 61.8% ret) converged within the said zone, as did the 100-period SMA.

Also attractive was the fact the area was positioned above the round number 0.67. Buy stops above the psychological boundary likely provided liquidity to sell into from 0.6707/0.6715. This is appealing for larger players. The selloff from the zone on Wednesday tested daily support at 0.6670 going into US hours, which, as you can see from the H1 chart, has held ground so far. Also note the 50-period SMA holding price lower, as we write.

Well done to any readers who managed to take advantage of the recent move lower.

Direction:

Going forward, daily buyers will likely try to defend support at 0.6670. Going on recent price action, though, buyers appear fragile here, but this is difficult to judge seeing as monthly price remains within demand.

Shorter-term movement may revisit 0.67, if we can overthrow sellers at the 50-period SMA. This could lead to another retest at the H1 zone from 0.6707/0.6715 for another chance at short sales.

USD/JPY:

Monthly timeframe:

Partially altered outlook from previous analysis –

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.

In recent movement, price trades at the upper boundary of the aforementioned descending triangle.

Currently, the pair trades +2.59% on the month.

Daily timeframe:

Yesterday’s 140-point+ advance jumped through channel resistance (109.48) and reached highs of 111.59. While a retest at the said channel may materialise, traders are urged to pencil in another channel resistance (red), albeit of a larger scale, from 108.47, and supply at 112.66/112.08.

The recent move higher also formed a nice-looking ‘rally-base-rally’ demand at 109.52/109.99 to have noted.

H4 timeframe:

Recent buying landed price action within the jaws of supply at 111.68/111.42 (located just south of a Fibonacci ext. point at 111.95), though not before ripping through two notable supply areas coming in at 110.02/110.23 and 110.84/110.57. Both now represent demand.

H1 timeframe:

The 111.50 point appears to have stemmed upside for now, guiding the candles to lows at 111.11. The 111 handle rests close by, with a break potentially setting the stage for an approach to a supply-turned demand area at 110.25/110.15.

Traders may find use in noting the 111 handle merges closely with the recently broken channel resistance on the daily timeframe – this ascending line may provide support should it be retested. However, psychological levels attract large amounts of orders, and are often prone to whipsaws. The H4 demand 110.84/110.57 is sited 16 points beneath the 111 base, therefore price could whipsaw to this level before turning higher.

Direction:

111 is in focus. A retest is likely on the cards, with the possibility of a fakeout to H4 demand at 110.84/110.57. Although appealing for longs back up to H4 supply at 111.68/111.42 (houses the 111.50 point on the H1 within), traders should remain cognisant of the monthly timeframe testing the upper edge of a descending triangle pattern.

GBP/USD:

Monthly timeframe:

Brought forward from previous analysis –

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This remains a well-rounded resistance area to keep an eye on long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019. Breaking the 1.3380 March 2019 high may eventually see a retest of 1.4520/1.3893.

Currently, the pair trades at -2.16% on the month.

Daily timeframe:

Sterling finished Wednesday around the upper boundary of demand at 1.2823/1.2910, the lower edge of a multi-month range between supply at 1.3303/1.3184 and the aforementioned demand. Note we also have a local trendline resistance (1.3514) that could come into effect, should we rebound from the current demand base.

Beyond the current demand, another port of demand, a touch larger than the current, resides at 1.2649/1.2799, which happens to house the 200-day SMA (1.2688).

H4 timeframe:

The February 5^th high 1.3070, a potential double-top formation (red arrows) that converges closely with a 61.8% Fibonacci retracement at 1.3079, has held firm. GBP/USD struck fresh weekly lows of 1.2907 yesterday, elbowing beneath demand at 1.2916/1.2942 and exposing another demand from 1.2868/1.2894.

H1 timeframe:

UK inflation surprised to the upside on Wednesday, with the headline rising to 1.8% year-on-year (exp: 1.6%), along with the core measure also rising to 1.6% from 1.4%, against an expected 1.5%. The impact of the release initially guided the pound higher, though price failed to sustain gains above the key figure 1.30.

Demand at 1.2965/1.2987 ceded ground yesterday, unlocking the path towards 1.29. What’s notable from a technical perspective here is the H4 demand mentioned above at 1.2868/1.2894, which boasts a strong connection to the current daily demand at 1.2823/1.2910, is positioned 6 points beneath the round number 1.29.

Direction:

The 1.29 handle is likely to be drawn into the fold today. The fact we have a H4 demand circling just south of 1.29 at 1.2868/1.2894 highlights the possibility of a fakeout occurring through 1.29 before buyers step in. This will help provide sell-stop liquidity to larger traders from the said H4 demand. The problem, however, is the underside of H4 demand at 1.2916/1.2942 leaves little room for manoeuvre as sellers often congregate around the lower edges of broken supply and demand zones.

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