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January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle

January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets

EUR/USD:

Monthly timeframe:

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

Following the break of long-term trendline resistance (1.6038) in July, and subsequent break of supply from 1.1857/1.1352 in August (2020), a modest correction surfaced. However, buyers making an entrance in November and December (registering fresh multi-month highs) reasons additional upside may be on the horizon, with ascending resistance (prior support – 1.1641) perhaps targeted.

The primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Partly modified from previous analysis –

Aside from Monday wrapping up significantly off session peaks, technical change is limited on this timeframe.

As 2020 drew to an end, price levelled off just ahead of a descending wedge pattern’s (1.2011/1.1612) take-profit target at 1.2318 (yellow). Traders will also note there is room to advance until reaching the bullish flag’s (1.2177/1.2078) take-profit level at 1.2384 (purple).

Trend on this timeframe remains decisively north, launching a series of higher highs and higher lows since March 2020 (secondary trend). However, the RSI also merits attention, with the value producing bearish divergence around overbought territory.

H4 timeframe:

Partly modified from previous analysis –

Once again, H4 failed to find acceptance above resistance at 1.2255 on Monday, topping at familiar highs.

This throws light back on the upper side of a symmetrical triangle (1.2271), joined by trendline support (1.1602).

Breaching the aforesaid trendline may liberate sellers, with little on the radar in terms of support until demand at 1.2040/1.2065.

H1 timeframe:

Going into US trading Monday, despite an earlier attempt to find grip north of 1.23, sellers hauled EUR/USD below support at 1.2287. Follow-through selling took on the 100-period simple moving average and, in recent hours, the 1.2250 support level. Sellers face neighbouring support at 1.2239 before possibly contending with demand at 1.2205/1.2213.

With reference to the RSI indicator, the market trades sub-50.00, suggesting momentum may continue to decrease until gracing oversold terrain.

Observed levels:

Partly modified from previous analysis –

The monthly timeframe reveals scope to carve out fresh highs. A 1.2095 daily support retest, however, could emerge prior to additional gains, targeting the two daily bullish pattern’s take-profit zones (1.2318/1.2384).

H4 holding below 1.2255 resistance highlights a possible test of two tight-knit trendline supports. This also reveals H1 could overpower bids at support from 1.2239 to test H1 demand at 1.2205/1.2213 (intersects with H4 trendlines). In light of this confluence, this may be a location where a bullish scene could unfold.

January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets

AUD/USD:

Monthly timeframe:

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

December traded higher by nearly 5 percent, following November’s 4.5 percent rebound from demand at 0.7029/0.6664 (prior supply), consequently wrapping up 2020 in positive territory.

Interestingly, buyers, according to the monthly chart, appear free to explore as far north as 0.8303/0.8082 in the coming months, a supply zone aligning closely with trendline resistance (prior support – 0.4776).

In terms of trend, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Sellers welcomed supply at 0.7756/0.7685 Monday, snapping a three-day winning streak. Dethroning nearby support at 0.7647 could set the ball rolling for moves to demand at 0.7453/0.7384 (prior supply) and trendline support (0.5506).

In spite of the supply area as well as the RSI recently forming bearish divergence, sellers are likely to remain cautious. This is due to the trend on this timeframe remaining north since early 2020, and monthly price seen calling for higher levels. A daily close beneath 0.7647 support, nevertheless, may add bearish conviction.

H4 timeframe:

The inability to reach resistance at 0.7752 Monday saw H4 engage demand at 0.7665/0.7644 (prior supply), an area sharing space with a local trendline support (0.7461).

Demand at 0.7600/0.7625 is also worth a mention, along with trendline support (0.6991).

H1 timeframe:

Ripping through demand at 0.7674/0.7684 allowed intraday flow to greet 0.7650 support and the 100-period simple moving average. The test also fashioned a hammer candle – generally viewed as a bullish signal at troughs. Downstream, 0.76 is seen as reasonable support.

In terms of the RSI indicator, the line bottomed just ahead of oversold levels and moulded bullish hidden divergence.

Observed levels:

Bottom-up analysis currently reveals a lack of enthusiasm off 0.7650 support on the H1, with supply at 0.7674/0.7684 (prior demand) potentially capping upside attempts. H4, however, boasts a combination of demand and trendline support, in line with monthly price calling higher and daily price retesting support at 0.7647 (despite coming from supply).

The above, coupled with the prevailing uptrend (daily timeframe), suggests buyers could potentially take the wheel and engage 0.7674/0.7684 on the H1.

January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets

USD/JPY:

Monthly timeframe:

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

Over the span of four years, USD/JPY carved out a descending triangle pattern between 118.66/104.62.

As you can see, though, December, down by 1 percent, pursued terrain south of 104.62.

104.62 ceding ground throws light on support from 101.70, with a break uncovering trendline support (76.15) and the descending triangle’s take-profit level at 91.04 (red).

Daily timeframe:

Partly modified from previous analysis –

Support at 103.08 emerged on December 17 and held into the 2020 close. Monday, as you can see, shaped an indecision candle, which could, given support, be interpreted as a bullish signal.

Upstream, trendline resistance (111.68) is seen; light falls on demand at 100.68/101.85 (holds monthly support at 101.70), however, if sellers push through 103.08 support.

RSI fans will see the indicator recently retreated below 57.00 resistance (capping upside since July) and remains under 50.00.

H4 timeframe:

Although daily support at 103.80 survived yesterday’s move, probing ten-month lows, technical framework reveals two nearby supply areas at 103.39/103.26 and 103.46/103.58 (representing a zone where a decision was made to break numerous local lows between 103.19/103.40).

Beneath 103.08, price could make its way towards support at 102.06.

H1 timeframe:

The whipsaw through 103 support yesterday not only filled protective stop-loss orders from any 103 longs, the move also tripped breakout sell-stops, causing what’s known as a bear trap.

Supply from 103.39/103.26 (H4 supply), joined together by a 50.00% level at 103.30 and the 100-period simple moving average, is an area likely on the radar for many. Below 103, however, traders have 102.50 support to target.

Also noteworthy is RSI resistance formed at 58.75.

Observed levels:

Daily support at 103.08 appearing to be hanging on by a thread, and monthly price exhibiting a bearish theme below descending triangle support at 104.62 throws light on H4 supply at 103.39/103.26 (and its connecting H1 confluence). 103.50 resistance on the H1 may also interest sellers, having seen the level unite with H4 supply at 103.46/103.58.

January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets

GBP/USD:

Monthly timeframe:

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

December ended higher by 2.5 percent, elevating GBP/USD to fresh multi-month highs and stirring trendline resistance (2.1161).

In terms of trend, however, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way – April high, 2018. In fact, the aforesaid high represents the next upside target on the monthly chart.

Daily timeframe:

Following three successive daily gains, Monday stepped forward and fashioned a bearish outside reversal candle ahead of resistance at 1.3755 (stationed below supply at 1.3996/1.3918). Increased selling today/this week points to a possible test of support at 1.3176.

The RSI reveals a rangebound environment, limited by support around 47.00 and resistance at the 66.00 region.

H4 timeframe:

Reported in Monday’s writing, research highlighted reasonably heavy-handed resistance at 1.3711, surrounded by two Fib projection levels around 1.3700. As you can see, price responded strongly from the aforesaid ceiling, movement that toppled support at 1.3607 and crossed paths with demand at 1.3527/1.3556.

Failure to hold from demand shines light on another demand from 1.3401/1.3446.

H1 timeframe:

1.37 proved stable resistance Monday, despite several upside attempts. Shaped by way of six successive bearish candles, the 1.36 level, support at 1.3576 and the 100-period simple moving average were dethroned (with the RSI also visiting its oversold area), leaving 1.3550 support to welcome buyers.

While bids continue to support 1.3550, 1.3576, joined by the 100-period simple moving average, could form resistance and guide moves south of 1.3550 today.

Observed levels:

Monthly trendline resistance remains under pressure. December’s higher close places buyers in a potentially favourable position, with 1.4376 targeted (April high 2018). Possibly opposing upside, nonetheless, is Monday’s daily bearish outside reversal candle and neighbouring resistance at 1.3755.

H4 tests demand at 1.3527/1.3556, recently forming an indecision candle (possibly a sign of exhaustion). Though with H1 sellers beginning to show some life off resistance at 1.3576, a run through 1.3550 support (H1) and H4 demand could occur, with 1.35 (H1) targeted.

January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  • January 5th 2021: Soured Risk Sentiment Elevates Dollar Demand; DXY Ends Monday Forming Daily Hammer Candle, FP Markets
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