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March 18th 2020: DXY Surges to Highs Just South of 100.00

March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets

EUR/USD:

Monthly timeframe:

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

The month of February witnessed EUR/USD revisit the upper limit of demand at 1.0488/1.0912 – a noteworthy area given the momentum derived from its base – and pencil in an appealing (bullish) hammer candlestick pattern.

March, as you can see, manoeuvred the pair into demand-turned supply at 1.1857/1.1352. However, leaving long-term trendline resistance (1.6038) unchallenged, price has reversed and is on track to chalk up a shooting star bearish candlestick signal and potentially revisit demand mentioned above at 1.0488/1.0912.

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

Daily timeframe:

Outlook partially altered from previous analysis –

Following a precipitous decline from supply at 1.1540/1.1486, an area located within the confines of the said monthly demand-turned supply at 1.1857/1.1352, the 200-day SMA provided brief respite, though gave way Tuesday with price embracing demand at 1.0940/1.1002.

Despite a mild end-of day correction, monthly structure proposes we may tunnel through the current daily demand as the top edge of the monthly demand zone is set around 1.0912. While 1.0912 could halt further loss, daily price exhibits scope to test demand coming in at 1.0680/1.0781, which happens to reside within the current monthly demand zone.

What’s also notable from a technical perspective is the RSI indicator recently exiting overbought levels, fading peaks at 82.00 (values not seen since March 2008) and overthrowing 50.00.

H4 timeframe:

EUR/USD swerved to near-three-week lows at 1.0954 Tuesday, closing in on the 127.2% Fib ext. level at 1.0981. A modest bid emerged off the said Fib level, charting the way for a retest at 1.1038/1.1072, a demand-turned supply area. Failure to hold off 1.0981 establishes a basis for an approach to trendline resistance-turned support (1.1172).

Another constructive development worthy of note on this timeframe is the unit remains compressing within a descending channel formation (1.1484/1.1055).

H1 timeframe:

The greenback surged Tuesday, driven higher by funding pressures while disregarding liquidity offered by the Fed. The euro lost out as the buck gained, boosted higher by US Treasury yields.

Short-term intraday flow bottomed a few points ahead of 1.0950, following a precipitous decline from peaks set just south of the 1.12 handle. Neighbouring demand-turned supply at 1.1044/1.1024 is in view north of 1.10, with a break revealing 1.1050 and a 38.2% Fib retracement at 1.1060. With respect to the RSI indicator we recently exited oversold levels and currently trade at 34.88.

Structures of Interest:

Monthly price portends lower moves, placing a question mark on daily demand at 1.0940/1.1002. The H1 demand-turned supply zone at 1.1044/1.1024 is glued to the underside of the H4 demand-turned supply area at 1.1038/1.1072, therefore could be an area where sellers make an appearance from today. Moves below 1.10 would be the initial objective out of 1.1044/1.1024, followed by a move to 1.0950 and possibly to 1.09, which is where buyers are most likely to step in due to the top edge of monthly demand residing around this neighbourhood.

March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets

AUD/USD:

Monthly timeframe:

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

Demand at 0.6358/0.6839 yielded last week, after capping downside since 2016. Overwhelmed by the effects of coronavirus, the pair recently refreshed multi-year lows, registering losses nearing 8.00% so far in March and testing demand at 0.6094/0.5866, an area formed in 2003 that held price higher in late 2008.

Since 2011, the primary trend in this market has faced a southerly bearing.

Daily timeframe:

Partially altered from previous analysis –

After AUD/USD powered through demand at 0.6330/0.6245 last week, the pair has since retested 0.6330/0.6245 as supply, challenged lows at 0.5958 and entered the walls of demand coming in at 0.5926/0.6062 (located within monthly demand at 0.6094/0.5866).

In terms of the RSI indicator, given the predominant downtrend in this market, the value continues to run through oversold terrain, unable to breach 50.0 to the upside.

H4 timeframe:

As we fade lows not seen since 2003, a newly formed supply zone rests nearby at 0.6147/0.6078. Above here, technical research shows limited supply in view until connecting with resistance at 0.6314.

H1 timeframe:

Despite a bounce in risk sentiment, AUD/USD took its cues from the mighty buck Tuesday, diving through 0.61 and 0.6050. A 161.8% Fib ext. level entered play at 0.5959 and so far established support, with price threatening a revisit to the underside of 0.6050. It should be emphasised that 0.6050 aligns closely with a local channel resistance (0.6385) and a more broader channel support-turned resistance (0.6463), denoted by a green zone.

In addition to the above, RSI momentum trades at 40.00, after recovering from a trough located deep within oversold terrain at 21.50.

Structures of Interest:

Keeping things simple this morning, the combination of 0.6050 on the H1 timeframe and converging channel resistances, along with the lower edge of H4 supply stationed at 0.6078, could appeal to sellers today. Note any short positions taken here, although in line with the primary downtrend, entails entering short into higher-timeframe demand.

March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets

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 (118.66/104.62). February had price elbow a touch outside the upper boundary of the aforementioned descending triangle to 112.22, though retreated lower and produced a shooting star pattern into the month’s end.

March, so far, breached the lower edge of the descending triangle, yet has recovered in strong fashion, leaving nearby demand at 96.41/100.81 unchallenged. Note current action trades in the shape of a hammer candlestick signal, considered a bullish pattern at troughs.

Daily timeframe:

Partially altered from previous analysis –

Recent upside saw action readdress a 61.8% Fib retracement at 108.02 and 200-day SMA, currently circulating around 108.23. While this combination capped upside Monday, the resurgence of bidding could eventually nudge price towards demand-turned supply at 110.10/109.52. This is a significant area knowing it is the origin of the move to highs at 112.22 and the decision point to cross above the 110.29 January 17th high. Selling from current price, on the other hand, display’s limited support until reaching demand coming in at 100.68/101.85, an area extended from September 2016 and glued to the top edge of the current monthly demand zone.

H4 timeframe:

Partially altered from previous analysis –

Although a reaction out of the 108.90/108.08 AB=CD bearish pattern occurred at the beginning of the week, price appears poised to retest the zone a second time.

Traditional take-profit targets associated with AB=CD formations generally reside around the 38.2% and 61.8% Fib retracement levels of legs A-D – in this case, at 105.67 and 103.93. As you can see, 105.67 along with a supply-turned demand zone at 105.75/105.17 entered the fold Monday. The second take-profit target out of the AB=CD formation remains intact at 103.93, therefore a response from 108.90/108.08 is not out of the question.

H1 timeframe:

Risk-on trade, along with broad-based USD bidding, saw USD/JPY continue to grind higher Tuesday, compressing within an ascending channel formation (green – 105.14/106.47). Settling north of 107, supply at 108.89/108.50 is the next obvious upside target on this timeframe, followed by a larger channel resistance (black – 105.91).

The RSI, for those who follow momentum-based indicators, recently topped ahead of overbought levels and is seen bottoming north of the 50.00 value.

Structures of Interest:

Despite Tuesday’s advance, daily price shows we still trade from an area of notable resistance. A similar picture is seen on the H4 timeframe from the AB=CD formation between 108.90/108.08. Traders may, therefore, have an eye on H1 supply at 108.89/108.50 for potential shorting opportunities, particularly at the point where the smaller green H1 channel resistance merges with the zone (pink). It should also be noted the current H1 supply forms part of the upper H4 resistance zone.

March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets

GBP/USD:

Monthly timeframe:

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

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fib retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, a recovery formed off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high. The month of February declined nearly 3.00%, with March currently extending losses, consequently reconnecting with 1.1904/1.2235.

Daily timeframe:

A small support area at 1.2050/1.2101 made an appearance Tuesday, following a near-2% decline. Continued upside from the current support zone has 1.2509/1.2372 in the firing range. A break lower, however, could spell trouble for the monthly support area stationed at 1.1904/1.2235.

With respect to the RSI indicator, the unit remains within oversold waters, testing values not seen since August 2018.

H4 timeframe:

The recovery from the daily support area underscored above at 1.2050/1.2101 shines the spotlight on a familiar demand-turned supply zone coming in at 1.2162/1.2220, which happens to be sharing its space with another layer of supply from 1.2273/1.2198. Moves beyond both of these barriers may liberate buyers to supply seen at 1.2404/1.2470.

H1 timeframe:

Sterling found little relief from better-than-expected UK earnings Tuesday, weighed by a robust USD bid. 1.22 fell apart in early London, with 1.21 giving way shortly after. Only once a 161.8% Fib ext. level at 1.2038 made its debut did buyers manage to gain some footing, with recent movement reclaiming 1.21+ status, though channel resistance (1.2964) could throw a spanner in the works for buyers attempting breakout scenarios here.

The RSI is seen nearing the 50.00 value after marginally breaking through 44.53 resistance.

Structures of Interest: 

Breakout buying north of 1.21 on the H1 timeframe must take into account H1 channel resistance could hamper upside. A H1 close above the said channel formation, however, technically speaking, paves the way north to the underside of the H4 demand-turned supply area at 1.2162/1.2220, holding within it the 1.22 handle from the H1.

Breakout buying, of course, goes against the primary downtrend, active since 2008 (see monthly timeframe), though boasts support structure from daily and monthly timeframes.

March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets

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  • March 18th 2020: DXY Surges to Highs Just South of 100.00, FP Markets
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