May 12th 2020: DXY Echoes Strong Position North of 100.00 Ahead of US Inflation Data

May 12th 2020: DXY Echoes Strong Position North of 100.00 Ahead of US Inflation Data

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 (intersects with a long-term trendline resistance [0.6038]) and demand at 1.0488/1.0912.

April, as you can see, spent the best part of the month feasting on the top edge of 1.0488/1.0912, squeezing out a Japanese hammer candlestick pattern, typically viewed as a bullish reversal signal.

May, on the other hand, is tunnelling back into the said demand, so far disregarding April’s candlestick pattern.

With reference to the primary trend, price has exhibited clear lower peaks and troughs since 2008.

Daily timeframe:

Partially altered from previous analysis –

Bottoming just ahead of the 78.6% Fib level at 1.0745 in the later stages of last week, price clawed back a portion of recent losses. However, Friday, abruptly off best levels, finished the session unmoved, producing a candle wick. This, along with Monday’s 0.2% decline, places a question mark on further buying from here.

Another constructive development is the formation of a bearish pennant pattern between 1.1147/1.0635. It is also worth pointing out the 200-day simple moving average (SMA) circles the upper portion of our pennant configuration around 1.1025.

A convincing daily close under the current pattern structure might give rise to a fresh wave of selling. Breaking lower would entail tipping 1.0745 and eventually competing with demand at 1.0526/1.0638, an area extended from March 2017.

H4 timeframe:

Friday formed a high just shy of supply fixed from 1.0906/1.0878, with Monday digging under support coming in from 1.0821. This shines the headlights on trendline support (1.0637). Beneath here, interest can be seen at a trendline resistance-turned support (1.1147).

Candlestick traders may also note yesterday’s prominent selling wick moulded at the underside of support from 1.0821 echoes the possibility of further downside today.

H1 timeframe:

Pressured amid healthy dollar bidding, EUR/USD brought in demand at 1.0803/1.0814 on Monday. The initial test witnessed a reasonably spirited recovery, reaching highs just shy of 1.0850. In recent hours, however, the lower limits of the aforementioned demand have been tested, suggesting 1.08 may come under fire in the early stages of Asia today. Note also we have the 100-period simple moving average (SMA) lurking just north of price at 1.0823.

Under 1.08, room to push for supply-turned demand at 1.0760-1.0775 is seen, shadowed by 1.0750.

Structures of Interest:

The lack of buying interest seen from monthly demand at 1.0488/1.0912, as well as above the 78.6% Fib level at 1.0745 on the daily timeframe, reveals we may see the daily bearish pennant pattern breached to the downside.

With H4 support at 1.0821 serving up potential resistance, moves lower could be seen on the H4 timeframe. As a result, a breach of 1.08, based on the H1 timeframe, is likely in the offing today, with an initial downside target plotted at H1 supply-turned demand at 1.0760-1.0775, which happens to merge with H4 trendline support (1.0637).

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.

April’s 370-pip advance has, as you can see, landed May within striking distance of supply fixed at 0.7029/0.6664, an area intersecting with a long-term trendline resistance (1.0582).

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

Daily timeframe:

Partially altered from previous analysis –

Supply from 0.6618/0.6544 re-entered play Friday, responding by way of a bearish outside day formation on Monday, typically considered a bearish signal. It should also be emphasised this area comes with a 127.2% Fib ext. level at 0.6578 and a nearby 161.8% Fib ext. level at 0.6642. Traders may include the 200-day simple moving average (SMA) here seen around 0.6668.

Although the chance of a move lower from supply is there, the fact we failed to print fresh lows out of this zone at the end of April, as well as the series of higher highs/lows formed since testing 0.5506, may fuel buyers.

H4 timeframe:

Reacting from daily supply at 0.6618/0.6544 underscores the possibility of an approach back to demand formed at 0.6356/0.6384. This is a familiar area that withstood two downside attempts in the early stages of May.

H1 timeframe:

Against the US dollar, the Australian dollar fell 0.6% Monday amid fading risk sentiment and a healthy dollar bid. 0.65 was taken on the H1 timeframe, as well as its surrounding demand area at 0.6494/0.6511.

US hours, nonetheless, saw the candles retest demand as supply. Although capping upside, sellers are likely hesitant about pulling the trigger here due to the 100-period simple moving average (SMA) circling close by at 0.6476.

Structures of Interest:

Monthly price shows room to approach supply at 0.7029/0.6664. In order to reach this far north, daily price must engulf its current supply from 0.6618/0.6544.

Intraday traders, on the other hand, likely have eyes on moves south of H1 demand-turned supply at 0.6494/0.6511 to at least 0.6450. A H1 close beneath the current 100-period SMA, knowing we produced a bearish outside day pattern on the daily timeframe yesterday, may add weight.

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.

April was pretty uneventful, ranging between 109.38/106.35. May, on the other hand, trades marginally higher by 0.50%.

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

Daily timeframe:

Price action staged a stronger-than-expected rebound out of demand from 105.70/106.66 Monday, recording its third successive daily gain. This has shifted focus back to the 200-day simple moving average (SMA) at 108.22. Directly above here, traders will also note April 6 high at 109.38.

H4 timeframe:

Supply at 108.10/107.79, an area that’s capped upside since mid-April, came within a few pips of making an entrance yesterday, formed by means of a reasonably well-built shooting star candlestick pattern. Continued buying here could land the candles at resistance from 108.53, while moves lower may re-join support at 106.91.

H1 timeframe:

Fresh buying lifted H1 action through 107 and surrounding supply at 106.99/107.16, which led to a violation of 107.50 and neighbouring supply at 107.67/107.57.

Current trade has the candles retesting supply-turned demand at 107.67/107.57, echoing the prospect of a run to 108 from here, a noted resistance from mid-April onwards.

The 100-period simple moving average (SMA), currently circulating around 106.58, is seen turning north after drifting lower since April 24. It may also be worth noting the RSI indicator is dipping from 83.00, threatening an exit from overbought territory.

Structures of Interest:

Aside from H4 supply at 108.10/107.79 potentially throwing a spanner in the works, a rally from H1 supply-turned demand at 107.67/107.57 to 108 is possible today. Note we may also observe a whipsaw through 108 to bring in the 200-day SMA highlighted above at 108.22.

GBP/USD:

Monthly timeframe:

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

Although March clocked levels 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 in motion in May. Neighbouring resistance can be seen in the form of a trendline (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 –

Upside momentum recently diminished as the pair crossed paths with the 200-day simple moving average (SMA) at 1.2649, a value that boasts a close connection to a demand-turned supply at 1.2649/1.2799.

Price action heading into Tuesday is currently consolidating ahead of demand at 1.2212/1.2075.

H4 timeframe:

Supply at 1.2477/1.2438 welcomed price action Friday, delivering a robust move to the downside on Monday and wrapping up a touch off worst levels just north of demand at 1.2147/1.2257.

As you can see, a violation of the current demand area could lay the basis for additional downside this week towards fresh demand found at 1.1771/1.1886.

H1 timeframe:

An early rebound from 1.24 took shape Monday, technically fuelled by strong confluence, including the 100-period simple moving average (SMA), a local trendline resistance-turned support (1.2418) and a 38.2% Fib level at 1.2391. Things turned sour ahead of 1.2450, with the London open forming a full-bodied H1 bearish candle through 1.24 that eventually led to a test of 1.23 heading into US trading.

Pattern traders may also acknowledge the local descending triangle forming around 1.2350. A descending triangle is a bearish formation usually formed during a downtrend as a continuation pattern. However, there are times a descending triangle may represent a reversal pattern at the end of an uptrend.

Structures of Interest:

Monthly price exhibits scope to approach 1.2235 (the top edge of support), while daily price also suggests the possibility of a move to 1.2212 (the upper edge of demand).

H4 demand at 1.2147/1.2257 has ‘test me’ written all over it. Between the top edge of monthly support at 1.2235 and the upper layer of H4 demand at 1.2257, we have a potential reversal zone. This would, however, entail whipsawing through 1.23 on the H1 timeframe.

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