May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices

May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, FP Markets

Charts: Trading View

EUR/USD:

Monthly timeframe:

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

Following a three-month retracement, support at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close. Month-to-date action for May also currently trades higher by 0.5 percent.

April upside—alongside May’s gains—throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

USD bids strengthened their grip Wednesday, lifted on the back of a rise in US Treasury yields (benchmark 10-year note rose 4 percent) in addition to stronger-than-anticipated US inflation data (headline inflation jumped 0.8% m/m versus the 0.2% consensus estimate).

Technically, EUR/USD extended losses south of Quasimodo resistance at 1.2169 yesterday, nudging the 1.1985 May 5th low in view, arranged just north of the 200-day simple moving average at 1.1949.

As mentioned in previous technical briefings, the trend, despite the 2021 retracement, remains to the upside (trending higher since early 2020).

Momentum, as measured by the RSI indicator, failed to clock overbought tops and is poised to potentially revisit support at 51.36.

H4 timeframe:

Wednesday’s bearish vibe watched H4 candles surpass support at 1.2108 (now labelled resistance) to shake hands with demand at 1.2044-1.2071 (this area, according to the H4 timeframe, represents a decision point to break through not only 1.2108, but also the 1.2150 top [April 29]).

South of current demand exposes support at 1.1990.

H1 timeframe:

1.2059-1.2073 Fib support made a show following Wednesday’s downside pressure.

As you can see, buyers have begun to establish a modest floor, which could stir a retest at the lower side of 1.21. Note, this Fib zone also benefits from connecting with H4 demand underscored above at 1.2044-1.2071.

Territory beneath the Fib zone shines the technical headlights on support drawn from 1.2035.

Short-term momentum dipped a toe in oversold space yesterday, though exited the zone late US trade (modest bullish cue), according to the RSI indicator.

Observed levels:

Short term, the H1 Fib support between 1.2059 and 1.2073—a base dovetailing with H4 demand at 1.2044-1.2071 and forming in line with the overall trend—triggering a bullish scenario is possible, with H1 targeting 1.21, followed by H4 resistance at 1.2108.

The drawback to longs, of course, is the daily timeframe informing technicians of room to drive as far south as 1.1985 troughs.

May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, FP Markets

AUD/USD:

Monthly timeframe:

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

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082.

Should a bearish scenario unfold, on the other hand, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Upbeat headline inflation inspired a healthy USD bid Wednesday, movement weighing on the risk-sensitive Australian dollar. Erasing 1.5 percent, and overturning support at 0.7816 (now labelled resistance), further selling could unfold to cross paths with support at 0.7563.

With respect to trend, however, despite a two-month retracement and yesterday’s down move, we have been decisively higher since the early months of 2020.

Downside momentum, as you can see from the RSI indicator, pulled the value through the 50.00 centreline—indicating additional losses may be on the cards.

H4 timeframe:

Shortly after voyaging beneath daily support at 0.7816, price action on the H4 timeframe reveals the pair retested the latter and subsequently cruised to trendline support, drawn from the low 0.7531. Technical elements also reveal a support area resides close by at 0.7696-0.7715.

Space below current supports direct attention to demand at 0.7632-0.7653—a decision point to break local peaks at 0.7661 and 0.7676.

H1 timeframe:

Despite H1 reclaiming 0.78+ status early London, buyers failed to find grip above the psychological figure as the 100-period simple moving average delivered (dynamic) resistance at 0.7816.

The currency pair settled around the 0.7724ish neighbourhood, threatening a dip to 0.77 (held price higher since April 21st and benefits from additional support in the shape of a Quasimodo formation at 0.7704).

RSI support at 19.40 also entered the frame in recent movement (capping downside since mid-April 2020), a base situated deep within oversold space.

Observed levels:

Looking ahead, H4 trendline support, and support at 0.7696-0.7715, is an area likely to stir short-term bullish interest. However, according to the H1 scale, a move to 0.77 could be seen before buyers attempt to make an appearance (fixed deep within the aforementioned H4 demand).

May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, FP Markets

USD/JPY:

Monthly timeframe:

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

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Following last Friday shaking hands with trendline support, extended from the low 102.59, Wednesday—on the back of gains in US Treasury yields and a healthy USD bid across the board—witnessed USD/JPY enter supply at 109.97-109.18 and add 1 percent.

North of 109.97-109.18 casts light on longer-term resistance at 110.94-110.29, stationed under supply at 111.73-111.19.

Trend studies reveal the pair has been trending higher since the beginning of 2021. In line with this, the RSI climbed above resistance at 57.00 yesterday, shifting attention to overbought space and RSI resistance at 83.02.

H4 timeframe:

Support between 108.20 and 108.50 (made up of demand from 108.20-108.43, a 1.618% Fib expansion at 108.36, a 1.272% Fib projection at 108.48, and support at 108.50) has served buyers well since late April.

Wednesday’s combination of technical buying from the aforementioned support, and broad USD upside, not only formed demand at 108.64-108.91, it guided price to a 61.8% Fib level at 109.60, set beneath familiar supply at 109.97-109.72.

H1 timeframe:

Latest developments out of the H1 timeframe show price overrun supply at 109.52-109.39 and swiftly retested the upper walls of the area as support. This followed a somewhat energetic move north of the 109 figure.

Although the RSI indicator currently engages with resistance at 79.60 (lodged within overbought), price space displays scope to reach resistance at 109.95.

Observed levels:

H1 price retesting 109.52-109.39 and establishing support may motivate short-term gains today. While in harmony with the monthly timeframe attempting to secure support from descending resistance, H4 reveals supply at 109.97-109.72 could hamper upside (an area pinned within the upper range of daily supply at 109.97-109.18).

May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, FP Markets

GBP/USD:

Monthly timeframe:

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

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

May, nonetheless, trades firmly on the front foot, up by 1.8 percent MTD.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Sterling withdrew against a healthy USD on Wednesday, following stronger-than-expected US inflation numbers.

Yesterday snapping a three-day bullish phase directed attention back to support at 1.4003, highlighting a possible retest play. Note this level served relatively well as resistance since March.

Out of the RSI, traders will note the value rotated lower just south of overbought, movement which may see trendline support, taken from the low at 36.14, enter the fight.

H4 timeframe:

After 1.4162 resistance welcomed sellers on Tuesday, Wednesday followed through to the downside and delivered the currency pair to within striking distance of demand at 1.4014-1.4045, plotted north of support at 1.4007.

Navigating deeper water, on the other hand, implies we might have trendline support, pencilled in from the low 1.3668, make a show.

H1 timeframe:

As you can see, an almost picture-perfect head and shoulders top pattern (yellow) formed a stone’s throw from Quasimodo resistance at 1.4176.

1.41 stepped aside, despite an earnest attempt to hold the figure during early US trade on Wednesday, allowing H1 candles to connect with the 100-period simple moving average around the 1.4062ish region. A decisive break here unlocks the trapdoor for a possible run to the widely watched 1.40 figure, which happens to align with a 50.00% retracement level at 1.4003.

The RSI nudged into oversold in recent trade, threatening a move to support at 12.22. Any upside from oversold today has trendline resistance, drawn from the peak 83.68, to target.

Observed levels:

The combination of daily support at 1.4003, H4 support at 1.4007 (located under H4 demand at 1.4014-1.4045) and the 1.40 figure on the H1, may be enough to lure bullish curiosity if tested.

Traders are, however, urged to pencil in the possibility of a whipsaw forming around 1.40, as this level will attract a number of orders.

May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  • May 13th 2021: Dollar Index Higher Following Surge in US Consumer Prices, FP Markets
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