May 19th 2020: Upbeat Risk Sentiment Sends DXY Sailing Back Through 100.00

May 19th 2020: Upbeat Risk Sentiment Sends DXY Sailing Back Through 100.00

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 supply at 1.1857/1.1352 (intersects with a long-term trendline resistance [1.6038]) 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 is seen recovering off worst levels, on track to perhaps form another Japanese hammer candlestick pattern out of current demand.

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

Daily timeframe:

Pattern traders will note the large potential bearish pennant pattern between 1.1147/1.0635, forming since late March.

A convincing daily close out of the current pennant pattern structure might give rise to a fresh wave of selling. Breaking lower entails tipping a 78.6% Fib level at 1.0745 and ultimately competing with demand at 1.0526/1.0638, an area extended from March 2017. Sustained upside, on the other hand, may lead to a whipsaw through the pattern’s upper boundary into the 200-day simple moving average (SMA), currently circling 1.1015.

H4 timeframe:

After crossing paths with trendline support (1.0635) Thursday, EUR/USD found itself attempting to regain footing, reaching highs at 1.0850 on Friday. Monday had the bulls come out swinging Monday on news Germany and France proposed joint EU debt issuance, a pivotal moment in the bloc’s history.

Against the dollar, the euro rallied to highs at 1.0926, crossing paths with a 61.8% Fib level 1.0921, with a break unmasking supply at 1.1057/1.1013.

H1 timeframe:

Recent upside saw intraday candles power through 1.0850 and 1.09, with Monday’s session pausing for breath marginally off best levels. The 100-period simple moving average has mildly turned higher in recent trading, echoing the possibility of a continuation move towards 1.0950, encased within supply from 1.0955/1.0946.

Indicator-based traders may also find use in noting the RSI trades marginally off peaks at 85.00, considered an extremely overbought reading.

Structures of Interest:

On the one hand, we have monthly price showing signs of recovery out of demand from 1.0488/1.0912, with daily price displaying scope to approach higher levels. Additionally, H1 price shows promise towards 1.0950.

On the other hand, though, H4 price recently bumped into a 61.8% Fib level at 1.0921, potentially throwing a spanner in the works.

However, given monthly, daily and H1 price demonstrate the possibility of running higher, breakout buyers may be loading up, looking for 1.0950 as an initial target.

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 series of lower lows and lower highs has been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

Supply at 0.6618/0.6544 remains a dominant fixture on this timeframe, though has, as of yet, been unable to deliver much in terms of downside.

It should also be emphasised the current supply 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 seen around 0.6661.

An extension to the downside faces possible support from 0.6372ish, with a break unmasking 0.6253 (April 21 low).

H4 timeframe:

Partially altered from previous analysis –

After forming an early peak out of supply from 0.6581/0.6545, price shaped what appears to be a falling wedge between 0.6561/0.6432, closing the week out ahead of demand at 0.6356/0.6384.

Technically, the aforementioned demand is also encased within 0.6351/0.6395, a zone made up of 161.8% and 127.2% Fib ext. levels. Fibonacci followers will also note a 61.8% Fib level resides within the said demand at 0.6373.

Monday had the candles penetrate the upper boundary of the falling wedge pattern, with a take-profit target (yellow) set just north of current supply at 0.6595.

H1 timeframe:

As of current price, the pair is seen fading 0.6524 (May 13 high) in a manner suggesting a retreat towards 0.65 today. On top of this, we see bearish divergence out of the RSI indicator. In the event of a retest of 0.65, a whipsaw through the round number is also a possibility towards demand at 0.6483/0.6472 (prior supply). Interestingly, a 38.2% Fib ret level at 0.6480 also aligns with the noted demand zone.

Aside from the 0.6524 peak the 0.6536 peak (May 12 high), we see little hampering a rally towards 0.6550 on this timeframe.

Structures of Interest:

As highlighted in the weekly technical market insight, in order to bring in monthly supply at 0.7029/0.6664, daily supply at 0.6618/0.6544 will need to be overturned.

Shorter term action recently penetrated a falling wedge pattern, indicating additional gains could be on the horizon. With that being the case, breaking north of 0.65 has perhaps enticed breakout buying.

However, if another retest at 0.65 materialises today, this could provide a second opportunity to long this market, though do remain aware a whipsaw through the round number is also a possibility towards demand at 0.6483/0.6472 (prior supply).

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 also remains subdued, ranging between 107.76/105.98.

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:

Brought forward from previous analysis –

Since registering a top from 109.38 at the beginning of April, USD/JPY moulded a falling wedge pattern, which had its upper limit breached early last week in strong fashion. The take-profit target out of the said pattern, traditionally measured by taking the value of the base and adding this to the breakout point (purple), sets an objective of around 109.30.

Demand at 105.70/106.66 also remains a feature on this timeframe, with resistance likely expected to emerge off the 200-day simple moving average at 108.25.

H4 timeframe:

Partially altered from previous analysis –

Support at 106.91, a level uniting with a 50.0% ret level at 106.86 and trendline support (106.35), restricted downside from Wednesday last week.

Having seen 106.91 offer a ‘floor’, supply at 108.10/107.79 may re-enter the fold this week. Note this area capped upside on a number of occasions since mid-April.

H1 timeframe:

USD/JPY pencilled in modest gains Monday, helping form what appears to be a rising wedge pattern between 106.85/107.37. Notably, the lower edge of the said pattern appears to be under attack, which may be enough to entice selling towards the pattern’s take-profit target at 106.81 (yellow).

Technical structure to the upside, nonetheless, resides around supply coming in from 107.67/107.57. To the downside, price action will have to get through the 100-period simple moving average at 107.13 and the 107 handle before reaching the rising wedge’s take-profit target.

Structures of Interest:

Along the same lines as Monday’s weekly technical market insight, the pair is tipped to potentially march higher this week after breaking through a daily falling wedge pattern, with the 200-day SMA at 108.23 on the radar as initial resistance.

H4 support at 106.91, and its local confluence, remains of interest, as price is buoyed 40 pips above the level. However, the recent break of the H1 rising wedge pattern may signal buyers are in trouble and could be heading back to 107ish.

GBP/USD:

Monthly timeframe:

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

Though under pressure, support at 1.1904/1.2235 remains in motion in May. A violation of this area, nevertheless, puts forward a 127.2% Fib ext. level at 1.1297. Neighbouring resistance, should we see an attempt at recovery, can be found 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:

A few pips south of supply at 1.2649/1.2799 (prior demand), we recently saw a double-top pattern form at 1.2647, with last Wednesday consuming the neckline (April 21 1.2247) and establishing a potential take-profit target (purple) around 1.1855.

Monday, however, snapped a five-day losing streak and closed a touch off best levels, drawing the pair towards the underside of the pattern neckline at 1.2247.

H4 timeframe:

Channel support (1.2266) capped downside on Monday, sending the H4 candles back within the walls of supply at 1.2147/1.2257 (prior demand). Technically, it appears the channel support is all that stands in the way of a move towards fresh demand found at 1.1771/1.1886.

H1 timeframe:

Sterling caught a healthy bid against the buck Monday, reclaiming 1.21 to the upside and taking out 1.2150 and eventually channel resistance (1.2467).

As of current price, we can see the H1 candles flirting with 1.22 and the 100-period simple moving average (SMA) at 1.2198.

Structures of Interest:

Buyers appear to have the upper hand at 1.22 at the moment, establishing support off the recently penetrated channel resistance (H1). 1.2250 is a visible upside target from here, which joins closely with the daily double top neckline at 1.2247 and is positioned close by H4 channel resistance from 1.2642.

Therefore, 1.2250 rests as a potential upside target for breakout buyers north of 1.22, and also as a platform for potential selling opportunities.

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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

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