May 21st 2020: Dollar Weakens to 99.00 Ahead of US Unemployment Data

May 21st 2020: Dollar Weakens to 99.00 Ahead of US Unemployment 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 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:

Partially altered from previous analysis –

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

Aside from Tuesday’s decisive retreat off 1.0976, the euro has outperformed against its US counterpart this week. Wednesday rose to highs of 1.0999, breaching the upper border of the current pennant formation and shining light on the 200-day simple moving average (SMA), currently circling 1.1014.

H4 timeframe:

Dipping from Tuesday’s peak of 1.0976, technical action bottomed out of demand at 1.0925/1.0897 (prior supply), leading to a decisive recovery that pinned supply at 1.1057/1.1013 in sight. This is an area that’s capped upside since late March.

H1 timeframe:

Mid-way through London Wednesday, GBP/USD bulls voyaged northbound, forming fresh demand at 1.0955/1.0946 and toppling supply (prior demand) at 1.0971/1.0990. This led to tops formed just ahead of the widely watched 1.10 level, closely joined by a 127.2% Fib ext. level at 1.0995.

Above 1.10, skies are reasonably clear until reaching 1.1050; that is, of course, if we’re able to overthrow the 200-day simple moving average at 1.1014. Indicator-focused traders may also wish to note the RSI oscillator recently produced bearish divergence out of overbought territory.

Structures of Interest:

Although we’re seeing mild intraday weakness a few pips under 1.10 on the H1 timeframe, buyers may still have a hand in this fight until reaching the 1.1015 region. 1.1015 essentially represents the underside of H4 supply at 1.1013 and the 200-day simple moving average at 1.1014.

Therefore, technical studies indicate we may see a run of buy-stops above 1.10 today to bring in 1.1015 before sellers make their debut.

AUD/USD:

Monthly timeframe:

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

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 fixture on this timeframe, though faces strong buying at the moment, threatening the possibility of a breach to nearby 161.8% Fib ext. level at 0.6642. Traders may also include the 200-day simple moving average seen around 0.6659.

H4 timeframe:

Partially altered from previous analysis –

Recent analysis highlighted a falling wedge formed between 0.6561/0.6432, on approach to demand at 0.6356/0.6384.

Monday had the candles penetrate the upper boundary of the falling wedge pattern, with Tuesday and Wednesday extending upside and crossing paths with the falling wedge take-profit target, measured by taking the base and adding this value to the breakout point (yellow), at 0.6595.

Thanks to recent buying, supply at 0.6695/0.6664 is also now on the hit list.

H1 timeframe:

Upside lifted the H1 candles into orders at 0.66 Wednesday, likely running buy-stops upon testing highs at 0.6616, a move which missed supply at 0.6647/0.6622 by a hair.

A pullback from 0.66 may collide with trendline support (0.6411), with a break unmasking the 0.6550 base.

What’s also notable is the RSI indicator recently produced bearish divergence.

Structures of Interest:

The run of stops above 0.66 may have provided sufficient fuel for intraday sellers to push lower as we enter the more liquid sessions today. Reducing risk to breakeven at H1 trend line support is an idea, with a take-profit target set at 0.6550.

Longer term, daily supply at 0.6618/0.6544 appears to be holding on by a thread, unlocking the possibility of bringing in nearby 161.8% Fib ext. level at 0.6642 and 200-day simple moving average at 0.6659, a dynamic value essentially connecting with the underside of monthly supply at 0.6664.

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 108.08/105.98.

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, boosted by demand at 105.70/106.66. 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.

However, in order to reach the noted take-profit target, the 200-day simple moving average at 108.26 will need to be overthrown.

H4 timeframe:

Snapping a two-day winning streak, sellers established position out of familiar supply at 108.10/107.79/trendline resistance (106.92), and rotated to demand at 107.21/107.41, which essentially marks the decision point to break 107.76 (May 11 high) and run into the current supply area.

Beyond noted demand, traders face 106.91 as potential support.

H1 timeframe:

After stabbing through trendline support (106.03) and testing the 100-period simple moving average at 107.42ish, local supply at 107.67/107.57 made an appearance late Wednesday.

A break back above the current supply could see 108 re-emerge as resistance; a break lower, on the other hand, throws 107 in the frame, owing to the lack of active demand seen to the left of current price.

Structures of Interest:

Rebounding from H4 demand at 107.21/107.41, in the form of a Japanese hammer candlestick pattern, and daily price displaying room to approach the 200-day simple moving average at 108.26 and falling wedge take-profit target around 109.30, traders will be looking for H1 supply at 107.67/107.57 to give way today and run for 108.

However, a break of the H1 trendline support, albeit against higher-timeframe flow, is still noteworthy. A decisive H1 close south of the trendline may see intraday sellers attempt moves to 107.

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:

Partially altered from previous analysis –

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

As of late, we have seen the British pound claw back some losses vs. the greenback, derailing downside attempts. However, traders, particularly pattern traders, will note the neckline at 1.2247 holds firm, with yesterday producing a half-hearted shooting star candlestick pattern.

H4 timeframe:

Wednesday finished somewhat neutral, but not before taking price outside of channel resistance (1.2642) and retesting the base as support.

Additional supply is seen to the left of price around 1.2280 (lower arrow), but this base may simply be a reaction off the upper zone at 1.2324 (upper arrow).

The violation of the noted channel resistance, therefore, shines the headlights on supply from 1.2477/1.2438.

H1 timeframe:

Since connecting with supply at 1.2282/1.2222 on Tuesday, the H1 candles have been entrenched within a range between the noted supply and local support derived from 1.2223.

External support/resistance is found at 1.22/23, with support intersecting with the 100-period simple moving average at 1.2201.

Structures of Interest:

In a nutshell we have the following to work with:

Monthly price holds 1.1904/1.2235, though this area is positioned against the major trend.

Buyers and sellers butt heads around the underside of the daily double top neckline at 1.2247.

H4 price is seen retesting channel resistance-turned support from 1.2642.

H1 action is rangebound between supply at 1.2282/1.2222 and support from 1.2223.

Taking the above into account, H4 buyers may find a footing today, boosted by monthly price and also H1 action bottoming just ahead of 1.2223. On the other hand, daily sellers remain at the underside of the daily double top neckline from 1.2247 and could still attempt to reach its take-profit target at 1.1855.

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.

 

 

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