May 27th 2020: Improved Sentiment Bolsters Risk Currencies

May 27th 2020: Improved Sentiment Bolsters Risk Currencies

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 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, as you can see, is recovering off worst levels, on track to 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:

Against the US dollar, the euro came out swinging Tuesday, chucking light on the 200-day simple moving average at 1.1010 as a feasible resistance today.

Although the pair could pause for breath at 1.1010, journeying through here positions supply at 1.1239/1.1179 in the firing range, stationed just under another area of supply at 1.1323/1.1268. A rejection from 1.1010, on the other hand, may position trendline support (1.0635) in sight.

H4 timeframe:

EUR/USD exhibited a one-sided display Tuesday, gathering traction ahead of a 50.00% ret level support at 1.0890 as the US dollar index glided through 99.00.

Recognised supply from 1.1057/1.1013, an area capping upside since late March, is now within walking distance. Interestingly, the 200-day simple moving average on the daily timeframe sits just under the aforesaid supply.

H1 timeframe:

Heading into US trade on Tuesday, intraday action saw momentum slightly tail off on approach to the widely watched round number 1.10. Indicator-based traders will also note the RSI oscillator is producing bearish divergence out of overbought territory.

Technically, this is a sign sellers may be gathering strength. A drop from current price could take the pair to demand at 1.0914/1.0930, a base joining closely with a 100-period simple moving average.

Above 1.10, nonetheless, traders face supply at 1.1033/1.1016.

Structures of Interest:

Monthly price displays scope to cross into higher ground out of demand at 1.0488/1.0912, potentially giving legs to daily price to conquer the 200-day simple moving average.

The lower timeframes illustrate the possibility of a whipsaw forming through 1.10. Running buy-stops above this number into H1 supply at 1.1033/1.1016, an area sat inside H4 supply from 1.1057/1.1013, may spark an intraday sell-off. Ultimately, a H1 close back beneath 1.10 adds weight to bearish themes.

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, together with May’s 2.2% run higher has, as you can see, landed price at the door 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:

Risk-on trade rejuvenated an Aussie bid Tuesday, elevating AUD/USD 1.7% to the upside. The 200-day simple moving average seen around 0.6656 entered vision, as a result of recent bidding. However, a break through the dynamic value today unmasks channel resistance (0.6557), viewed closely with supply at 0.6777/0.6736.

H4 timeframe:

Heading into Tuesday’s close, H4 addressed supply at 0.6695/0.6664, by way of a Japanese shooting star candlestick pattern, considered a bearish signal. What’s interesting here is the aforesaid supply is glued to the lower limit of monthly supply at 0.7029/0.6664.

Yet, harmonic traders will note an ABCD bearish pattern (orange) completes a handful of pips above the current H4 supply at 0.6708.

H1 timeframe:

After a fleeting move to highs at 0.6675, H1 hovers around 0.6650 as we transition into Asia Wednesday. 0.67 denotes available resistance north of 0.6650, with 0.66 resting as logical support.

The RSI indicator, after registering a vigorous peak at 87.80, exited overbought territory and is within walking distance of RSI trendline support. A break of here could serve as a sign for moves to 0.66.

Structures of Interest:

Having monthly supply at 0.7029/0.6664 in play, together with the 200-day simple moving average and H4 supply at 0.6695/0.6664 in the form of a shooting star candlestick signal, bearish themes sub 0.6650 are an option today, with 0.66 calling for attention as an initial downside target.

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 on May 11 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 108.29 will need to be defeated.

H4 timeframe:

Partially altered from previous analysis –

Structurally, supply at 108.10/107.79 remains present on the H4 timeframe, along with a local demand area at 107.21/107.41, consequently forming a week-long range. A break of the latter advertises moves to support priced in from 106.91, whereas navigating waters above the aforesaid supply could lead to resistance at 108.53 making an appearance.

H1 timeframe:

The tail end of last week, as well as early movement this week, found a home under trendline resistance (prior support – 106.85). USD/JPY, as you can see, swung lower Tuesday, dethroning the 100-period simple moving average and shortly after retesting the value as resistance. Demand is not expected to emerge until reaching 107.15/107.23. Technically, we also have an ABCD bullish correction (orange) in process, terminating within the parapets of the said demand, along with a nearby 61.8% Fib ret level at 107.26.

Structures of Interest:

Daily price displays room to approach the 200-day simple moving average at 108.29 and the falling wedge take-profit target of around 109.30.

H1 demand at 107.15/107.23 is glued to the underside of the current H4 demand found at 107.21/107.41, therefore sellers off the 100-period simple moving average could face opposition from the top edge of H4 demand 107.41.

Despite this, given H1 demand comes with an ABCD correction and a nearby 61.8% Fib ret level at 107.26, noting this level as a buy zone may be an idea.

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. Neighbouring resistance, should we see an attempt at recovery, can be found in the form of a trendline (1.7191). A violation of support, nevertheless, puts forward a 127.2% Fib ext. level at 1.1297.

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 May 13 consuming the neckline (April 21 1.2247) and establishing a potential take-profit target (purple) around 1.1855.

In recent sessions, the double-top neckline at 1.2247 held as resistance – that was until yesterday’s 1.2% advance. However, recent buying does not imply the double-top pattern will fail; what it does mean, though, traders are able to sell this market at a better price, as protective stop-loss orders are generally positioned above pattern peaks: 1.2647.

H4 timeframe:

According to the H4 chart, price action has been grinding channel support (1.2642 – prior resistance) since topping last Tuesday at 1.2296. Yesterday, nonetheless, gathered traction to the upside, producing what appears to be the D-leg of an ABCD bearish configuration (orange) at 1.2389.

Above the ABCD completion, trendline resistance (prior support – 1.2163) is seen uniting with supply at 1.2477/1.2438.

H1 timeframe:

Amid a sharp slump in the USD Tuesday, sterling found itself testing highs at 1.2362, brushing aside a number of key technical resistances on the H1 timeframe and hauling the RSI indicator into overbought waters.

Supply at 1.2373/1.2345 put a cap on gains as we headed into US trade, an area that could force a retest at 1.23. Still, a whipsaw through the round number is in the offing, knowing demand (prior supply) at 1.2295/1.2266 resides close by.

Structures of Interest:

Monthly price holds 1.1904/1.2235, despite positioned against the major trend.

Sellers on the daily timeframe appear fragile right now, in spite of the recent double-top resistance forming at 1.2647.

H4 price has eyes on 1.2390ish – the ABCD completion – as possible resistance.

H1 price is testing supply at 1.2373/1.2345. A whipsaw through this area to 1.24 is a possibility, which happens to align nearby the H4 ABCD correction. This scenario may appeal to intraday sellers. However, do be aware we are coming off monthly support.

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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