May 28th 2020: DXY Vulnerable Sub 99.00 Though Daily Demand at 98.18/98.65 May Hamper Downside

May 28th 2020: DXY Vulnerable Sub 99.00 Though Daily Demand at 98.18/98.65 May Hamper Downside

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:

Partially altered from previous analysis –

The key observation on the daily timeframe this morning shows price engaging the underside of the 200-day simple moving average at 1.1010. Although commonly used to determine trend direction, moving averages often provide support and resistance.

While the pair may 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 which unites with a trendline resistance (1.0879). A rejection from 1.1010, on the other hand, may position trendline support (1.0635) in sight.

H4 timeframe:

Wednesday observed EUR/USD close in on supply from 1.1057/1.1013, an area that’s capped upside since late March. Adding weight to the zone as a possible resistance point, the 200-day simple moving average on the daily timeframe sits just under the aforesaid supply.

If the mood changes and we dethrone current supply, traders will likely note the possibility of 1.1189/1.1158 making a show, a rally-base-drop supply zone.

H1 timeframe:

Following a vigorous dip to lows at 1.0934, buyers regained consciousness ahead of the 100-period simple moving average and demand at 1.0914/1.0930, and whipsawed through 1.10 into H1 supply at 1.1033/1.1016. As you can see, traders faded upside momentum above 1.10, shorting buy-stop liquidity that delivered moves back beneath 1.10.

A H1 close back above the round number could see moves through current H1 supply to 1.1050, based on the premise the supply area is potentially weakened from the latest reaction.

Structures of Interest:

As stated in recent analysis, monthly price displays scope to push out of demand at 1.0488/1.0912, potentially giving legs to conquer the 200-day simple moving average on the daily timeframe.

Although we’re holding off H4 supply at 1.1057/1.1013, H1 price crossing back above 1.10 places a question mark on its strength, as H1 supply at 1.1033/1.1016 also echoes a weak tone.

As it stands, technical action suggests bulls may take EUR/USD higher today, navigating through 1.10 and H1 supply at 1.1033/1.1016. As such, bullish themes above 1.10 could be in store.

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 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:

AUD/USD bulls, as you can see from the daily timeframe this morning, ran into opposition by way of the 200-day simple moving average seen around 0.6655.

Stripping sellers from 0.6655 unearths channel resistance (0.6557), connecting closely with supply at 0.6777/0.6736.

H4 timeframe:

Partially altered from previous analysis –

In recent sessions, price action on the H4 chart 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.

Wednesday landed the candles at an area of support derived from 0.6528/0.6583, currently hampering further selling. In the event a break of this base unfolds, though, this will likely shine the headlights on demand coming in at 0.6356/0.6384.

H1 timeframe:

Sellers toppled 0.6650 heading into US trade Wednesday, after a fleeting move to highs at 0.6679. 0.66 put up little fight, with price crossing paths with demand at 0.6572/0.6561 (prior supply) as well as the 100-period simple moving average, enough to mildly pare losses back above 0.66. 0.6650 rests as feasible resistance from this point.

Structures of Interest:

Having monthly supply at 0.7029/0.6664 in play, together with the 200-day simple moving average, the H4 support area at 0.6528/0.6583 could struggle to print much to the upside.  With this being the case, it’s unlikely buyers will be able to maintain a presence above 0.66 today. In fact, it would likely raise a few eyebrows should we overcome 0.6650 today, therefore marking a strong resistance point to keep an eye on today.

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 108.30 will need to be defeated.

H4 timeframe:

Brought forward 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:

Early London Wednesday entered into a phase of notable buying, consequently taking out the 100-period simple moving average and producing a demand area seen at 107.46/107.56.

As you can see, price topped a few pips ahead of 108 as we transitioned into US trade. The 100-period simple moving average, currently circling 107.64, is in place as the next possible support, with a break bringing the aforesaid demand to light.

Structures of Interest:

As aired in recent analysis, 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.

H4 supply at 108.10/107.79 forced H1 price lower yesterday, leaving 108 unopposed. Today, therefore, could see a whipsaw through the 100-period simple moving average into H1 demand at 107.46/107.56. Failure to hold here shifts attention back to demand at 107.15/107.23, an area glued to the underside of the current H4 demand found at 107.21/107.41 and forming a close connection with a H1 61.8% Fib level at 107.26.

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 low 1.2247) and establishing a potential take-profit target (purple) around 1.1855.

In recent sessions, the double-top neckline at 1.2247 has had its nerve tested. However, recent buying does not imply the double-top pattern will fail; what it does mean, though, is traders are able to sell this market at a healthier risk/reward ratio, as protective stop-loss orders are generally positioned above pattern peaks: 1.2647.

H4 timeframe:

Sterling sunk vs. the greenback on Wednesday, hurling candle action to lows at 1.2204, a whisker short of healthy demand from 1.2170/1.2204 and trendline support (1.2075). Breaking lower here possibly liberates sellers, with limited demand visible on this timeframe until channel support (prior resistance – 1.2643).

H1 timeframe:

Heading into US trade Wednesday witnessed a pronounced intraday sell-off, a move that ousted 1.23, demand at 1.2295/1.2266 and the 100-period simple moving average. Momentum slowed, however, once the pair linked with demand (prior supply) at 1.2220/1.2199, consequently tempting buyers back into the market.

1.2295/1.2266 stands as possible supply today, though it is also worth taking into account we could see a whipsaw form to 1.23 here.

Structures of Interest:

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

Sellers on the daily timeframe still have a hand in the fight around the double-top resistance neckline at 1.2247.

H4 price formed a bottom a few pips shy of demand at 1.2170/1.2204 and trendline support.

H1 price lurks under supply at 1.2295/1.2266 after rebounding from demand at 1.2220/1.2199.

In a nutshell, monthly and H4 price suggest buyers may govern movement, while daily and H1 price indicate we could be navigating lower levels today.

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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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