Weekly Technical Market Insight: 10th – 14th May 2021

Weekly Technical Market Insight: 10th – 14th May 2021, FP Markets

Charts: Trading View

US Dollar Index (Daily Timeframe):

April’s end-of-month recovery gain—movement trimming a three-week decline—failed to motivate further USD outperformance in the first full week of May. According to the US dollar index (ticker: DXY), a gauge of USD value against six major currencies, the greenback shed 1.2 percent and settled at weekly lows.

For those who read the previous week’s technical market insight, you may recall the following (italics):

The space between the 200-day simple moving average at 91.98 (91.92) and resistance from 91.36 (previous Quasimodo support) delivers a potential ceiling to be mindful of this week, strengthened on the back of a clear-cut downtrend since early 2020.

As evident from the chart, 91.98/91.36 proved effective resistance, with the latter half of the week underlining a vigorous bearish phase and shaking hands with trendline support, taken from the low 89.20 (arranged just north of support coming in from 90.00). Territory south of 90.00 shines the technical spotlight on another bed of support at 89.34.

In terms of trend, as highlighted in previous writing, long-term price action has been underwater since topping ahead of 103.00 in March 2020—many analysts likely refer to this downward movement as a primary trend on the daily scale. Also of technical relevance is the 93.43 31st March peak. April’s slide, along with last week’s additional losses, echoes seller strength within the current downtrend.

As measured by the RSI indicator, momentum levelled off a stone’s throw below the 50.00 centreline and settled the week around 35.00. This week, therefore, may witness a test of oversold space, targeting support at 21.36.

  • The combination of trendline support and nearby support at 90.00 unearths a potential bullish scenario this week. However, downside risks remain evident, given the longer-term trend favours sellers. 90.00 support giving way, therefore, perhaps opens the door for an approach to 89.34 support.

Weekly Technical Market Insight: 10th – 14th May 2021, FP Markets

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 1.2 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:

Europe’s single currency clocked two-month highs against the greenback on Friday, powered by miserable US jobs data.

Mid-week technical trading observed price bottom north of the 200-day simple moving average at 1.1944, with recent trade testing Quasimodo resistance at 1.2169. Additional progress this week would bring light to another Quasimodo formation at 1.2278.

Latest out of the RSI reveals the value recoiled from support at 51.36, threatening a possible visit to overbought space this week—in particular resistance at 80.39.

As for trend, despite the 2021 retracement, the overall bias remains to the upside.

H4 timeframe:

Mid-week action on the H4 also saw trade explore support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converged).

EUR/USD bulls, as you can see, entered an offensive phase from 1.1971/1.1990 and, with the help of Friday’s bullish energy, scaled resistance at 1.2108 (now set as possible support) and shined the headlights on Quasimodo resistance drawn from 1.2180 (set just above the daily Quasimodo resistance at 1.2169).

H1 timeframe:

Clearance of Quasimodo resistance at 1.2135 (now labelled support) on Friday—and having noted limited active (potentially consumed) supply to the left of price (see late February)—could have the 1.22 figure call for attention this week (not visible on the chart). Price action traders will also note supply at 1.2239-1.2216 shelters the aforementioned round number.

However, before climbing to the 1.22 neighbourhood, traders are urged to pencil in the possibility of a 1.2135 retest.

From the RSI, momentum registered overbought status on Friday and touched gloves with resistance at 78.97. This suggests a dip in upside momentum early week, possibly triggering a retest of H1 price support noted above at 1.2135.

Observed levels:

Long term:

The vibe out of the monthly timeframe shows price extending recovery gains from demand at 1.1857-1.1352, consequently placing a question mark on the daily timeframe’s Quasimodo resistance this week at 1.2169.

Short term:

With the daily timeframe’s Quasimodo unlikely to deliver much to write home about, a retest of H1 support at 1.2135 is a bullish theme that could unfold early trading this week and attract dip-buyers. Upside targets from this area are seen at H4 Quasimodo resistance from 1.2180, followed by the 1.22 figure on the H1 and nearby H1 supply at 1.2239-1.2216.

Weekly Technical Market Insight: 10th – 14th May 2021, 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. However, with May trading 1.7 percent in positive territory, visiting the aforesaid areas could be on the table.

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:

Amidst intensified USD downside Friday—fuelled by disappointing non-farm payrolls—the Australian dollar flexed its financial muscle and marginally overthrew familiar resistance from 0.7817 (now labelled support). Note the currency pair has been consolidating beneath 0.7817 since mid-April.

Settling north of 0.7817 stirs a possible bullish scenario this week, with limited resistance visible until reaching supply at 0.8045-0.7985 (stationed just south of monthly supply mentioned above at 0.8303-0.8082).

The RSI value trekked above the 50.00 centreline last week—a sign of a strengthening trend—and appears poised to reach trendline resistance, extended from the high 80.12.

With respect to trend, despite a two-month retracement, we have been decisively higher since the early months of 2020.

H4 timeframe:

Friday adopting a bullish phase, as you can see, not only established demand at 0.7759-0.7791 (decision point to break resistance at 0.7816 [now labelled support]), we can also see price advanced into the walls of demand-turned supply at 0.7848-0.7867.

Removing the aforesaid supply shifts attention to resistance at 0.7899, though before an attempt to take hold of 0.7848-0.7867 is seen, a retest at 0.7816 support may materialise.

H1 timeframe:

Thanks to Friday’s ascent, the H1 scale shows demand at 0.7775-0.7787 took shape, with subsequent upside breaking/retesting the 0.78 figure to touch 0.7850 resistance into the close (fixed within H4 supply at 0.7848-0.7867).

Similar to the EUR/USD H1 chart (see above), the AUD/USD demonstrates limited active supply above 0.7850 (see late February action) until resistance at 0.7891 (previous Quasimodo support) and the 0.79 figure.

The RSI tested resistance at 80.85 on Friday and exited overbought space. Any downside from here is likely to approach trendline support, drawn from the low 24.50.

Observed levels:

Long term:

In addition to the uptrend present on the daily timeframe since 2020, price climbing resistance at 0.7817 on Friday perhaps clears the river north for further buying this week, targeting supply from 0.8045-0.7985.

Short term:

The US session connecting with 0.7850 resistance on the H1 scale Friday ignited mild bearish flow.

The weak bearish presence could have H4 buyers probe supply at 0.7848-0.7867 this week and trigger a bullish wave to the 0.79ish neighbourhood.

Short-term bulls, therefore, would likely welcome a 0.7850 break/retest scenario.

Weekly Technical Market Insight: 10th – 14th May 2021, 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:

Supply at 109.97-109.18 entertained price action last week, triggering bearish activity on Friday. The leg lower—which shook hands with trendline support, extended from the low 102.59—was accompanied by a decline in US Treasury yields and lower-than-forecast US jobs data.

Pushing beyond the aforementioned trendline support this week not only warns of upside weakness, it underlines demand at 107.58-106.85 (prior supply) and a 38.2% Fib level from 107.73 as potential downside objectives. North of 109.97-109.18, however, casts light towards longer-term resistance at 110.94-110.29, stationed under supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator crossed paths with resistance at 57.00 last week and ducked back under the 50.00 centreline into the close. This suggests additional downside momentum could be on the cards.

H4 timeframe:

NFP-induced selling on Friday pulled the currency pair through support at 108.99 (now labelled resistance) to join 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).

Unseating the aforementioned support area this week emphasises continuation selling to support priced in at 107.44 (dovetails with a 1.272% Fib projection at 107.41).

H1 timeframe:

109 and Quasimodo support at 108.80 suffered a heavy blow in the wake of Friday’s employment data.

The spirited decline had price action bump heads with a support area at 108.15-108.34 (glued to the underside of H4 demand at 108.20-108.43), extended from early March 2020, and subsequently retest the lower side of the breached Quasimodo support as resistance. Below 108.15-108.34, traders are likely to have the 108 figure pinned on the board.

Momentum, based on the RSI, unwrapped a rebound from oversold space at the closing stages of the week. RSI resistance at 39.97 is nearby; RSI support, however, can be seen fixed around 18.76.

Observed levels:

Long term:

The monthly and daily timeframes display converging signals, thanks to Friday’s dip.

Monthly action is attempting to ignite support off the breached descending resistance, while daily flow recently touched base with trendline support.

Short term:

Lower on the curve, H4 and H1 technical structure—in line with the bigger picture—shows price responding from demand/support areas between 108.15 and 108.43.

The above, therefore, points the spotlight to a potential bullish theme early week, with the 109 figure (H1) arranged as an upside objective (links with H4 resistance at 108.99).

Weekly Technical Market Insight: 10th – 14th May 2021, 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.

The first full week of May finished on the front foot—within striking distance of April highs (1.4009)—up by 1.2 percent.

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:

Resistance at 1.4003, as aired in recent writing, has proved a stubborn hurdle since March, capping bullish attempts on multiple occasions. Notably, sterling accelerated to the upside on Friday as dismal US jobs data weighed on its US counterpart, consequently forming a near-full-bodied bullish candle that paved the way for a 1.4003 test.

Any downside from 1.4003 this week throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609. However, should buyers extend Friday’s bullish showing and override current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value recoiled from trendline support, pencilled in from the low 36.14, and cemented 50.00+ status into the close last week (a sign of a strengthening uptrend). In conjunction with this, GBP/USD has remained entrenched within a long-term uptrend since early 2020, despite the recent two-month retracement.

H4 timeframe:

Drawing price action northbound, we can see Friday’s ascent toppled resistance at 1.3919 (now labelled support) and came within touching distance of Quasimodo resistance at 1.4007 in the shape of a shooting star candlestick pattern (bearish signal).

Interestingly, rupturing 1.4007, according to price action specifics, could have the currency pair advance as far north as the 1.4200 neighbourhood. Though a bearish wave unfolding south of 1.4007 shines light on support from 1.3919.

H1 timeframe:

The technical stage on the H1 watched Fibonacci resistance at 1.4013-1.3988 (houses the key figure at 1.40, along with H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003) welcome price action on Friday. The technical confluence around 1.40 saw upside momentum smooth off, underlining a potential retracement to support from 1.3929 early week.

Out of the RSI, we can see the value spiked overbought terrain on Friday and—albeit leaving RSI resistance at 84.66 unchallenged—settled around 63.53.

Observed levels:

Long term:

Despite hesitation within February’s range, the monthly timeframe shows a trendline resistance breach occurred late 2020. Should the 1.4376 top move aside, longer-term buying may become a key theme in this market.

Resistance at 1.4003, however, remains noteworthy on the daily timeframe this week.

Short term:

H1 Fibonacci resistance at 1.4013-1.3988, alongside additional technical levels (holds the 1.40 figure [H1], H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003), is likely on the radar for many traders this week. Bearish flow from this region has H1 support at 1.3929 to target, followed by H4 support at 1.3919 and then the 1.39 figure.

Weekly Technical Market Insight: 10th – 14th May 2021, FP Markets


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  • Weekly Technical Market Insight: 10th – 14th May 2021, FP Markets
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