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July 10th 2020: DXY Firms as Risk Sentiment Sours

July 10th 2020: DXY Firms as Risk Sentiment Sours, FP Markets

EUR/USD:

Monthly timeframe:

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

The month of May, as you can see, recovered off worst levels out of demand from 1.0488/1.0912 and closed firm.

June extended gains to highs at 1.1422 and finished adding 1.19%, despite running into opposition at the lower ledge of nearby supply from 1.1857/1.1352 mid-month (unites with long-term trendline resistance [1.6038]).

July is currently seen toying with the aforesaid supply.

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

Daily timeframe:

Partially altered from previous analysis –

The month of June observed EUR/USD address a potential reversal zone (PRZ), derived from a harmonic bearish bat pattern. The base is comprised of an 88.6% Fib level at 1.1395, a 161.8% BC projection at 1.1410 and a 161.8% Fib ext. level at 1.1462 (red oval). It’s typical, in the case of bearish formations, to see traders sell PRZs and place protective stop-loss orders above the X point (1.1495). Common take-profit targets fall in at the 38.2% and 61.8% Fib levels (of legs A/D) at 1.1106 and 1.0926, respectively.

As you can see, traders remain undecided right now, leaving sellers in a precarious situation as the aforementioned Fib targets have yet to be met.

H4 timeframe:

Resistance at 1.1348 came under fire Thursday, though buyers were unable to muster enough strength to draw in neighbouring supply located at 1.1415/1.1376. This led to an impulsive decline, listing channel support (prior resistance – 1.1422) back in view. Levels of interest under the aforesaid channel has the July 3 low at 1.1219 to target, as well as demand at 1.1189/1.1158 (prior supply).

H1 timeframe:

Heading into US trading Thursday, intraday price movement unwound from levels just under 1.1350 in dominant fashion, as the US dollar index stamped in a relatively impressive recovery. After dethroning demand at 1.1316/1.1306, price went on to tackle the 1.13 level and 100-period simple moving average, with price now bound for lows around 1.1265 and demand at 1.1239/1.1251, an area bringing with it 1.1250 support.

Beyond 1.1239/1.1251, eyes will be on demand at 1.1181/1.1202 and the 1.12 level.

Structures of Interest:

According to the above, sellers appear to have the advantage heading into Friday.

Consequently, intraday sellers may make a show under 1.13 today, headed for the 1.1250 neighbourhood (and H1 demand at 1.1239/1.1251), which happens to align closely with channel support on the H4 timeframe. Movement beyond H1 demand at 1.1239/1.1251 will look to H1 demand at 1.1181/1.1202 (and the 1.12 level).

July 10th 2020: DXY Firms as Risk Sentiment Sours, FP Markets

AUD/USD:

Monthly timeframe:

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

May’s extension, together with June’s follow-through, has supply at 0.7029/0.6664 echoing a vulnerable tone in early July, particularly as an intersecting long-term trendline resistance (1.0582) shows signs of giving way.

Regarding the market’s primary trend, a series of lower lows and lower highs have been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

AUD/USD ousted resistance at 0.6931 Monday, with the latter now featured as support.

The break to the upside shines focus on two trendline resistances close by (prior supports – 0.6744/0.6671); a violation here unmasks another resistance at 0.7197.

H4 timeframe:

Brought forward from previous analysis –

Since June 10, H4 has been in the process of establishing a (bullish) pennant pattern between 0.7064/0.6776, generally considered a continuation pattern among chart pattern traders.

As you can see, though, last week had price penetrate the upper boundary of the aforesaid pennant, unearthing a buy signal.

In light of daily price establishing position above 0.6931, H4 supply at 0.7058/0.7029 remains featured as the next obstacle on the H4 timeframe.

H1 timeframe:

The Australian dollar pared a portion of Wednesday’s gains on Thursday, nosediving from supply at 0.7003/0.6987, specifically the 0.70 level, amid risk aversion.

Consequently, demand at 0.6939/0.6952 (and 0.6950 support) made an entrance into US trade, after toppling the 100-period simple moving average.

Outside of the aforesaid demand, 0.6927, 0.6922 and 0.6901 denote potential swing low support points, though a break of current demand will likely see price bound for the 0.69 level, or H4 support at 0.6886.

Structures of Interest:

Partially altered from previous analysis –

Monthly price appears to be squeezing sellers out of the market as daily price holds 0.6931 as support. This, coupled with room to advance on the H4 to supply at 0.7058/0.7029, may see H1 demand at 0.6939/0.6952 (and 0.6950 support) hold and summon buyers into the market.

July 10th 2020: DXY Firms as Risk Sentiment Sours, FP Markets

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.

April and May were pretty uneventful, with June also wrapping up indecisively in the shape of a neutral doji candlestick pattern.

Areas outside of the noted triangle can be seen at supply from 126.10/122.66 and demand coming in at 96.41/100.81.

Daily timeframe:

Partially altered from previous analysis –

Despite failing to connect with the 200-day simple moving average at 108.36 last week, upside momentum came to an abrupt halt and fashioned a bearish outside day.

Having seen a mild downbeat tone take over the pair of late, light still shines on a possible run back to demand at 105.70/106.66.

H4 timeframe:

Brought forward from previous analysis –

Demand at 107.03/107.28 remains a key feature on the H4 timeframe, despite mid-week trade failing to journey above 107.70. It should also be noted, in case we cross into deeper water, we have a trendline support lurking just beneath the current demand zone, drawn from 106.58.

H1 timeframe:

Demand at 107.16/107.26, an area located within the upper boundary of H4 demand, came under attack Thursday. Failure here opens up the risk of a return to 107 and associated trendline support (prior resistance – 107.45).

Structures of Interest:

A rally from H1 demand at 107.16/107.26, as a consequence of Thursday’s action, is unlikely to come to fruition.

Traders, therefore, will likely mark 107 as viable support on the H1 today, a level joining with H1 trendline support (107.45), as well as another trendline support from the H4 timeframe (106.58).

July 10th 2020: DXY Firms as Risk Sentiment Sours, FP Markets

GBP/USD:

Monthly timeframe:

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

Support at 1.1904/1.2235 and long-term trendline resistance (1.7191) offers clear structure on the monthly timeframe at the moment, with the latter prompting a notable upper shadow in June.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008, placing 1.1904/1.2235 support in a vulnerable position.

Daily timeframe:

Partially altered from previous analysis –

Demand at 1.2192/1.2361 received price action last week, stirring a notable bid. This week has so far continued to build on recent momentum, moving to highs at 1.2669 yesterday.

Thursday wrapped up by way of a gravestone doji candlestick pattern, considered a bearish indicator, missing the 200-day simple moving average at 1.2688 by a hair. A violation of this dynamic value unearths supply at 1.3021/1.2844.

H4 timeframe:

Leaving supply at 1.2720/1.2682 unopposed Thursday, downside gained speed.

Overall, though, price action remains compressing within the walls of an ascending channel formation between 1.2257/1.2530. The next available demand, outside of channel support, rests at 1.2462/1.2506, standing just ahead of support at 1.2453.

H1 timeframe:

Following a 1.26 retest, price gathered momentum to the upside in early Asian trading on Thursday, a move that eventually eclipsed 1.2650 resistance and tested highs at 1.2669.

Things turned sour heading into the US session, however, as the DXY strived to regain lost ground. This hurled GBP/USD back to 1.26, which remains in motion as we transition into Asia Friday.

Failure to influence buyers off 1.26 shines light on nearby trendline support (1.2257), accompanied by the 100-period simple moving average. Traders will note the aforesaid trendline represents the underlined channel support, based on the H4 timeframe.

Structures of Interest:

The lack of enthusiasm off 1.26 is concerning.

For this reason, a dip to H1 trendline support (H4 channel support) is likely in store today. GBP/USD trendlines tend to perform favourably, particularly when accompanied by additional confluence (100-period simple moving average). However, traders will also want to pencil in the possibility of a whipsaw through the aforesaid trendline to 1.2550, before buyers step into the frame.

July 10th 2020: DXY Firms as Risk Sentiment Sours, FP Markets

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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