Weekly Technical Market Insight: 3rd – 7th August 2020

Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets

US Dollar Index:

The US dollar index, measured by factoring in the exchange rates of six major world currencies, relinquished additional ground last week, dropping nearly 1 percent and processing a sixth successive weekly decline. 

Early week, as you can see, had technical movement dethrone a daily bearish pennant (98.27/100.93) take-profit target at 93.97 (yellow). Also notable is a daily bear flag, shaped between 95.72/97.45, introducing itself as a sell signal at the beginning of July and completing, hitting take-profit, at 92.71 (measured by calculating the preceding move and adding the value to the breakout point – purple) on Friday by way of a clear-cut daily bullish engulfing pattern. It should be noted this area is situated just ahead of daily support at 92.26.

The RSI momentum oscillator also burrowed further into oversold territory last week, clocking as far south as 18.50 before turning modestly higher into the second half of the week. Note, though, the value has yet to exit the oversold area. 

Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets

EUR/USD:

Monthly timeframe:

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

The euro punched out a third successive monthly gain against the US dollar in July, adding nearly 5 percent. The move toppled long-term trendline resistance (1.6038) and made contact with the upper border of supply from 1.1857/1.1352. This argues a trend change to the upside may be on the horizon, with trendline resistance (prior support – 1.1641) on the radar as the next upside target.

 

Daily timeframe:
Friday’s attempt to sustain upside came to an abrupt halt, fading session peaks at 1.1909 ahead of supply at 1.2012/1.1937 and responding to an ABCD bearish pattern at 1.1872.

Increased interest to the downside this week targets support at 1.1553, with a breach throwing light on demand at 1.1369/1.1450, as well as a 38.2% Fib level at 1.1460 and trend-line support (1.0774). Harmonic traders will note the 38.2% Fib level generally represents the initial take-profit target out of ABCD configurations.

With respect to the RSI indicator, the value topped around 80.00 last week and exhibits signs of exiting overbought territory. 

 

H4 timeframe:
After cornering the lower ledge of supply from 1.1938/1.1909, by way of a bearish engulfing candlestick pattern, Friday settled around demand seen at 1.1731/1.1770. 

Other areas of note this week are demand at 1.1682/1.1716, which contained downside last Tuesday, a trendline support (1.1254) and additional demand at 1.1582/1.1621. 

 

H1 timeframe:
A fleeting attempt to gain control north of supply at 1.1891/1.1869 fell flat Friday as we made our way into London trade, a move which left resistance at 1.1936 unopposed.

Bolstered by recovery gains in the USD, the euro went on to divide the 1.18 level, cross paths with the 100-period simple moving average at 1.1776 and pull the RSI indicator to within touching distance of oversold levels. Areas to monitor, should the aforesaid SMA surrender ground, are demand coming in at 1.1724/1.1734 and the 1.17 level. 

 

Structures of Interest:

Long term:
The monthly timeframe urges traders to consider the possibility of a long-term trend change after overrunning trendline resistance. Clearing monthly supply at 1.1857/1.1352 would help confirm this. Before heading north, nonetheless, daily sellers may make an entrance off a recently completed ABCD bearish pattern at 1.1872, targeting support at 1.1553.

 

Short term:
H1 shows signs of wanting to engage lower levels early trade, perhaps visiting demand at 1.1724/1.1734 and 1.17. What could hold intraday sellers back, however, is H4 demand at 1.1731/1.1770.

All in all, with monthly price trading within supply, daily price coming off an ABCD bearish correction and H1 closing under 1.18, this reflects a reasonably strong bearish tone heading into the week. Therefore, this may pull intraday sellers towards at least the 1.17 neighbourhood.

Weekly Technical Market Insight: 3rd – 7th August 2020, 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 and July’s follow-through, witnessed supply at 0.7029/0.6664 and intersecting long-term trend-line resistance (1.0582) relinquish ground. Concluding July higher by 3.5 percent, buyers appear free to explore as far north as 0.8303/0.8082, a supply zone aligning closely with trendline resistance (prior support – 0.4776).

Despite taking trendline resistance, the market’s primary trend points south, demonstrating a series of lower lows and lower highs since mid-2011. 

 

Daily timeframe:
Confirmed by RSI bearish divergence out of overbought territory, supply at 0.7264/0.7224 impacted movement Friday, guiding the pair lower and snapping a five-day winning streak. Additional downside this week has support in view at 0.7067. 

 

H4 timeframe:
Friday brought 0.7246/0.7227 in view, an area extended from February 2019. Shaped in the form of a bearish engulfing pattern heading into European trading and fed by a strong USD recovery, AUD/USD sunk to lows at 0.7133.

Demand at 0.7082/0.7106 inhabits territory close by, while moves lower shines light on trendline support (0.6832). In addition, support also rests nearby at 0.7043 as well as another demand at 0.7015/0.7035.

 

H1 timeframe:
Noted as a possibility in Friday’s analysis, recent trade witnessed candles cross above 0.72 and, following a short-lived retest, challenge supply nearby at 0.7246/0.7227 (the H4 zone). 

Powered by daily selling, buy-stops (LQ) taken above 0.72 and selling out of the aforesaid H4 supply, price made its way back under 0.72 going into London and pulled the RSI value to within close proximity of oversold levels. This saw the 100-period simple moving average come under fire, with the pair settling the week a few pips ahead of demand at 0.7111/0.7122, positioned above the 0.71 level. 

 

Structures of Interest:

Long term:
Monthly price sweeping through supply and associated trendline resistance has likely aroused interest from longer-term traders. Friday’s reaction out of daily supply at 0.7264/0.7224, therefore, may be short-lived, unlikely to break 0.7067 support.

 

Short term:
Short term, may see H4 demand at 0.7082/0.7106 make a stand this week, as could H1 demand at 0.7111/0.7122, sited just above the H4 base. 

0.71 may also put forward support, though at this point traders must take into account the possibility of a whipsaw through the round number into daily support at 0.7067, which could prove to be a stable base for bullish strategies. 

Weekly Technical Market Insight: 3rd – 7th August 2020, 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 carving out a descending triangle pattern between 118.66/104.62. 

April, May and June were pretty uneventful, with the latter wrapping up indecisively in the shape of a neutral doji candlestick pattern. July, nonetheless, sunk nearly 2 percent, consequently testing the mettle of the lower boundary of the current descending triangle. 

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:
Under 105.70/106.66 demand, the path on the daily timeframe appeared free to reach as far south as demand at 100.68/101.85, extended from October 2016. However, with monthly support at 104.62 making a show, daily price ended the week retesting the underside of 105.70/106.66 as possible supply, as well as lifting the RSI value out of oversold water. 

Removing 105.70/106.66 this week will have the pair work its way into the next available supply at 107.58/106.85. 

 

H4 timeframe: 

 

The reaction from monthly support on the H4 timeframe witnessed price action address supply at 106.16/105.68 into the closing stages of the week, and finish by way of a relatively neutral indecision candle.

 

While 106.16/105.68 has the ability to withstand upside attempts this week, having seen the area sharing space with daily supply at 105.70/106.66, there’s a chance we could pop higher to bring in supply (prior demand) at 106.39/106.64.  Note this base resides within the upper limit of the aforesaid daily supply, too. 

 

H1 timeframe:
Friday’s stronger-than-expected recovery, fuelled by the US dollar index recapturing 93.00 to the upside and monthly support at 104.62, voyaged through several resistances, including the 100-period simple moving average and 105.68 level. 

US trading finished the day connecting with 106, a level reinforced by an RSI overbought signal and a shooting star candle pattern (bearish signal).

 

Structures of Interest:

Long term:
The descending triangle’s lower perimeter recently making an entrance at 104.62 caused a noteworthy reaction, with enough impetus to throw 105.70/106.66 back in the pot as supply on the daily timeframe.  

 

Short term:
106, coupled with H4 supply at 106.16/105.68 and daily supply at 105.70/106.66, fuelling an intraday dip to H1 support at 105.68 in early trading is possible, perhaps even bringing in 105.50 support. 

Yet, breaking 106 to the upside, although against the aforesaid H4 and daily supply zones, trades in line with monthly structure. H1 supply at 106.49/106.35 is likely to welcome price should a break of 106 unfold. 

Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets

GBP/USD: 

Monthly timeframe: 

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

GBP/USD finished higher by 5.5 percent in July, leading to long-term trendline resistance (1.7191) being absorbed. This follows support at 1.1904/1.2235 withstanding downside attempts during April and May.

Despite the primary trend facing lower since early 2008, rupturing current trend-line resistance could have buyers work towards another prominent trend-line resistance (2.1161) over the coming weeks. 

 

Daily timeframe: 

After squeezing through the 200-day simple moving average and toppling supply at 1.3021/1.2844, price found a degree of resistance ahead of 1.3201 (resistance) and nearby 161.8% Fib ext. level at 1.3264. 

The RSI oscillator, for those who follow momentum indicators, will note the value continues to toy with the 80.00 overbought level. 

 

H4 timeframe: 

Ahead of daily resistance at 1.3201, H4 price turned lower Friday by way of a bearish engulfing candle after whipsawing through the upper limit of supply at 1.3150/1.3064.

An area of stacked demand will enter play between 1.2948/1.2910 and 1.2945/1.2989 should sellers remain in the driving seat this week.

 

H1 timeframe: 

US trade Friday found thin air north of 1.3150 resistance, formed a bearish engulfing candle and wrapped up the session minus 1.31.

Local demand at 1.3020/1.3045 appears next in line, sharing space with trendline support (1.2673) and 1.3050 support. Also technically appealing is the round number 1.30 below, and nearing 100-period simple moving average.  

 

Structures of Interest: 

Long term:
Monthly breaking trendline resistance puts across an optimistic tone for GBP this week/month. Before exploring higher terrain, however, a 1.3021/1.2844 retest as demand may come to fruition, likely providing enough enthusiasm to move things to daily resistance at 1.3201.

 

Short term:
The break of H4 supply at 1.3150/1.3064 signals strength to the upside, despite the week ending lower following the formation of a H4 bearish engulfing pattern. Clearing 1.31 on the H1, presents an intraday bearish tone today until we meet with demand at 1.3020/1.3045, an area shaded with local confluence. 

Overall, technical studies suggest bulls have the upper hand this week, despite a dip to retest daily demand at 1.3021/1.2844 likely to occur. Given this, H1 demand at 1.3020/1.3045, glued to the top edge of daily demand, is likely an area traders will be watching for bullish strategies this week, though at the same time will also be aware a whipsaw to 1.30 could also materialise. 

Weekly Technical Market Insight: 3rd – 7th August 2020, 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.

  • Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets
    • Articles
    • Views
    AUTHOR

    FP Markets

    FP Markets is an Australian regulated broker established in 2005 offering access to CFDs across Forex, Indices, Commodities, Stocks & Cryptocurrencies on consistently tighter spreads in unparalleled trading conditions. FP Markets combines state-of-the-art technology with a huge selection of financial instruments to create a genuine broker destination for all types of traders.

    PROFILE
Start Trading with a Global Broker

Archives

Archives

Categories


Start
Trading
in Minutes

Open an account now


Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets Access +10,000 financial instruments
Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets Auto open & close positions
Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets News & economic calendar
Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets Technical indicator & charts
Weekly Technical Market Insight: 3rd – 7th August 2020, FP Markets Many more tools included

By supplying your email you agree to FP Markets privacy policy and receive future marketing materials from FP Markets. You can unsubscribe at any time.