Weekly Technical Market Insight: 17th – 21st January 2022

Weekly Technical Market Insight: 17th – 21st January 2022, FP Markets

Charts: Trading View

(Italics: Previous Analysis Due to Limited Price Change)

EUR/USD:

Weekly timeframe:

As anticipated, long-standing resistance from $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing last week. Downstream, familiar support resides at $1.1237-1.1281. Made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237, this area delivered a floor heading into the close of 2021. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation (extended D leg).

Strengthening the aforementioned resistance area, the pair took out 2nd November low (2020) at $1.1603 in late September (2021), suggesting a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s primary downtrend since mid-2008.

Daily timeframe:

Technical observations on the daily timeframe reveal the currency pair forming a potential whipsaw above a 7-month trendline resistance, extended from the high $1.2254. Note also that price movement established a bearish engulfing candle (a reversal pattern in which focus is directed to the real candle body rather than upper and lower shadows). Should bearish follow-through emerge this week, Quasimodo support offers an obvious target at $1.1213.

For those who read Friday’s technical briefing you may recall the following:

Long term, we’re at the lower boundary of weekly resistance at $1.1473-1.1583, structure perhaps hindering further buying beyond the daily timeframe’s 7-month trendline resistance, extended from the high $1.2254.

Momentum studies, derived through the relative strength index (RSI), shows the indicator spun lower ahead of resistance at 63.66 and is threatening a move back to the 50.00 centreline.

Trend on this scale has been lower since June 2021.

H4 timeframe:

Fibonacci resistance between $1.1506 and $1.1476 served this market well at the tail end of the week, welcoming a one-sided decline on Friday and throwing light on support at $1.1382, closely followed by a decision point at $1.1354-1.1379. Harmonic traders (much like the weekly timeframe) will acknowledge that the 1.272% Fibonacci projection at $1.1476 forming the lower side of the noted resistance is commonly referred to as an ‘alternate’ AB=CD formation (extended D leg).

What also gave credibility to the Fibonacci resistance (underlined in previous writing) was the area overlapping the lower edge of weekly resistance from $1.1473-1.1583.

The technical framework on this chart, therefore, shines light on a possible test of support at $1.1382 and neighbouring decision point at $1.1354-1.1379 early week.

H1 timeframe:

A closer reading of price action on the H1 shows Friday led the currency pair under support at $1.1452, which was subsequently retested and established resistance. Merging trendline support, drawn from the low $1.1285, and the psychological base at $1.14 was later tested and held into the close. $1.14 failing to hold places demand at $1.1363-1.1375 in view.

As you would expect, the relative strength index (RSI) dipped a toe in oversold waters, but departed the range prior to the close.

Observed Technical Levels:

Long term:

Weekly resistance at $1.1473-1.1583 elbowing its way into the spotlight and the daily timeframe chalking up a bearish engulfing candle around trendline resistance, extended from the high $1.2254, promotes a bearish climate this week.

Short term:

The higher timeframe’s bearish opinion, and some elbow room on the H4 to support at $1.1382 and the decision point at $1.1354-1.1379, $1.14 bids are fragile early week on the H1. On this account, two potential scenarios are seen:

  • A short-term dip through $1.14 to H1 demand at $1.1363-1.1375 (shares space with the H4 decision point at $1.1354-1.1379).
  • Continuation bidding off $1.14 to test H1 resistance at $1.1452 to bring in sellers.

Weekly Technical Market Insight: 17th – 21st January 2022, FP Markets

AUD/USD:

Weekly timeframe:

Prime support at $0.6968-0.7242 continues to play a crucial role on the weekly timeframe. Bulls, as you can see, embraced a modestly bullish stance into the close of 2021. 2022, on the other hand, has been undecided so far. Should buyers continue pressing higher, resistance is formed at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.

Since mid-Feb 2021, a modest downside bias has been seen. This followed higher prices since pandemic lows of $0.5506 (March 2020). However, it is important to note that from the monthly timeframe the unit has been entrenched within a large-scale downtrend from mid-2011.

Daily timeframe:

Resistance—made up of a 61.8% Fibonacci retracement at $0.7340, a 100% Fibonacci projection at $0.7315, an ascending resistance, drawn from the low $0.7106, trendline resistance, drawn from the high $0.7891, and the 200-day simple moving average at $0.7423—came within a pip of making an entrance on Thursday and finished by way of a shooting star candle (bearish configuration). Friday answered with a near-full-bodied bearish candle, erasing 1.0 percent.

Aside from the $0.7130 low (7th January) and the $0.7082 (20th December [2021]) low, obvious support at $0.7021 calls for attention.

The relative strength index (RSI) continues to circle the 50.00 centreline. $0.7423-0.7315 sellers, therefore, will likely be watching for the indicator to secure position beneath the 50.00 neighbourhood this week, movement that informs market participants that average losses exceed average gains.

H4 timeframe:

Prime resistance drawn from $0.7323-0.7308 was a highlighted area in recent analysis, receiving price action on Thursday.

Thursday’s response and Friday’s additional softness manoeuvred through support at $0.7250 (now a marked resistance level). The $0.7169-0.7187 demand is next in the line of fire for sellers, with Quasimodo support residing a touch below at $0.7146.

H1 timeframe:

Following a whipsaw north of $0.73 (into H4 prime resistance at $0.7323-0.7308) and a subsequent head and shoulders top pattern forming ($0.7293, $0.7314, $0.7294), the euro plunged against the buck on Friday—taking out $0.7273 support—and eventually butted heads with $0.72.

South of the psychological base, Quasimodo support is visible at $0.7168, accompanied by a nearby demand at $0.7126-0.7141.

Supporting the modest $0.72 ‘bounce’ is the relative strength index (RSI) poking oversold space. A decisive exit from this range informs short-term traders that average gains are beginning to outweigh average losses on this timeframe: positive momentum. Indicator support rests nearby at 19.17.

Observed Technical Levels:

Long term:

The near-test of daily resistance between $0.7423 and $0.7315 commanded the attention of bearish players in the second half of last week. Although weekly price remains within prime support at $0.6968-0.7242, daily flow may take aim at lows around $0.7130 and $0.7082, followed by support forged from $0.7021.

Short term:

Having noted space for sellers to zero in on H4 demand at $0.7169-0.7187, dipping under $0.72 to test H1 Quasimodo support at $0.7168 (plotted just beneath H4 demand) is a possible situation this week. Alternatively, H1 bids may remain off $0.72, looking at a potential run back to H1 resistance at $0.7273. Holding $0.72 is also bolstered by the RSI testing oversold and (from a higher timeframe perspective) weekly price inhabiting prime support.

Weekly Technical Market Insight: 17th – 21st January 2022, FP Markets

USD/JPY:

Weekly timeframe:

After touching gloves with a 1.272% Fibonacci projection from ¥116.09 and refreshing multi-year pinnacles, movement probed resistance-turned support from ¥114.38 last week. Assuming sellers secure position south of the latter, support at ¥112.16 warrants attention.

In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61. In consideration of the trend, a dip-buying theme forming between ¥112.16 and ¥114.38 is a reasonable assumption.

Daily timeframe:

Technically aiding bearish action last week was Quasimodo resistance at ¥116.33 on the daily timeframe, seated above the weekly timeframe’s 1.272% Fibonacci projection from ¥116.09. Following two decisive bearish days, Friday pencilled in a hammer pattern, void of an obvious technical floor. Note that the real body colour of hammer formations (and shooting stars) are irrelevant.

Despite the technical candle, added bearish pressure developing this week guides attention towards demand at ¥112.66-112.07, tailed closely by a decision point from ¥111.18-111.79 and the 200-day simple moving average at ¥111.32.

In terms of the relative strength index (RSI), support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May) remains active.

H4 timeframe:

Shortly after clipping the lower edge of another decision point at ¥113.54-113.78 (leaving Quasimodo support at ¥113.22 unchallenged), resistance is featured at ¥114.50, joined by trendline support-turned resistance, extended from the low ¥112.56, a decision point from ¥114.72-114.51 and additional trendline resistance nearby, taken from the high at ¥116.35.

H1 timeframe:

Downside momentum slowing (showed through bullish divergence on the relative strength index) in the second half of the week, in spite of breaching (and retesting as resistance) the ¥114 psychological figure, EUR/USD bulls consequently adopted an offensive phase off support at ¥113.56 and finished the week settling above ¥114 in the form of a shooting star bearish candle pattern.

Resistance is seen above at ¥114.32; subsequent bullish moves target Quasimodo support-turned resistance at ¥114.83 and the ¥115 figure.

Further RSI analysis shows the indicator’s value crossed above the 50.00 centreline: positive momentum until either re-entering -50.00 territory or testing overbought space.

Observed Technical Levels:

Long term:

Weekly price modestly stabbing through resistance-turned support from ¥114.38 and open space to journey lower on the daily timeframe to demand at ¥112.66-112.07 submits a potential bearish play this week.

Should lower prices take form, a dip-buying phase remains on the table between the said daily demand and a decision point from ¥111.18-111.79 (joined by weekly support at ¥112.16).

Short term:

In line with the bearish perspective on the bigger picture, the H4 decision point from ¥114.72-114.51 and associated H4 technical levels is a possible target area for sellers early week. In order to reach the above area, nevertheless, a H1 resistance breach at ¥114.32 must come about.

Weekly Technical Market Insight: 17th – 21st January 2022, FP Markets

GBP/USD:

Weekly timeframe:

The current 4-week bid—initiated ahead of the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes)—continues to echo a muscular tone, in line with the weekly timeframe’s current uptrend since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.

Nevertheless, ‘consumed supply’ (blue area) is nearby between $1.4001 and $1.3830. Considering this, candle action may be guided as far north as resistance from $1.4371-1.4156 in the coming weeks.

Daily timeframe:

Counter to the weekly timeframe is the daily timeframe bonding with the lower side of the 200-day simple moving average at $1.3733 last week. Thursday assembled a shooting star candle formation (bearish signal) and Friday sailed to a low of $1.3653.

Observed support falls in at $1.3602, aided by neighbouring trendline resistance-turned support, taken from the high $1.4250. Conquering the SMA this week, on the other hand, sets the technical stage to as far north as Quasimodo resistance at $1.3892.

The relative strength index (RSI) recorded overbought conditions in line with price testing the noted SMA and exited the area into the week’s close. This is considered by many technicians a sign upside momentum is beginning to slow and bears could take the wheel.

H4 timeframe:

Following the near-test of supply from $1.3782-1.3758 and a deep 88.6% Fibonacci retracement at $1.3758, the unit retested a merging steep trendline support, drawn from the low $1.3173, and Quasimodo resistance-turned support at $1.3668. You will note the aforesaid supports are toughened by a nearby decision point at $1.3622-1.3646.

Below the decision point, aside from a number of local lows, demand is seen at $1.3428-1.3444.

H1 timeframe:

Quasimodo resistance-turned support at $1.3667 embraced price action in the final hours of trade Friday, backed by the relative strength index (RSI) dropping in on oversold terrain to a low of 25.09. This followed a decisive decline from Quasimodo support-turned resistance at $1.3739 earlier in the session.

Demand at $1.3628-1.3643 warrants attention this week, rooted just ahead of support at $1.3627, followed by $1.36 and additional demand from $1.3580-1.3600.

Observed Technical Levels: 

Long term:

The daily timeframe connecting with the 200-day simple moving average at $1.3733 brings light to support at $1.3602 this week, and trendline resistance-turned support, taken from the high $1.4250.

Short term:

The higher timeframe stance places a bearish cloud over H4 trendline support, drawn from the low $1.3173, and Quasimodo resistance-turned support at $1.3668, as well as the decision point at $1.3622-1.3646. With the daily timeframe perhaps targeting support at $1.3602, driving through the above noted H4 structure (and H1 demand at $1.3628-1.3643 and H1 support from $1.3627) could take shape to the $1.36ish neighbourhood on the H1.

Weekly Technical Market Insight: 17th – 21st January 2022, 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: 17th – 21st January 2022, FP Markets
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