Weekly Technical Market Insight: 17th – 21st May 2021

Weekly Technical Market Insight: 17th – 21st May 2021, FP Markets

Charts: Trading View

US Dollar Index (Daily Timeframe):

Despite an optimistic mid-week bid off 90.00 support, the US dollar, as measured by the US dollar index (ticker: DXY), concluded the week considerably off best levels, to end at 0.1 percent. This follows the prior week’s one-sided decline, aided by resistance forged between the 200-day simple moving average at 91.85 and resistance from 91.36 (previous Quasimodo support).

90.00 support remains a key level to note going forward, though a break will unmask longer-term support at 89.34 (extended from as far back as early 2009). Also of technical relevance is 91.85-91.36 resistance highlighted above.

With respect to trend, a bearish narrative has clouded the greenback since the early months of 2020, in the shape of well-defined lower lows and lower highs. Many analysts likely refer to this downward movement as a primary trend. Interestingly, the 93.43 31st March peak—and subsequent downside—echoes seller strength within the current downtrend, consequently unlocking the possibility of fresh lower lows over the coming weeks (see black arrows).

The RSI indicator, a popular gauge of momentum, reveals a relatively low reading formed last week, anchored around the lower side of resistance at 45.51. This implies we may drop in on oversold space, possibly greeting support at 21.36. Should 45.51 move aside, on the other hand, another layer of indicator resistance is visible at 55.67.

  • Technically speaking, while 90.00 support served buyers last week, the level communicates a somewhat vulnerable tone. Not only did buyers fail to build on mid-week gains from the support, the longer-term trend favours sellers. Challenging 89.34 support would be interesting this week; should a break come to pass, this suggests a resumption of the longer-term downtrend.

Weekly Technical Market Insight: 17th – 21st 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 currently trades higher by 1.1 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 breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Although the Quasimodo formation at 1.2169 played its part as resistance last week, Friday—following Thursday’s modest low of 1.2051—witnessed EUR/USD stage a comeback amidst USD softness (DXY < 90.50). Climbing 1.2169 this week shines the technical spotlight on another Quasimodo resistance at 1.2278. Downside objectives to be mindful of, however, are the 1.1985 May 5th low, arranged just north of the 200-day simple moving average (currently circling 1.1952).

The vibe out of the daily chart has been mostly bullish since price crossed above the 200-day simple moving average in early April. Additionally, the trend, despite the 2021 retracement, remains to the upside (trending higher since early 2020).

Movement out of the RSI indicator shows the value rebounding from support at 51.36, threatening continuation moves to overbought territory (in particular resistance at 80.39).

H4 timeframe:

Areas of demand that achieve something on the chart will always capture the hearts of price action traders. Demand at 1.2044-1.2071 welcomed (and contained) price during mid-week movement (represents a decision point to break through the 1.2150 top [April 29]) and, along with trendline support (taken from the low 1.1712), provided a platform for buyers to push from on Friday.

Commanding attention to the upside this week is Quasimodo resistance from 1.2180, followed by resistance at 1.2222.

H1 timeframe:

Following earlier moves out of a familiar Fib support at 1.2059-1.2073 (green), European hours on Friday pulled EUR/USD above 1.21, tripping protective stops and filling breakout buyers. A short-lived pause emerged around the 100-period simple moving average (at 1.2117), yet buyers stood their ground and subsequently marched to Quasimodo resistance at 1.2149 during US trading.

Upstream, beyond 1.2149, the river appears ripple free until reaching another layer of Quasimodo resistance at 1.2178, sheltered south of the 1.22 figure.

The RSI value wrapped up the week hovering within striking distance of overbought territory. RSI resistance is seen at 78.97, with trendline support also stationed nearby (etched from the low 23.69).

Observed levels:

Long term:

With the overall trend facing higher, and monthly price exiting demand at 1.1857-1.1352 in April, daily flow navigating space above Quasimodo resistance at 1.2169 this week is potentially on the cards, targeting Quasimodo resistance at 1.2278.

Short term:

The H4 timeframe, in conjunction with the higher timeframes, also demonstrates scope to climb this week, at least until reaching Quasimodo resistance at 1.2180 (positioned just above daily Quasimodo resistance at 1.2169). This analysis, therefore, places a question mark on H1 Quasimodo resistance at 1.2149 and opens the curtain on a possible short-term bullish scenario, targeting H1 Quasimodo resistance at 1.2178 (plotted just beneath the H4 Quasimodo).

Weekly Technical Market Insight: 17th – 21st 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. Should a bearish scenario unfold, 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:

Despite rupturing resistance at 0.7816, breakout buyers north of the base emphasised a non-committal tone last week. Subsequent action witnessed muscular selling on Wednesday, though follow-through moves were limited and resulted in a bullish revival on Friday.

From a technical perspective, the aforesaid resistance is hanging by a thread—recent visits (from April 20th) to the resistance have proved fruitless, echoing weakness. Nevertheless, any downside attempt has support at 0.7563 on the radar. Closing above 0.7816 this week, however, and holding gains, throws light on supply at 0.8045-0.7985 (plotted just south of monthly supply at 0.8303-0.8082).

With respect to trend, we have been higher since the early months of 2020. In line with this, the RSI value holds above the 50.00 centreline (a positive for the current uptrend), with trendline resistance placed overhead, taken from the high 79.74.

H4 timeframe:

Delivering support and resistance since late January this year, 0.7696-0.7715 made a show on Thursday and, with the help of USD downside, encouraged a healthy bid on Friday.

Daily resistance mentioned above at 0.7816 also has a home on the H4 chart, with a break uncovering Quasimodo resistance at 0.7862, as well as another resistance from 0.7899.

Space below current support, should sellers take the reins, directs attention to demand at 0.7632-0.7653—a decision point to break local peaks at 0.7661 and 0.7676.

H1 timeframe:

As evident from the H1 chart, early London on Friday forged demand at 0.7728-0.7747. Further buying took the currency pair north of trendline resistance, drawn from the high 0.7890, and resistance at 0.7755 (now labelled support), along with the 100-period simple moving average at 0.7776.

Overhead, 0.78 is likely to demand a response, having seen the level drawing a close connection with daily resistance at 0.7816. Above here, 0.7850 is recognised as another form of resistance.

The RSI indicator made its way into overbought territory in the closing hours of Friday’s session, directing the spotlight to a potential test of resistance at 80.85.

Observed levels:

Long term:

Daily resistance at 0.7816 is key on the bigger picture. With the level failing to express much bearish interest Since April 20th, moves to daily supply at 0.8045-0.7985 could be in the offing this week (plotted below supply at 0.8303-0.8082).

Short term:

The 0.78 figure on the H1, aligning closely with daily resistance at 0.7816, has the ability to spark a short-term bearish theme early week. Interested sellers, nonetheless, are urged to pencil in the possibility of breaking higher, according to the daily timeframe (see above in bold).

Therefore, although a bearish setup may form off 0.78, a break of the figure is equally likely, movement unlocking a possible bullish wave to 0.7850 resistance on the H1.

Weekly Technical Market Insight: 17th – 21st 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:

Mid-week trading watched USD/JPY extend its rebound from trendline support, extended from the low 102.59, and power into the walls of supply at 109.97-109.18. As you can see, sluggish selling into the second half of the week provides a basis for longer-term resistance at 110.94-110.29 to possibly enter the frame, posted under supply at 111.73-111.19. However, a retest of nearby trendline support is still not out of the question before buyers attempt to regain footing.

Trend studies reveal the pair has been trending higher since the beginning of 2021.

In line with the current trend, the RSI value is looking to try and secure position above resistance at 57.00, shifting attention to overbought terrain and RSI resistance at 83.02.

H4 timeframe:

The combination of a 61.8% Fib level at 109.60 and supply at 109.97-109.72 witnessed the pair steadily decline in the latter part of the week.

Demand at 108.64-108.91 calls for attention lower on the curve, an area fastened above familiar demand at 108.20-108.43. North of current supply, the technical radar is fixed on supply at 110.85-110.46 (fixed within daily resistance at 110.94-110.29 and joined by a H4 100% Fib projection at 110.64 and a 1.272% Fib expansion at 110.37).

H1 timeframe:

Friday watched H1 filter through trendline support, extended from the low 108.35, with price subsequently shaping a retest of the ascending line which held as resistance. Also of technical note was price challenging a 38.2% Fib level at 109.23 (along with a 50.00% retracement).

Technical elements overhead show additional (more local) trendline resistance present, taken from the high 109.78. A break here, as well as pushing through local tops, could eventually nudge price action towards resistance at 109.95.

Below Fib support, the 100-period simple moving average is seen around 109.18, closely shadowed by the 109 figure.

The RSI delivered a late test of trendline resistance on Friday, taken from the high 79.10, with the value now pursuing terrain south of the 50.00 centreline. Momentum, therefore, may see further downside this week.

Observed levels:

Long term:

We have monthly price possibly forging support off a recently breached descending resistance line, which underscores a potential bullish scenario. This may have daily buyers attack supply at 109.97-109.18 this week, and make a run for longer-term daily resistance at 110.94-110.29.

Short term:

Before buyers make an entrance, a test of H4 demand at 108.64-108.91 (set just beneath 109 on the H1) could come about. What’s also interesting is the H4 demand area intersects with daily trendline support. Therefore, according to chart studies, a bullish theme emerging from the aforementioned H4 demand is perhaps in store this week.

Weekly Technical Market Insight: 17th – 21st 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. May, despite diminished volatility during March and April, trades firmly on the front foot, up by 2 percent MTD.

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:

Thursday’s near-test of support at 1.4003 (situated above demand at 1.3857-1.3940—an area where a decision was made to break above 1.4003 resistance), as you can see, finished by way of what’s known as a doji indecision candle. Friday, on the back of a renewed USD selling bias, observed GBP/USD bulls regain position and close nearby session peaks (1.4111).

Aside from last week’s tops around 1.4167, price is likely to discover resistance at 1.4250 in the form of a Quasimodo pattern.

Trend in this market has remained firmly to the upside since March 2020.

From the RSI, traders will note the value rotated lower just south of overbought last week, movement which may see trendline support, taken from the low 36.14, make an entrance.

H4 timeframe:

Support at 1.4007—a previous Quasimodo resistance level—welcomed price action on Thursday.

Bullish energy from 1.4007, though, did not come about until Friday, elevated higher not only on technical buying but also USD weakness across the board. This signals the unit may navigate towards 1.4162 resistance this week.

In the absence of follow-through buying, territory beneath 1.4007 shines light on trendline support, extended from the low 1.3668, with subsequent selling taking aim at support coming in from 1.3919.

H1 timeframe:

Heading into US trade on Friday, following an earlier advance above 1.4050, price action entered a narrow range around the lower side of 1.41 and the 100-period simple moving average. Interestingly, the ranging motion established a pennant pattern (continuation patterns that generally form after decisive movement). If a breakout higher comes to pass, local trendline resistance, taken from the high 1.4166, is seen. And should we clear the aforesaid trendline, Quasimodo resistance is located around 1.4176.

While pennant patterns are considered continuation formations, traders are urged to take into account the RSI value exited overbought space and nudged beneath trendline support on Friday, extended from the low 26.37. This indicates downside momentum could take shape early week.

Observed levels:

Long term:

With scope to advance on the monthly scale, and the daily timeframe’s rebound from just north of support at 1.4003, in line with the current trend (see daily chart), further buying could be in the offing this week, targeting last week’s tops around 1.4167, and maybe daily resistance at 1.4250.

Short term:

Room to scale higher on the H4 to resistance at 1.4162, suggests H1 voyaging above 1.41 and neighbouring trendline resistance is possible this week, perhaps clearing the runway to H1 Quasimodo resistance at 1.4176 (located a touch above H4 resistance at 1.4162).

Weekly Technical Market Insight: 17th – 21st May 2021, FP Markets

 

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  • Weekly Technical Market Insight: 17th – 21st May 2021, FP Markets
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