Weekly Technical Market Insight: 18th – 22nd October 2021

Weekly Technical Market Insight: 18th – 22nd October 2021, FP Markets

Charts: Trading View

(Italics: previous analysis)

US Dollar Index (Daily Timeframe):

Against a basket of six international currencies, the US dollar left behind another subdued close last week, despite marginally refreshing one-year highs at 94.56.

Closely resembling the prior week’s market insight, support from 93.90 and long-term resistance at 94.65 remain prominent levels this week. Note the former—a previous Quasimodo resistance—greeted price movement at the tail end of the week, delivering a tentative ‘floor’ into the close.

Shadowing current support is a 92.71-93.53 decision point, in addition to trendline support, drawn from the low 89.84. The point in which the aforementioned areas intersect is a location buyers could emerge from.

With reference to trend, since mid-May the index has established a series of higher highs and higher lows since price made contact with support from 89.69. Under these circumstances, coupled with current support, further USD buying could be in the offing.

Upside momentum, however, has visibly decelerated, portrayed through the relative strength index (RSI) generating bearish divergence and a trendline support (taken from the low 39.47) breach. The 50.00 centreline is likely watched, with analysts perhaps anticipating support from this region, aided by neighbouring trendline support, extended from the low 20.95.

  • Support at 93.90, as well as the decision point from 92.71-93.53 and intersecting trendline support, are likely to be monitored this week for signs of dip-buying.

Weekly Technical Market Insight: 18th – 22nd October 2021, FP Markets

EUR/USD:

(Italics: previous analysis)

Weekly timeframe:

Buyers and sellers continue to battle for position around the upper region of prime support at $1.1473-1.1583.

As you can see, buyers marginally have the upper hand right now, potentially fuelled on the back of long-term sell-stops tripped beneath lows at $1.1612 (2020). $1.1981-1.1848 supply is recognised as the next upside objective on this scale.

In the event buyers fail to agree higher prices, south of current support shines the technical spotlight on a 61.8% Fibonacci retracement at $1.1281.

Daily timeframe:

Mid-week trade watched EUR/USD bulls enter an offensive phase just north of Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support). Resistance from $1.1614, however, swiftly put a lid on gains, with price chalking up back-to-back shooting star candle patterns. Brushing aside current resistance elbows Quasimodo support-turned resistance at $1.1689 in sight.

In terms of trend, sentiment has favoured downside since June. The relative strength index (RSI), on the other hand, recently established bullish divergences, indicating positive momentum. The 50.00 centreline is likely a watched level this week, similar to the US dollar index (above).

H4 timeframe:

Since shaking hands with resistance at $1.1622, candle structure has been in the process of establishing a pennant formation (continuation pattern; high: $1.1624 low: $1.1584). This, coupled with the trendline resistance breach, a descending line drawn from the high $1.1846, suggests a break of $1.1622 this week and highlights resistance at $1.1665 which closely corresponds with a 61.8% Fibonacci retracement at $1.1668 and a 38.2% Fibonacci retracement at $1.1672.

Lower, you will note support is at $1.1563.

H1 timeframe:

The H4 timeframe’s pennant formation, according to H1 structure, is enclosed between supply at $1.1628-1.1615 and support from $1.1584. Should price dethrone current supply, as suggested by the aforementioned H4 continuation pattern, October 4th high is seen at $1.1640, followed by H4 resistance at $1.1665.

If the H4 pennant fails to complete, breaking H1 support mentioned above at $1.1584 opens the door to H4 support at $1.1563 and H1 demand coming in at $1.1545-1.1555.

Observed Technical Levels:

Long term:

Clearance of daily resistances at $1.1614 and $1.1689 would be a welcomed sight for buyers out of weekly prime support at $1.1473-1.1583.

Short term:

In conjunction with the weekly timeframe’s bullish environment, price breaking above the H4 timeframe’s pennant pattern this week—overthrowing H4 resistance at $1.1622—could draw H4 resistance at $1.1665 into play.

Should the above come to fruition, H1 supply at $1.1628-1.1615 would also step aside.

If buyers fail to commit, H1 support is a key watch at $1.1584. A break of this level implies H4 support at $1.1563 is potentially on the cards.

Weekly Technical Market Insight: 18th – 22nd October 2021, FP Markets

 

AUD/USD:

(Italics: previous analysis)

Weekly timeframe:

As you can see, price extended recovery gains north of prime support at $0.6968-0.7242 last week, adding 1.5 percent and finishing a touch off session highs. Prime resistance at $0.7849-0.7599 represents a reasonable target, though failure to preserve gains opens up support at $0.6673.

Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 might be the start of a dip-buying attempt to join the current trend.

Daily timeframe:

Albeit recording fresh monthly pinnacles at $0.7440, Friday finished unchanged.

Prime resistance at $0.7506-0.7474 is in the crosshairs this week. Immediately above, we have Quasimodo support-turned resistance at $0.7621, joined closely with the 200-day simple moving average at $0.7568, as well as a 61.8% Fibonacci retracement at $0.7585 and a 100% Fibonacci projection at $0.7551.

As momentum continues to gain traction, traders are urged to note the relative strength index (RSI) is zeroing in on overbought territory, ending the week at 64.00. Indicator resistance is seen at 74.80.

H4 timeframe:

$0.7426 resistance entertained price action Friday, though also tolerated a modest whipsaw to nearby Quasimodo resistance at $0.7441. Both levels remained in place into the close.

Lower on the curve this week, Quasimodo resistance-turned support falls in at $0.7394, with a break uncovering trendline support, etched from the low $0.7170.

H1 timeframe:

Prime resistance at $0.7450-0.7433 entered view early London Friday and held strong. $0.74 provides possible support lower down, with a test perhaps opening the door to a whipsaw into a decision point from $0.7382-0.7391 and trendline support, brought in from the low $0.7226.

It should be noted that $0.7450-0.7433 houses H4 Quasimodo resistance at $0.7441.

Observed Technical Levels:

Long term:

Prime support on the weekly timeframe at $0.6968-0.7242 held position in recent weeks, with energy directed to prime resistance at $0.7849-0.7599.

Before reaching $0.7849-0.7599, however, prime resistance on the daily timeframe at $0.7506-0.7474 could throw a spanner in the works. It is only once this area is cleared will the path be free to test daily resistance between $0.7621 and $0.7551 (fastened to the lower side of the weekly prime resistance).

Short term:

Having noted the bigger picture exhibiting scope to explore higher levels, H4 resistances between $0.7441 and $0.7426, along with H1 prime resistance at $0.7450-0.7433, may be fragile.

As such, between the H1 decision point at $0.7382-0.7391 and $0.74 (an area including H4 support from $0.7394) might welcome a bullish phase if tested this week.

Weekly Technical Market Insight: 18th – 22nd October 2021, FP Markets

USD/JPY:

 

(Italics: previous analysis)

Weekly timeframe:

The US dollar settled 1.8 percent higher against the Japanese yen last week, recording its largest weekly gain since March 2020 and stretching to a three-year peak of ¥114.47.

Resistance at ¥114.38 deserves notice; a decisive reaction from here this week sets the stage for bringing in support at ¥112.16.

In terms of trend, we’ve been advancing since the beginning of this year.

Daily timeframe:

Powered higher on the back of risk-on sentiment, Friday came within a stone’s throw of reaching a Fibonacci cluster. Made up of two 1.272% Fibonacci projections at ¥114.63 and ¥114.61, together with a deep 78.6% Fibonacci retracement at ¥114.94, this area, along with weekly resistance highlighted above at ¥114.38, is a potential headwind for the currency pair this week.

From the relative strength index (RSI), following support emerging from 56.85 (prior range resistance), the indicator’s value continues exploring overbought space. However, with the trend facing northbound this year, overbought signals should be viewed in this context.

H4 timeframe:

Following an early break above the upper limit of an ascending triangle (low: ¥113 high: ¥113.79 [generally viewed as a bullish continuation structure]), Friday came within touching distance of reaching the formation’s profit objective (thick black arrows) at ¥114.64.

Adding to the above, technicians will note that joining current weekly resistance at ¥114.38 is channel resistance, extended from the high ¥112.05.

Holding beneath the aforementioned resistances points to a retest of the upper side of the ascending triangle early week, with subsequent selling interest directing light towards channel support, pencilled in from the low ¥109.12.

H1 timeframe:

Sitting just above the H4 timeframe’s ascending triangle on the H1 timeframe is a decision point from ¥113.84-113.96, and the ¥114 psychological level. Lower on the curve, another decision point area is evident at ¥113.59-113.70.

Upstream, you will note a 1.618% Fibonacci projection coming in at ¥114.49.

Observed Technical Levels:

Long term:

Weekly resistance at ¥114.38 deserves mention, as does the daily timeframe’s Fibonacci cluster between ¥114.94 and ¥114.61.

Consequently, profit taking could materialise between ¥114.94 and ¥114.38 this week.

Short term:

In similar fashion to the bigger picture, a healthy cocktail of resistance is evident on H4 and H1 timeframes.

Between the H4 ascending triangle profit objective at ¥114.64, the H4 channel resistance at ¥114.38 and the H1 1.618% Fibonacci projection at ¥114.49, traders have clear short-term resistance to work with within the higher timeframe resistance zone noted above between ¥114.94 and ¥114.38.

Weekly Technical Market Insight: 18th – 22nd October 2021, FP Markets

GBP/USD:

 

(Italics: previous analysis)

Weekly timeframe:

While late September probed the lower wall of supply-turned demand at $1.3629-1.3456, the first half of October has entertained a bullish atmosphere, with last week’s session climbing 1.0 percent.

While we cannot rule out the possibility of further upside, technical elements suggest sellers could eventually strengthen their grip. Not only did price drop beneath $1.3629-1.3456, the unit also closed below a double-top pattern’s ($1.4241) neckline at $1.3669.

The double-top pattern’s profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the breakout point—sits around $1.3093. Conservative pattern sellers are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Daily timeframe:

Ultimately, sterling has been bid on bullish comments regarding interest rates from the Bank of England (BoE). Nevertheless, helping to discourage additional buying in this market is trendline resistance, taken from the high $1.4250, and the 200-day simple moving average at $1.3841. The combination of the two offers powerful confluence.

The relative strength index (RSI) secured position above the 50.00 centreline last week, zeroing in on resistance at 58.70. Removing the latter this week places overbought space in the firing range.

H4 timeframe:

Friday’s 0.5 percent advance pulled GBP/USD to within range of channel resistance, extended from the high $1.3640, and Fibonacci resistance between $1.3807 and $1.3785. What’s also technically interesting is the daily timeframe’s trendline resistance aligns closely with H4 structure.

Any bearish showing this week has support in view at $1.3657 and channel support, taken from the low $1.3415.

H1 timeframe:

US hours Friday connected with resistance at $1.3764 and mildly pared gains. North of noted resistance tips the balance towards $1.38, which joins with a 200% Fibonacci extension and nearby 100% Fibonacci projection at $1.3813.

Assuming sellers maintain position, $1.37 represents potential support, a level blending closely with a 38.2% Fibonacci retracement at $1.3695. And an extension beyond here shines light on support from $1.3657 and neighbouring 61.8% Fibonacci retracement at $1.3647.

Observed Technical Levels:                              

Long term:

Although we have seen buyers enter the frame this month from supply-turned demand at $1.3629-1.3456 on the weekly scale, traders are urged to monitor the daily timeframe’s trendline resistance this week, taken from the high $1.4250, as well as the 200-day simple moving average at $1.3841. This combination suggests strong confluence, and therefore possible resistance.

Short term:

Fibonacci resistance between $1.3807 and $1.3785 on the H4 timeframe is likely on the watchlists for many price action traders this week. Not only does the area bring channel resistance to the table, the H4 zone dovetails closely with daily trendline resistance, in addition to the H1 timeframe’s resistance formed between $1.3813 and $1.38.

Therefore, in light of the above analysis, a break of H1 resistance at $1.3764 to test $1.38 could come to fruition, where, according to chart studies on the H4 and H1, sellers will be closely watching resistance between $1.3813 and $1.3785.

Weekly Technical Market Insight: 18th – 22nd October 2021, 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: 18th – 22nd October 2021, FP Markets
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