Weekly Technical Market Insight: 19th – 23rd October 2020

Weekly Technical Market Insight: 19th – 23rd October 2020, FP Markets

US Dollar Index:

The US dollar flexed its financial muscle last week, consequently snapping a two-week losing streak.

Adding 0.7 percent, buyers navigated from daily demand at 92.71/93.14 (a drop-base-rally formation) at the beginning of the week and eventually revisited a daily trendline formation (102.99), a level linked with a small area of daily supply at 94.08/93.84. Traders will also note the RSI oscillator is seen closing in on trendline resistance (prior support).

Bringing down the aforesaid resistances this week establishes a basis for buyers to take aim at daily resistance from 94.65 and, maybe after a strong coffee, even the longer-term daily resistance level at 95.83.

With respect to the 200-day simple moving average, circling 96.84, the dynamic value continues to curve lower, two years after mostly drifting higher.

In the context of trend, previous research highlighted the following:

 

  • A large-scale pullback since March 2008 from 70.70 is seen on the monthly timeframe (primary trend is considered south).

 

  • The daily timeframe’s immediate trend has also faced lower since March 2020. Breaking the noted resistances this week, however, suggests a deeper pullback could be in the offing.

Weekly Technical Market Insight: 19th – 23rd October 2020, FP Markets

EUR/USD:

Monthly timeframe:

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

August, as you can see, toppled supply from 1.1857/1.1352 and extended space north of long-term trendline resistance (1.6038), arguing additional upside may eventually be on the horizon, targeting trendline resistance (prior support – 1.1641).

Before seeking higher territory, a dip to the recently penetrated trendline resistance (support) could materialise, backed by September’s monthly outside bearish reversal candle that snapped a four-month winning streak.

The primary downtrend (since July 2008) remains intact until 1.2555 is engulfed (Feb 1 high [2018]).

Daily timeframe:

Supply at 1.1872/1.1818, a rally-base-drop configuration, in addition to a trendline resistance (prior support – 1.1695), has proven a tough nut to crack.

Interestingly, though, before sellers can reach for support at 1.1553 (arranged just under 1.1612 [September 25 low]), trendline support (prior resistance – 1.2011) must be dethroned. Should buyers take charge here, price taking on current supply and zeroing in on another layer of supply at 1.2012/1.1937 is also a possible scenario.

 

  • The trend on the daily timeframe has displayed a bullish vibe since March.

 

  • The RSI oscillator recently dipped from peaks around 58.00 and is on track to test trendline support (prior resistance).

 

H4 timeframe:

Thursday saw the pair partner up with Fib support between 1.1693/94 (127.2% projection/61.8% Fib level), housed within demand at 1.1682/1.1716. Efforts to the upside, however, have so far been contained by neighbouring supply from 1.1752/1.1729.

Other areas to be conscious of this week are channel resistance (1.1684) and demand featured at 1.1580/1.1626.

H1 timeframe:

Friday witnessed an enthusiastic, albeit short-lived, intraday run to fresh pinnacles just south of 1.1750 resistance (and the 100-period simple moving average). Confirmed by RSI hidden bearish divergence, price re-entered space beneath channel resistance (1.1798) and shined light back on a support area made up of 1.1684 support and the 1.17 level (green).

Structures of Interest:

Long term:

So far, we’ve seen limited effort from buyers off daily trendline support, indicating sellers may be gearing up for another wave lower, targeting 1.1553 daily support.

Short term:

Intraday sellers on the H1 may toughen their grip in early Asia today to target support at 1.1684/1.1700.

From here, buyers are likely to try and come in and defend the aforesaid support, given daily trendline support and H4 demand at 1.1682/1.1716. However, knowing we lack oomph off the daily trendline support, bearish setups might develop and push through 1.1684 as we head deeper into the week.

Weekly Technical Market Insight: 19th – 23rd October 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

The month of September (lower by 2.9 percent) shattered a five-month winning streak and tested the upper border of demand at 0.7029/0.6664 (prior supply). Structurally speaking then, buyers still have the advantage, free to explore as far north as 0.8303/0.8082 in the coming months, a supply zone aligning closely with trendline resistance (prior support – 0.4776).

In terms of trend, though, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Leaving supply at 0.7345/0.7287 (a rally-base-drop supply) untested, last week withdrew to deeper waters and cast light on nearby demand at 0.6964/0.7042, an area secured above support at 0.6931.

Another key observation on the daily chart is the RSI oscillator fading support-turned resistance at 52.00, with the value now trading at 40.00.

H4 timeframe:

Following Thursday’s one-sided decline, demand at 0.7073/0.7097 had its lower boundary taken out, with buyers and sellers competing for position Friday.

With stops under the aforesaid demand possibly consumed, additional bearish sentiment towards demand at 0.7014/0.7035 could be seen this week.

H1 timeframe:

Friday offered little in terms of market movement, pencilling in a narrow range between 0.7098/0.7070.

Territory to the upside remains interesting. 0.7105/0.7134 represents a supply zone, complemented by the 0.71 level, a channel resistance (prior support – 0.7150) and a 38.2% Fib level at 0.7128. Note the channel resistance received price on Friday and held form.

Voyaging to lower levels this week throws light on 0.7050 support, with a break unmasking the widely watched 0.70 level.

Structures of Interest:

Long term:

Although buyers could eventually make a show off monthly demand at 0.7029/0.6664, a dip into daily demand at 0.6964/0.7042 may emerge beforehand.

Short term:

Room seen for daily price to navigate lower until the top edge of demand at 0.7042, and H4 demand at 0.7073/0.7097 underlining a fragile position, places H1 supply from 0.7105/0.7134 (and aligning H1 structure) in the frame this week.

The reaction seen from the current H1 channel resistance, therefore, could be sufficient enough for sellers to extend losses, with 0.7050 targeted, as well as the upper edge of daily demand at 0.7042, followed by the upper base of H4 demand at 0.7035 and then the 0.70 round number (H1).

Weekly Technical Market Insight: 19th – 23rd October 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. July 2020 onwards, as you can see, has had price toying with the lower boundary of the aforesaid pattern.

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

Daily timeframe:

Supply at 106.33/105.78, encouraged by the RSI oscillator also fading resistance at 57.00, echoes a dominant presence on the daily chart. Directly above, traders will also note trendline resistance (111.71) and another supply zone at 107.58/106.85 that houses the 200-day simple moving average at 107.36.

Monthly support at 104.62 (the lower boundary of the monthly descending triangle) awaits to receive price should sellers improve their position this week.

H4 timeframe:

H4 candle movement is currently caught between a supply area from 105.52/105.69 and a demand zone at 104.92/105.09 (both areas also include 50.0% retracement levels).

Areas of consideration outside of the two aforesaid zones are supply at 105.98/105.85 and demand from 104.40/104.57.

H1 timeframe:

Support at 105.24, together with a 50.0% retracement at 105.26, commanded attention heading into the second half of last week and remains important going forward. Below, however, downside appears free to approach a 50.0% retracement level at 105.05 (green line) ahead of the 105 level.

105.50 is also interesting resistance, though beyond here Fibonacci enthusiasts may be drawn to the Fib cluster around 105.63, which is accompanied by a neighbouring supply at 105.71/105.77 (prior demand).

Structures of Interest:

Long term:

Direction is somewhat muted on the higher timeframes at the moment, largely consolidating between daily supply at 106.33/105.78 and a monthly support level at 104.62.

Short term:

 

  • The H1 Fibonacci cluster around 105.63, sheltered within H4 supply at 105.52/105.69, could act as a magnet this week and pull intraday action above 105.50. A whipsaw to H1 supply at 105.71/105.77 could also occur before sellers consider making a move (located just under daily supply at 106.33/105.78).

 

  • With daily price exhibiting scope to approach at least 105.78 and H4 to 105.52, the H1 support area at 105.24 also remains a place buyers could favour this week.

Weekly Technical Market Insight: 19th – 23rd October 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

Leaving trendline resistance (2.1161) unopposed, the month of September fell 3.4 percent by way of a bearish outside reversal candle and snapped a three-month winning streak. This advertises a possible dip to retest trendline support (prior resistance – 1.7191).

In terms of trend, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way – April 2 high 2018.

Daily timeframe:

Brought forward from previous analysis –

Demand at 1.2645/1.2773 (and 200-day simple moving average at 1.2707) is an area worth highlighting on the daily timeframe, due to it being a location a decision was made to break the 1.2813 peak (June 10).

Another area drawing attention is resistance at 1.3201.

RSI enthusiasts will also note the value recently met with 55.00 resistance.

H4 timeframe:

Sterling’s near-1 percent plunge last Thursday against a broadly stronger US dollar, positioned Friday’s candles around the upper frame of familiar demand at 1.2836/1.2881, a drop-base-rally formation.

Should buyers step in this week, resistance at 1.3006 represents a potential obstacle, while a decisive break uncovers supply around 1.3116/1.3160 (prior demand).

Additional selling this week, however, movement that dethrones the aforesaid demand, throws light on support at 1.2773.

H1 timeframe:

1.29 welcomed price action last Thursday, and, alongside a 78.6% Fib level at 1.2894 and a 50.0 retracement level at 1.2879 (green line), as well as two nearby trendline supports (1.3007/1.2819), capped downside into the week’s close.

Although notable (support) confluence, 1.2950 resistance hindered attempts to target the 1.30 region.

Structures of Interest:

Long term:

The bigger picture on GBP/USD shows technical elements favouring a bearish setting this week, at least until daily demand at 1.2645/1.2773 makes an entrance.

Short term:

Against the negative backdrop of higher timeframe structure, intraday technicians are currently working with a collection of H1 supports around 1.29 and a H4 demand at 1.2836/1.2881.

Traders who follow a multi-timeframe approach, therefore, may wait and see if H1 closes above 1.2950 before considering a bullish position, due to the threat of additional downside on the higher timeframes.

Weekly Technical Market Insight: 19th – 23rd October 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: 19th – 23rd October 2020, FP Markets
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