Weekly Technical Market Insight: 21st – 25th June 2021

Weekly Technical Market Insight: 21st – 25th June 2021, FP Markets

Charts: Trading View

US Dollar Index (Daily Timeframe):

According to the US dollar index (ticker: DXY), dollar bulls entered an offensive phase last week, awakened on the back of a hawkish Fed tailwind.

Climbing 2 percent, the advance not only delivered technical demand at 90.32-90.70, it overpowered resistance at 91.36 (now potential support), as well as the 200-day simple moving average, currently circling 91.51. Regular readers will note recent moves also completed a descending wedge pattern (a shape exhibiting decreased downside momentum within converging walls [91.43/90.42]), colliding with the formation’s take-profit target around 91.32 (red zones) on Wednesday.

In terms of trend, while the DXY has been underwater since topping in early 2020—by way of well-defined lower lows and lower highs (black arrows)—the question is whether recent USD optimism is the beginning of a trend change? On the basis of technical trend studies presented here, a bullish revival could be on the cards if the 94.74 25th September high is overrun (blue arrow). Of course, some technicians will view last week’s price close above the 200-day simple moving average as a bullish cue.

Prior to crossing swords with 94.74, price must confront the 93.43 31st March high, closely shadowed by Quasimodo resistance drawn from 93.90.

Unsurprisingly, the RSI indicator (a popular gauge of momentum) entered overbought on Friday, stroking levels not seen since early March 2020 (73.00). Despite overbought conditions, this oscillator can remain overbought for prolonged periods. Exiting overbought, nevertheless, is a bearish sign some traders watch for; others seek what’s known as bearish divergence and failure swings.

  • While the RSI is at a point profit-taking may emerge, price studies indicate the technical pendulum favours further buying this week, taking aim as far north as 93.43 tops and Quasimodo resistance from 93.90.

Weekly Technical Market Insight: 21st – 25th June 2021, FP Markets

EUR/USD:

Monthly timeframe:

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

Down 3 percent MTD, June is clearly on the ropes.

Reclaiming May’s gains and chipping into April’s upside, Europe’s single currency is now touching gloves with familiar support at $1.1857-1.1352.

Upstream, the technical spotlight remains concentrated on 2021 peaks at $1.2349, with additional enthusiasm welcoming 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 major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Latest developments show the currency pair navigating territory south of the 200-day simple moving average at $1.1991. Although crossing below the SMA awakens bearish calls, downside risks could ease once/if the unit challenges Quasimodo support at $1.1836 this week.

A $1.1836 breach, on the other hand, helps validate the bearish tone, highlighting Quasimodo support from $1.1688.

On the side of a bullish theme off $1.1836, however, is the RSI oscillator, recently nosediving into oversold terrain and establishing what many traders will view as hidden bullish divergence—commonly forms a trend continuation signal that suggests trend strength remains, despite momentum producing negative signals. Essentially, this consists of the RSI pulling out a lower low and price action forming a higher low.

H4 timeframe:

H4, as you can see, discovered a degree of support off the Quasimodo formation at $1.1899 at the tail end of the week, though was brushed aside as the USD continued to flex its financial muscle.

Clearing $1.1899 opens the door to a possible test of demand from $1.1794-1.1822, arranged south of Quasimodo support at 1.1836 on the daily timeframe. Yet, before pursuing lower levels, a $1.1899 retest on the H4 could come about.

H1 timeframe:

The Fed-induced USD bid, coupled with local resistance at $1.1926, weighed on $1.19 bids on EUR/USD Friday, eventually delivering lows of $1.1847, just ahead of demand at $1.1835-1.1846.

Moves lower smothered not only the round number, but also Quasimodo support found at $1.1883. Combined, $1.19 and $1.1883, therefore, may shape resistance early week to raid $1.1835-1.1846 and test daily Quasimodo support within at $1.1836.

From the RSI, the value shows momentum crawling higher, balancing off trendline support, taken from the low 8.62. Though, traders are unlikely to take this seriously until the indicator climbs the 50.00 centreline.

Observed levels:

Long term:

Thanks to a strong-willed decline, monthly support at $1.1857-1.1352 is back in the frame. In similar fashion, daily price is on the doorstep of Quasimodo support from $1.1836, emphasising a bullish setting this week.

Short term:

Before reaching daily Quasimodo support at $1.1836, the combination of the $1.19 figure on the H1 and resistance from $1.1883 is a recipe short-term sellers may appreciate, targeting H1 demand at $1.1835-1.1846 (holds daily Quasimodo support within).

An alternative short-term bearish scenario to potentially decorate the H1 chart is a whipsaw through $1.19 offers—tripping stops—to fuel offers around resistance at $1.1926.

Weekly Technical Market Insight: 21st – 25th June 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 low) and supply from $0.8303-0.8082. That was, of course, until last week’s one-sided decline, movement throwing light on support at $0.7394. Additional downside pressure also brings light to demand at $0.7029-0.6664 (prior supply).

June is currently down by 3.2 percent.

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:

Last week’s four-day slump chopped at support from $0.7563 and the 200-day simple moving average at $0.7549, introducing the possibility of bringing in supply-turned demand at $0.7453-0.7384 this week (note this area holds monthly support at $0.7394). Also flirting with the area is a collection of Fib studies, including a 61.8% Fib retracement value at $0.7379, a 1.272% Fib expansion at $0.7411 and a 100% Fib projection at $0.7418.

Harmonic traders will acknowledge the 100% value represents an AB=CD bullish formation. And with this, we can therefore accommodate the B-C 1.27% Fib extension at $0.7425.

The above—alongside the RSI indicator dropping in on oversold territory—underlines a bullish theme if the demand base is tested this week.

H4 timeframe:

Several support levels stepped aside last week, including Quasimodo support at $0.7507 which welcomed a resistance test on Friday. This unlocked the trapdoor to possible follow-through selling this week until support at $0.7440.

Additional resistances to be mindful of are $0.7529, $0.7563 and $0.7588.

H1 timeframe:

Friday, as you can see, attempted to reclaim 0.75+ status but found $0.7511 resistance too much of a ceiling and subsequently had price action refresh session lows into the close.

Downstream, technical support is not expected to develop until around $0.7450ish, which happens to dovetail closely with the upper side of daily demand at $0.7453.

Interestingly, although price forged fresh lows, the RSI indicator, a measure of momentum, shows momentum gradually climbing, aided by support within oversold at 19.30.

Observed levels:

Long term:

Longer term, technical eyes (in particular price action traders) will be on the daily timeframe’s demand zone at $0.7453-0.7384. Aside from housing a number of Fib studies and an AB=CD bullish configuration, monthly support resides within the lower boundary at $0.7394. As such, this is a location the chart may witness bulls attempt to make a stand this week.

Short term:

Against the backdrop of higher-timeframe structure, the lower timeframes—H4 and H1—reveal fresh air to the downside until H1 support at $0.7450, followed by H4 support at $0.7440.

With the above, technical studies suggest a short-term bearish theme until $0.7450ish, at which point traders might abandon shorts and shift to longs in response to daily demand mentioned above at $0.7453-0.7384.

Weekly Technical Market Insight: 21st – 25th June 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 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 (+0.2 percent) held the breached descending resistance, echoing potential support for the month of June, currently trading higher by 0.6 percent.

Daily timeframe:

Technical framework unchanged from previous research.

Long-term resistance at ¥110.94-110.29—posted under supply at ¥111.73-111.19—made a show in recent movement, with Thursday enticing bearish flow and erasing a large portion of Wednesday’s upside. You will note, however, Friday lacked direction and consequently fashioned what’s known as a doji indecision candle.

Downside structure to be cognisant of this week are lows around ¥109.19 (upper green oval), closely shadowed by ¥108.60ish lows (lower green oval), with subsequent selling to perhaps bump heads with supply-turned demand at ¥107.58-106.85.

Trend studies reveal the pair has been trending higher since the beginning of the year, though discovered a top heading into early April. Recent research also showed the RSI continues to oscillate around resistance at 57.00. Additional RSI structure is found at support from 28.19 and resistance drawn from 83.02.

H4 timeframe:

Last week’s technical studies identified supply at ¥110.85-110.46, a range accommodating a number of Fib studies and the completion of a three-drive bearish formation (the 1.272% Fib extension at ¥110.63). Sellers occupied the zone on Thursday, eking out a 0.5% decline, and Friday scored a low of ¥109.94.

The 38.2% and 61.8% Fib retracement values at ¥109.50 and ¥108.70, respectively, remain logical downside targets this week (collected from the origin of the three-drive pattern [¥107.48] to recent tops at ¥110.82). Note the chart displays trendline support, taken from the low ¥107.48, plotted close by demand at ¥109.02-109.20.

H1 timeframe:

Early London hours on Friday acknowledged the ¥110 figure. Powered on the back of St. Louis Fed President James Bullard noting the central bank’s latest shift was a natural response to economic growth, USD/JPY reached ¥110.48. Nevertheless, heading into the early hours of US trading handed the baton to sellers, presumably weighed by waning US Treasury yields (benchmark 10-year yield down more than 4 percent).

Though ¥110 remains support, it’s worth pencilling in Quasimodo support situated at ¥109.91. Psychological levels (¥110) often provide a home for a crowd of orders, and the majority, in this case, would site stops (from both buyers attempting to fade and breakout sellers) just south of the level. This opens up a stop-run scenario, with price perhaps fading stops off ¥109.91.

In terms of momentum, the RSI oscillator finished the week circling the 50.00 centreline, following an earlier bottom ahead of oversold space.

Observed levels:

Long term:

Higher timeframe charts have contradictory positions.

The long-term monthly chart is in the process of attempting to take hold of a breached descending resistance-turned possible support, while daily price engages with resistance at ¥110.94-110.29.

Ultimately, higher timeframe structure tends to take precedence.

Short term:

Lower timeframe charts also deliver conflicting views.

The H4 timeframe’s supply at ¥110.85-110.46—housed within daily resistance at ¥110.94-110.29—is a technical sign lower levels are in the air this week, zeroing in on the 38.2% Fib retracement value from ¥109.50.

Then again, knowing the monthly scale is in the process of attempting to take hold of a breached descending resistance, the H1 chart may witness a whipsaw through ¥110 bids to fuel (stops) bids at Quasimodo support from ¥109.91 for a possible bullish play. Though, be aware that should ¥110 give in, ¥109.50 on the H4, as stated above, is likely the next downside objective, conveniently aligning with H1 demand at ¥109.44-109.55.

Weekly Technical Market Insight: 21st – 25th June 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 moved in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance, taken from the high $2.1161. May, despite diminished volatility during March and April, traded firmly on the front foot, up by 2.8 percent.

June, however, reclaimed May’s gains, down 2.9 percent MTD, albeit recording fresh YTD peaks at $1.4250.

Despite the trendline breach (which could serve as 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:

Arranged by way of three hefty bearish candles, driven amidst a Fed-induced USD bid, cable eked out its worst week since September 2020, down more than 2 percent.

Last week muscled through support at $1.4003 (now labelled resistance) and demand at $1.3857-1.3940, with Friday closing at session lows. This unearths Quasimodo support at $1.3609 and neighbouring 200-day simple moving average circling $1.3586.

According to the RSI indicator, the value is on the verge of entering oversold space, an area that could spark recovery interest.

H4 timeframe:

Friday found itself under significant pressure—pressure that annihilated back-to-back Quasimodo support levels at $1.3876 and $1.3823 and uncovered another Quasimodo support base at $1.3761. What’s interesting is its position: nestled beneath 3rd May low at $1.3800. Below $1.3800 is a location breakout stops will be located, and once filled are perhaps sufficient to fuel bids off $1.3761. The question, of course, is whether the bids contain enough oomph to override bearish pressure?

H1 timeframe:

After an earlier $1.39 retest, it was one-way traffic south until $1.38. Efforts to hold the latter in early US flatlined just north of $1.3830ish and left resistance at 1.3851 unopposed, resulting in a retest—and marginal breach—of $1.38.

H4 Quasimodo support at $1.3761 also commands attention on the H1 scale this week, possibly welcoming price action in early trade.

With reference to the RSI indicator, the value discovered resistance around 40.00 while oversold space has provided support—common view during periods of selling. Between the 50.00 centreline and 40.00, therefore, may serve as an overbought trigger for the time being.

Observed levels:

Long term:

Brushing aside daily demand at $1.3857-1.3940 on Friday unzips a downside bias this week. According to the chart, scope to approach Quasimodo support at $1.3609 is seen.

Short term:

Shorter-term charts focus on H4 Quasimodo support at $1.3761. The fact H1 bulls failed to build on the initial reaction from $1.38 Friday indicates the round number is hanging by a thread. A H1 close south of the number, therefore, might stir a short-term bearish scenario, targeting $1.3761, with further selling possibly on the cards given the daily timeframe’s technical position.

Weekly Technical Market Insight: 21st – 25th June 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: 21st – 25th June 2021, FP Markets
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