Weekly Technical Market Insight: 22nd – 26th June 2020

Weekly Technical Market Insight: 22nd – 26th June 2020

US Dollar Index:

The rebound from daily support at 95.84 and recent completion of a daily AB=CD pattern at 96.16, regarded as a basic bullish configuration among harmonic traders, witnessed additional recovery gains last week.

Finishing the week +0.6%, the US dollar index, or DXY, could experience a further surge in demand this week until crossing paths with daily supply at 98.18/98.65. Accommodated within this zone, traders will also note additional resistance by way of the 200-day simple moving average at 98.40, a 38.2% daily Fib level at 98.51 and a 161.8% daily Fib ext. level at 98.52. Note the 38.2% Fib represents a common initial take-profit target out of AB=CD patterns.

In addition to the above, late May witnessed price push through the lower limit of a large bearish pennant configuration (98.27). Traders following this pattern will, therefore, still acknowledge the possibility of moves eventually forming as far south as 93.97: the pennant take-profit target, measured by taking the preceding move and adding the value to the breakout point (yellow).

EUR/USD:

Monthly timeframe:

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

May, as you can see, recovered off worst levels and wrapped up a few pips shy of monthly highs out of demand from 1.0488/1.0912.

June extended gains, consequently running into opposition at the lower ledge of supply from 1.1857/1.1352 (unites with long-term trendline resistance [1.6038]). As you can see, June is now on track to close by way of a shooting star candlestick pattern, considered a bearish signal according to Japanese candlestick analysis.

With reference to the primary trend, price has exhibited clear lower peaks and troughs since 2008.

Daily timeframe:

Partially altered from previous analysis –

EUR/USD recently addressed a potential reversal zone (PRZ), derived from a harmonic bearish bat pattern, comprised of an 88.6% Fib level at 1.1395, a 161.8% BC projection at 1.1410 and a 161.8% Fib ext. level at 1.1462 (red oval). According to the harmonic pattern’s overall structure, price is tipped for more underperformance this week.

It’s typical to see traders sell PRZs and place protective stop-loss orders above the X point, in this case at 1.1495. Common targets fall in at the 38.2% and 61.8% Fib levels (legs A/D) at 1.1106 and 1.0926, respectively. Note in between the said Fib studies traders must also contend with the 200-day simple moving average at 1.1026.

In addition to the bearish configuration, the RSI indicator recently exited overbought territory and has eyes on the 50.00 value.

H4 timeframe:

Four successive days of losses unearthed demand at 1.1189/1.1158 (prior supply) heading into the week’s close. Despite Friday’s attempt to recover, downside gained speed and settled deeper within the current demand’s range.

Another area likely monitored this week is fresh demand at 1.1115/1.1139, marrying up nicely with an ABCD bullish formation and trendline support (1.0774).

H1 timeframe:

Upside attempts through 1.1250, once again, proved unsustainable amid early US Friday, leading to a wave of selling that penetrated 1.12 and welcomed channel support (1.1207) into the fold.

1.12 was also retested as resistance, consequently increasing the probability of a 1.1150 test.

Structures of Interest:

Long term:

The response out of monthly supply at 1.1857/1.1352, along with price respecting the daily harmonic bearish bat pattern and suggesting we may be headed for the 38.2% Fib level at 1.1106, promotes the idea of further selling on the bigger picture.

Short term:

H4 demand at 1.1189/1.1158, although fed a mild recovery, is currently under pressure with some traders betting on a decline to H4 demand at 1.1115/1.1139 (along with H4 ABCD/trendline confluence). H1 has eyes on 1.1150 as support, following 1.12 holding as resistance.

Note 1.1150 is positioned just ahead of H4 demand at 1.1115/1.1139. Combined, this could fire up a short-term recovery this week. Ultimately, though, things are likely to eventually head for 1.11, based on the higher timeframes.

AUD/USD:

Monthly timeframe:

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

May’s extension as well as June’s follow-through swerved action into supply at 0.7029/0.6664, an area benefitting from additional resistance by way of a long-term trendline formation (1.0582).

Regarding the market’s primary trend, a series of lower lows and lower highs have been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

After squaring off under two trendline resistances (prior supports – 0.6744/0.6671), and shipping through support from 0.6931, the latter proved worthy resistance last week.

This has thrown light on support nearby at 0.6755, with a violation perhaps unmasking the 200-day simple moving average at 0.6664. It should be noted the moving average is in the process of flattening, following months of drifting lower.

H4 timeframe:

Demand at 0.6773/0.6814 is ripe for another run this week, an area boasting a connection with a 38.2% Fib level at 0.6808. What’s also particularly attractive about the aforesaid demand is a possible deep ABCD correction at 0.6779.

Failure to stir a reaction here, this may establish a basis for bringing in demand at 0.6695/0.6664 (prior supply).

H1 timeframe:

Partially altered from previous analysis –

Since the beginning of the week, H1 has been in the process of forming a descending triangle pattern (slightly revised from Friday’s analysis) between 0.6976 and 0.6836. Although it’s usual to see these form in a downtrend, they can represent reversal patterns. A notable downside break here, according to the pattern’s take-profit target (yellow – measured by taking the base value and adding this to the breakout point), could reach as far south as 0.67.

Sellers picked up the pace into US trade Friday after finding thin air above 0.69. The 100-period simple moving average ceded ground, as did 0.6850, holding as resistance into the close. Also prominent is the lower base of the descending triangle coming under attack. Below, traders will note 0.68 resting as possible support.

Structures of Interest:

Long term:

Monthly supply at 0.7029/0.6664, along with monthly trendline resistance, and daily resistance at 0.6931, is likely sufficient to fuel sellers this week.

Short term:

H4 demand at 0.6773/0.6814, particularly off the ABCD level at 0.6779, may temporarily take the wind out of sellers.

A confident break below the H1 descending triangle pattern may find opposition at 0.68, as the number is located within H4 demand at 0.6773/0.6814. A break of here, however, lines up daily support at 0.6755, followed by 0.67 on the H1 which essentially also represents the upper boundary of H4 demand at 0.6695/0.6664 and the H1 descending triangle’s take-profit target.

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 busy carving out a descending triangle pattern between 118.66/104.62.

The month of March concluded by way of a long-legged doji candlestick pattern, ranging between 111.71/101.18, with extremes piercing the outer limits of the aforementioned descending triangle formation. April was pretty uneventful, ranging between 109.38/106.35. May also remained subdued, ranging between 108.08/105.98, with June currently off best levels, down 0.9%.

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

Daily timeframe:

Partially altered from previous analysis –

Demand at 105.70/106.66 welcomed price action into the closing stages of the week. Despite Thursday’s mild recovery, underlying bids remained soft Friday. This threatens a dive into the aforesaid demand this week.

The 200-day simple moving average at 108.40 has been flattening since mid-March, and represents achievable resistance should a rotation to the upside come to fruition.

H4 timeframe:

Since Thursday, H4 price has been in the process of establishing a tight bearish pennant pattern between 107.13/106.66, considered among market technicians to be a continuation pattern.

Interestingly, the pattern is centred around resistance at 106.91 and is deriving some support off demand close by at 106.49/106.66, an area fixed at the top edge of daily demand from 105.70/106.66.

H1 timeframe:

107 has proved a wholesome resistance, withstanding a number of upside attempts in the second half of the week. Also intersecting with 107 is trendline resistance (107.62); the 100-period simple moving average is also seen closing in on the round number, currently circulating the 107.10 region.

To the downside on the H1 timeframe, local demand is relatively limited, therefore focus will likely remain on H4 demand underlined above at 106.49/106.66.

Structures of Interest:

Long term:

Daily price recently bumped back into demand at 105.70/106.66 and is holding, albeit lacking impetus.

Short term:

The H4 bearish pennant pattern suggests the prospect of further losses this week, though at the same time faces opposition off H4 demand at 106.49/106.66, which as we already know, is linked with the upper boundary of daily demand at 105.70/106.66. As such, if the lower limit of the H4 bearish pennant gives way, traders can expect a potentially uncomfortable ride to its take-profit target (measured by taking the preceding move and adding this value to the breakout point).

GBP/USD:

Monthly timeframe:

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

Support at 1.1904/1.2235 and long-term trendline resistance (1.7191) remain in view, with the latter so far prompting an attractive upper shadow this month, shaped by way of a Gravestone doji candlestick pattern.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008. Consequently, this places 1.1904/1.2235 in a vulnerable position.

Daily timeframe:

Following Tuesday’s retest at the 200-day simple moving average from 1.2682, the second half of the week took the currency pair to demand at 1.2192/1.2361. This is an area not only fastened to the top edge of monthly support, it is also considered the decision point to break 1.2647 (April 14 high).

In light of the connection between monthly support and daily demand, exploring deeper waters within the latter (to 1.2235) is possible before buyers make an entrance.

H4 timeframe:

Buyers taking a back seat Friday overwhelmed demand at 1.2374/1.2427. This also formed supply coming in from 1.2457/1.2412 and launched price action into demand at 1.2304/1.2343 (located within upper range of daily demand at 1.2192/1.2361).

Another demand worthy of highlighting this week is 1.2231/1.2279.

H1 timeframe:

Heading into US hours Friday, following a stab at the lower edge of demand at 1.2375/1.2413, brought about a spirited pop to highs at 1.2411, testing local supply around 1.2424/1.2407.

The session wrapped up with a reasonably decisive push through 1.2350, with price now leaning towards 1.23.

Indicator-based traders will note bullish divergence forming out of oversold territory.

Structures of Interest:

Long term:

The overall trend in this market remains to the downside, placing pressure on monthly support at 1.1904/1.2235, and its associated daily demand found at 1.2192/1.2361.

Despite direction pointing lower, a recovery attempt out of daily demand is a strong possibility this week.

Short term:

H4 demand at 1.2304/1.2343 recently made its presence known. This, along with the H1 RSI putting up bullish divergence and price action in the shape of a potential stop-hunt beneath 1.2350, could stir buyers in early trade and force price to revisit at least 1.2375/1.2413 and 1.2424/1.2407.


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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.

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