Weekly Technical Market Insight: 25th – 29th May 2020

Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets

US Dollar Index:

Down 0.5%, the US dollar index, or DXY, witnessed buyers take a back seat last week, snapping a two-week winning streak.

On the technical front, supply at 101.79/101.00 is located in an ideal site to facilitate a fakeout setting above tops at around 100.88 this week. It was stressed in the previous weekly insight sellers would likely target the 61.8% Fib level at 101.21 as a point of merging resistance. Thanks to recent moves, though, a 127.2% Fib ext. level at 101.12 can also be thrown in the pan as additional resistance to consider.

Maintaining a downside trajectory this week throws light on demand at 98.18/98.65, an area not only capping downside twice since late March, but one which claims a connection with the 200-day simple moving average at 98.48.

With reference to the RSI indicator, since April the oscillator has fluctuated around its mid-way value (50.00).

Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets

EUR/USD:

Monthly timeframe:

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

March, evident from the monthly chart, left behind a long-legged doji indecision candle, with its extremes crossing paths with heavyweight supply at 1.1857/1.1352 (intersects with a long-term trendline resistance [1.6038]) and demand at 1.0488/1.0912.

April spent the best part of the month feasting on the top edge of 1.0488/1.0912, squeezing out a Japanese hammer candlestick pattern, typically viewed as a bullish reversal signal. May, as you can see, is recovering off worst levels, on track to form another Japanese hammer candlestick pattern out of current demand.

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

Daily timeframe:

Partially altered from previous analysis –

Pattern traders will note a large potential bearish pennant configuration on the daily timeframe, forming since late March between 1.1147/1.0635.

Mid-week watched price breach the upper border of the current pennant formation. Yet, after Thursday failed to deliver much follow through, missing the 200-day simple moving average at 1.1012 by a whisker, Friday wrapped up the week probing lows at 1.0885.

By and of itself, the floor appears free to test lower levels on this timeframe this week.

H4 timeframe:

The euro dived another 0.4% to 1.0898 Friday, largely taking cues from the greenback amid risk aversion.

Demand at 1.0925/1.0897 (prior supply) broke down heading into the close, consequently crossing paths with a 50.00% ret level at 1.0890. A breach here highlights fresh demand at 1.0799/1.0827, which, as you can see, crosses with trendline support (1.0635).

H1 timeframe:

Early Asia Friday had demand at 1.0936/1.0947 cede ground, despite an attempt to keep the area alive Thursday. The base remains significant as possible supply this week.

The 100-period simple moving average at 1.0940 also gave way, with the pair colliding into the 1.09 region going into London’s session. Buyers off this base seem nervous, with some already having sell-stops tripped amid the push to lows around 1.0887.

Thanks to the above, demand at 1.0850/1.0866 commands attention, not only due to the generous momentum out of the base, but also because it is considered a decision point to approach 1.09.

Structures of Interest:

Long term:

Some conflict is seen on the higher timeframes at the moment.

Monthly price displays scope to cross into higher ground out of demand at 1.0488/1.0912, while daily price suggests moves back into the bearish pennant pattern’s frame.

Short term:

1.09 on the H1 timeframe stands out as feasible resistance today. This, of course, is bolstered by H4 testing the lower boundary of 1.0925/1.0897. A H4 close under the 50.00% ret level at 1.0890 might steer sellers into the market with H1 demand at 1.0850/1.0866 viewed as an initial obstacle to the downside.

Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

April’s 370-pip advance has, as you can see, landed May within striking distance of supply fixed at 0.7029/0.6664, an area intersecting with a long-term trendline resistance (1.0582).

May is proving lacklustre, however, up 0.38% as of writing.

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

Daily timeframe:

Brought forward from previous analysis –

Supply at 0.6618/0.6544 remained in the fight last week, with price shattering a three-day winning streak by way of a bearish inside candle formation on Thursday, and modestly following through Friday.

Circling the upper border, we have the 161.8% Fib ext. level at 0.6642, fixed a few pips from the 200-day simple moving average seen around 0.6658.

H4 timeframe:

Partially altered from previous analysis –

Recent analysis highlighted a falling wedge formed on approach to demand at 0.6356/0.6384, between 0.6561/0.6432.

The week kicked off penetrating the upper boundary of the falling wedge, with Tuesday and Wednesday extending ground and crossing paths with the falling wedge take-profit target, measured by taking the base and adding this value to the breakout point (yellow), at 0.6595. The remainder of the week observed price give back a portion of earlier gains to lows at 0.6505.

In regards to technical zones, supply at 0.6695/0.6664 is on the hit list. Demand at 0.6356/0.6384 also offers a base of focus this week.

H1 timeframe:

Risk sensitive currencies took a mild hit Friday, in the middle of forming what appears to be a five-wave impulse move on the H1 timeframe, with the expectation waves 1 and 5 will equal. It’s common to see wave 4 terminate around 38.2% of wave 3, therefore, we could see an intraday push lower from the 0.6550 range, followed by a whipsaw through 0.65 into demand at 0.6483/0.6472 (prior supply), which conveniently unites with wave 5.

Structures of Interest:

Long term:

Daily supply at 0.6618/0.6544 appears to be holding on by a thread, despite recent action pulling back. This unlocks the possibility of bringing in the nearby 161.8% Fib ext. level at 0.6642 and 200-day simple moving average at 0.6658, a dynamic value connecting closely with the underside of monthly supply at 0.6664.

Short term:

0.6550 deserves notice on the H1 timeframe as resistance, powered on the back of a possible wave-4 completion and room to navigate lower levels on the H4 timeframe. Intraday sellers will likely watch 0.65 as a take-profit target from 0.6550, as well as demand from 0.6483/0.6472 on the H1.

The noted demand, given a possible wave-5 completion, is not only measured as a downside target for shorts, it also forms a base of strong support to consider this week.

Weekly Technical Market Insight: 25th – 29th May 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 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 remains subdued, ranging between 108.08/105.98.

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

Daily timeframe:

Brought forward from previous analysis –

Since registering a top from 109.38 at the beginning of April, USD/JPY moulded a falling wedge pattern, which had its upper limit breached on May 11 in strong fashion, boosted by demand at 105.70/106.66. The take-profit target out of the said pattern, traditionally measured by taking the value of the base and adding this to the breakout point (purple), sets an objective of around 109.30.

However, in order to reach the noted take-profit target, the 200-day simple moving average at 108.27 will need to be defeated.

H4 timeframe:

Brought forward from previous analysis –

After bottoming at 105.99, H4 activity has been chalking up what appears to be a rising wedge pattern, with price action closing in on the apex. Take profit targets out of rising wedge patterns are commonly measured by taking the base value and adding this figure to the breakout point.

Structurally, supply at 108.10/107.79 is also present, along with a local demand area at 107.21/107.41. A break of the latter advertises moves to support priced in from 106.91.

H1 timeframe:

Trendline resistance (prior support – 106.85), together with another local trendline resistance (108.08) and a supply pencilled in from 107.69/107.59 as well as the 100-period simple moving average at 107.60, collectively capped upside amid the US session Friday.

Violating the current resistances today/this week unearths 108 as resistance; a rejection, though, may dip as far south as demand at 107.15/107.23.

Structures of Interest:

Long term:

Daily price displays room to approach the 200-day simple moving average at 108.27 and the falling wedge take-profit target of around 109.30.

Short term:

Should H1 hold space around current supply and trendline resistances, this may be considered a forerunner to decisively break out of the H4 rising wedge, a move that could swarm H4 demand at 107.21/107.41 and attack H4 support at 106.91. Essentially, this represents a similar outlook to Friday.

The point the two H1 trendlines join (green), however, offers particularly interesting resistance.

Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

Though under pressure, support at 1.1904/1.2235 remains in motion in May. Neighbouring resistance, should we see an attempt at recovery, can be found in the form of a trendline (1.7191). A violation of support, nevertheless, puts forward a 127.2% Fib ext. level at 1.1297.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008.

Daily timeframe:

Partially altered from previous analysis –

A few pips south of supply at 1.2649/1.2799 (prior demand), a double-top pattern formed at 1.2647, with May 13 consuming the neckline (April 21 1.2247) and establishing a potential take-profit target (purple) around 1.1855.

The week saw the British pound initially come out fighting, clawing back some losses vs. the greenback. However, traders, particularly pattern traders, will note the double-top neckline at 1.2247 holds firm.

H4 timeframe:

Sterling, according to the technical picture on the H4 chart, has been grinding channel support (1.2642 – prior resistance) since topping Tuesday at 1.2296.

Supply at 1.2244/1.2209 contained upside Friday, establishing a notable candle wick off its lower edge. This proposes we may push for the original channel support (1.2266) and maybe even fresh demand at 1.1771/1.1886, extended from March 25. Areas to the upside, aside from Tuesday’s high at 1.2296, is found at supply from 1.2477/1.2438.

H1 timeframe:

Formed in early European trade Friday, following UK retail sales data falling by a record 18%, supply at 1.2220/1.2199 held price action lower into the US session and closed within a few pips of 1.2150.

Dethroning 1.2150 this week throws light on demand at 1.2094/1.2125, a zone joining with a 161.8% Fib ext. level at 1.2109, the round number 1.21 and channel support (1.2185).

The 100-period simple moving average, currently circling the 1.2222 neighbourhood, is seen flattening after a fleeting move higher from May 19.

Structures of Interest:

Long term:

Monthly price holds 1.1904/1.2235, though this area is positioned against the major trend.

Sellers on the daily timeframe appear to be taking charge around the underside of the daily double top neckline at 1.2247.

Short term:

Buyers seem feeble off H4 channel support (1.2642), weighed by selling pressure out of H4 supply at 1.2244/1.2209. This, together with daily price structure, may prompt a break of 1.2150 on the H1 timeframe towards demand at 1.2094/1.2125, perhaps welcoming intraday breakout scenarios today.

Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets

 

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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.

 

  • Weekly Technical Market Insight: 25th – 29th May 2020, FP Markets
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