Weekly Technical Market Insight: 26th – 30th July 2021

Weekly Technical Market Insight: 26th – 30th July 2021, FP Markets

Charts: Trading View

US Dollar Index (Daily Timeframe):

Versus six foreign currencies, the US dollar index (ticker: DXY) chalked up a second consecutive weekly gain last week, adding 0.2 percent within the parapets of a rising wedge configuration between 91.52 and 92.40.

Additional gains shine the spotlight on the 93.44 31st March high, followed by neighbouring Quasimodo resistance from 93.90—a level accompanied by a number of key Fibonacci ratios between 94.49 and 93.90. Deserving attention within this Fibonacci zone is the 100% Fib projection at 93.90. Harmonic traders will acknowledge this level as an AB=CD barrier, consequently also bringing the 1.13% BC Fib extension at 94.03 to the table.

To the downside, focus is on the 200-day simple moving average at 91.36, grouped together with substantial support at 90.64-91.40.

Trend studies, as noted in previous weekly writing, reveal the greenback has echoed a recovery phase since the beginning of 2021, following a sizeable decline during 2020. After realising support at 89.34 (a level displaying historical significance), 2021 trades higher by 3.3 percent year to date.

In terms of momentum, the relative strength index (RSI) shows bearish divergence, action informing traders of weakening momentum. This is in agreement with the price chart’s rising wedge formation. Indicator support is present at 55.67; resistance resides within overbought space at 73.00.

  • The rising wedge may continue to take shape until reaching Fibonacci resistance between 94.49 and 93.90 this week, in which case chartists are likely to anticipate a retracement. A breakout below the rising wedge prior to testing the aforesaid Fib resistance also unlocks the door to a bearish scenario, targeting support at 90.64-91.40.

Weekly Technical Market Insight: 26th – 30th July 2021, FP Markets

EUR/USD:

Monthly timeframe:

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

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.8 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since mid-June, the daily timeframe has been carving out a falling wedge between $1.1847 and $1.1975, structure displaying weakening downside momentum. Quasimodo support at $1.1688 making an entrance is a possibility this week, arranged south of 31st March low at $1.1704 (a place sell-stops are perhaps positioned).

Any breakout above the wedge pattern will reignite interest in the 200-day simple moving average, circling $1.2002, a dynamic value sheltered beneath supply at $1.2148-1.2092.

With regards to long-term trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the indicator continues to occupy space south of trendline support-turned resistance (around 35.00-40.00), extended from the low 29.54. In spite of this, modest bullish divergence is taking shape. Indicator resistance is close by at 51.36, serving well since November 2020, and support falls in around the oversold threshold of 30.00.

H4 timeframe:

Quasimodo support from $1.1749 remains a key watch on the H4 as price movement drifts within a stone’s throw of the base. It’s reasonable to assume traders are cautious buyers at this point, having witnessed June’s decline. The flipside to this, of course, is the chart pencilling in a falling wedge between $1.1875 and $1.1772, which represents a potential reversal pattern forming within the walls of the daily timeframe’s falling wedge (see above).

Additional technical levels to be mindful of this week are Quasimodo support at $1.1720 and Quasimodo resistance from $1.1880.

H1 timeframe:

A closer reading of price action on the H1 chart guides attention to Fibonacci structure between $1.1745 and $1.1749, an area sharing chart space with H4 Quasimodo support underlined above at $1.1749.

Overhead, the 100-period simple moving average made a show around $1.1784 on Friday, delivering resistance heading into the early hours of London. Clearing the dynamic value this week will perhaps see $1.18 call for attention and resistance at $1.1821, joined alongside a 50.00% retracement value at $1.1817.

The relative strength index (RSI) defended support (36.94) at the back end of the week, and established minor bullish divergence. This tells traders that while Friday did indeed breach Thursday’s lows—albeit briefly—momentum is in the process of strengthening.

Observed levels:

Long term:

Monthly support at $1.1857-1.1352, and the anticipation of a breakout above the daily timeframe’s falling wedge between $1.1847 and $1.1975, places longer-term flow in a somewhat bullish light.

Short term:

A breakout above the H4 falling wedge between $1.1875 and $1.1772, supported by a Quasimodo formation from $1.1749, underscores the likelihood of a bullish reversal occurring.

Couple the above with the H1 timeframe’s Fibonacci structure between $1.1745 and $1.1749, chart studies suggest short-term flow is eyeballing higher terrain this week, targeting $1.18 as an initial upside objective.

Weekly Technical Market Insight: 26th – 30th July 2021, FP Markets

AUD/USD:

Monthly timeframe:

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

Following June’s 3.0 percent decline, July is attempting to secure position south of support at $0.7394. Additional downside brings demand at $0.7029-0.6664 to light (prior supply).

Month to date, July is down 1.8 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Chartists observed AUD/USD modestly trim recovery gains Friday, aided by resistance at $0.7453-0.7384. Knocking on the door of a 1.272% Fib projection at $0.7273 is possible should follow-through selling emerge this week, whereas consuming $0.7453-0.7384 targets the 200-day simple moving average at $0.7585, plotted a touch beneath resistance at $0.7626.

With respect to trend, 2021 is underwater right now, emphasised by the close below the 200-day simple moving average at the beginning of July.

As for momentum, limited change has been seen on the relative strength index (RSI), maintaining a narrow consolidation between resistance at 41.63 and the oversold perimeter 30.00.

H4 timeframe:

Fibonacci structure between $0.7293 and $0.7315—an area housing a 100% Fib projection at $0.7313 which is a level harmonic traders recognise as an AB=CD bullish formation—held firm mid-week, inspiring a $0.7364 resistance breach, a base shortly after welcoming a retest and holding support.

Harmonic AB=CD traders commonly set take-profit targets at 38.2% and 61.8% Fib retracement levels, derived from legs A-D. With $0.7364 attempting to forge support, 38.2% Fib retracement at $0.7408 is on the radar, with a break unmasking a 61.8% Fib retracement at $0.7482.

H1 timeframe:

Friday’s lacklustre vibe had the currency pair finish the week between $0.74 and nearby support at $0.7347 (previous Quasimodo resistance), a level currently working alongside the 100-period simple moving average.

As aired in Friday’s technical briefing, technicians will acknowledge that although $0.74 attracts limited (technical) confluence on the H1, H4 has the 38.2% Fib retracement organised above at $0.7408. With that being said, a whipsaw through $0.74—action not only tripping some sellers’ protective stops but also filling a portion of breakout buyers’ orders—into the H4 Fibonacci base could come to fruition.

Momentum, according to the relative strength index (RSI), dipped under the 50.00 centreline on Friday, underscoring average losses exceed average gains. Moves to oversold territory this week, therefore, may be on the cards.

Observed levels:

Long term:

While it’s too early to say monthly support at $0.7394 has reached its end, daily resistance at $0.7453-0.7384 may discourage bullish commitment at this point, perhaps forcing a bearish play to the daily timeframe’s 1.272% Fib projection at $0.7273 this week.

Short term:

A whipsaw above $0.74 into the H4 timeframe’s 38.2% Fib retracement at $0.7408 (an initial take-profit level derived from a H4 AB=CD formation) is a possible scenario on the table. Not only will the move fill buy-stops north of $0.74 and fuel willing $0.7408 sellers, additional resistance comes in at $0.7453-0.7384 on the daily timeframe.

Weekly Technical Market Insight: 26th – 30th July 2021, FP Markets

USD/JPY:

Monthly timeframe:

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

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 a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, however, July trades 0.5 percent in the red.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The USD/JPY exchange rate climbed 0.4 percent Friday, extending the week’s recovery from ¥109.06 lows.

Consequently, resistance at ¥111.88-111.20 has been thrown back into the mix, which happens to have teamed up with trendline support-turned resistance, taken from the low ¥102.59. Above the aforesaid resistances, supply at ¥112.68-112.20 commands attention.

Downriver, however, assuming price voyages beneath last week’s low, supply-turned demand at ¥107.58-106.85 offers an obvious floor in this market, aligning with the 200-day simple moving average at ¥107.02.

Interestingly, momentum studies out of the relative strength index (RSI) shows the value elbowed above the 50.00 centreline last week, a move displaying average gains outweigh average losses. Despite this, the indicator finished the session ahead of the lower side of a recently breached ascending channel between 58.82 and 47.51, which may provide resistance.

H4 timeframe:

Quasimodo resistance-turned support at ¥110.09—organised above trendline resistance-turned support, drawn from the high ¥111.66 (2021 highs)—served buyers well at the tail end of the week.

A bullish wind this week seats supply at ¥110.99-110.80 in the firing range, a base capping upside in early July. Of technical note is the supply is set just south of daily resistance from ¥111.88-111.20, therefore moves through this area to H4 resistance at ¥111.56 should not surprise.

H1 timeframe:

Following an earlier rebound from trendline support, acquired from the low ¥109.06, sellers came under attack around supply at ¥110.54-110.41 during US hours Friday, drawing attention to Quasimodo resistance at ¥110.65.

Navigating above ¥110.65, technically speaking, appears clear of major liquidity until ¥111. For that reason, a ¥110.65 breach is movement we could see breakout buyers welcome.

From the relative strength index (RSI), the indicator exited overbought space and is on track to form a bearish failure swing (blue level: 60.80), structure that can warn of a move to the downside.

Observed levels:

Long term:

With the monthly timeframe displaying scope to climb, and price action on the daily timeframe in pursuit of resistance at ¥111.88-111.20, buyers appear to have the upper hand for the time being.

Short term:

In conjunction with the bigger picture, a H1 close above Quasimodo resistance at ¥110.65 is a logical path, from a technical standpoint. Follow-through buying may also involve price action working its way into H4 supply at 110.99-110.80 as H1 targets ¥111.

Weekly Technical Market Insight: 26th – 30th July 2021, FP Markets

GBP/USD:

Monthly timeframe:

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

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 0.6 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Quasimodo support at $1.3609 welcoming buyers mid-week triggered a recovery phase, snapping a four-day losing streak. Reclaiming the 200-day simple moving average at $1.3703 on Thursday shines light on tops around $1.3909, followed by resistance at $1.4003.

Technicians will also note the daily scale recently elbowed under a double-top pattern neckline at $1.3670 (double top formed between 24th Feb high at $1.4241 and June 1st high at $1.4250), therefore an extension to the recent pullback this week might appeal to pattern sellers in search of better entry levels.

Trend on this chart has been somewhat rangebound since late February. As for momentum studies, the relative strength index (RSI) pencilled in bullish divergence, informing traders of strengthening momentum. Note the indicator’s value finished the week just beneath the 50.00 centreline.

H4 timeframe:

Mid-week trading brought about support from a 100% Fib projection at $1.3640 and a 1.618% Fib extension at $1.3613. This blend is recognised as an AB=CD harmonic formation, which benefits from forming at daily Quasimodo support highlighted above at $1.3609. Common take-profit objectives out of AB=CD areas are arranged at 38.2% and 61.8% Fib retracement values, derived from legs A-D. In this case, 38.2% is stationed at $1.3739, and 61.8% is found at $1.3842.

$1.3739, as you can see, was engulfed Friday and demand at $1.3687-1.3723—an important decision point that overthrew supply at 1.3762-1.3746 (black arrow)—made an entrance. Should the aforesaid demand continue to sponsor buyers, the AB=CD pattern’s 61.8% Fib target at $1.3842 may be in the offing this week.

H1 timeframe:

Aided by the relative strength index (RSI) arranging a bearish failure swing pattern (blue line at 60.89), the 61.8% Fib retracement value at $1.3780 (green) stood firm on Friday (set below $1.38) and encouraged sellers to take on $1.3750 support. $1.37 governs space south of the level, accompanied by the 100-period simple moving average at $1.3695 and a 38.2% Fib retracement at $1.3705.

Area above $1.38 brings light to Quasimodo resistances at $1.3867 and $1.3841.

Referring to the relative strength index (RSI), we can see following the formation of the bearish failure swing, the value dropped to within a whisker of indicator support at 39.68 and rebounded. Though it must be noted the value failed to find acceptance above the 50.00 centreline and consequently ended Friday at 46.33.

Observed levels:

Long term:

Based on the daily timeframe’s technical position: trading above the 200-day simple moving average at $1.3703, buyers could remain in the driving seat this week, targeting tops around $1.3909, followed by daily resistance at $1.4003.

Short term:

The daily timeframe’s picture, alongside the H4 timeframe witnessing price bounce from demand at $1.3687-1.3723, could encourage shorter-term flow on the H1 to adopt a bullish position early week. A retest of $1.37, having seen this barrier merge with the 200-day simple moving average, may, therefore, serve as a platform for buyers to work with.

Weekly Technical Market Insight: 26th – 30th July 2021, 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: 26th – 30th July 2021, FP Markets
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