Weekly Technical Market Insight: 28th September – 2nd October 2020

Weekly Technical Market Insight: 28th September – 2nd October 2020, FP Markets

US Dollar Index:

After penetrating the upper perimeter of a daily falling wedge pattern (93.91/92.55), upside performance was initially lacklustre, hampered by daily supply at 94.02/93.56 and the current downtrend, active since topping in March. A falling wedge can signify either a reversal or continuation signal – in this case the pattern implies a reversal.

The dollar’s aggressive appreciation last week (four out of five bullish days) witnessed the candles power through the aforesaid supply (contained upside since August) and cross paths with an area of interesting resistance heading into the close. Not only has the buck reached the falling wedge take-profit target at 94.65 (measured by gauging the base distance and adding this value to the breakout point – light purple boxes), price action also communicates healthy confluence here in the form of a trendline resistance (102.99) and an ABCD resistance at 94.63 (together with a 2.0 BC projection at 94.58).

Sustained upside this week suggests resistance at 95.84, an active S/R level since June 2016, may resurface, while bearish forces could retest broken supply at 94.02/93.56.

The RSI oscillator has produced a series of higher lows/highs after bottoming at 17.50 heading into August, with the value currently hovering within a stone’s throw from overbought space.

Concerning the 200-day simple moving average, circling 97.10, the dynamic value continues to curve lower, two years after mostly drifting higher.

Weekly Technical Market Insight: 28th September – 2nd 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 be on the horizon, targeting trendline resistance (prior support – 1.1641). Trading in September, however, is down more than 2.5 percent, on track to snap a four-month winning streak and retest broken trendline resistance.

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

Daily timeframe:

Partially altered from previous analysis –

Thursday’s recovery effort off 1.1626 proved unsustainable, in the absence of any concrete daily support.

The currency pair’s technical position is tipped for more underperformance this week until making contact with 1.1553 support, with a break uncovering demand at 1.1369/1.1450.

With respect to the RSI oscillator, the line recently pushed through the lower limit of a two-month descending channel formation, throwing light on oversold terrain.

H4 timeframe:

Partially altered from previous analysis –

Thursday, as you can see, recoiled from a 161.8% Fib ext. level at 1.1628, a level positioned two pips above demand at 1.1580/1.1626. This fed price to supply at 1.1682/1.1716 (prior demand), missing the supply area sited within at 1.1717/1.1691 by a couple of pips.

Friday wrapped up on the backfoot, nosediving into the aforesaid demand. Traders will note that sustained weakness here provides a basis to test nearby support at 1.1570.

H1 timeframe:

Leaving behind supply at 1.1717/1.1691 (also represents supply on the H4 and contains 1.17) on Friday, mid-morning trade during Europe reacted off RSI trendline resistance and burrowed through 1.1650 support to test lows just ahead of the 1.16 level and 1.1589 support. This also pulled the RSI value into oversold terrain.

Note the 100-period simple moving average has also been wandering lower since topping mid-September.

Structures of Interest:

Long term:

Although testing the air above monthly supply at 1.1857/1.1352 likely tripped some long-term stops, September’s depreciation echoes a possible decline to retest the recently penetrated monthly trendline, which happens to share space with daily demand at 1.1369/1.1450.

However, to reach the aforesaid demand, daily support at 1.1553, an active hurdle since February 2015, must be dethroned.

Short term:

H4 demand at 1.1580/1.1626 is unlikely to bear much fruit, owing to both weekly and daily timeframes suggesting moves beyond the area to at least daily support at 1.1553. As such, a retest at 1.1650 resistance on the H1 may excite sellers in early trade to initially approach 1.16.

Weekly Technical Market Insight: 28th September – 2nd 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)

August’s 3.3% gain extended space north of supply at 0.7029/0.6664 and long-term trendline resistance (1.0582). Technically, buyers appear 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). The month of September (lower by nearly 5 percent), however, is on track to snap a five-month winning streak with price currently retesting 0.7029/0.6664.

In addition to the above, traders might want to take into account the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partially altered from previous analysis –

Arranged by way of six successive daily bearish candles, demand at 0.7131/0.7192 (a drop-base-rally area) accepted defeat Wednesday and permitted price movement to address demand at 0.6964/0.7042, plotted just ahead of support at 0.6931.

The trend, according to the daily timeframe (and also the 200-day simple moving average), has emphasised a positive tone since bottoming in late March. Traders may also recognise the RSI traded aggressively south of 53.00, a clear S/R level since October 2019, and recently embraced oversold turf.

H4 timeframe:

Resistance at 0.7080 and neighbouring supply at 0.7080/0.7059 proved effective heading into the second half of the week, receiving a recovery attempt out of strong demand at 0.7014/0.7035 (stationed within the upper boundary of daily demand at 0.6964/0.7042).

Late Friday observed price spike through the lower perimeter of H4 demand, enough to perhaps collect stops and shine light on a possible run to demand at 0.6934/0.6965 (grips the lower boundary of daily demand).

H1 timeframe:

Bottoming a handful of pips ahead of the widely watched 0.70 figure (confirmed by bullish RSI divergence), late US Friday moderately pared losses and finished the week hugging supply at 0.7054/0.7028 (holds 0.7050 resistance within).

Traders will note that a break of 0.70 preps the ground for demand at 0.6962/0.6977 (fastened to the upper edge of H4 demand at 0.6934/0.6965) to make an entrance.

Structures of Interest:

Long term:

Monthly price testing 0.7029/0.6664 as demand, along with daily price also testing demand at 0.6964/0.7042 (albeit buyers appear lacklustre at the moment off this area), puts forward a bullish vibe heading into the fresh week.

Short term:

H4 demand at 0.7014/0.7035 is under fire after having its lower perimeter checked on Friday, signalling sellers could take on bearish commitments out of H1 supply at 0.7054/0.7028 to at least test 0.70. Buyers are expected to make a show this week, according to the higher timeframes, therefore movement beyond H1 demand at 0.6962/0.6977 is questionable.

Weekly Technical Market Insight: 28th September – 2nd 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.

Notably, September tested 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:

Partially altered from previous analysis –

Recent recovery gains off monthly support at 104.62 (the lower boundary of the monthly descending triangle), shaped in the form of five successive bullish candles, invites the prospect of additional bullish sentiment this week towards trendline resistance (111.71) and nearby supply at 107.58/106.85.

The RSI, for those who follow momentum oscillators, recently bottomed ahead of oversold levels and is now on track to test 50.00.

H4 timeframe:

The week, as you can see, staged an impressive recovery off a 161.8% Fib ext. level at 104.12.

Friday, following a mild phase of consolidation on Thursday, addressed supply at 105.82/105.66, which happens to store a 61.8% Fib level at 105.81.

Other areas of interest on the H4 chart are resistance at 105.98 and supply from 106.38/106.23. In addition, demand can also be seen at 104.92/105.09.

H1 timeframe:

Early Europe Friday rebounded ahead of intraday demand (prior supply) at 105.23/105.14 and, underpinned by the DXY listing healthy gains, cruised through 105.50 resistance to knock out a weekly peak at 105.70.

Mildly paring gains amidst US trading turned things back to 105.50 support, set just above demand at 105.40/105.48 (a significant intraday zone as this potentially was where a decision was made to break through 105.50).

Scope to build on recent gains is visible on the H1, demonstrating a relatively clear road north until resistance at 105.85 and supply at 106.05/105.91.

Structures of Interest:

Long term:

Monthly support at 104.62 (lower base of the monthly descending triangle) prompting a decisive advance last week, along with the daily chart exhibiting room to approach trendline resistance and supply coming in from 107.58/106.85, signals buyers are likely to remain behind the wheel this week.

Short term:

Supply at 105.82/105.66 is in place on the H4 timeframe, yet on the H1 chart 105.50 and demand at 105.40/105.48 could tempt buying. This, of course, is in line with higher timeframe action recently rebounding from monthly support, together with room to approach higher levels on the daily chart.

Weekly Technical Market Insight: 28th September – 2nd 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 taken from 2.1161 unopposed, September trades lower by 4.7 percent, on track to retest trendline support (prior resistance – 1.7191).

Interestingly, the primary trend has faced lower since early 2008, unbroken until 1.4376 gives way – April 2 high 2018.

Daily timeframe:

Brought forward from previous analysis –

Despite three decisive bearish candles established out of supply at 1.3021/1.2844, the second half of the week exhibited a somewhat stationary bearing, with each session concluding unmoved.

Price, as you can see, engages with the 200-day simple moving average at 1.2717, stored inside demand at 1.2645/1.2773. Violating the aforesaid demand shines light on another demand placed at 1.2192/1.2361, an area that contained downside in late June.

The RSI indicator is currently drawing up a possible double-bottom pattern ahead of oversold space.

H4 timeframe:

Brought forward from previous analysis –

Demand at 1.2646/1.2685 accepted price action on Wednesday. Although buyers continue to defend the aforesaid demand area, resistance at 1.2773 is proving a tough nut to crack. Should the pair eventually muster enough strength to conquer the noted level, supply at 1.2876/1.2840 is next on tap.

H1 timeframe:

Sterling enters the new week rangebound on the H1 timeframe between supply at 1.2824/1.2776 and the 1.27 level. Note the supply also carries within it the 1.28 level.

Outside of the current range, traders will be watching resistance at 1.2867 and support coming in from 1.2649.

It might also be worth noting the RSI oscillator recently brushed through 50.00 to the upside.

Structures of Interest:

Long term:

Recognising monthly price shows some room to push lower until testing trendline support (around 1.26ish), together with daily price struggling to print anything of meaning out of demand at 1.2645/1.2773, echoes a bearish vibe.

Short term:

Buyers off 1.27, plotted just ahead of H4 demand at 1.2646/1.2685, are likely watching for H1 supply (1.2824/1.2776) to give way. However, breaking this area lands H4 price within close proximity of supply at 1.2876/1.2840. This implies buyers could be in for a hard time.

Failure to overthrow H4 resistance at 1.2773 and H1 supply at 1.2824/1.2776, therefore, could see intraday flow probe beyond 1.27 this week, with H1 support at 1.2649 targeted, followed by the 1.26 level. The latter represents a logical downside target for sellers and a potential reversal zone for buyers, given it connects with monthly trendline support.

Weekly Technical Market Insight: 28th September – 2nd 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: 28th September – 2nd October 2020, FP Markets
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