Weekly Technical Market Insight: 29th – 3rd July 2020

Weekly Technical Market Insight: 29th – 3rd July 2020, FP Markets

US Dollar Index:

The recent recovery from daily support at 95.84, accompanied by a daily AB=CD pattern at 96.16, with the latter regarded as a basic bullish configuration among harmonic traders, witnessed last week’s action put forward a prominent weekly lower shadow, suggesting additional recovery gains could be in store.

Seen overhead, however, daily supply at 98.18/98.65, an area housing the 200-day simple moving average at 98.36, a 38.2% daily Fib level at 98.51, a 127.2% daily Fib ext. level at 98.31 and a potential daily AB=CD bearish pattern at 98.36, may knock some wind out of a rally. Note the 38.2% Fib represents a common initial take-profit target out of the 96.16 larger AB=CD pattern.

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, therefore, may 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).

Weekly Technical Market Insight: 29th – 3rd July 2020, FP Markets

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 out of demand from 1.0488/1.0912.

June extended gains to highs at 1.1422, though mid-month ran into opposition at the lower ledge of supply from 1.1857/1.1352 (unites with long-term trendline resistance [1.6038]), giving rise to a possible shooting star candlestick pattern – a Japanese bearish reversal configuration.

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

Daily timeframe:

Partially altered from previous analysis –

The month of June observed EUR/USD address a potential reversal zone (PRZ), derived from a harmonic bearish bat pattern. The base is 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).

It’s typical, in the case of bearish formations, to see traders sell PRZs and place protective stop-loss orders above the X point (1.1495). Common take-profit targets fall in at the 38.2% and 61.8% Fib levels (legs A/D) at 1.1106 and 1.0926, respectively.

As you can see, the aforesaid Fib targets have yet to be met. Though knowing the US dollar index shows room to move higher (inversely correlated to EUR/USD), this increases the odds of 1.1106 making a show this week.

H4 timeframe:

Partially altered from previous analysis –

The second half of the week had two trendline supports (1.1422/1.0780), as well as demand fixed from 1.1189/1.1158 (prior supply), derail downside attempts.

So far, buyers have made their presence felt from the aforesaid areas, though upside remains somewhat slack despite limited resistance in sight until 1.1348.

Failure to uphold current structure could result in another layer of demand making a show at 1.1115/1.1139.

H1 timeframe:

Demand at 1.1181/1.1202, a base glued to the upper boundary of H4 demand at 1.1189/1.1158 and one that contains the 1.12 level, remains on site.

The response out of 1.1181/1.1202 has produced a local ascending channel between 1.1190/1.1231, closing in on 1.1250 as feasible resistance and the 100-period simple moving average, currently circling 1.1259.

Structures of Interest:

Long term:

The lower base of monthly supply at 1.1857/1.1352 throws light on a possible shooting star candlestick pattern (bearish), and the daily chart reminds traders there’s also scope for a drop to the 38.2% Fib level at 1.1106 this week.

Short term:

Although downside pressure from higher timeframes hamper bids out of H1/H4 demands, 1.1250 on the H1 is still likely to put in an appearance this week. This represents an ideal take-profit base for longs off H1/H4 demands and, at the same time, puts forward a possible reversal zone for selling opportunities in line with higher-timeframe direction.

Weekly Technical Market Insight: 29th – 3rd July 2020, FP Markets

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, has supply at 0.7029/0.6664 echoing a somewhat vulnerable tone at the moment, despite the base 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 June 11 overpowered support at 0.6931, the base has proved reasonably worthy resistance throughout June, with last week modestly swinging lower from the base.

In case of a break to the upside, two trendline resistances inhabit territory close by (prior supports – 0.6744/0.6671). Support at 0.6755 also remains in position to the downside, with a break throwing light on the 200-day simple moving average at 0.6664, a dynamic value in the process of flattening, following months of drifting lower.

H4 timeframe:

Brought forward from previous analysis –

Last Wednesday’s tumble proposes the prospect of a double-top pattern forming off 0.6977, with a neckline at 0.6807 (blue arrows).

However, breaking the neckline, albeit a bearish signal, entails overriding demand at 0.6773/0.6814, a familiar area boasting a connection with a 38.2% Fib level at 0.6808. The next demand area available south of here rests at 0.6695/0.6664 (prior supply).

H1 timeframe:

As you can see, Thursday began the process of developing a rising wedge pattern, built from 0.6847/0.6888 on the H1 timeframe. Friday, heading into US trade, witnessed downside gain speed. This, in addition to breaking the lower limit of the falling wedge and hitting the take-profit (yellow), saw price cross paths with trendline support (0.6776) and 0.6850 support.

Demand at 0.6813/0.6824 can be seen as the next accessible base of support under 0.6850, though the area is balancing on precarious ground given 0.68 could act as a magnet to price.

Structures of Interest:

Long term:

Monthly supply at 0.7029/0.6664 and its associated trendline resistance, in conjunction with daily resistance at 0.6931, may exert downside pressure this week.

Due to the above, daily support at 0.6755 could make a show.

Short term:

H4 demonstrates scope to drop into demand at 0.6773/0.6814, prompting a potential break of 0.6850 on the H1 to demand at 0.6813/0.6824 (located around the upper edge of H4 demand).

However, as highlighted above. H1 demand is susceptible to a whipsaw into 0.68.

Weekly Technical Market Insight: 29th – 3rd July 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 remained subdued, ranging between 108.08/105.98, with June currently off best levels, down 0.5%.

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 –

USD/JPY came out swinging from demand at 105.70/106.66 Wednesday, putting forward a bullish inside candle pattern. Thursday extended gains though wrapped up quite a way off best levels, and Friday ended indecisively.

The 200-day simple moving average at 108.37, flattening since mid-March, represents achievable resistance should a continuation to the upside come to fruition.

Dethroning current demand, on the other hand, possibly leads price to nearby support at 105.01, with a break uncovering demand at 100.68/101.85.

H4 timeframe:

Two trendline supports (106.58/107.62) made a show Friday, with price action chalking up a relatively spirited recovery. This exposes the likelihood of testing supply coming in at 107.51/107.76 (prior demand) this week and maybe, with a little enthusiasm, also resistance at 108.09.

H1 timeframe:

London trade Friday whipsawed below 107 and tested the 100-period simple moving average nearby at 106.90, as well as H1 demand drawn in from 106.70/106.80. This move likely tripped sell-stop liquidity, fuelling an end-of-week rally into the close.

Above current price, aside from 107.50, we see limited supply until coming into contact with 107.86/107.67, an area fastened to the upper border of H4 supply at 107.51/107.76.

Structures of Interest:

Long term:

Daily price, although lacking enthusiasm out of demand at 105.70/106.66 at the moment, could eventually take the currency pair back up to the 200-day simple moving average at 108.37.

Short term:

A H1 retest at 107 as support could come to fruition in the early stages of the week, which will likely have traders seeking bullish strategies, with 107.50 denoting a possible target (also underlines the lower edge of H4 supply).

Weekly Technical Market Insight: 29th – 3rd July 2020, FP Markets

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 clear structure on the monthly timeframe, with the latter so far prompting a notable upper shadow this month shaped by way of a gravestone doji candlestick pattern. This is a Japanese candle formation, serving as an indication of a possible reversal to the downside.

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

Daily timeframe:

Thanks to Wednesday’s bearish outside day, demand at 1.2192/1.2361 re-entered sight Friday. This, as underscored in recent analysis, 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).

1.2235 (black level), the top edge of monthly support, will likely be a watched base within the aforesaid demand this week for a possible reversal.

H4 timeframe:

Since topping at supply from 1.2851/1.2805 early June, the pair has been in the process of constructing a bullish three-drive pattern that completes within the parapets of demand from 1.2231/1.2279, at a 127.2% Fib ext. level marked at 1.2239.

In order to complete the three-drive pattern, demand at 1.2304/1.2343 must be dethroned.

H1 timeframe:

US trade directed action lower Friday, making relatively quick work of the 1.24 level and also 1.2350, which, as you can see, was retested as resistance into the second half of the US session.

Fresh supply also formed at 1.2415/1.2386 as a result of recent selling. Recent trade also recognises the likelihood of a 1.23 test in the early stages of the week.

Structures of Interest:

Long term:

Monthly price has eyes for the top edge of support at 1.2235, located within the lower section of daily demand at 1.2192/1.2361.

Short term:

1.2235 on the monthly chart coincides nicely with 1.2239 on the H4 timeframe, our three-drive pattern. This offers attractive confluence to work with this week for a possible buying opportunity.

Before reaching this far south, a break of H4 demand at 1.2304/1.2343 is needed, as well as a break through 1.23 on the H1. Breaching the latter also presents a feasible bearish signal, likely to appeal to intraday sellers.

Weekly Technical Market Insight: 29th – 3rd July 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: 29th – 3rd July 2020, FP Markets
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