Weekly Technical Market Insight: 6th – 10th April 2020

Weekly Technical Market Insight: 6th – 10th April 2020

US Dollar Index:

The US dollar index, a leading benchmark measuring the value of the greenback relative to a basket of 6 major world currencies, chalked up a spirited recovery last week, adding 2.42% and reclaiming a large portion of recent losses.

Aside from Tuesday forming a ‘shooting star’ Japanese candlestick pattern within the parapets of supply from 100.03/99.37, mid-week witnessed an acceleration to the upside. Boasting three successive daily gains, price toppled the noted supply and laid the foundation for a test of 101.79/101.00 this week, with a break warning traders that two-week tops south of 103.00 could re-emerge.

Traders will also note the 200-day SMA, a technical indicator used to analyse and identify long term trends, returned to its northerly position in recent trade, following a brief spell of flattening at the beginning of March. What’s also notable is the RSI momentum indicator established support off its 50.00 value, currently trading at 56.80.

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 extremes crossing paths with heavyweight demand-turned supply at 1.1857/1.1352 and demand at 1.0488/1.0912.

As we head into the early stages of April, the technical foundation has price rangebound between the two aforementioned price structures; notably, however, April’s candle is 2% lower, testing the upper boundary of 1.0488/1.0912.

The primary downtrend remains in motion, trading lower since 2008 and exhibiting clear lower peaks and troughs.

Daily timeframe:

Europe’s single currency recorded its fifth consecutive losing day against the greenback Friday, extending its position south of the 200-day SMA at 1.1071 and clearing demand at 1.0925/1.0864.

Friday’s close, according to chart structure, may have liberated sellers, providing a basis for price to address demand at 1.0526/1.0638, an area extended from March 2017. Be that as it may, traders are urged to take into account where the DXY is currently positioned: a few points ahead of supply at 101.79/101.00 (see above), therefore EUR/USD could rebound ahead of the said demand.

H4 timeframe:

As we head into the first full week of April, recent movement left behind a possible 5-wave structure, based on Elliot Wave Theory. Traditional definition of a motive wave is a 5-wave move in the same direction as the trend of one larger degree. Both the daily and monthly timeframe are entrenched within downtrends at present. The 5-wave sequence, going on the basis wave 1 will equate to wave 5, given wave 3 is somewhat extended, could see support develop ahead of demand at 1.0602/1.0630 with Elliot Wave technicians possibly expecting an ABC correction.

In addition, wave 4 may terminate around newly formed supply at 1.0867/1.0839. In the event we violate this area and approach supply at 1.1044/1.0966, expect sellers to potentially make a show here.

H1 timeframe:

According to the US Bureau of Labour Statistics Friday, total non-farm payroll employment fell by 701,000 in March, and the unemployment rate increased by 0.9% to 4.4%. The changes in these measures reflect the effects of the coronavirus (COVID-19) and efforts to contain it.

In another release, US economic activity in the non-manufacturing sector grew in March for the 122nd consecutive month, according to the nation’s purchasing and supply executives. The institute for Supply Management (ISM) noted the non-manufacturing index registered 52.5 percent, 4.8 percentage points lower than the February reading of 57.3 percent. This represents continued growth in the non-manufacturing sector, at a slower rate.

Both metrics provided little in the way of fresh impetus; the H1 candles put in a mild bottom around the 1.08 neighbourhood, off channel support (1.0926). Candlestick analysis also reveals a ‘shooting star’ Japanese candlestick formation emerged into the closing hours Friday, a few points above the 1.08 handle.

Demand-turned supply at 1.0889/1.0937 also remains a feature on this timeframe (aligns with the 100-period SMA, the 1.09 RN and channel resistance [1.1144]), while demand south of 1.08 is limited until reaching possible support off 1.07.

Structures of Interest:

Longer term:

April has price trading within monthly demand at 1.0488/1.0912, suggesting a recovery could be on the cards this week. This is further bolstered by the US dollar index revealing nearby daily supply at 101.79/101.00.

Shorter term:

Short sales based on the H1 ‘shooting star’ pattern may be hindered off 1.08 serving as support. A rally from the said RN, based on higher-timeframe flow, is thus a possibility, though expect resistance around 1.0850, knowing the level inhabits H4 supply 1.0867/1.0839.

Continuation above 1.0850 may be drawn to the H1 demand-turned supply at 1.0889/1.0937 which holds 1.09, the 100-period SMA and channel resistance. Also note the H1 base is glued to the top edge of daily supply at 1.0925/1.0864.

AUD/USD:

Monthly timeframe:

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

Overwhelmed by the effects of the coronavirus pandemic, the month of March scored seventeen-year lows at 0.5506 ahead of demand pencilled in from 0.5219/0.5426, before staging an impressive recovery. The recovery move reclaimed more than 60% of the month’s losses, consequently drawing the pair to within reasonably close proximity of supply fixed at 0.7029/0.6664, intersecting with a long-term trendline resistance (1.0582).

April, however, currently trades lower by 2.40%.

With reference to the market’s primary trend, a downtrend has been present since mid-2011.

Daily timeframe:

Unable to grasp nearby demand-turned supply at 0.6330/0.6245, which holds a 50.0% retracement band at 0.6271, price turned lower in the earlier stages of the week. Wednesday struck the top edge of a demand base at 0.5926/0.6062 and produced a clear-cut indecision candle Thursday. Friday, nonetheless, saw sellers strengthen their grip and tunnel further into 0.5926/0.6062, registering a fourth successive bearish close.

Continued downside here could pave the way lower towards demand at 0.5710/0.5767, as well as nearby support from 0.5563.

With reference to the RSI indicator, the value is struggling to make headway north of 30.00, fading levels beneath 50.00.

H4 timeframe:

A moderate supply-turned demand area at 0.6029/0.5964 welcomed price action in the later stages of the week, holding by way of an ‘indecision’ candle formation Thursday and pencilling in an ‘inverted hammer’ candlestick pattern late Friday – interpreted as a bullish signal.

The foundation for a climb to 0.6314/0.6235 is still potentially in the pipeline. With limited active supply visible to the left of price, 0.6314/0.6235 is in sight, comprised of a support-turned resistance at 0.6314, a 161.8% Fib ext. level at 0.6273 and a 61.8% Fib retracement at 0.6235 (yellow oval).

A break beneath 0.6029/0.5964, on the other hand, has demand at 0.5737/0.5825 on the radar.

H1 timeframe:

Friday observed intraday flow welcome a 161.8% Fib ext. level at 0.5989 mid-way through London hours, likely running sell-stop liquidity south of the widely watched 0.60 figure. The greenback maintained a strong upside presence in spite of disappointing US jobs data, capping upside attempts from 0.60.

Additional technical findings have the candles compressing within a descending channel configuration between 0.6185 and 0.6006. Lack of support off 0.60 will shine the spotlight on a robust demand base coming in at 0.5906/0.5934, enveloped by the 0.59 RN and 161.8% Fib ext. level at 0.5940.

With reference to the RSI indicator we are coming off lows out of oversold terrain, though the value remains sluggish.

Structures of Interest:

Longer term:

Monthly price exhibits scope for a run lower over the coming weeks; however, a retest at supply from 0.7029/0.6664 is certainly not out of the question. Daily flow is struggling to entice bids within demand at 0.5926/0.6062, with the possibility of a break lower occurring this week.

Shorter term:

H4 and H1 timeframes echo a somewhat conflicting tone right now. H1 emphasises weakness off 0.60, potentially attracting the eyes of sellers, while H4, although deep within a supply-turned demand at 0.6029/0.5964, produced a bullish candlestick signal.

Ultimately, though, sellers appear to have the upper hand at the moment. There’s little suggesting the bulls want to take things higher, aside from the H4 bullish candlestick signal. As such, bearish scenarios sub 0.60 could be in store early week.

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.

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

Daily timeframe:

Partially altered from previous analysis –

Leaving demand at 105.70/106.66 unopposed, price action established a healthy bullish recovery into the close, inviting an approach to the 200-day SMA at 108.31, adding nearly 50 points on the week.

Should a close higher transpire, active supply is limited according to local price action until we near the 111.30 region along with familiar supply at 112.64/112.10.

H4 timeframe:

Familiar supply at 108.88/108.49, an area of supply that contained upside earlier in the week, re-emerged in the closing stages of play Friday. A rejection from this angle this week potentially confirms a rangebound market on this timeframe, with the lower boundary coming in at demand from 106.75/107.22.

Areas outside of the said zones has supply resting at 109.71/109.20, and a supply-turned demand at 105.75/105.17 as the next obvious platform (positioned a few points south of a 127.2% Fib ext. level at 105.99) to the downside.

H1 timeframe:

Early trade Friday witnessed a mild fakeout north of 108 – this was likely a bull trap as price swiftly reverted to lows of 107.80. Heading into London, however, a more decisive move higher materialised, leading to an approach towards the underside of ‘stacked’ supply at 108.90/108.62. Directly above we can see a demand-turned supply forms at 108.84/109.23, housing the round number 109 within its lower limit.

In terms of the 100-period SMA, the value is seen drifting a touch beneath 108, currently trading at 107.83. With respect to the RSI indicator, we traded from overbought levels and are seen bottoming ahead of 50.00.

Structures of Interest:

Longer term:

USD/JPY is unlikely to reflect a bullish stance until we decisively firm above the 200-day SMA; this, technically speaking, clears the path for higher levels.

Shorter term:

The fact we’re coming from a 200-day SMA value, a H4 supply at 108.88/108.49 and stacked H1 supply (lower boundary) at 108.90/108.62, a dip back to 108 could be in the offing in early trade this week on the H1, with the possibility of a fakeout emerging to the 100-period SMA.

Most traders, however, will likely want to see a retest at 108.90/108.62 before engaging, as price currently trades in no man’s land right now, according to chart studies on the H1.

GBP/USD:

Monthly timeframe:

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

Although March saw lows not seen since the 1980s, ahead of a 127.2% Fib ext. level at 1.1297, price staged an impressive recovery and regained approximately 80% of the month’s losses.

Support at 1.1904/1.2235 remains relevant in April, despite recent moves to lows. Nearby resistance can be seen in the form of a trendline formation (1.7191).

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

Daily timeframe:

Supply at 1.2509/1.2372 proved itself valid in the later stages of the session, after the majority of the week formed hesitant candles. Friday, as you can see, stepped lower in the form of a near-full-bodied bearish candle, testing the upper parapet of demand coming in from 1.2212/1.2075.

In case of further selling this week, traders’ crosshairs will likely be fixed on possible support emerging off 1.1958, a low formed in early September 2019, followed by trendline supports drawn from 1.2373 and 1.2041.

The RSI indicator continues to hold a reasonably positive tone, but is flattening around its 50.00 value.

H4 timeframe:

Dismal US non-farm payrolls data failed to ruffle markets Friday, with GBP/USD greeting demand at 1.2147/1.2257, an area that contained downside last Monday.

Technically, upside is likely to be hindered from here, given trend line support-turned resistance (1.1445) lurking just ahead. This could prompt a run to supply-turned demand at 1.2136/1.2049 this week, with a break of here drawing the spotlight towards fresh demand coming in at 1.1778/1.1911

H1 timeframe:

A clear G10 laggard, aided by a weak UK services PMI and USD demand, saw GBP/USD swarm 1.23 in early London Friday, clocking a session low at 1.2205, before mildly paring losses into the close.

Further weakness on this timeframe this week will likely see price overthrow 1.22 and test demand at 1.2121/1.2173, formed by way of a potential 5-wave sequence, based on wave 1 equating to wave 5, given a wave 3 extension.

In the event bulls enter the week on strong footing, 1.23 will likely come under fire, with the 100-period SMA around 1.2368 likely to make a show.

The RSI indicator is seen emerging from oversold ground, though emphasising a lacklustre tone.

Structures of Interest:

Longer term:

Monthly support at 1.1904/1.2235 recently entered the mix, as did daily demand at 1.2212/1.2075, therefore a pop higher might be in store this week.

Shorter term:

H1 demand at 1.2121/1.2173, fixed between current H4 demand and supply-turned demand at 1.2147/1.2257 and 1.2136/1.2049, may enter view this week. 1.2121/1.2173 would be particularly appealing if an approach formed in the fashion of a wave 5 completion on the H1. Also something to bear in mind, sell stops are likely set beneath 1.22, therefore providing liquidity for bigger pockets to buy into from the said H1 demand.

1.23 as resistance appears somewhat thin, given the lack of surrounding confluence.

A breakout north of 1.23 is likely to be hampered by H4 trendline support-turned resistance, therefore long players here may look to reduce risk to breakeven as soon as logically possible.


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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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