Weekly Technical Market Insight: 7th – 11th September 2020

Weekly Technical Market Insight: 7th – 11th September 2020, FP Markets

US Dollar Index:

Daily support at 92.26, an active S/R level on the US dollar index (DXY) since late 2017, commanded attention early last week, albeit suffering a whipsaw to YTD lows at 91.75.

Recovery gains from the aforesaid support, as you can see, extended into the week’s close, consequently throwing light on the upper border of a daily falling wedge pattern (93.91/92.55). A falling wedge can represent either a reversal or continuation signal. In this case, assuming a convincing breakout to the upside this week, the falling wedge puts forward a reversal signal and may have the buck seek higher levels.

Before reaching 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), supply at 94.02/93.56, an area that’s contained upside since the beginning of August, must be dethroned, along with trendline resistance, drawn from the peak 100.56.

Traders with a focus on momentum-based indicators will acknowledge the RSI oscillator has produced a series of higher lows/highs after bottoming at 17.50 heading into August, suggesting bullish divergence. Concerning the 200-day simple moving average, circling 97.40, the dynamic value continues to curve lower, two years after mostly drifting higher.

Weekly Technical Market Insight: 7th – 11th September 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 nudged to a fourth successive monthly gain against the US dollar, adding nearly 1.5 percent. The move also toppled long-term trendline resistance (1.6038) and supply from 1.1857/1.1352. This argues additional moves to the upside may be on the horizon, with trendline resistance (prior support – 1.1641) on the radar as the next target.

What could potentially hamper upside, though, is the primary downtrend (since July 2008) which remains intact at least until 1.2555 is engulfed (Feb 1 high [2018]).

Daily timeframe:

Partially altered from previous analysis –

Efforts to extend higher remain contained within the parapets of a rising channel pattern (1.1695/1.1909), in addition to supply at 1.2012/1.1937 making an entrance on August 18, extended from May 2018.

Tuesday, as seen on the chart, shaped a robust shooting star candlestick formation off YTD peaks at 1.2011, a move that pierced through the aforementioned channel resistance and tested the range of current supply. Heading into the second half of the week, sellers offered a non-committal tone, with Thursday and Friday’s sessions wrapping up off worst levels and forming hammer candlestick patterns.

Trendline support (1.0774) currently intersects with the aforesaid channel support, potentially reinforcing the area in the event a pullback/retest emerges this week. On the other hand, immersing the aforementioned supply favours moves to as high as resistance at 1.2095.

Trend traders, however, will note that alongside the monthly trendline break, price, based on the daily timeframe, has trended higher since late March.

H4 timeframe:

Viewing price action from the H4 timeframe reveals EUR/USD recently found a degree of support from a trendline formation (1.1711). Technically, this helped facilitate the end-of-week daily hammer candlestick patterns.

Newly formed supply 1.1878/1.1851 is proving stubborn, with additional backing from another area of supply at 1.1884/1.1908, a prior demand area. Burrowing to lower levels this week potentially welcomes demand at 1.1682/1.1716 back into position, yet taking over the two aforesaid supply areas throws light on resistance at 1.1988.

H1 timeframe:

In similar fashion to the H4 chart, H1 recently entered into a consolidation phase between 1.18 psychological support and supply at 1.1880/1.1860 (prior demand). Additional resistances to consider this week are the 100-period simple moving average at 1.1878, supply at 1.1913/1.1898 and 1.19. In terms of support, traders are likely leaning towards demand at 1.1761/1.1774, formed August 21, and 1.1750 support.

Momentum, as shown via the RSI oscillator, sent across bullish divergence Friday and ended the week around the 50.00 mid-way point.

Structures of Interest:

Long term:

Monthly price recently unearthed the possibility of further upside north of supply at 1.1857/1.1352, indicating the daily timeframe’s current uptrend may gather traction and, consequently, topple daily channel resistance (1.1909) and supply from 1.2012/1.1937.

Short term:

The scope for manoeuvre is limited on the H4 timeframe between supply at 1.1878/1.1851 and trendline support. In addition, H1 offers a 60-pip range to work with this week between supply at 1.1880/1.1860/1.18. As such, given the direction of the current trend, buyers are likely to watch for bullish strategies to form around the lower edge of the current range this week.

Also of particular interest is the 1.1750 support on the H1 timeframe; the level shares space with merging daily channel support (1.1695) and trendline support (1.0774), offering reasonably appealing bullish confluence should we reach this far south.

Weekly Technical Market Insight: 7th – 11th September 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

July, coupled with August’s 3.3% follow-through, witnessed supply at 0.7029/0.6664 and intersecting long-term trendline resistance (1.0582) abandon its position. 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).

While price has removed trendline resistance and notable supply, traders might still want to take into account that the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partially altered from previous analysis –

Supply at 0.7453/0.7384 maintains a dominant presence on the daily timeframe, with AUD/USD sliding 1 percent over the course of last week, south of YTD peaks at 0.7413.

Although Friday concluded significantly off worst levels, extending the recent retracement slide could lead to demand at 0.7131/0.7192 making an entrance this week, a drop-base-rally area.

The trend, according to the daily timeframe, however, has been higher since bottoming in late March. Indicator-based traders will also note the RSI visibly exited overbought space and is now poised to approach support around 53.00.

H4 timeframe:

Demand at 0.7216/0.7240 arrived on the scene late Friday with price action forming a healthy hammer candlestick pattern, a bullish configuration pulling things back to supply at 0.7300/0.7282. Note, however, the closing H4 candle produced a shooting star pattern from the aforesaid supply, a bearish signal.

Unseating supply this week has supply from 0.7339/0.7357 (prior demand) to possibly target. Beyond current demand, though, trendline support (0.7076) is in sight.

H1 timeframe:

US trading on Friday had sellers step aside as price welcomed a 61.8% Fib level at 0.7241 (green). The intraday advance climbed above 0.7250 resistance and mildly eclipsed earlier peaks set in London at 0.7296.

The modest end-of-week turn ahead of 0.73, a level shadowed by supply at 0.7303/0.7316 (prior demand), guided candles to within shouting distance of demand at 0.7260/0.7279 by the close.

As for the RSI indicator, 54.00 has proven a stable area of support and resistance since August 25, therefore given the recent test as resistance, momentum could potentially fade in early movement this week.

Structures of Interest:

Long term:

Daily price suggests AUD/USD may drop to demand at 0.7131/0.7192, while monthly action forecasts further buying over the coming months to 0.8303/0.8082.

Short term:

Against the backdrop of higher timeframe activity, H4 tests supply at 0.7300/0.7282, yet H1 is poised to greet demand at 0.7260/0.7279.

Taking in the above, reacting from H4 supply this week could send price as low as 0.72 on the H1, aligning not only with the upper border of daily demand from 0.7192 but also with trendline support on the H4 timeframe, from 0.7076.

Reacting from H1 demand, on the other hand, implies we’re likely to dethrone H4 supply and leave daily demand unchallenged. Although H1 supply resides at 0.7303/0.7316 (prior demand), intraday/scalping long opportunities may be found between 0.73 and H1 supply at 0.7346/0.7333 (fastened to the underside of H4 supply at 0.7339/0.7357).

Weekly Technical Market Insight: 7th – 11th September 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. July sunk nearly 2 percent, testing the lower boundary of the descending triangle, while August ended off best levels, effectively unmoved.

Areas outside of the noted 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 –

Supply from 107.58/106.85 has proven a tough nut to crack (an area sharing space with trendline resistance from 111.71 and also located just under the 200-day simple moving average at 107.89) in August.

Despite the week’s 0.8% advance, trading to the downside is still a possible scenario to 104.62 this week (monthly support). If a break comes to pass here this likely shifts interest to daily demand at 100.68/101.85, drawn from 2016.

With reference to the RSI, we are pretty neutral right now, hovering around 50.00.

H4 timeframe:

Following the recently completed ABCD bearish structure at 106.46, combined with trendline resistance (105.10 – prior support), buyers have struggled to find any significant demand. Seeking higher levels this week, nevertheless, focuses attention on the 106.94 high (August 28), as well as supply at 107.37/107.17, followed by another supply stationed at 107.60/107.42.

Pursuing levels beyond last Thursday’s trough at 106.00, on the other hand, has demand at 105.57/105.76 likely to call for attention.

H1 timeframe:

106.50 elbowed into the limelight Thursday as resistance, with Friday also revisiting the base. This, together with H4 ABCD resistance and trendline resistance, delivers powerful intraday confluence to work with this week.

H1 supports to be aware of fall in at a trendline formation (105.20), the 100-period simple moving average, the 106 level and demand at 105.55/105.73.

In terms of where we stand concerning the RSI oscillator, the value marginally dipped south of 50.00 Friday after peaking just ahead of overbought status.

Structures of Interest:

Long term:

Monthly price holds off support at 104.62, yet gains are currently capped by daily supply at 107.58/106.85.

Short term:

The ABCD reaction on the H4 could force price beyond the current H1 trendline support to revisit 106 this week, a move likely to persuade current ABCD sellers to partially cash in on profits. However, follow-through selling is also possible to H4 demand at 105.57/105.76 (essentially representing the same range as H1 demand at 105.55/105.73).

Weekly Technical Market Insight: 7th – 11th September 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

GBP/USD finished 2.2 percent higher in August, extending space beyond the recently penetrated long-term trendline resistance (1.7191).

Despite the primary trend facing lower since early 2008 (unbroken until 1.4376 gives way – April 2 high [2018]), the break of current trendline resistance has September potentially targeting another trendline resistance taken from 2.1161.

Daily timeframe:

Partially altered from previous analysis –

After engaging with the 161.8% Fib ext. level at 1.3408, movement that embraced fresh year-to-date peaks at 1.3483, GBP/USD adopted a mild bearish tone last week. Support at 1.3201 shifted back into view Friday, with price generating a solid recovery off worst levels to end the session unchanged.

A break south this week unearths demand from 1.3021/1.2844 and the nearby 200-day simple moving average at 1.2735.

The RSI indicator also recently faded the underside of overbought levels, currently trading at 60.00, a touch north of RSI trendline support.

H4 timeframe:

Demand at 1.3160/1.3201, a mild drop-base-rally area, and two uniting trendline supports (1.2260/1.3267), received price action on Friday, triggering a moderately strong end-of-session recovery. As a result, supply at 1.3319/1.3278, a rally-base-drop area, has been hauled into the mix, while a break re-opens the possibility of a return to supply at 1.3480/1.3447.

H1 timeframe:

Sterling suffered amid European trading Friday, travelling from a peak at 1.3319 to weekly lows at 1.3175 against the US dollar. After bumping heads with 1.32 into the US session, demand for the pound increased, witnessing moves above 1.3250 to position the pair within a stone’s throw from 1.33 and intersecting trendline resistance (1.3482).

Overrunning 1.33 this week shines light on the 100-period simple moving average, currently circling 1.3333, 1.3350 resistance and supply from 1.3383/1.3365.

Meanwhile, the RSI, following a decisive recovery from oversold waters, modestly reclaimed 50.00 by the week’s close.

Structures of Interest:

Long term:

Longer term, the monthly chart suggests buyers have some fuel left in the tank, with monthly action looking towards trendline resistance (2.1161) and daily recently taking on support at 1.3201.

Short term:

With daily support making a stand, H4 supply at 1.3319/1.3278 may prove delicate, as might H1 trendline resistance (1.3482) and 1.33.

However, a pullback from the 1.33 region to 1.3250 would still not surprise, having seen GBP/USD respond well to H1 trendline formations over the years. Ultimately, however, higher timeframe pressure is likely to pull price above 1.33 this week, possibly igniting intraday breakout signals to take out H4 supply (as well as 1.3350 resistance and H1 supply at 1.3383/1.3365) and push for at least the 1.34 region (next daily resistance target also rests around 1.3408 – Fib ext.).

Weekly Technical Market Insight: 7th – 11th September 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: 7th – 11th September 2020, FP Markets
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