Charts: Trading View

(Italics: Previous Analysis)

US Dollar Index (Daily Timeframe):

Against a basket of six foreign currencies—including the euro, the Japanese yen and British pound—last week witnessed the US dollar (USDX) clock highs (99.42) not seen since May 2020 and chalk up a fifth consecutive gain (+0.6 percent).

Mid-week trading witnessed channel resistance welcome sellers, an ascending line extended from the high 96.94. Support at 97.45, however, was left unchallenged as buyers strengthened their grip at the tail end of the week. Beyond the aforementioned levels, traders will acknowledge resistance at 100.91-100.32, as well as the 50-day simple moving average at 96.40 and channel support, taken from the low 89.84.

Trend studies reveal well-defined upward movement. Since price made contact with support from 89.69 in May (2021), the unit has shaped a series of higher highs and higher lows. The weekly timeframe has displayed a long-term range since 2015, fluctuating between 103.82 and 88.25. Yet, this consolidation followed dominant bullish action since May 2011 (72.70). Therefore, the primary trend is considered north with the secondary trend (daily timeframe) demonstrating a clear bullish narrative. Adding to this viewpoint, the 50-day simple moving average crossed above the 200-day simple moving average, currently circling 94.30. Technicians often label this as a ‘Golden Cross’, implying a longer-term uptrend could be on the table.

In terms of momentum, the relative strength index (RSI) came within touching distance of indicator resistance at 79.23 last week and reached its highest level (77.44) since February 2020. Nevertheless, the week concluded with the indicator departing overbought territory and touched a low of 60.00. Although exiting the overbought area is considered by many to be an indication of deteriorating momentum, false signals are common in upward facing markets. Traders will likely want to view a break of indicator trendline support (drawn from the low 35.04) to confirm downside momentum. An additional technical observation on the RSI is support (a temporary oversold region) between 40.00 and 50.00; this area has been centre stage since August 2021 and is a common view in uptrends.

Technical Outlook:

Acknowledging trend strength since 2021, support from 97.45 is a key watch this week and may be considered a location for dip-buying opportunities. Assuming a breach of channel resistance, chart studies imply further outperformance towards resistance at 100.91-100.32.  

EUR/USD:

Europe’s single currency wrapped up the week hesitant versus the US dollar, reflected in the way of a long-legged doji indecision candle on the weekly timeframe at channel support, extended from the low $1.1186. This, coupled with neighbouring weekly Quasimodo support priced at $1.0778, delivers support to be mindful of this week. According to trend on the bigger picture, however, a downside bias remains firmly in view, trending lower since topping at $1.2350 at the beginning of January (2021). This is reinforced by a weekly trendline support breach, drawn from the low $1.0636, together with the break of the $1.1602 November 2020 low (circled) and the currency pair refreshing year-to-date lows last week at $1.0806.

In reference to the daily timeframe, descending support-turned resistance, taken from the low $1.1186, and the 38.2% Fibonacci retracement at $1.1075 proved a stubborn ceiling, prompting an end-of-week decline. This week’s headlights are now focussed on the decision point at $1.0788-1.0854 and ascending support, drawn from the $1.0340 3^rd January low 2017. The $1.0727 24^th April 2020 low also warrants attention. The aforementioned resistances, on top of the unit remaining below the 200-day simple moving average (circling 1.1559), adds (technical) weight to the current downtrend. Also of bearish note is the relative strength index (RSI) exiting oversold space, though has yet managed to reach the 50.00 centreline.

The $1.1139-1.1090 supply and $1.1124 resistance greeted price action on Thursday—H4 levels sharing chart space with the above-mentioned daily resistances. As you can see, H4 trendline resistance, etched from the high $1.1495, and the decision point from $1.1234-1.1195 were left unchallenged. H4 support is at $1.0903 this week, with a breach exposing prime support at $1.0785-1.0820.

From the H1 timeframe, Friday finished on the doorstep of $1.09, following an earlier decline from $1.10. Interestingly, sub $1.09 resides an AB=CD pattern at $1.0881, complemented by a 1.618% Fibonacci expansion at $1.0860 and a 78.6% Fibonacci retracement at $1.0874. Note that some traders will be watching the 88.6% Fibonacci retracement at $1.0843, which is the central limit of a harmonic bat pattern. Of additional relevance is the upper edge of the daily timeframe’s decision point at $1.0854 and the weekly channel support underpins H1 supports mentioned above between $1.0843 and $1.0881 (yellow).

Technical Outlook:

Medium term:

The weekly timeframe points to further weakness over the coming weeks, according to the trend. This is further underlined on the daily timeframe: price is comfortable south of its 200-day simple moving average.

However, before additional underperformance develops, weekly Quasimodo support at $1.0778, weekly channel support, and the daily timeframe’s decision point from $1.0788-1.0854 must be engulfed. 

Short term:

H1 support between $1.0843 and $1.0881 (yellow) is likely to be watched in early trading this week. On top of the area converging with higher timeframe supports (see above), the H1 support resides beneath $1.09 and echoes the possibility of a stop-run scenario. Whipsawing under $1.09 would, in theory, trip a number of stops and may be sufficient to energise any $1.0843-1.0881 bids to drag price higher.  

AUD/USD:

Snapping a five-week winning streak, the Australian dollar closed 1.1 percent lower against its US counterpart last week. The weekly timeframe’s prime support at $0.6968-0.7242 remains a talking point. Upstream, weekly resistance is visible at $0.7501, sheltered under weekly prime resistance at $0.7849-0.7599. The trend, however, appears to be averse to the idea of surpassing the noted resistance levels. Longer term—the monthly timeframe—has portrayed a downtrend since August 2011, suggesting the 12.6 percent correction from mid-Feb tops at $0.8007 (2021) on the weekly timeframe might be the start of a bearish phase and not a dip-buying correction from the 2021 advance from pandemic lows of $0.5506. This places a question mark on weekly prime support and highlights a possible bearish scene should $0.7051 resistance or prime resistance at $0.7849-0.7599 put in an appearance. If a break lower should come to pass, weekly support at $0.6673 and a 50% retracement at $0.6764 are observable.

The week kicked off connecting with trendline resistance on the daily timeframe, drawn from the high $0.8007. This led to subsequent indecision around the 200-day simple moving average at $0.7312. Ousting trendline resistance this week will likely have traders betting on the possibility of further outperformance to $0.7660. As you can see, the double-bottom pattern ($0.6991) recently had its neckline taken ($0.7314), with the pattern shining light on a profit objective coming in at $0.7660 (seen within the lower limits of weekly prime resistance mentioned above at $0.7849-0.7599). In the event price secures position south of the moving average this week, nonetheless, a familiar decision point from $0.6964-0.7040 may re-enter the fight. Momentum studies, according to the relative strength index (RSI), has its value north of the 50.00 centreline, showing positive momentum for now. Yet, it would not be a surprise to see the 50.00 value investigated this week.

Outside of the higher timeframes, the H4 chart remained under Fibonacci resistance (a modest Fibonacci cluster) between $0.7412 and $0.7392. Looking ahead, assuming $0.7240 lows are cleared, trendline support, taken from the low $0.6968, is on the radar this week. Derailing this ascending line, however, unearths a harmonic bat pattern’s PRZ (potential reversal zone) between $0.7109 and $0.7149 (note that we included a 61.8% Fibonacci retracement within the PRZ at $0.7149, as well as a Quasimodo support from $0.7109, which define the zone).

Analysis based on the H1 chart reveals $0.73 failed to deliver support on Friday, leading to a session low of $0.7282 and a retest of Quasimodo support-turned resistance at $0.7291. Additional structures of note are the decision point at $0.7310-0.7302 and supply from $0.7320-0.7312. Lower on the curve, potentially consumed demand resides between $0.7264 and $0.7276, with supports between $0.7238 and $0.7247 calling for attention below.

Technical Outlook:

Medium term:

According to the longer-term trend, further weakness is possible. However, until weekly prime support is taken at $0.6968-0.7242, sellers are unlikely to commit. Should the daily timeframe claim space south of the 200-day simple moving average at $0.7312, this would help reaffirm a bearish angle.

Short term:

In conjunction with the long-term downside bias, price action on the H1 timeframe could hold position under Quasimodo support-turned resistance in early trade at $0.7291. Failure to respect the aforementioned level will lead to a possible whipsaw of $0.73 on the H1 into either supply at $0.7320-0.7312 or the decision point at $0.7310-0.7302. A decisive close back under $0.73 after testing either area will likely be regarded as a bearish scenario to target (potentially) consumed H1 demand at $0.7264-0.7276.

USD/JPY:

USD/JPY bulls went on the offensive last week, adding 2.2 percent and refreshing 2022 tops at ¥117.36, its largest one-week gain since March 2020. This followed a retest of weekly support at ¥114.57 in February, with current price movement fuelling the possibility of reaching weekly resistance at ¥118.64, shadowed closely by a 1.618% Fibonacci projection at $119.77 and a channel resistance, pencilled in from the high ¥110.97. Supportive of recent upside is the trend. The currency pair has been stepping higher since early 2021, clearly visible on the weekly timeframe within an ascending channel (¥102.59-¥110.97). In line with this, the overall longer-term trend has been climbing since 2012 (check monthly timeframe). The 21.5 percent correction from June 2015 to June 2016 provided a dip-buying opportunity, as did a subsequent 14.8 percent correction from December 2016 to pandemic lows formed early March 2020. Overall, the primary trend is higher, with the secondary trend promoting additional advances.

The daily chart has been in the process of chalking up an ascending triangle pattern (typically considered a continuation arrangement) since December 2021 between Quasimodo resistance at ¥116.33 and an ascending line drawn from the low ¥112.53. Toppling ¥116.33 last week allows analysts to chart a pattern profit objective by extending the ‘base’ distance (blue vertical box) from the breakout point to ¥120.11. This, along with weekly price projecting higher levels, informs market participants that USD/JPY may remain on the front foot this week. However, traders are still urged to pencil in the possibility of a ¥116.33 retest before buyers switch into a higher gear.

The closing hours of the week on the H4 timeframe watched price shake hands with a Fibonacci cluster at around ¥117.25 (resistance), made up of two 100% Fibonacci projections and a 1.272% Fibonacci projection. Should the unit clear the noted resistances, as suggested by the higher timeframes, Quasimodo resistances are seen between ¥118.24 and ¥117.81 (houses a 1.272% Fibonacci projection at ¥118.06). Analysing H1 price data shows the currency pair lifted north of ¥117 on Friday to within striking distance of ¥117.50. Of particular note on the H1 scale is ¥117 converging closely with channel resistance-turned support, taken from the high ¥115.79.

Technical Outlook:

Medium term:

The primary trend in this market faces north; the secondary correction (¥125.86 [June 2015] to ¥98.79 [June 2020]) has demonstrated upside strength since 2021 (weekly ascending channel [¥102.59-¥110.97]). This is further emphasised on the daily timeframe through price rupturing the upper boundary of an ascending triangle at ¥116.33 and displaying scope to reach higher levels (weekly resistance at ¥118.64 is recognised as the next upside objective).

Short term:

The H4 connecting with the Fibonacci cluster at around ¥117.25 (resistance) is unlikely to offer much of a ceiling for sellers. However, what it might accomplish is force a retest of ¥117 on the H1. Should this occur and price retests the psychological figure (preferably at the point the level intersects with H1 channel support), short-term buyers may step in, technically persuaded by the bigger picture. Upside targets fall in around ¥117.50, followed by H4 resistance at ¥118.24-117.81.

GBP/USD:

Sterling wrapped up another week underwater against the US dollar, down 1.4 percent.

The weekly timeframe crossed swords with a double-top ($1.4241) profit objective at $1.3090, ‘completing’ this long-term bearish pattern. We are now dealing with weekly prime resistance located at $1.3473-1.3203 and the possibility of an extension to weekly support at $1.2719. The longer-term trend supports additional downside. Trend direction has been southbound since late 2007 tops at $2.1161. As a result, the 25 percent move from pandemic lows in March 2020 to February 2021 may be viewed as a pullback within the larger downtrend. This, of course, places a question mark on the 8.5 percent ‘correction’ from February 2021 to March 2022; it may in fact be the beginning of a longer-term push to the downside and not a dip-buying scenario.

Based on the daily timeframe, recent developments show price defeated support at $1.3082 which shines the spotlight on channel support, drawn from the low $1.3160, and support seen at $1.2826. Technicians will note the currency pair continues to operate south of the 200-day simple moving average at $1.3622. We can also see that the relative strength index (RSI) remains within oversold territory and could do so for a prolonged period given the current downtrend.

Price action on the H4 timeframe dropped through support at $1.3079 which has potentially set the stage for an approach to support coming in at $1.2965. An additional technical consideration is the falling wedge between $1.3623 and $1.3273. Out of the H1 timeframe, the technical landscape directs focus to the key figure $1.30, following Friday’s failed attempt to reclaim $1.31. H1 supply is also an important note this week at $1.3103-1.3069, and could be retested prior to sellers endeavouring to reach $1.30.

Technical Outlook:

Medium term:

The overall trend facing lower, in addition to the daily timeframe closing under support from $1.3082, favours sellers this week. Downside targets rest at daily channel support (around $1.2944) and daily support from $1.2862.

Short term:

The bearish outlook is supported on short-term charts. H4 price demonstrates scope to close in on support at $1.2965, while the H1 timeframe has room to reach $1.30. Though, it is important to realise that before sellers look to take the wheel, a retest of H1 supply from $1.3103-1.3069 might materialise.

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