Charts: Trading View
(Italics: Previous Analysis)
Europe’s single currency advanced against its US counterpart on Wednesday, snapping a two-day losing streak and adding 0.5 percent at the close of European trading. Global equities were largely bullish and US government debt continued to rally, consequently sending yields southbound. The 2-year yield extended declines to a low of 2.27%, with the benchmark 10-year yield also dipping to a low of 2.65%.
From a technical perspective, a bearish narrative remains on the EUR/USD. The currency pair has been stepping lower since the beginning of 2021, leaving weekly price on the doorstep of Quasimodo support at $1.0778, complemented by weekly channel support (extended from the low $1.1186).
Modest scope to press lower on the weekly timeframe places a question mark on the daily timeframe’s decision point area at $1.0788-1.0854 (and ascending support, drawn from the $1.0340 3rd January low 2017). However, you will note that the aforementioned daily areas entered the fold this week and prompted buying yesterday. Interestingly, underpinning recent upside we can see the daily relative strength index (RSI) has been levelling off around 38.00ish.
Meanwhile on the H4 timeframe, prime support from $1.0785-1.0820 welcomed buyers in recent trading, glued to the lower side of the daily timeframe’s decision point zone at $1.0788-1.0854. The H4 decision point base stationed at $1.0990-1.0963 now calls for attention, an area formed prior to the break of 28th March low at $1.0945.
Arranged on top of the noted H4 prime support is H1 Quasimodo support at $1.0821, which also received price movement on Wednesday and served well as a technical floor. $1.09 is within reach on the H1 with a break communicating the possibility of a continuation move to H1 Quasimodo support-turned resistance at $1.0931, and H1 resistance at $1.0950.
Having noted buying interest emerging from the daily decision point area at $1.0788-1.0854, together with the H4 prime support at $1.0785-1.0820 and H1 Quasimodo support at $1.0821 presenting a platform for buyers to work with, a short-term break above $1.09 may materialise on the H1.
With the weekly timeframe showing a clear path lower, chart studies suggest a bearish showing could develop from either of the following areas: H1 Quasimodo support-turned resistance at $1.0931; H1 resistance at $1.0950; H4 decision point area at $1.0990-1.0963.
A broadly weaker US dollar bolstered the AUD/USD on Wednesday, elevating the currency pair from a 38.2% Fibonacci retracement at $0.7397 on the daily timeframe (arranged nearby trendline resistance-turned support, extended from the high $0.8007).
Those who read previous writing may recall the unit withdrew from $0.7660 on 5th April: a daily double-bottom pattern’s ($0.6991) profit objective that dovetailed with a 100% daily Fibonacci projection at $0.7645 (AB=CD harmonic structure), as well as weekly prime resistance at $0.7849-0.7599. Note that the aforementioned area made an entrance last week and established a shooting star pattern. One final point regarding the daily timeframe is the relative strength index (RSI) shaking hands with the 50.00 centreline after tumbling from overbought territory in early April.
Resistance at $0.7451 remains centre stage on the H4 timeframe, aided by a decision point area at $0.7492-0.7466. Cementing position south of the noted level has H4 Quasimodo resistance-turned support at $0.7349 to target, which happens to dovetail with a trendline support, drawn from the low $0.6968. Lower on the curve, $0.74—helped by current daily Fibonacci support—delivered H1 support heading into US hours on Wednesday and price subsequently explored higher levels. Overhead, H1 resistance is visible at $0.7467 (set within the H4 decision point area at $0.7492-0.7466), followed by $0.75 and H1 prime resistance at $0.7509-0.7527.
We’re seeing a difference of opinion on the bigger picture at the moment. Structurally, the 38.2% Fibonacci retracement at $0.7397 on the daily timeframe is delivering support, while weekly prime resistance caps upside at $0.7849-0.7599. Overall, higher timeframes tend to take precedence over lower time periods, therefore buying pressure could deteriorate.
On the lower timeframes, H1 resistance at $0.7467 and the H4 decision point area at $0.7492-0.7466 could attract sellers. Though a whipsaw above $0.75 to H1 prime resistance at $0.7509-0.7527 is equally likely to attract the curiosity of short-term sellers, who have an eye on the surrounding technical picture.
Latest developments reveal USD/JPY refreshed a multi-year top on Wednesday, touching a high of ¥126.32 and shaking hands with 1st June high (2015) at ¥125.86. The currency pair is higher by 1.1 percent WTD, following March’s 5.8 percent rise. Whether ¥125.86 contains enough technical ‘oomph’ to delay the decisive uptrend (since 2021) remains to be seen, even with Wednesday’s daily shooting star candlestick pattern (bearish signal). To the downside, weekly support demands attention at ¥118.66, though prior to the unit testing this level, a daily decision point base is seen at ¥121.16-122.51.
Adding to the daily timeframe’s technical picture, we can see the relative strength index (RSI) peaked around 87.52 (a level not seen since 2014) in late March. Despite an immediate push lower, dipping a toe under the 70.00 threshold, the value remains within overbought territory. Exiting overbought space is considered a bearish indication by many technicians. However, in upward facing markets, such as the one we’re in now, false bearish signals are common. If the RSI value does eventually tunnel lower, the 40.00-50.00 area of support may be targeted (served as a ‘temporary oversold’ base since May 2021).
H4 support is nearby at ¥125.11. A break of this base would help confirm a short-term bearish vibe. That is assuming H1 price manages to cross below trendline support, taken from the low ¥121.28, and the ¥125 figure. Beyond this psychological level, ¥124 and H1 demand at ¥123.75-124.00 can be found.
H4 support at ¥125.11 and the ¥125 level are key. The currency pair holding above the aforesaid levels suggests buyers could strengthen their grip and navigate beyond ¥125.86. On the other hand, sub ¥125 encourages a bearish scene towards ¥125.
The British pound received fresh impetus on Wednesday, following latest inflation figures out of the UK. According to the Office for National Statistics, consumer prices rose by 7.0 percent in March, based on a year-on-year basis. GBP/USD rallied 0.9 percent, sweeping through a number of technical resistances, including $1.31 applied to the H1 timeframe. This followed an advance from the widely watched $1.30 figure. Upstream on the H1 scale, Quasimodo resistance is seen at $1.3145. Adding to the short-term picture, H4 price manoeuvred above trendline resistance, taken from the high $1.3620, as well as resistance drawn from $1.3015 (now a marked support). H4 prime resistance is seen above at $1.3228-1.3186.
Moving across to the higher timeframes, we can see that despite a healthy move higher yesterday, trend direction on the weekly chart has been southbound since late 2007 tops at $2.1161. As a result, the 25 percent move from pandemic lows ($1.1410) in March 2020 to February 2021 might 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 ($1.4241) to April 2022, suggesting the possibility of continuation selling.
The trend evident on the weekly timeframe, in addition to price rejecting the lower side of prime resistance at $1.3473-1.3203 with room to push towards weekly support at $1.2719, adds to the bearish environment. This, coupled with space to move lower on the daily timeframe to support at $1.2862 (and channel support) and the daily timeframe’s relative strength index (RSI) closing in on the underside of 50.00 (potential resistance), could hinder further buying.
Given weekly prime resistance at $1.3473-1.3203 receiving price action, in addition to trend direction facing southbound and daily price showing room to the downside, the break above $1.31 on the H1 may find a ceiling around H1 Quasimodo resistance at $1.3145. Alternatively, a break of the H1 zone shines the spotlight on H4 prime resistance from $1.3228-1.3186.
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