Charts: Trading View
(Italics: Previous Analysis)
Measuring the value of the US dollar against a basket of six international currencies, the US Dollar Index (USDX) touched a high of 103.28 on Wednesday, its highest top since early 2017. USD upside has left a considerable dent in Europe’s shared currency; week to date, EUR/USD is lower by 2.2 per cent, shaped by way of three consecutive daily bearish candles.
The ongoing sell-off led weekly price under Quasimodo support at $1.0778 to weekly Quasimodo support from $1.0517, extended from 2017. How much enthusiasm current support will offer is difficult to estimate at this stage, considering the visible downtrend on the weekly scale—dominant since the beginning of 2021.
A key area to be aware of on the daily timeframe is the recently breached pandemic low of $1.0638 and a Quasimodo support-turned resistance at $1.0632. Technicians may also acknowledge the 100% Fibonacci projection at $1.0494, sheltered a touch under the weekly Quasimodo support at $1.0517. Adding to the daily timeframe’s technical picture, the unit has been south of its 200-day simple moving average at $1.1393 since 17th June, and the relative strength index (RSI) nudged under the oversold threshold. Indicator support is visible at 21.87.
Across the page on the H4 timeframe, current price moulded a half-hearted hammer candle from the weekly timeframe’s Quasimodo support at $1.0517. Overhead, Quasimodo support-turned resistance is seen at $1.0595, closely shadowed by another Quasimodo formation at $1.0655. From the H1 scale, price discovered support ahead of $1.05 in early US trading on Wednesday (from weekly Quasimodo support). Overhead, $1.06 is seen as possible resistance, accompanied by trendline resistance, taken from the high $1.0936.
With weekly Quasimodo support entering the frame at $1.0517, this could encourage buying. However, in a market entrenched within a decisive downtrend, buyers might struggle at H4 Quasimodo support-turned resistance from $1.0595 and unlock a bearish scenario. Note that alongside this Quasimodo configuration, the H1 chart has the $1.06 figure, complemented by trendline resistance, drawn from the high $1.0936.
Down 1.4 per cent, the week shows price tunnelling into prime support from $0.6948-0.7242 on the weekly timeframe. While this area has capped selling since September 2020, the trend suggests that surpassing the zone could be seen in the coming weeks. The monthly timeframe has portrayed a downtrend since August 2011, indicating the pullback (February 2022 to current) on the weekly timeframe has likely been viewed as a ‘sell-on-rally’ theme and not a ‘dip-buying’ opportunity within the 2020 advance from pandemic lows of $0.5506 (march 2021).
Meanwhile on the daily timeframe, price action overthrew the 200-day simple moving average at 0.7289 last week. Alone, this is considered by many technicians as a sign of bearish interest: the unit is now below the average price for the previous 200 trading days. Support at $0.7165 was engulfed Tuesday and subsequently retested to form resistance on Wednesday. Maintaining this level signals a potential move to a familiar daily decision point at $0.6964-0.7040 (fixed within the lower limits of weekly prime support mentioned above at $0.6948-0.7242). In terms of the relative strength index (RSI), the indicator’s value came within a whisker of touching oversold space—support is seen close by at 21.38.
H4 Quasimodo support at $0.7109 and a 78.6% Fibonacci retracement at $0.7116 put in an appearance on Wednesday. H4 Quasimodo support-turned resistance at $0.7246 is seen overhead, while a break south eyes the 1.272% Fibonacci projection at $0.7057 and the 88.6% Fibonacci retracement from $0.7048. $0.71 is positioned nearby on the H1 chart, and was left unchallenged in US hours on Wednesday. Higher, $0.72 calls for attention as well as a demand-turned supply base at $0.7216-0.7236.
Having noted the daily timeframe retesting $0.7165 as resistance, together with scope to navigate towards a decision point at $0.6964-0.7040, sellers could attempt to maintain control. Should H1 price retest $0.72, therefore, a sell-on-rally scene may unfold.
In spite of the overall trend facing lower, a cautionary point to the above setup, of course, is weekly price engaging with prime support at $0.6948-0.7242.
Upside levelled off in recent days, consequently piecing together a potential bullish flag on the daily timeframe, drawn from a high of ¥129.41 and a low of ¥127.80. Daily supply from ¥130.65-129.57 accommodates space just north of the bullish flag and might disturb breakout flow from the noted pattern should one arise. Overall, though, it’s important to understand that the currency pair has been rooted within a dominant uptrend since 2021, therefore a breakout higher could well take on noted supply.
Adding to the daily timeframe’s technical picture, we can see the relative strength index (RSI) peaked around 87.52 resistance on two occasions (a level boasting historical significance as far back as 2014). Note that this is technically the early stages of a double-top within the RSI with the neckline stationed around the 66.78 31st March low. Exiting overbought space is considered a bearish indication by many technicians. Still, in upward facing markets, such as the one we’re clearly 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).
Territory lower shines light on weekly support coming in from ¥125.54, followed closely by H4 support located at ¥125.11. Of technical relevance on the weekly timeframe, limited resistance is recognised until the ¥135.16 high (28th Jan 2002).
Out of the H1 timeframe, price staged an impressive recovery from the ¥127 region, aided by a 100% Fibonacci projection at ¥127.19 (AB=CD support). Wednesday overthrew ¥128 and tested a 61.8% Fibonacci retracement at ¥128.50 (harmonic traders may recognise this as a take-profit objective based on the AB=CD support). Upstream reveals ¥129 along with trendline support-turned resistance, taken from the low ¥121.28.
The weekly timeframe exhibiting space to explore higher levels, in addition to the daily timeframe boasting a possible bullish flag pattern, could see H1 action preserve position north of ¥128 and possibly take aim at ¥129.
Month to date, sterling is 4.5 per cent lower against the US dollar. Week to date, we are 2.3 per cent lower with weekly price elbowing beneath support at $1.2719, a level that may form resistance in the coming weeks. What’s technically interesting is the absence of clear support on the weekly timeframe until reaching a Quasimodo formation at $1.2164. Interestingly, long-term trend direction on the weekly chart has been southbound since late 2007 tops at $2.1161.
A closer reading of price action on the daily timeframe reveals GBP/USD to be testing a long-term 61.8% Fibonacci retracement from $1.2502 (green). Continuation selling from current price could have the currency pair manoeuvre towards Quasimodo support at $1.2334. The daily timeframe’s relative strength index (RSI) is travelling within oversold space, though given the strong downside momentum this should not surprise. Caution is warranted taking long signals based on oversold conditions as the indicator can remain oversold for prolonged periods in downward facing markets.
According to the H4 timeframe, alongside the daily timeframe’s 61.8% Fibonacci retracement, support is evident at $1.2529. Currently, resistance is stationed at $1.2650. From the H1 timeframe, focus is on $1.25 and $1.26, together with steep channel resistance, printed from the high $1.3033.
The weekly timeframe demonstrates scope to pull lower, while the daily timeframe shows support in the form of a 61.8% Fibonacci retracement from $1.2502. H4 action also puts forward support at $1.2529, as does H1 movement from $1.25.
Despite the support, the downside bias is clear in this market. With that in mind, $1.26 could interest sellers.
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