Charts: Trading View
(Italics: Previous Analysis)
Europe’s single currency finished the week off best levels against its US counterpart, erasing a sizeable portion of earlier upside.
Trend on the bigger picture continues to echo a downside bias, reflecting bearish status since topping at $1.2350 at the beginning of January (2021). This is reinforced by a trendline support breach on the weekly scale, drawn from the low $1.0636, together with the retest of weekly resistance from $1.1174 following year-to-date lows at $1.0806 in early March. Weekly channel support, extended from the low $1.1186 (arranged north of weekly Quasimodo support at $1.0778), remains a technical ‘floor’ for the time being.
Supporting the bearish picture is daily flow trading beneath its 200-day simple moving average at $1.1484 since mid-June. Also of technical relevance on the daily timeframe, of course, is Thursday’s bearish outside reversal ahead of resistance at $1.1224. The $1.0788-1.0854 decision point (as well as an intersecting ascending support, drawn from the $1.0340 3rd January low 2017) represents a reasonable downside objective this week which complements the weekly timeframe’s channel support. An additional study on the daily scale reveals the relative strength index (RSI) attempting to hold the lower side of the 50.00 centreline. Remaining under the aforementioned line informs market participants that average losses exceed average gains on this timeframe (negative momentum).
Out of the H4 timeframe, the tail end of the week witnessed the currency pair stall a handful of pips beneath a decision point at $1.1234-1.1195 after confronting a 100% Fibonacci projection at $1.1185. The connection to higher timeframe structure here is interesting; the noted decision point is set above the weekly timeframe’s $1.1174 resistance and shares space with the daily timeframe’s resistance at $1.1224. Trendline support (etched from the low $1.0806) on the H4 is also close by, benefitting from a 61.8% Fibonacci retracement at $1.1008 and a 50.00% retracement from $1.0996.
From the H1 chart, although the pair dropped lower, the move was void of passion on Friday. Nevertheless, price is now on the doorstep of Quasimodo resistance-turned support at $1.1023, joined by a descending support, drawn from the high $1.1046. Interestingly, prime support resides beneath here at $1.0992-1.1011, an area that encloses the widely watched $1.10. While the aforementioned support areas are likely to be of interest early week, upstream shifts attention to $1.11, as well as neighbouring Quasimodo resistance at $1.1114 and prime resistance from $1.1170-1.1140.
Having weekly price make contact with resistance at $1.1174, in a market trending lower, this may prompt follow-through downside this week. This is strengthened by the daily timeframe’s bearish outside reversal. Short term, nonetheless, an area of H1 support is on the menu between the lower side of prime support at $1.0992 and a Quasimodo resistance-turned support at $1.1023 (accompanied by H4 trendline support).
Technical expectations suggest downside pressure (from the higher timeframes) could to be too much for noted lower timeframe supports. Should the pair push south, this would help ‘confirm’ the bearish environment on the bigger picture and unlock the gate to a potential short-term bearish scene south of $1.0992.
It was a monotonous session for AUD/USD last week, eking out a modest 0.2 percent gain and featuring a range between $0.7540 and $0.7456. Recent weeks, however, has seen the currency pair occupy weekly resistance coming in from $0.7501. This followed a decisive bid from weekly prime support at $0.6948-0.7242. As a result, weekly prime resistance at $0.7849-0.7599 also warrants focus this week. The trend, according to overall chart studies, suggests that surpassing the noted resistance levels on the weekly scale may be problematic. Longer term, the monthly timeframe has portrayed a downtrend since August 2011, indicating the 12.9 percent correction from mid-Feb tops at $0.8007 (2021) and subsequent pullback (February 2022 to current) on the weekly timeframe might be viewed as a ‘sell-on-rally’ theme and not a ‘dip-buying’ opportunity from within the 2021 advance from pandemic lows of $0.5506 (march 2021). A bearish scene from $0.7051 resistance or prime resistance at $0.7849-0.7599, therefore, could develop. If a $0.6948-0.7242 break lower should come to pass, weekly support at $0.6673 and a 50% retracement at $0.6764 are observable.
Meanwhile on the daily timeframe, trading has been tedious since 24th March (around the current weekly resistance), consequently chalking up a possible bullish flag pattern (sometimes referred to as a ‘half-mast pattern’). Note the strong ‘pole’ prior to the flag that sets the scene for the flag’s formation. Earlier trading observed a trendline resistance breach (drawn from the high $0.8007). Communicating a bullish signal, along with price trading above its 200-day simple moving average at $0.7296, the prospect of a continuation run towards $0.7660 is in the offing. As you can see, a double-bottom pattern ($0.6991) had its neckline taken ($0.7314) in March and drew attention to its profit objective at $0.7660 (connects closely with Fibonacci resistance between $0.7641 and $0.7609). Though, according to the relative strength index (RSI), despite a mid-March rebound from the 50.00 centreline, the indicator has yet to engulf the 68.24 high formed on 4th March (bearish divergence might eventually emerge). Should we invade overbought territory, nevertheless, indicator resistance from 74.80 is of particular importance.
H4 space continues to respect the underside of resistance between $0.7547 and $0.7527 (composed of two Quasimodo resistances and a 1.272% Fibonacci expansion [merging closely with weekly resistance mentioned above at $0.7501]). Sellers, at the time of writing, appear unwilling to commit and test the mettle of Quasimodo resistance-turned support coming in at $0.7451.
From the H1 timeframe, recent movement has been centred around the $0.75 figure. Prime resistance is at $0.7561-0.7540, which if breached perhaps frees the path to the $0.76 neighbourhood. Sub $0.76 has Quasimodo resistance-turned support at $0.7459, with a break exposing another Quasimodo resistance-turned support at $0.7424.
The area between the lower limit of weekly prime resistance at $0.7849-0.7599 and weekly resistance at $0.7501 is a space likely to be watched closely this week, as the trend places this zone in favourable light. Daily flow, assuming an upside breakout of the current flag pattern) exhibits scope to approach Fibonacci resistance between $0.7641 and $0.7609 (as well as the double-top profit objective at $0.7660) which informs technicians that the lower area of weekly prime resistance at $0.7849-0.7599 is a more ‘realistic’ resistance for sellers.
From a short-term perspective, knowing higher timeframes may pursue higher levels, we could see H1 price eventually cement position north of $0.75 and take on both H4 resistance ($0.7547-0.7527) and H1 prime resistance at $0.7561-0.7540 to reach $0.76ish. As a result, according to technical studies, bullish vibes are seen above $0.75 this week.
Optimism faded last week as price encountered multi-year pinnacles at ¥125.11 and the weekly timeframe’s Quasimodo resistance at ¥124.42. Some candlestick enthusiasts will label the weekly closing candle as a shooting star, a bearish reversal signal found at swing highs or resistance. Yet, in light of the candle’s blatant lower shadow, the pattern’s structure is weakened. Nevertheless, seeking lower ground from current prices shines light on weekly support from ¥118.66.
Although we’re retreating from resistance, trend studies communicate a bullish vibe. Along with the daily timeframe holding above its 200-day simple moving average at ¥113.34 since February 2021, the overall longer-term trend has been higher 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. Adding to this, we broke the ¥118.66 December 2016 high in mid-March.
In line with the weekly timeframe, daily price defended resistance coming in at ¥123.72 last week. Demand is at ¥118.25-119.16 should sellers put in another appearance. An additional technical note is the relative strength index (RSI) peaking around 87.52 (a level not seen since 2014). Exiting overbought space is considered a bearish indication by technicians. However, in upward facing markets, such as the one we’re in now, false bearish signals are common. Further to this, if the RSI value does indeed tunnel lower, the 40.00-50.00 area of support may be targeted (served as a ‘temporary oversold’ base since May 2021).
But while the higher timeframes demonstrate scope to extend current losses, buyers appear to be in the driving seat on the H4 and H1 timeframes. H4 action delivered a floor from ¥121.44-120.89, following the reaction from weekly Quasimodo resistance at ¥124.42. Below current support could draw in additional support from ¥120.06-119-57. In terms of the H1 timeframe, a double-bottom pattern established itself ahead of ¥121 at the beginning of last week. The pattern’s neckline (¥122.46), as you can see, has been engulfed which informs chartists that further upside to ¥123.61 could be in the offing (profit objective derived by measuring from the lowest trough to the neckline and then extending this value at the breakout point [vertical red rectangles]). What’s interesting is the profit objective blends with a decision point coming in from ¥123.76-123.43 that’s located above ¥123.
Based on weekly and daily charts, weekly Quasimodo resistance at ¥124.42 and daily resistance from ¥123.72 remain potential headwinds, with scope for price to press lower. This is in spite of a clear uptrend in play.
From a short-term view, however, the prospect of a push higher is on the table, technically speaking. Holding above ¥122 swings the pendulum in favour of eventually breaking ¥123 to test the H1 decision point at ¥123.76-123.43 and ‘complete’ the current H1 double-bottom pattern.
As (technically) anticipated, sellers changed gears last week and pulled GBP/USD lower by 0.5 percent.
Prime resistance is a focal point on the weekly timeframe at $1.3473-1.3203 with the chart demonstrating scope to drop as far south as weekly support from $1.2719. Trend direction on the weekly chart has also 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.
Daily support at $1.3082 remains a fragile level, incapable of stirring interest last week. Unsupportive of buying, aside from the weekly timeframe casting light on lower price levels, the relative strength index (RSI) on the daily timeframe is seen pulling lower from the 50.00 centreline (negative momentum). For any longer-term trend followers watching the longer-dated moving averages, you will also note the currency pair continues to operate south of the 200-day simple moving average at $1.3557—a (technical) bearish view.
Assessing lower timeframes, we can see that H1 dropped in on $1.31 Friday and ‘completed’ a bullish AB=CD formation on the H1 timeframe. Harmonic traders will likely acknowledge Quasimodo support from $1.3075 and the 1.272% Fibonacci projection at $1.3078 (which represents an ‘alternate’ AB=CD formation). Upside targets from current price, according to AB=CD structure, are usually set at the 38.2% and the 61.8% Fibonacci retracements ($1.3122 and $1.3146), derived from legs A-D.
H4 resistance at $1.3194 (serving well since late November 2021) is a notable base this week, enclosed by the H4 $1.3228-1.3186 prime resistance. Ultimately, the chart displays little in terms of support until reaching the $1.2965ish region.
Given weekly prime resistance at $1.3473-1.3203 receiving price action, in addition to trend direction facing southbound, upside efforts from daily support at $1.3082 are fragile. For that reason, chart studies indicate possible clearance of the level this week.
Although the above depicts a bearish vibe, a short-term extension from $1.31 is possible on the H1 timeframe to reach the AB=CD take-profit targets at $1.3122 and $1.3146. Though, whether this market has enough ‘oomph’ to reach H4 prime resistance at $1.3228-1.3186 is still questionable, however.
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