Charts: Trading View
(Italics: Previous Analysis)
Long-term technical flow derived from the weekly timeframe reveals a bearish setting has emerged this week, following last week’s test of resistance at $1.1147. Weekly channel support, extended from the low $1.1186, as well as weekly Quasimodo support at $1.0778, remain downside objectives on this timeframe. The bearish narrative is reinforced by current trend studies. For those who read previous technical writing you may recall the following text regarding trend:
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 strengthened by a trendline support breach on the weekly scale, drawn from the low $1.0636, together with the recent retest of weekly resistance following year-to-date lows at $1.0806 in early March.
Meanwhile on the daily timeframe, a bearish outside reversal decorated the chart last week, just south of resistance at $1.1224. Subsequent movement pencilled in consecutive losing sessions and pulled the unit to within reach of a familiar decision point from $1.0788-1.0854, complemented by ascending support, drawn from the $1.0340 3rd January low 2017. Note that this decision point also closely shares chart space with weekly support underlined above. Momentum studies, according to the relative strength index (RSI), continues to unearth negative momentum, shown by way of manoeuvring beneath the 50.00 centreline.
Addressing lower timeframes, technicians will acknowledge the currency pair crossing swords with H4 trendline resistance-turned support, taken from the high $1.1495, and a 78.6% retracement at $1.0888. The lack of bullish commitment visible from the aforementioned supports, however, is concerning. Voyaging lower exposes prime support coming in from $1.0785-1.0820. From the H1 timeframe, $1.09 failed to deliver much in the way of support, hindered by Quasimodo support-turned resistance at $1.0931. ‘Fresh’ support is not seen until a Quasimodo formation at $1.0821.
Should H1 price secure a decisive close under $1.09, a bearish scene may unfold, targeting the upper edge of the daily decision point at $1.0854, followed by H1 Quasimodo support at $1.0821 (merges with the upper side of H4 prime support at $1.0820).
Latest technical developments out of the weekly timeframe has price shaking hands with the lower side of prime resistance at $0.7849-0.7599. Candlestick enthusiasts will note the current candle is on track to form a shooting star pattern—a formation echoing a bearish signal.
$0.7849-0.7599 was an area highlighted in previous writing, and for good reason. Take note of recent trend studies:
The trend, according to overall chart studies, suggests that surpassing the noted resistance may be problematic. The monthly timeframe has portrayed a downtrend since August 2011, indicating the 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).
Continuation selling from current weekly prime resistance, therefore, could zero in on weekly prime support from $0.6948-0.7242. 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.
Price action on the daily timeframe is withdrawing from $0.7660: a daily double-bottom pattern’s ($0.6991) profit objective that dovetails with a 100% Fibonacci projection at $0.7645 (AB=CD harmonic structure). Wider declines in the currency pair shines the technical spotlight on trendline resistance-turned support, extended from the high $0.8007.
You will see recent selling shook out buyers from support at $0.7547 on the H4 timeframe and re-opened the risk of a return to Quasimodo resistance-turned support at $0.7451. As for the H1 timeframe, prime resistance at $0.7561-0.7540 is on the radar after the currency pair connected with $0.75. Venturing beneath the psychological level exposes Quasimodo resistance-turned support from $0.7459.
Technically, everything points to a $0.75 rebound and subsequent test of H1 prime resistance at $0.7561-0.7540, an area perhaps welcomed by sellers. This is largely due to the technical picture drawn from weekly, daily and H4 timeframes suggesting lower prices.
As evident from the weekly timeframe, the currency pair remains on the doorstep of multi-year tops at ¥125.11 and Quasimodo resistance at ¥124.42. Although the noted resistance made a show last week and produced a sizeable upper shadow, trend argues further outperformance is on the cards.
Recent trend studies from previous writing:
Along with the daily timeframe holding above its 200-day simple moving average at ¥113.53 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 resistance at ¥123.72 recently re-entered the frame. This followed a low of ¥121.28 last week, leaving demand at ¥118.25-119.16 unchallenged. An additional technical note is the daily timeframe’s relative strength index (RSI). While the indicator peaked around 87.52 (a level not seen since 2014), the value has turned higher after dipping a toe under the 70.00 threshold. 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).
As evident from the lower timeframes, the currency pair spent the day toying with the lower side of ¥124, placed a touch under H1 Quasimodo resistance at ¥124.20. To the downside, the chart shows support in the form of ¥123.
Recognising daily resistance is in play at ¥123.72, the area between H1 Quasimodo resistance at ¥124.20 and the ¥124 figure could produce a zone of interest for short-term sellers. Any downside move is likely to target ¥123.
GBP/USD finished unchanged on Wednesday; therefore, the majority of the following analysis will echo similar thoughts put forward in Wednesday’s technical briefing.
Prime resistance remains 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 and on the brink of giving way. This is supported by the relative strength index (RSI) 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 $1.3549—a (technical) bearish view.
As can be seen from the H4 timeframe, price left prime resistance at $1.3228-1.3186 unopposed and has since navigated lower. Ultimately, the chart displays little in terms of support until reaching the $1.2965ish region, closely shadowed by a 100% Fibonacci projection coming in from $1.2936 (AB=CD structure).
On the H1 timeframe, price retested the lower side of $1.31 and respected the base. Interestingly, limited support is observed until the widely watched $1.30 figure, while above we can see Quasimodo resistance at $1.3145.
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. With H1 price cementing position sub $1.31, this helps ‘confirm’ a bearish theme and may persuade short-term players to commit, targeting $1.30.
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