August 10th 2022: Technical View Ahead of US Inflation Data

August 10th 2022: Technical View Ahead of US Inflation Data, FP Markets

Charts: Trading View

(Italics: Previous Analysis)


News flow remained light on Tuesday as investors await the release of today’s US inflation figures following last week’s hotter-than-anticipated US employment data. Overall, it was a soft day for the US dollar consequently underpinning Europe’s shared currency.

The weekly timeframe’s price action, as noted in recent technical briefings, came within a whisker of clipping resistance at $1.0298 in recent weeks. Knowing this market has been entrenched within a decisive downtrend (primary bear trend) since 2021, weekly price nibbling at resistance is a key technical event. Couple this with the daily timeframe testing a ‘local’ trendline resistance, extended from the high $1.0774, together with the relative strength index (RSI) still nipping at the lower side of the 50.00 centreline, sellers appear to have the upper hand for the time being.

The H4 timeframe has price action working with a decision point at $1.0276-1.0235. You may recall from previous analysis that I highlighted the consolidation zone on the H4 chart between the noted decision point and support coming in at $1.0125. Additional levels to be mindful of are Quasimodo support from $0.9998 and a Quasimodo support-turned resistance at $1.0354.

Price action out of the H1 timeframe is on the verge of retesting $1.02 following yesterday’s session high at $1.0248. Failure to welcome buyers from $1.02 will likely see Quasimodo support at $1.0150 call for attention. Upstream, nevertheless, shines the technical spotlight on Quasimodo resistance from $1.0275, a base accompanied by a 100% Fibonacci projection at $1.0274 and a 1.272% Fibonacci extension at $1.0284.

Technical Expectation:

Weekly, daily and H4 timeframes favour sellers in terms of trend and technical structures. As a result, a downside breach of $1.02 on the H1 timeframe may be viewed as a bearish scenario, targeting H1 Quasimodo support from $1.0150. Alternatively, a break to fresh short-term highs could see H1 Quasimodo resistance make a show at $1.0275. Reinforced by Fibonacci confluence, this area might also appeal to sellers.

August 10th 2022: Technical View Ahead of US Inflation Data, FP MarketsAUD/USD:

Similar to EUR/USD, the AUD/USD currency pair exhibited narrow trading on Tuesday. You may recall from recent writing that I underlined the currency pair has been chewing at the lower side of weekly resistance from $0.6996 since the end of July. While this follows a rebound from weekly support between $0.6632 and $0.6764, traders are encouraged to note the trend direction favours sellers (definitively lower since early 2021). On top of this, the daily timeframe throws light on neighbouring resistance at $0.7039— accompanied by a 38.2% Fibonacci retracement at $0.7051 and a nearby prime resistance at $0.7104-0.7080. However, seeing that daily support from $0.6901 has stood its ground and the daily chart’s relative strength index (RSI) remains off its 50.00 centreline (positive momentum), we have mixed signals on the bigger picture right now.

Given the lacklustre movement we’ve seen, the following text remains valid (taken from Tuesday’s technical briefing):

In previous research, I did note that a drop under daily support, and the daily chart’s relative strength index (RSI) voyaging under the 50.00 area (negative momentum), would add weight to the weekly timeframe’s resistance. Though for now that has yet to come to fruition.

Supply-turned demand at $0.6901-0.6862 on the H4 timeframe served well on Monday, elevating the unit to within a stone’s throw of prime resistance at $0.7062-0.7031. The daily prime resistance just above here at $0.7104-0.7080 will likely draw attention should price dethrone $0.7062-0.7031.

Lower on the curve, buyers and sellers are squaring off around $0.70, a widely watched psychological level. Overhead, the lower edge of the H4 prime resistance is marked at $0.7031, which happens to form a Quasimodo resistance level (left shoulder seen at the black arrow). The $0.6898-0.6914 prime support calls for attention to the downside on the H1 scale, merging with the $0.69 figure.

Technical Expectation:

Between daily resistance at $0.7039 and weekly resistance at $0.6996 is an area sellers could respond to on the bigger picture. The daily prime resistance at $0.7104-0.7080 is also a key watch should buyers overstretch at the noted resistance area.

More immediate, of course, is the $0.70 figure (H1) and its connection with weekly resistance at $0.6996. Therefore, this may also be a location we see sellers show themselves from.

August 10th 2022: Technical View Ahead of US Inflation Data, FP MarketsUSD/JPY:

It was another monotonous session also for USD/JPY on Tuesday, leaving us with the same technical structure as we had heading into Tuesday’s sessions. Therefore, much of the following text will echo thoughts put forward in recent analysis.

From the weekly timeframe, action staged an impressive comeback from a decision point at ¥126.40-131.30 and firmly placed resistance at ¥137.23 back in the frame. Should the aforementioned level cede ground, in line with the primary bull trend (since 2021), fresh 24-month peaks will likely be recorded and Quasimodo resistance at ¥146.79 is noted.

Supply-turned demand at ¥131.93-131.10 on the daily timeframe, which happens to be glued to the upper side of the weekly decision point, put in an appearance last week. Resistance is seen at ¥139.55: Quasimodo support-turned resistance that came within a whisker of putting in an appearance in mid-July. Interestingly, the daily timeframe’s relative strength index (RSI) has now reconnected with the lower side of its 50.00 centreline after coming within an inch of testing oversold space and forming hidden positive divergence. Dethroning the 50.00 level would add weight to last week’s push, informing market participants that average gains are exceeding average losses (positive momentum).

H4 trendline resistance, drawn from the high ¥138.88, however, has marginally given up its ground and could now offer support. An ascending support-turned resistance is seen to the upside (taken from the low ¥134.27), which is joined closely with a 78.6% Fibonacci retracement at ¥137.48. Quasimodo resistance-turned support at ¥130.58, however, is positioned lower.

Finally, on the H1 timeframe, price appears set to revisit ¥134 and the nearby Quasimodo resistance-turned support at ¥134.14. A rebound from the aforesaid levels could send price as far north as prime resistance at ¥136.21-135.87 and perhaps reconnect with ¥137.

Technical Expectation:

The weekly and daily timeframes show buyers may strive to make contact with weekly resistance at ¥137.23. As such, the break of the current H4 trendline resistance might fuel further buying, drawing H1 price to prime resistance at ¥136.21-135.87.

August 10th 2022: Technical View Ahead of US Inflation Data, FP MarketsGBP/USD:

Aside from price action on the H1 timeframe touching gloves with trendline resistance, extended from the high $1.2293, and guiding the currency pair south of $1.21, it was another quiet session on Tuesday, largely ending off best levels. Follow-through selling on the H1 scale could see the unit retest $1.20.

Higher up, I see limited change, therefore much of the following text is taken from previous analysis.

Price action is still finding it troublesome to garner much of a floor from the daily timeframe’s trendline resistance-turned support, taken from the high $1.3639. Visible alongside the daily chart’s relative strength index (RSI) venturing below its 50.00 centreline (negative momentum), any upside from the aforementioned trendline support is likely to be feeble. Couple this with the weekly timeframe’s support level at $1.1958 failing to ignite much bullish pressure in recent weeks, in addition to the trend facing south since the early months of 2021, sterling clearly echoes a strong bearish vibe.

Across the page on the H4 timeframe, H4 action did manage to discover some support from the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This follows a near-test of the pattern’s take-profit level from $1.2335 last week. However, in light of the soft support observed on the higher timeframes, traders are urged to pencil in support at $1.1933 in the event we pursue deeper water.

Technical Expectation:

According to the four charts analysed, sellers appear to have the upper hand right now. Consequently, H1 price cementing position south of $1.21 is a reasonable scenario, targeting the $1.20 region.

August 10th 2022: Technical View Ahead of US Inflation Data, FP MarketsDISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

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