Charts: Trading View
(Italics: Previous Analysis)
Against a basket of six international currencies, the US dollar continued to explore lower territory on Thursday. Risk events saw US weekly unemployment claims come in largely as expected at 262,000, while the Producer Price Index (PPI) fell 0.5 per cent in July versus 1.1 per cent in June.
EUR/USD moderately extended gains on Thursday and has resistance at $1.0377 in the headlights right now, which happens to intersect with trendline resistance, extended from the high $1.1495. This is a key level as defending the lower side of these barriers implies the break above weekly resistance coming in at $1.0298 could be short lived. Ultimately, the trend—facing south since early 2021—favours sellers emerging from $1.0377. In terms of where I stand on the daily chart’s relative strength index (RSI), we are now comfortably north of the 50.00 centreline (positive momentum), opening the possibility of testing indicator resistance from 63.66.
Across the page on the H4 and H1 charts, price is seen connecting with H4 Quasimodo support-turned resistance at $1.0354. Support at $1.0279 made a show in recent trading and provided a platform for short-term buyers to work with. Nearby, we also have trendline support seen, pencilled in from the low $0.9952. Journeying above current resistance (and engulfing daily resistance at $1.0377), prime resistance is seen from $1.0535-1.0505. The area of resistance between $1.0376 and $1.0356 on the H1 timeframe, made up of two Fibonacci projection levels (1.272% and 1.618%), also made an appearance on Thursday as it houses the current H4 resistance within. This follows an earlier rebound from support drawn from between a Quasimodo resistance-turned support at $1.0275 and $1.03.
The clear downtrend, the daily resistance at $1.0377, the daily trendline resistance, the H4 Quasimodo support-turned resistance at $1.0354, and the H1 resistance between $1.0376 and $1.0356 is likely sufficient technical evidence to tempt a bearish scenario unfolding in this market.
To convince sellers, however, they will likely require at least a H1 close under $1.0275, action perhaps clearing the path to the H4 trendline support and the $1.02 figure on the H1 scale.
The Australian dollar gained versus a broadly softer US dollar on Thursday, comfortably aligning AUD/USD within a stone’s throw of the 200-day simple moving average at $0.7151. Blending with a 50% retracement at $0.7167 and a deep 78.6% Fibonacci retracement at $0.7156, this technical ceiling may contain sufficient fuel to hinder further buying (note that moving averages can [and often do] deliver dynamic support and resistance as price commonly reverts to its mean).
Up nearly 3.0 per cent week to date, however, the currency pair is on the verge of forging a close above resistance from $0.6996 on the weekly timeframe. As noted in previous writing, assuming a dominant finish to the week, weekly price invites an approach to as far north as prime resistance coming in at $0.7849-0.7599. This follows a rebound from weekly support between $0.6632 and $0.6764.
From a shorter-term perspective, H4 price came within touching distance of retesting supply-turned demand at $0.7062-0.7031 before rallying. H4 Quasimodo support-turned resistance is seen at $0.7148. On the H1 chart, price is shaking hands with Quasimodo resistance at $0.7129 (set just beneath the H4 Quasimodo base), with support standing close at $0.71. If we venture under the aforementioned round number, H1 Quasimodo resistance-turned support calls for attention at $0.7032.
Daily resistance made up between a 200-day simple moving average and Fibonacci ratios (50% is not a Fib number) at around $0.7160ish is likely to act as a magnet to price and ultimately pull H1 price above Quasimodo resistance at $0.7129 to test the H4 Quasimodo support-turned resistance at $0.7148.
This means should we see a retest of $0.71 on the H1 scale as support, buyers could potentially step in.
Following Wednesday’s one-sided decline, Thursday attempted to navigate area to the downside, though ended the session considerably off worst levels after touching gloves with supply-turned demand at ¥131.93-131.10 on the daily scale. Note that this is an area that is glued to the upper boundary of a weekly decision point coming in at ¥126.40-131.30. Overhead on the bigger picture, weekly resistance is seen at ¥137.23, with a break here pointing to daily Quasimodo support-turned resistance at ¥139.55.
As I said in Thursday’s technical briefing, until the weekly decision point at ¥126.40-131.30 is overthrown, I do not expect to see much call for USD/JPY shorts, technically speaking. A break of the daily timeframe’s supply-turned demand at ¥131.93-131.10, however, would likely be a talking point for technical analysts as limited support is observed until reaching support at ¥125.54 (a weekly support level positioned just south of the current weekly decision point). Therefore, ¥131.93-131.10 is likely to be monitored closely.
I do not really have anything to add on the H4 timeframe right now as structure is relatively distant. Nevertheless, on the H1 scale, price is currently testing ¥133 and the H1 Quasimodo support-turned resistance at ¥133.11. This follows the push from ¥132. If we move north of ¥133, then traders are likely to zero in on ¥134 and neighbouring prime resistance at ¥134.88-134.33.
Given the pair has tested the daily timeframe’s supply-turned demand area at ¥131.93-131.10, which shares a connection with the upper boundary of the weekly chart’s decision point at ¥126.40-131.30, a ¥133 break to the upside should not surprise. This may also trigger breakout buying towards ¥134. However, it is at this point I see a potential whipsaw of this number into H1 prime resistance at ¥134.88-134.33 which could have short-term sellers make a show.
Ahead of UK GDP data, sterling ended Thursday largely unmoved, remaining within the upper boundary of Wednesday’s range ($1.2277) and mildly fading session highs of $1.2249.
Therefore, here is where I left the charts on the weekly and daily timeframes in Thursday’s technical briefing (italics):
Kicking things off from the weekly timeframe, Wednesday’s performance may instil some confidence in bids from long-term weekly support at $1.1958. This is a level that has had a question mark on it as its positioned in a market trending lower since 2021. Continued interest to the upside casts light on weekly resistance at $1.2719. The recent bid is further reinforced on the daily timeframe after daily price retested (and held) trendline resistance-turned support, taken from the high $1.3639, with the chart also demonstrating space to rally until reaching a decision point at $1.2605-1.2465.
Right now, therefore, higher timeframe structure is in favour of buyers.
The H4 timeframe’s price action also remains unchanged (italics):
Thanks to recent buying, we have seen the currency pair rebound from the H4 inverted head and shoulder’s pattern ($1.1876; $1.1760; $1.1890) neckline (from the high $1.2056). This locates the pattern’s take-profit level from $1.2335 back in the frame.
From the H1 timeframe, we can see the currency pair is attempting to hold off $1.22 in the form of support. I do not see much in the way of resistance on this timeframe until the $1.23 region, though a break of $1.22 could send price back to $1.21.
According to the four charts analysed, buyers are likely to remain in command.
The retest of $1.22 on the H1 timeframe, therefore, could offer buyers a platform to work with, targeting $1.23, and then the H4 timeframe’s pattern (inverted H&S) profit objective at $1.2335.
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