February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory.

February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory., FP Markets

EUR/USD:

Monthly timeframe:

Brought forward from previous analysis:

Long term, EUR/USD’s primary trend has faced a southerly trajectory since topping in mid-July 2008, at 1.6038. Activity on the monthly chart remains languishing south of a resistance area at 1.2048/1.1653 as well as a trendline resistance (1.6038).

Downside risk remains on this timeframe until connecting with the support area marked at 1.0742/1.0333.

Daily timeframe:

It was emphasised in yesterday’s analysis that traders are likely anticipating resistance to form off 1.0962/1.0925. The underside of this zone held to the point, elbowing the pair to lower ground Wednesday and connecting with support at 1.0822/1.0879, boasting history as far back as March 2016.

The RSI also drove further into oversold territory, currently trades at 26.46.

H4 timeframe:

What’s interesting from a technical standpoint on the H4 timeframe is price retested the underside of a recently violated channel support as resistance, which happened to align with the daily resistance zone at 1.0962/1.0925.

1.0826/1.0851 rests as the next area of support, which houses a 161.8% Fibonacci ext. point at 1.0839. Note this H4 zone also resides within the lower boundary of the daily timeframe’s current support zone at 1.0822/1.0879.

H1 timeframe:

Europe’s single currency traded lower against the buck Wednesday, dropping more than 40 points, or 0.40%. This followed a revival in USD bidding, in which the US dollar index conquered the 99.00 handle.

On the data front, in December 2019 compared with November 2019, seasonally adjusted industrial production fell by 2.1% in the euro area (EA19) and by 2.0% in the EU27, according to estimates from Eurostat, the statistical office of the European Union.

Federal Reserve Chair Jerome Powell reiterated his confidence in the US economic outlook, even as he said he expected some drag “soon” from China’s coronavirus epidemic and called out the threat from income inequality and an expanding federal debt (Reuters).

Technically, EUR/USD tunnelled its way back into a descending channel (1.1014/1.0964). Another constructive development was the retaking of the 1.09 handle to the downside. The general sense is a push for mid-1.08s and its intersecting channel support (1.0964) today. Indicator flows has the RSI attempting to climb from oversold terrain, rebounding from familiar RSI support around 20.13.

Direction:

1.0850, based on the H1 timeframe, represents feasible support today. There are a number of technical aspects that support this view. Firstly, as underlined above, the H1 channel support convergence. Secondly, daily price is toying with a support area, confirmed by its RSI exhibiting oversold conditions, and thirdly, 1.0850 merges closely with the top edge of H4 support at 1.0851.

February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory., FP Markets

 

AUD/USD:

Monthly timeframe:

Brought forward from previous analysis:

Following a retest to the underside of a resistance area drawn from 0.8409/0.8082 in early 2018, AUD/USD has been grinding lower, down nearly 1500 points since.

June 2018 witnessed a long-standing trend line support (1.4776) give way, followed by the 0.6827 January 2016 low in August 2019. This, technically speaking, suggests scope for further downside to 0.5986/0.6346, a long-term support zone.

Daily timeframe:

The Australian dollar rose against the greenback for a third successive session Wednesday, retrieving last Friday’s losses and challenging the lower border of a resistance zone at 0.6770/0.6751.

Upward momentum may slow off the said resistance area today which, as you can see, is located just ahead of a trendline support-turned resistance level (0.7393).

The RSI, for those who follow indicators, is seen coming off mild bullish divergence from oversold territory and is poised to approach the 50.0 value.

H4 timeframe:

After scoring a fresh lower low at 0.6662 late last week, breaking the previous swing low 0.6679, traders likely seek short sales on the correction, based on the H4 timeframe.

Trendline resistance (0.7031) elbowed its way into view Wednesday, with price action topping just south of the level in the shape of three successive bearish wicks. This is usually a forerunner to a move lower, though may fade given we’re yet to connect with the said trendline resistance or the nearby resistance area priced in at 0.6783/0.6769 (joined closely with a 38.2% Fibonacci retracement at 0.6765 and the 50.0% retracement at 0.6770).

H1 timeframe:

The short-term trendline support (0.6672) gave way in recent hours, following a tame reaction out of 0.6750/0.6742, a resistance area drawn from the beginning of February. This, by and of itself, is a bearish signal, and may see an approach to 0.67, assuming a jump through the 50/100-period SMAs just below at 0.6722 and 0.6707, respectively. Traders may also find use in noting the faster 50-period MA crossed above the slower 100-period MA, highlighting a possible bullish bias. The RSI remains hovering north of 50.0 with traders likely watching for a cross beneath this value to head for oversold territory.

Direction:

The fact we crossed paths with a daily resistance area at 0.6770/0.6751, connected with a local H1 resistance zone at 0.6750/0.6742 and violated a H1 trendline support, suggests lower levels could be on the cards. However, the possibility of a move up to the current H4 resistance area at 0.6783/0.6769 is something worth bearing in mind, potentially derailing any short sales.

February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory., FP Markets

USD/JPY:

Monthly timeframe:

Brought forward from previous analysis:

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this pattern is common to the downside, but an upward breakout is considered more reliable and profitable.

Outside of the current configuration, a resistance area is visible at 121.36/124.23, while lower on the curve we have a support area visible at 98.83/101.42.

Daily timeframe:

Despite a reasonably healthy recovery since August 2019, the resistance area at 110.73/110.31, along with a long-term trendline resistance (114.54), has capped upside. As can be seen from the daily timeframe, price is attempting to brush through the said trendline resistance, as we write.

Brought forward from previous analysis:

Should we eventually overthrow the said zones, immediate resistance resides close by in the form of a channel resistance (109.48) and a 78.6% Fibonacci retracement at 110.71 (red level). A rejection, on the other hand, has a support area at 108.21/108.51 to target, along with the 200-day SMA (108.38) and channel support (106.48).

H4 timeframe:

Following a dip/retest to familiar support at 109.68, USD/JPY bulls went on the offensive Wednesday and drew swords with resistance coming in from 110.09ish. Although the level does not look much in terms of size, remember this base is housed within the current daily resistance area at 110.73/110.31 and merges with daily trendline resistance.

H1 timeframe:

In recent hours, the market witnessed increased demand for the safe-haven Japanese yen on the back of a report from Bloomberg, estimating the latest coronavirus figures.

With sell-stops triggered beyond 1.10 and trend line support (108.31), along with H4 resistance and the daily resistance combination also in the mix, we could be heading for the 109.50 level today.

Direction:

Traders are likely watching for H1 price to close beneath both the 110 handle and trendline support, before shooting for short sales to 109.50. There’s still a risk the 100/50-period SMAs may hold price action higher at 109.85 and 109.90, respectively.

February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory., FP Markets

GBP/USD:

Monthly timeframe:

Brought forward from previous analysis:

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red).

In recent months, though, the market witnessed longer-term flows retest the underside of a resistance area at 1.3699/1.3503. continued selling is a possibility on this timeframe, targeting a support area at 1.1899/1.2217.

Daily timeframe:

In conjunction with the monthly timeframe, we can see price action on the daily timeframe chalked up a bearish pennant pattern and had its lower edge engulfed last week.

As of current price, we are retesting the recently broken pennant edge, which if it holds, could guide the pair to as far south as a support area coming in at 1.2816/1.2719, followed by the 200-day SMA (1.2687).

Note we also have a resistance zone supporting the upper edge of the pennant formation at 1.3269/1.3165, as well as a trendline resistance (1.3514) in the mix.

H4 timeframe:

Leaving the 127.2% Fibonacci extension at 1.2867 unchallenged, GBP/USD dipped a toe in waters within a resistance zone at 1.2993/1.2958 in recent sessions. With highs of 1.2991 reached yesterday, there’s a possibility the market may breach the current resistance zone to draw in sellers from the 38.2% Fibonacci retracement ratio at 1.3001. Note this level also coincides closely with a trend line support-turned resistance level (1.2954).

H1 timeframe:

GBP/USD retested the underside of a noted zone of resistance Wednesday between the key figure 1.30, a 61.8% Fibonacci retracement ratio at 1.2994 and a 161.8% Fibonacci extension at 1.2991 (marked in red). Price now hovers a few points north of a support area at 1.2940/1.2949, reinforced by a 50-period SMA (1.2945) and nearby 100-period SMA (1.2933). Traders may also note the RSI recently crossed beneath its 50.0 value, indicating a bearish tone on this timeframe.

Beyond the said SMAs we have the 1.29 handle to look forward to, a level that offered healthy support and held price higher Tuesday.

Direction:

The monthly, daily and H4 timeframes all exhibit potential to the downside, therefore a break of the current H1 support area could be in the offing today. A break lower will likely see sellers from the 1.30/1.2991 H1 resistance reduce risk to breakeven, with the expectation of a run materialising to 1.29.

February 13th 2020: Dollar Index Conquers 99.00, Resuming its Upside Trajectory., FP Markets

DISCLAIMER:

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, www.fpmarkets.com 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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