Charts: Trading View
(Italics: Previous Analysis)
Deteriorating risk sentiment underpinned a USD bid on Wednesday, action pressuring Europe’s single currency. As of writing, EUR/USD is treading water ahead of $1.13 (H1), lower by nearly 0.2 percent. Technical traders will note familiar H1 prime support stationed south of the psychological figure at $1.1264-1.1294. Additional observations reveal the H1 timeframe has been rangebound between the said supports and supply coming in at $1.1407-1.1386 (houses $1.14) since mid-February.
H4 prime support is also within reach at $1.1262-1.1304 (encloses H1 prime support and $1.13). Overthrowing the latter shines the technical spotlight on another prime support at $1.1205-1.1230, a base sited above a harmonic bat pattern. The harmonic PRZ resides between $1.1164 and $1.1181 and shares a connection with daily prime support at $1.1161-1.1199.
Against the backdrop of lower timeframe flow, the daily chart has trendline resistance-turned support, taken from the high $1.2254, intersecting with the noted H1 and H4 prime supports. Technically, although this adds weight to these zones, longer-term trend studies show a break of trendline support could be on the menu.
Those who read recent technical reports may recall the following points made on higher timeframe trend and technical structure:
Technically, according to trend, a downside bias has been in play since topping at $1.2350 at the beginning of January (2021) on the weekly timeframe. This is reinforced by a weekly trendline support breach, drawn from the low $1.0636, together with the break of the $1.1602 November 2020 low (circled) and the retest of weekly resistance at $1.1473-1.1583. Continued interest to the downside on the weekly chart could overthrow 28th January low at $1.1121 and bring attention to as far south as Quasimodo support at $1.0778—area not seen since pandemic lows of March 2020.
Lower on the curve, the daily timeframe witnessed a trendline resistance breach in early February, movement conflicting with the weekly timeframe’s bearish environment. Yet, the $1.1483 14th January peak (marked Key WATCH) echoing muscular resistance between 4th and 10th February, along with a subdued bid from trendline support and the relative strength index (RSI) dipping a toe under 50.00, airs a bearish vibe, in line with the weekly scale. Dethroning the noted trendline pulls interest towards daily prime support mentioned above at $1.1161-1.1199.
Given rangebound behaviour, the technical outlook for EUR/USD remains unchanged.
The combination of the following technical elements: daily trendline support, $1.13 on the H1 (and prime support at $1.1264-1.1294) and H4 prime support from $1.1262-1.1304, exposes possible support. The caveats, of course, are the weekly timeframe’s test of resistance at $1.1473-1.1583, in a market trending lower, long term, as well as daily action failing to find acceptance north of $1.1483.
Therefore, interested buyers are likely to adopt a cautious stance and seek additional confirmation before pulling the trigger.
Elevated geopolitical tensions continue to dominate headlines and risk sentiment. AUD/USD finished Wednesday off best levels as risk appetite soured, handing back 40 pips heading into US hours.
Technically speaking, notable resistance also made an entrance in recent trading: daily resistance between $0.7339 and $0.7278 (made up of a 200-day simple moving average, trendline resistance [taken from the high $0.7891], and Quasimodo resistance), and H1 trendline support-turned resistance, extended from the low $0.6968.
It is important to note that while we are coming from a dense technical ‘ceiling’, the weekly timeframe continues to forge a ‘floor’ within the walls of prime support at $0.6968-0.7242. However, siding with daily and H1 resistances is the overall trend. For those who read previous technical writing you may recall the following:
Longer term—the monthly timeframe—has portrayed a downtrend since August 2011, suggesting the 12.6 percent correction from mid-Feb tops at $0.8007 (2021) on the weekly timeframe might be the start of a bearish phase and not a dip-buying correction from the 2021 advance from pandemic lows of $0.5506. This places a question mark on weekly prime support, which has failed to ignite much bullish interest since late November 2021. If a break lower should come to pass, weekly support at $0.6673 and a 50% retracement at $0.6764 are visible.
With the above in mind, technical support targets likely on the radar are H1 channel support, pencilled in from the low $0.7086, followed by $0.72 as well as H4 trendline support, drawn from the low $0.6968. Assuming the currency pair extends losses, the daily timeframe unearths a possible dip towards a decision point from $0.6964-0.7040.
Medium term, attention remains on daily resistance between $0.7339 and $0.7278, in line with the current downside bias. However, the weekly timeframe’s prime support from $0.6968-0.7242 also remains a point of interest for now.
Lower on the curve, scope to navigate deeper water is evident until shaking hands with H1 channel support, pencilled in from the low $0.7086, followed by $0.72 as well as H4 trendline support, drawn from the low $0.6968.
With that being the case, traders may view this as an opportunity to drill down to shorter-term timeframes and pursue lower timeframe bearish formations.
Against the Japanese yen, the US dollar has been somewhat rangebound between ¥115.24 and ¥114.50 in recent days. Technically, however, there’s still plenty to discuss.
For those who read the recent technical report you may recall the following:
The landscape from the H4 timeframe has candles on the verge of greeting a 61.8% Fibonacci retracement at ¥114.57. Coupled with Friday’s successful retest of the breached trendline (drawn from the low ¥113.47) to shape resistance—communicates the potential for a test of the 61.8% Fibonacci retracement (considered by many to be a second profit objective from the H4 AB=CD bearish pattern). Interestingly, this echoes the possibility of an AB=CD bullish formation (black arrows to the downside) that completes at the 61.8% Fibonacci ratio.
As evident from the H4 chart, recent movement did indeed cross swords with the 61.8% Fibonacci retracement at ¥114.57. This effectively ‘completes’ the AB=CD bearish pattern that triggered around daily Quasimodo resistance at ¥116.33, and brought in the H4 ABCD bullish configuration off the 61.8% Fibonacci level. Price has already reached the 38.2% Fibonacci retracement (derived from legs A-D of the bullish pattern) at ¥115.21, with the possibility of ‘completing‘ the pattern at the 61.8% Fibonacci retracement ratio at ¥115.64 (also derived from legs A-D of the bullish pattern). Supporting the likelihood of additional buying is the H1 timeframe, breaking above a trendline resistance (taken from the high ¥116.34) and retesting the breached level in recent hours. Also of technical note is H1 support at ¥114.82.
In terms of the higher timeframes, you may recall the following analysis:
The trend in this market favours buyers at the moment. The currency pair has been stepping higher since early 2021, clearly visible on the weekly timeframe. In line with this, the overall longer-term trend has been climbing 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.
The weekly timeframe’s 1.272% Fibonacci projection at ¥116.09, as you can see, has remained a headwind since the beginning of this year. The potential for a double-top pattern to form is present, thanks to an additional test of the Fibonacci base early February. Weekly channel support, extended from the low ¥102.59, could be an area we see enter the frame going forward, should sellers strengthen their grip over the coming weeks.
The meaningful rejection from the daily timeframe’s Quasimodo resistance at ¥116.33 (technically) aided the weekly timeframe’s Fibonacci projection test (¥116.09). Aside from lows at ¥114.15 (2nd Feb) and ¥113.47 (24th Jan), supply-turned demand from ¥112.66-112.07 is seen. Not only is the area in the company of a 78.6% Fibonacci retracement at ¥112.00 and a 50% retracement from ¥112.55, technicians will acknowledge the widely watched 200-day simple moving average housed within the lower limit of the zone at ¥112.17. Note the relative strength index (RSI) is testing support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May—common view in trending markets).
Should H1 support from ¥114.82 and H1 trendline support (etched from the high ¥116.34) underpin a bid, this could see H4 dethrone the 38.2% Fibonacci retracement (derived from legs A-D of the bullish pattern) at ¥115.21 and reach for the 61.8% Fibonacci retracement ratio at ¥115.64 to ‘complete’ the recent H4 bullish AB=CD pattern off 61.8% Fibonacci support at ¥114.57.
BoE’s Tenreyro—a known ‘dove’—said on Wednesday ‘only a small amount of tightening is needed’, clearly pushing against aggressive monetary policy tightening. This, coupled with mounting geopolitical worries between Russia and the Ukraine, watched sterling slip 0.3 percent against its US counterpart.
Longer-term trend direction has been southbound since late 2007 tops at $2.1161. As a result, the move from pandemic lows in March 2020 may be viewed as a pullback within the larger downtrend. This places the 7.5 percent ‘correction’ from February 2021 to December 2021 in questionable territory and may in fact be the beginning of a longer-term push to the downside rather than a dip-buying scenario.
Technical structure visible on the weekly timeframe consists of resistance at $1.4371-1.4156 (potential compressed supply appears between $1.3983 and $1.3834 [blue arc]) and a double-top pattern’s ($1.4241) profit objective at $1.3090 (red boxes).
Daily resistance remains in the spotlight at $1.3602, organised under the 200-day simple moving average, circling $1.3680. Further weakness from here shines light on support at $1.3355, with follow-through downside perhaps throwing Quasimodo support into the mix at $1.3119. Of note, the aforementioned support shares chart space with the weekly timeframe’s double-top pattern’s profit objective at $1.3090. In terms of momentum, the relative strength index (RSI) is now on the doorstep of its 50.00 centreline, with a break informing traders average losses are exceeding average gains.
Lower timeframes draw light on a H4 consolidation between resistance at $1.3622-1.3646 (arranged beneath Quasimodo resistance at $1.3650) and Quasimodo resistance-turned support at $1.3498. Note that price recently faded the aforesaid resistance zone. Also of particular importance is H4 prime support located at $1.3428-1.3444. This is a fresh zone that’s in good shape, placed to take advantage of ‘sell-stop momentum’ beneath $1.3498.
Based on the H1 timeframe, following a failed attempt to find grip above $1.36 during London on Wednesday, the currency pair is fast approaching prime support at $1.3477-1.3514 (surrounds H4 Quasimodo support-turned resistance at $1.3498). However, as this prime zone has been tested, it could be brittle. Consequently, this throws the H1 decision point at $1.3441-1.3459 in the mix (sharing space with the H4 prime support at $1.3428-1.3444).
Daily resistance remaining active at $1.3602 indicates a bearish setting.
Chart studies imply the move under $1.36 could ensue until reaching H4 prime support at $1.3428-1.3444 and the H1 decision point at $1.3441-1.3459. This is due to daily resistance maintaining position at $1.3602 and H4 Quasimodo resistance-turned support at $1.3498 (and H1 prime support at $1.3477-1.3514) already being tested.
With the above in mind, traders might attempt to locate intraday bearish setups, targeting $1.3444.
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