February 25th 2022: Forex Technical Outlook

February 25th 2022: Forex Technical Outlook, FP Markets

Charts: Trading View

(Italics: Previous Analysis)


Risk sentiment took a clobbering on Thursday in direct response to a ‘full-scale’ Russian invasion of Ukraine. Investors flocked to safer assets, such as the US dollar. The US dollar index (USD) refreshed YTD pinnacles at 97.74 and lent on EUR/USD demand, down more than 1 percent on the session.

Recent weakness is in line with the weekly timeframe’s technical position. For those who read recent technical writing you may recall the following:

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 [RECENTLY TESTED] and bring attention to as far south as Quasimodo support at $1.0778—area not seen since pandemic lows of March 2020.

From the daily timeframe, the $1.1483 14th January peak (marked Key WATCH) echoed muscular resistance between 4th and 10th February and was clearly a ‘ceiling’ of note. Remaining south of the 200-day simple moving average (circling 1.1623), Thursday acknowledged fresh YTD troughs for EUR/USD and unearthed a probable dip to prime support from $1.0941-1.1000. Also of note is the relative strength index (RSI) cementing position under 50.00 (average losses exceeding average gains: negative momentum).

Prime resistance is seen at $1.1322-1.1276 on the H4 scale, while a H4 1.272% Fibonacci projection at $1.1125 entered the fight and delivered support in recent hours. H4 Quasimodo resistance-turned support also resides to the downside at $1.1089.

Out of the H1 timeframe, price is currently engaging the lower side of $1.12 and a neighbouring 38.2% Fibonacci retracement ratio at $1.1206 (another 38.2% Fibonacci retracement ratio seen at $1.1216). Climbing the said structure opens the door to a decision point tucked under $1.13 at $1.1295-1.1275, whereas a $1.12 rejection potentially sets the stage for bringing in $1.11.

Technical Outlook:

Although the current geopolitical situation will remain the main driver of price action, technical studies suggest H1 resistance between $1.1216 and $1.1200 could welcome a bearish scene. This is strengthened by higher timeframe direction pointing to the possibility of deeper levels in coming weeks (possibly days).

 February 25th 2022: Forex Technical Outlook, FP Markets


Against a broadly stronger US dollar, the Australian dollar shook hands with the prior weekly low ($0.7086) on Thursday, weighed by geopolitical headlines.

Technical developments show subdued demand coming out of the weekly timeframe’s prime support at $0.6968-0.7242. In terms of trend, you may recall the following from previous writing:

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.

Technical observations from the daily timeframe reveals resistance between $0.7336 and $0.7278 (made up of a 200-day simple moving average, trendline resistance [taken from the high $0.7891], and Quasimodo resistance) served well, following Wednesday’s shooting star (bearish) candlestick. The daily decision point calls for attention at $0.6964-0.7040, with the relative strength index (RSI) on the verge of dipping a toe in waters south of the 50.00 centreline (negative momentum), following a clear rejection from indicator resistance at 58.43.

A closer reading of price movement on the H4 and H1 timeframes show a recovery phase emerged from $0.71 on the H1, heading into US trading on Thursday, joined by the H4 timeframe’s Quasimodo support from $0.7109. Upside objectives are seen around trendline support-turned resistance, taken from the low $0.6968, on the H4 scale, closely linked with $0.72 on the H1.

Technical Outlook:

Medium term, further weakness is possible. According to the daily scale, scope to test $0.6964-0.7040 is visible. With this being the case, the area between $0.72 on the H1 and the H4 timeframe’s trendline support-turned resistance could deliver a ‘ceiling’ to work with.

 February 25th 2022: Forex Technical Outlook, FP Markets


Despite early hours unleashing intense selling on the back of a safe-haven bid, USD/JPY finished Thursday on the front foot in the shape of a daily bullish outside reversal. This places daily Quasimodo resistance back in the mix at ¥116.33. Note the daily relative strength index (RSI) is also showing signs of respecting support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May—common view in trending markets).

The recent bid also throws light firmly on the weekly timeframe’s 1.272% Fibonacci projection at ¥116.09. We recently detailed the higher timeframe’s picture here:

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.

In terms of the H4 timeframe, it is quite a (technical) sight. Recent flow ‘completed’ a H4 AB=CD bullish formation (black arrows to the downside) at the 61.8% Fibonacci ratio from ¥115.64 (derived from legs A-D of the bullish pattern). Note that above ¥115.64, a trendline support-turned resistance is seen, extended from the low ¥113.47, with subsequent upside interest casting light on the daily Quasimodo resistance mentioned above at ¥116.33. As for the H1 timeframe, Quasimodo resistance is overhead at ¥115.75, followed closely by ¥116. This follows an earlier retest of resistance-turned support from ¥115.31.

Technical Outlook:

While the trend in this market clearly faces northbound, resistance should not be overlooked (¥116.33-115.75): between the daily timeframe’s Quasimodo resistance at ¥116.33, the weekly timeframe’s 1.272% Fibonacci projection at ¥116.09, and (nearer term) the H1 Quasimodo resistance at ¥115.75 as well as H4 trendline resistance.

 February 25th 2022: Forex Technical Outlook, FP Markets


With risk sentiment clearly underpinning the buck on Thursday, sterling voyaged to lows not seen since late December 2021. Recording its largest one-day loss since November 2021, the technical picture reveals daily price welcomed support at $1.3355. Under this level, Quasimodo support is seen at $1.3119. This followed nearly a month of hesitation around daily resistance at $1.3602—stationed under the 200-day simple moving average at $1.3673.

While daily support has certainly made a show, technicians will note the daily relative strength index (RSI) recently submerged under 50.00, informing market participants average losses outweigh average gains: negative momentum.

Regarding trend and weekly structure, recent reports highlighted the following:

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).

Meanwhile on the H4 timeframe, the unit pencilled in a bottom a handful of pips ahead of an AB=CD bullish formation at $1.3263. A potential headwind for the currency pair now is Quasimodo support-turned resistance at $1.3436, joined closely by a 50.00% retracement and a 38.2% Fibonacci retracement around $1.3455. Upstream, we also have resistance plotted at $1.3498.

Lower on the curve, H1 action settled around $1.34 following a healthy bid from $1.33. The test of $1.33 did some ‘serious’ damage, stabbing to a low of $1.3273 and forming a clear ‘bear trap’. Overthrowing $1.34 elbows two resistance areas into view at $1.3441-1.3459 and $1.3477-1.3514 (houses $1.35).

Technical Outlook:

Having seen H1 resistance at $1.3441-1.3459 join forces with H4 resistance between $1.3455 and $1.3436, this might be a location sellers make an entrance from. However, while H1 and H4 resistance deliver technical confluence, sellers pursuing additional confluence before pulling the trigger is not out of the question. This is due to the daily timeframe rebounding from support at $1.3355.

 February 25th 2022: Forex Technical Outlook, FP Markets


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.

Start Trading
in Minutes

bullet Access 10,000+ financial instruments
bullet Auto open & close positions
bullet News & economic calendar
bullet Technical indicators & charts
bullet Many more tools included

By supplying your email you agree to FP Markets privacy policy and receive future marketing materials from FP Markets. You can unsubscribe at any time.

Source - cache | Page ID - 22412

Get instant Updates in Telegram