February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks

February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks, FP Markets

Note—Charts provided by Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Following the break of long-term trendline resistance (1.6038) in July, and subsequent break of supply at 1.1857/1.1352 in August, EUR/USD, by way of two back-to-back bullish candles, welcomed 2021 in good health.

While this reasons additional upside towards ascending resistance (prior support – 1.1641) may eventually be on the horizon, before we press higher, an 1.1857/1.1352 retest is also on the cards in view of February’s correction.

The primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Sellers spent Tuesday extending the recent retracement slide, movement that welcomed trendline support (1.0774)—an area complemented by neighbouring demand at 1.1923/1.2001.

After failing to find acceptance north of the 50.00 centreline, RSI movement, deprived of support, made its way sub 40.00 yesterday.

H4 timeframe:

After withstanding three downside attempts, demand at 1.2040/1.2065 caved under the pressure of selling Tuesday, fuelled by the US dollar index (DXY) upholding a bullish tone above 91.00.

Should sellers manage to remain at the wheel, demand at 1.1962/1.1976 could make its way into the spotlight today. Interestingly, as highlighted in Tuesday’s technical writing, 1.1962/1.1976 is also housed within the daily demand zone mentioned above at 1.1923/1.2001.

H1 timeframe:

Those short the textbook three-drive bearish pattern at 1.2156 (the 127.2% Fib projection) have had a good start to the week, with a near 150-pip decline.

Mid-way through London on Tuesday, sellers stormed 1.2050 support. After a swift 1.2050 retest, further weakness threw light on the 1.20 level—a key base just about every market technician will be watching today.

Based on the RSI indicator, we are seeing minor bullish divergence after failing to find grip above the 50.00 centreline.

Observed levels:

A dip into 1.20 bids is on the table, according to chart structure.

What’s interesting from a technical perspective is while this entails whipsawing through trendline support on the daily timeframe, the 1.20 level shares space with the upper edge of daily demand at 1.1923/1.2001.

As a result, 1.20 has some reasonably strong backing and could put up a fight if tested.

February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks, FP Markets

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Following two spirited months of gains off demand at 0.7029/0.6664 (prior supply), early 2021 pencilled in a half-hearted shooting star candle formation (a bearish signal at peaks).

This, together with February’s 0.5 percent depreciation, shines light on a possible correction in the first quarter of 2021. Though should buyers regain consciousness, a continuation higher to 0.8303/0.8082—a supply zone aligning closely with trendline resistance (prior support – 0.4776)—could play out.

In terms of trend, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Latest developments nudged trendline support (0.5506) in the fight. Buyers, as you can see, have shown some life, though traders are still urged to pencil in demand at 0.7453/0.7384 (prior supply) should sellers make a show.

In the event buyers take over off trendline support, refreshing 2021 tops could be on the cards as well as a test of supply at 0.7937/0.7890.

As evidenced from the RSI indicator, the value is seen dipping a toe in waters beneath the 50.00 centreline, following a trendline support breach last week.

H4 timeframe:

For those who read Tuesday’s technical writing you may recall the following (italics):

The break of demand at 0.7600/0.7625 last Thursday likely cornered many buyers in this region. This, alongside the Fib cluster at 0.7696 serving up resistance, suggests price is perhaps bound for territory south of demand. Interestingly, below demand we have the daily trendline support close by around the 0.7583 neighbourhood.

As you can see from the chart, price has snapped through demand at 0.7600/0.7625, with daily price reacting from trendline support—a fakeout play here?

H1 timeframe:

Similar to the H4 chart, H1 whipsawed through 0.76 bids—likely causing pain on both sides of the market—and tested daily trendline support. Focus is now on price reclaiming 0.76+ status, a move which could provide upside impetus today.

In terms of the RSI indicator, we are seeing the value head for the underside of the 50.00 centreline, with resistance targeted at 60.18.

Observed levels:

Buyers holding the daily trendline support, along with H4 tripping stops south of demand at 0.7600/0.7625 as well as H1 also tripping stops below 0.76, could spark a bullish scenario above 0.76 today, assuming a H1 close above the level.

February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks, FP Markets

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Over the span of four years, USD/JPY carved out a descending triangle pattern between 118.66/104.62.

Although December pursued terrain south of 104.62, January chalked up a comeback and retested the level.

104.62 ceding ground throws light on support from 101.70, with a break here uncovering trendline support (76.15) and the descending triangle’s take-profit objective at 91.04 (red).

Daily timeframe:

Partly modified from previous analysis –

Against the backdrop of the monthly chart demonstrating a 104.62 retest (a potential bearish signal), the pair recently chalked up a fifth successive bullish close on the daily chart, albeit with yesterday wrapping up considerably off best levels.

In addition, RSI resistance at 57.00—a level hindering upside since July 2020—also gave in last week, with the value now on the doorstep of overbought space.

H4 timeframe:

In recent writing, the research team shined the spotlight on a harmonic Gartley pattern’s potential reversal zone (PRZ) between 105.17 and 105.00. Support is found at 104.16, with interest also likely directed at trendline support (102.59).

Price recently tested the range of the PRZ and sellers appear to be holding lower, for now.

H1 timeframe:

105.14 resistance made a show on Tuesday—a double-top pattern formed mid-November (2020)—with enough force to position H1 back under 105.

To the downside, south of 105, bearish eyes may draw towards demand at 104.43/104.57, which happens to hold a 104.50 support.

RSI followers also explored terrain south of the 50.00 centreline.

Observed levels:

Partly modified from previous analysis –

As noted in Monday’s report, monthly price circling the lower side of the descending triangle at 104.62 may pressure daily breakout buyers above trendline resistance.

H1 marginally reclaiming 105 to the downside, in addition to the H4 timeframe’s Gartley pattern’s PRZ between 105.17 and 105.00 and the monthly chart’s position, echoes a bearish theme today, with H1 demand at 104.43/104.57 perhaps targeted.

February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks, FP Markets

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

December’s 2.5 percent extension elevated GBP/USD and stirred trendline resistance (2.1161), with January recording fresh multi-month highs and logging a 0.2 percent gain.

In terms of trend, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way – April high, 2018. In effect, the aforesaid high represents the next upside objective on the monthly chart.

Daily timeframe:

Similar outlook from previous analysis –

Aside from Tuesday churning out an indecision doji candle (given previous price action this is unlikely to be interpreted as a reversal signal), the technical framework has remained unchanged since January 21.

Buyers and sellers continue to square off around the lower side of resistance at 1.3755. Breaching the latter brings light to supply at 1.3996/1.3918.

The RSI indicator has revealed a rangebound environment since November, limited by support around 47.00 and resistance at the 66.00 region (the value stands at 54.20). It is common to see higher oversold support areas form in an uptrend.

H4 timeframe:

Unchanged from previous analysis due to lacklustre movement –

Demand at 1.3618/1.3637 has proven an effective base in the latter part of January, withstanding numerous downside attempts.

Overhead, resistance is seen at 1.3763, with a break unveiling supply at 1.3837/1.3800.

H1 timeframe:

Extended from the 1.3611 low and the high 1.3758, Tuesday’s technical research underscored a possible ascending triangle, which tends to serve (though not always) as a continuation signal. As the lower side of the ascending line caved in yesterday, this negates its use as a continuation signal.

Rebounding from 1.3611, accompanied by an RSI oversold signal yesterday, the underside of the breached ascending line (not a traditional trendline) is being retested, with sellers displaying interest.

Observed levels:

The monthly timeframe, as noted in previous writing, carries a bullish atmosphere and places a question mark on daily resistance at 1.3755. This helps explain the indecision around the resistance since mid-January.

Technically speaking, the monthly timeframe’s presence also helps justify the strength behind H4 demand at 1.3618/1.3637.

With the above taken on board, sellers may not find much grip from the underside of the H1 ascending line and instead look to 1.37 confluence (61.8% Fib resistance and nearby 100-period simple moving average). Though in light of the higher timeframes showing room to pursue higher territory, a H1 close north of 1.37 may form and could be interpreted as a bullish cue to reach tops around 1.3758 (the upper edge of the previous H1 ascending triangle).

February 3rd 2021: US Dollar Index Extends Upside Despite Gains in Stocks, 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.




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 - 22420

Get instant Updates in Telegram