June 2nd 2021: Dollar off Worst Levels; DXY Eyes 90.00

June 2nd 2021: Dollar off Worst Levels; DXY Eyes 90.00, FP Markets

Charts: Trading View


Monthly timeframe:

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

Following a three-month retracement, support at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close. May traded higher by 1.7 percent.

April upside—alongside May’s gains—throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

The US dollar remained mostly on the backfoot on Tuesday, despite the May ISM manufacturing index registering 61.2 from 60.7 (estimate: 60.8). However, according to the report, shortages of raw materials weighed on production.

Technically, last week established a floor off a Quasimodo resistance-turned support at 1.2169, in the shape of a dragonfly doji candlestick pattern (bullish signal) and encouraged a bullish showing on Monday. EUR/USD, as you can see, finished Tuesday considerably off session tops around 1.2254.

The RSI continues to echo bearish divergence, despite trend studies suggesting further upside is favourable (trending higher since March 2020) which reinforces the recent bullish narrative off 1.2169.

H4 timeframe:

Resistance parked at 1.2244 made an entrance yesterday (a handful of pips south of the daily Quasimodo resistance level underlined above at 1.2278), though has yet to deliver much in the way of bearish activity. In terms of downside, limited support is visible until reaching 61.8% Fib support at 1.2133 (arranged above another 61.8% Fib level at 1.2125).

H1 timeframe:

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

Short term shows H4 price closing in on resistance at 1.2244, implying H1 could run through supply at 1.2240-1.2228 and perhaps cross swords with H1 Quasimodo resistance at 1.2257 (reinforced by Fibonacci studies). Therefore, technical expectations show a possible (short-term) bearish attempt forming around 1.2250ish.

As evident from the chart, we can see H1 did indeed run through supply at 1.2240-1.2228 on Tuesday and—albeit leaving Quasimodo resistance at 1.2257 unchallenged—shook hands with the H1 1.618% Fib expansion at 1.2249 which sparked a bearish response, with 1.22 calling for attention along with the 100-period simple moving average at 1.2202.

From the RSI, we have seen mild bearish divergence emerge this week, in addition to the value elbowing below the 50.00 centreline yesterday (a centreline cross signals trend weakness).

Observed levels:

From a technical perspective, H1 and H4 show little stopping the currency pair from continuing to explore deeper water today until bumping heads with the 1.22 figure on the H1, joined with a 100-period simple moving average at 1.2202.

What’s also interesting from a technical standpoint is it is from 1.22 chart studies show buyers may attempt to make an entrance knowing that both the daily and monthly timeframe have space to run higher (at least until daily Quasimodo resistance from 1.2278).

June 2nd 2021: Dollar off Worst Levels; DXY Eyes 90.00, FP Markets


Monthly timeframe:

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

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 low) and supply from 0.8303-0.8082. Should a bearish scenario unfold, support at 0.7394 is featured to the downside, with additional downside pressure targeting demand at 0.7029-0.6664 (prior supply).

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Unchanged technical view from previous analysis.

Despite rupturing resistance at 0.7816 early May, the level maintains its position on the daily chart. Interestingly, since April 20th, AUD/USD has offered a non-committal tone, consolidating between the aforementioned resistance and support from 0.7699 (yellow). Of late, however, the currency pair shook hands with the lower wall of the aforementioned range and has taken on a bullish vibe.

Below the consolidation, technicians have support at 0.7563 in sight.

With respect to trend, though, we have been higher since the early months of 2020.

Out of the RSI, the indicator remains flirting with the 50.00 centreline, following a dip from 60.30 peaks in May.

H4 timeframe:

From the H4 scale, price action remains circling space between 0.7696-0.7715 support (served as support and resistance since the end of January) and Quasimodo resistance from 0.7782.

Outside of these areas, we have the daily resistance at 0.7816, while lower on the curve, H4 demand is featured at 0.7632-0.7653.

H1 timeframe:

A closer reading of price action on the H1 scale reveals price derived a floor of support off the 100-period simple moving average around 0.7737 on Tuesday.

Overhead, supply is found at 0.7783-0.7771, with subsequent buying shining the technical spotlight on 0.78. South of the SMA, technical space appears free until support at 0.7714, followed by 0.77 and then demand plotted at 0.7671-0.7687.

The RSI value crossed swords with overbought resistance at 70.61 (stationed just south of another resistance at 80.85) and is bound for the 50.00 centreline.

Observed levels:

Should H1 buyers continue to govern control north of the 100-period simple moving average at 0.7737, confronting H1 supply at 0.7783-0.7771 is likely on the cards. However, knowing H4 Quasimodo resistance resides at 0.7782 (essentially the upper edge of the noted H1 supply), this could draw a move through the supply to form a bull trap, movement which larger traders may look to fade (sell into) to take aim at the 100-period SMA.

An alternative scenario, of course, is H1 price tests 0.78. Having seen this level dovetail closely with daily resistance at 0.7816, between the latter and 0.78 may stir a bearish theme.

June 2nd 2021: Dollar off Worst Levels; DXY Eyes 90.00, 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.

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