March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets

March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets, FP Markets

EUR/USD:

Monthly timeframe:

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

The month of February witnessed EUR/USD revisit the upper limit of demand at 1.0488/1.0912 – a noteworthy area given the momentum derived from its base – and pencil in an appealing (bullish) hammer candlestick pattern.

March, as you can see, manoeuvred the pair into demand-turned supply at 1.1857/1.1352. Leaving long-term trendline resistance (1.6038) unchallenged, price reversed and is now on track to chalk up a shooting star bearish candlestick signal and potentially revisit demand mentioned above at 1.0488/1.0912.

The primary downtrend remains in motion and has remained lower since 2008, exhibiting clear lower peaks and troughs.

Daily timeframe:

Outlook brought forward from previous analysis –

Following a precipitous decline from supply at 1.1540/1.1486, an area located within the confines of the said monthly demand-turned supply at 1.1857/1.1352, the 200-day SMA made an appearance in the later stages of last week, set north of a 61.8% Fib retracement at 1.1051.

Monthly price suggesting lower levels could prompt daily demand at 1.0940/1.1002 to come forward, with a break exposing familiar demand at 1.0680/1.0781, located within the walls of monthly demand underlined above at 1.0488/1.0912.

What’s also notable from a technical perspective is the RSI indicator recently exiting overbought levels, fading peaks at 82.00 (values not seen since March 2008).

H4 timeframe:

Having shown resilience from demand at 1.1038/1.1072 late last week and again Monday (considered significant given it was likely the decision point to break the 1.1095 January 31st high), the candles revisited the underside of a demand-turned supply at 1.1218/1.1245 for a second time Monday and held ground. In light of this, a range between the two said structures is visibly forming.

Should we eventually form another leg down, traders’ crosshairs will likely be fixed on 1.1005/1.0979 as potential demand, whereas a move through the upper edge of the current range has supply at 1.1332/1.1298 to target.

H1 timeframe:

It was quite a day Monday.

In a surprise move Sunday night, the Federal Reserve cut short-term interest rates by 100bps to 0.00%-0.25% via a 9-1 vote, and the Fed launched a USD 700bln QE program. This, however, failed to impress markets as global equities plunged. On the data front, we also had a dreadful NY Empire State Manufacturing Index print. According to the Federal Reserve Bank of New York, business activity declined in New York State, according to firms responding to the March 2020 Empire State Manufacturing Survey. The headline general business conditions index fell thirty-four points to -21.5, its lowest level since 2009.

From a technical standpoint, price rushed through 1.12 in early London Monday, tripping buy-stop liquidity and testing channel resistance (1.1199) that merged beautifully with a trendline resistance (1.1366) and the 100-period SMA. The 1.11 handle also remained supportive yesterday, lifting the H1 candles to within striking distance of 1.12, ahead of the close. Note also the aforementioned trendline resistance (yellow) aligns closely with 1.12.

Structures of Interest:

Monthly price portends lower moves, placing a question mark on the 200-day SMA and 61.8% Fib retracement at 1.1051 on the daily timeframe as potential support, despite yesterday’s recovery. Daily demand at 1.0940/1.1002, therefore, may come forward sometime this week, though also faces opposition from the monthly timeframe.

With monthly technicals portending moves lower, and H4 action showing room to replenish its range to demand at 1.1038/1.1072, intraday sellers may find use in 1.12 today given its close relationship with trendline resistance.

March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets, FP Markets

AUD/USD:

Monthly timeframe:

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

Demand at 0.6358/0.6839 yielded last week, after capping downside since 2016. Overwhelmed by the effects of coronavirus, the pair recently refreshed multi-year lows, registering losses nearing 6.00% so far in March and testing demand at 0.6094/0.5866, an area formed in 2003 that held price higher in late 2008.

Since 2011, the primary trend in this market has faced a southerly bearing.

Daily timeframe:

Partially altered from previous analysis –

After AUD/USD powered through demand at 0.6330/0.6245 last week, the pair has since challenged lows at 0.6078 and retested 0.6330/0.6245 as supply.

This may have unshackled downside to another layer of demand coming in at 0.5926/0.6062 (located within monthly demand at 0.6094/0.5866), holding a 161.8% Fib ext. level around its upper edge.

In terms of the RSI indicator, given the predominant downtrend in this market, the value continues to run through oversold terrain, unable to breach 50.0 to the upside.

H4 timeframe:

Early hours Monday observed a healthy bid lift AUD/USD from the 127.2% Fib ext. at 0.6122, missing the 0.6314 resistance by a hair before pulling back to south of 0.62. As we head into Asia Pac hours, buyers appear nervous off 0.6122, potentially prepping the ground for moves to a 161.8% Fib ext. point at 0.6009.

H1 timeframe:

The 0.61 handle is proving a valuable support in this market, combined with a 161.8% Fib ext. level at 0.6099. In a bid to counter buying interest off 0.61 Monday, however, 0.6184 offered sellers a platform and, more recently, 0.6150. It might also interest some traders to note that the unit remains compressing within a descending channel formation (0.6384/0.6212).

Note also 0.6050 calls for attention beyond 0.61 and the 100-period SMA continues to drift south. Additionally, the RSI indicator forms modestly visible bullish divergence a few points north of the oversold level.

Structures of Interest:

Monthly demand at 0.6094/0.5866 may prompt a minor recovery in this market, with scope to revisit the underneath of 0.6358/0.6839. Before this occurs, though, daily price suggests a test of demand at 0.5926/0.6062, holding a 161.8% Fib ext. level around its upper edge. Consequently, intraday selling south of 0.61 is an idea, while 0.6050 (sited within the upper limit of daily demand at 0.5926/0.6062) may offer key support in this market for moves as far north as 0.6358 (monthly levels).

March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets, FP Markets

USD/JPY:

Monthly timeframe:

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

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern (118.66/104.62). February had price elbow a touch outside the upper boundary of the aforementioned descending triangle to 112.22, though retreated lower and produced a shooting star pattern into the month’s end.

March, so far, breached the lower edge of the descending triangle, yet has recovered in reasonably strong fashion, leaving nearby demand at 96.41/100.81 unchallenged. Note current action trades in the shape of a hammer candlestick signal.

Daily timeframe:

Recent upside saw action address a 61.8% Fib retracement at 108.02 and 200-day SMA, currently circulating around 108.25. While this combination capped upside Monday, a resurgence of bidding could eventually nudge towards demand-turned supply at 110.10/109.52. This is a significant area knowing it is the origin of the move to highs at 112.22 and the decision point to cross above the 110.29 January 17th high. Continued selling, on the other hand, display’s limited support until reaching demand coming in at 100.68/101.85, an area extended from September 2016 and glued to the top edge of the current monthly demand zone.

H4 timeframe:

Friday navigating higher ground produced the final D-leg to an AB=CD bearish pattern, terminating around 108.08. Traditional take-profit targets associated with AB=CD formations generally reside around the 38.2% and 61.8% Fib retracement levels of legs A-D – in this case, at 105.67 and 103.93. As you can see, 105.67 along with a supply-turned demand zone at 105.75/105.17 entered the fold Monday and, for now, offers support. The second take-profit target out of the AB=CD formation remains intact at 103.93.

H1 timeframe:

Even after the Federal Reserve embarked on huge monetary stimulus, global equities plummeted Monday, consequently increasing demand for the safe-haven Japanese yen. The week kicked off with a downward gap, south of supply at 108.89/108.50 and channel resistance (105.91), that prompted moves to lows just south of 106. 107 was later tested and held, which was followed by moves below 106 to the 100-period SMA, stationed a touch above 105 and a 127.2% Fib ext. level at 104.97.

The day ended marginally south of 105, though early Asia is seeing bulls attempt to clinch a foothold north of the figure. The RSI, for those who follow momentum-based indicators, recently crossed through 50.00, indicating a bullish bias on this intraday timeframe.

Structures of Interest:

Although H1 price is seen attempting to regain footing above 106, bolstered by H4 supply-turned demand at 105.75/105.17, monthly price exhibits space to explore lower ground, as does daily price to demand at 100.68/101.85.

Whether this will be enough to induce selling is difficult to judge since there’s an awful lot of support to overcome on the H1 timeframe, including a reasonably long-term channel support (101.18).

March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets, FP Markets

GBP/USD:

Monthly timeframe:

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

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fib retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on long term.

In recent months, a recovery formed off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high. The month of February declined nearly 3.00%, with March currently extending losses, consequently reconnecting with 1.1904/1.2235.

Daily timeframe:

As of current price on the daily timeframe, we are seeing buyers defend a 161.8% Fib ext. from 1.2231, shadowed by demand coming in at 1.2178/1.2061. Despite an earnest attempt to highs at 1.2423, demand-turned supply at 1.2404/1.2470 capped upside.

With respect to the RSI indicator, the unit remains within oversold waters, though appears to be flattening.

H4 timeframe:

After retesting the underside of a demand-turned supply at 1.2404/1.2470, demand at 1.2162/1.2220 was tested on Monday; this is the third time price action has revisited this zone. Although the area holds into Asia hours, pencilling in demand from 1.2101/1.2050 may be an idea in the event we travel lower today.

H1 timeframe:

Despite an optimistic start to the week, things quickly turned sour after price action prodded a demand-turned supply zone at 1.2405/1.2460. Price proceeded lower, formed within the limits of a descending channel formation (green – 1.2420/1.2284), tunnelling through 1.23 and bottoming north of 1.22 by a handful of points.

While technical structure remains compressing within the said descending channel pattern, traders are urged to consider the larger descending channel configuration in play (black 1.2964/1.2490). Another support point worthy of note is the 127.2% Fib ext. at 1.2163.

Structures of Interest:

While the market’s trend exhibits a strong bearish tone right now, monthly, daily and H4 timeframes show supportive structures in play. With this being the case, a stop run south of 1.22 could occur today, testing the 127.2% Fib ext. at 1.2163, for an advance back above 1.22, targeting the current H1 channel resistances and 1.23.

March 17th 2020: Fed Monetary Stimulus Fails to Impress Markets, 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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