Charts: Trading View
(Italics: Previous Analysis)
Equities were bid on Tuesday, with major benchmark indexes closing higher across the board. Optimism stemmed from positive talks between the Ukraine and Russia, which also led the US dollar southbound (USDX) as well as oil markets exploring lower levels. In terms of currencies, Europe’s shared currency outperformed against its US counterpart, touching a high of $1.1137 on the session.
Technically, the weekly space appears poised to touch gloves with resistance at $1.1174. It was noted in previous analysis that this level is of particular importance due to the current trend. For those who missed the weekly technical briefing, here’s a reminder:
Longer-term, the trend remains averse to upside movement, reflecting bearish status since topping at $1.2350 at the beginning of January (2021). 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 pair refreshing year-to-date lows at $1.0806 in early March. Weekly resistance continues to call for attention at $1.1174, strategically positioned within the current downtrend. Weekly channel support, extended from the low $1.1186 (arranged north of weekly Quasimodo support at $1.0778), remains a technical ‘floor’ for the time being.
Meanwhile on the daily timeframe, resistance at $1.1224 warrants attention north of the $1.1138 17th March top. Technical eyes will note the level closely shares chart space with weekly resistance underlined above at $1.1174. Territory north of the level unearths area to daily resistance at $1.1483 (located nearby the 200-day simple moving average at $1.1497—price has traded south of here since mid-June). An additional study on the daily scale reveals the relative strength index (RSI) bumping heads with the lower side of the 50.00 centreline. Venturing above here informs market participants that average gains exceed average losses on THIS timeframe: positive momentum. To the downside, the $1.0788-1.0854 decision point (as well as an intersecting ascending support, drawn from the $1.0340 3rd January low 2017) is visible, which connects with weekly channel support.
Shorter term, H4 manoeuvred north of trendline resistance (drawn from the high $1.1495) in dominant fashion and crossed swords with supply coming in from $1.1139-1.1090. This likely interested traders as lower on the curve, H1 price movement whipsawed above $1.11 and came within a whisker of connecting with Quasimodo resistance at $1.1138 before spinning back under $1.11. The move had ‘stop-run’ written all over it. Going forward, nevertheless, H1 Quasimodo resistance-turned support is nearby at $1.1063 (working closely with a 38.2% Fibonacci retracement at $1.1064), with a break exposing $1.10.
Long term, technical studies shine light on weekly and daily resistances between $1.1174-1.1224, an area complemented by the current downside bias.
In light of the possibility of additional upside on the higher timeframes (until connecting with resistances), H1 Quasimodo resistance-turned support from $1.1063 may be an area buyers move in from. Should sellers remain in the driving seat, however, elbowing sub $1.1063 unlocks a possible short-term bearish phase to $1.10ish.
European trading observed AUD/USD action close largely unchanged on Tuesday.
Higher timeframe technical movement, therefore, echoes a similar picture to this week’s technical weekly briefing:
Extending recovery gains last week, AUD/USD occupied weekly resistance coming in from $0.7501. This followed the prior week’s decisive bid from weekly prime support at $0.6948-0.7242. As a result, weekly prime resistance at $0.7849-0.7599 also warrants focus. While the surge higher may excite traders and investors, the trend, according to overall chart studies, suggests that surpassing the noted resistance levels on the weekly scale may be problematic. Longer term, the monthly timeframe has portrayed a downtrend since August 2011, signifying the 12.9 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 opportunity within the 2021 advance from pandemic lows of $0.5506. A bearish scene from $0.7051 resistance or prime resistance at $0.7849-0.7599, therefore, could develop. If a $0.6948-0.7242 break lower should come to pass, weekly support at $0.6673 and a 50% retracement at $0.6764 are observable.
Meanwhile on the daily timeframe, early trading last week pencilled in a trendline resistance breach (drawn from the high $0.8007). Communicating a bullish signal, the possibility of a continuation run towards $0.7660 is in the offing. As you can see, the double-bottom pattern ($0.6991) had its neckline taken ($0.7314) in early March and drew attention to its profit objective at $0.7660 (connects closely with Fibonacci resistance between $0.7641 and $0.7609). However, recognising the weekly space connecting with resistance (see above), upside momentum lacks energy, consequently establishing upper shadows. According to the relative strength index (RSI), despite a rebound from the 50.00 centreline, the indicator has yet to engulf the 68.24 high formed on 4th March. So, bearish divergence might eventually emerge. Should we invade overbought territory, nevertheless, indicator resistance from 74.80 is of particular importance.
According to H4 space, the currency pair continues to respect the underside of resistance between $0.7547 and $0.7527 (composed of two Quasimodo resistances and a 1.272% Fibonacci expansion and dovetails closely with weekly resistance mentioned above at $0.7501). Sellers, at the time of writing, appear unwilling to commit, hovering above Quasimodo resistance-turned support coming in at $0.7451.
A closer reading of price action on the H1 chart shows the unit struggling to find grip above $0.75. Of technical note, H1 Quasimodo resistance-turned support stepped into the frame during early US trading at $0.7459. Moving forward, prime resistance is seen at $0.7561-0.7540; below $0.7459, another Quasimodo resistance-turned support falls in at $0.7424.
The area between the lower limit of weekly prime resistance at $0.7849-0.7599 and weekly resistance at $0.7501 is a space likely to be watched closely, as the trend places this zone in favourable light for sellers. Daily flow exhibits scope to approach Fibonacci resistance between $0.7641 and $0.7609 (as well as the double-top profit objective at $0.7660) which informs technicians that the lower area of weekly prime resistance at $0.7849-0.7599 is a more realistic resistance for sellers.
From a short-term perspective, $0.75 is likely to be a watched base early hours. Given the daily timeframe indicating scope to press higher, $0.75 could give way and deliver support, targeting a break of $0.7561-0.7540 to reach $0.76ish.
Tuesday watched USD/JPY withdraw further from Monday’s multi-year ¥125.11 pinnacle, technically aided by the weekly timeframe’s Quasimodo resistance at ¥124.42. Closing at current prices would have candlestick enthusiasts label recent movement as a possible bearish signal: Japanese shooting star pattern. Seeking lower ground from current prices shines light on weekly support from ¥118.66. Although we’re retreating from resistance, trend studies communicate a bullish vibe. The overall longer-term trend has been higher 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. Adding to this, we also broke the ¥118.66 December 2016 high in mid-March.
In line with the weekly timeframe, daily price defended resistance coming in at ¥123.72. Demand is seen at ¥118.25-119.16 should sellers make a show. An additional technical note is the relative strength index (RSI) peaking around 87.00, a level not seen since 2014. Although a considerably high RSI value, traders are urged to exercise caution as amidst trending environments the RSI can remain within overbought space for prolonged periods and initiate a number of false bearish signals.
After touching weekly Quasimodo resistance (¥124.42), H4 dropped in on support from ¥122.27 (positioned above support at ¥121.44-120.89). As of writing, the currency pair has modestly recoiled from ¥122.27. As for the H1 scale, ¥122 served well as support amidst US hours on Tuesday with subsequent action pulling towards ¥123. Interestingly, residing north of this region we have a decision point at ¥123.76-123.43, opening up the possibility of a whipsaw above ¥123 into the noted decision point.
Based on weekly and daily charts, weekly Quasimodo resistance at ¥124.42 and daily resistance from ¥123.72 remain potential headwinds, in spite of the clear uptrend in play. From a short-term view, the rebound from ¥122 on the H1 scale supports the current upside bias on the bigger picture. Should upside momentum clear ¥123 and cement position north of the figure, this indicates additional strength could be on the cards. However, defending ¥123 suggests underperformance, targeting ¥122 and perhaps lower.
From a technical perspective, this week’s downside picture should not surprise. Here’s where we left our week-ahead technical briefing on the weekly timeframe:
Not only is the trend to likely weigh on upside efforts, prime resistance is a focal point on the weekly timeframe at $1.3473-1.3203 with the chart demonstrating scope to drop as far south as weekly support from $1.2719. Trend direction has been southbound since late 2007 tops at $2.1161. As a result, the 25 percent move from pandemic lows in March 2020 to February 2021 might be viewed as a pullback within the larger downtrend. This, of course, places a question mark on the 8.5 percent ‘correction’ from February 2021 to March 2022, suggesting the possibility of continuation selling.
In view of selling, the daily timeframe’s support put in an appearance from $1,3082. Unsupportive of buying from here is Tuesday’s response (or lack of it), the relative strength index (RSI) pulling lower from the 50.00 centreline and, of course, the overall trend. For any longer-term trend followers watching the longer-dated moving averages, you will also note the currency pair continues to operate south of the 200-day simple moving average at $1.3568—a (technical) bearish view.
$1.3120 has served as a resistance in recent trading, following an earlier break to the downside this week. Should sellers remain in the driving seat, support from $1.2965 represents a potential target. From the H1 timeframe, the pair has been working with a descending channel (drawn from $1.3298 and $1.3175). Further to this, Quasimodo support from $1.3075 has proven a tough nut to crack, offering a floor each time $1.31 was whipsawed. Continuation moves lower could have the unit take aim at the widely watched $1.30 psychological figure.
Given weekly prime resistance at $1.3473-1.3203 receiving price action, in addition to trend direction facing southbound, upside efforts from daily support at $1.3082 are likely to be fragile. Therefore, chart studies indicate possible clearance of the level.
H4 resistance in play around $1.3120 suggests the H1 will eventually muster enough strength to overthrow $1.3075 and unlock the door for a run towards $1.30.
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