March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00

March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00, 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 and chalk up a reasonably appealing (bullish) hammer candlestick pattern – a noteworthy area of demand given the momentum derived from its base. Additional upside is, therefore, achievable, with demand-turned supply at 1.1857/1.1352 and long-term trendline resistance (1.6038) established as upside targets.

To the downside, however, traders looking beyond the current demand zone likely have crosshairs fixed on a reasonably ‘fresh’ demand at 0.9581/1.0221 (boasts history dating back as far as 2003).

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

Daily timeframe:

Partially altered outlook from previous analysis –

Demand at 1.0680/1.0781, an area formed April 2017, elbowed its way into the spotlight in recent trade and, for the time being, remains a dominant fixture on this timeframe.

Supply coming in at 1.1117/1.1078, which intersects with the 200-day SMA, put up little fight Monday, exposing a familiar supply coming in at 1.1281/1.1208, which entered view yesterday. What’s also notable from a technical perspective here is the RSI indicator touching overbought levels as well as an RSI trendline support-turned resistance.

H4 timeframe:

Supply at 1.1190/1.1172 held to lows of 1.1095, capped by supply-turned demand at 1.1109/1.1087. Price rallied strongly from this zone in early US yesterday, strengthened on the back of the US Federal Reserve shocking markets with a 0.5% emergency cut to interest rates to help counteract the economic impact of the coronavirus. This led to price revisiting the noted supply zone and whipsawing through its upper boundary, likely tripping the majority of sellers here and filling any breakout buy orders.

A H4 close above the current supply could tip EUR/USD for more outperformance this week, with some traders betting on an increase to 1.1239 December 31st high.

H1 timeframe:

Tuesday’s Fed-induced rally had price action surpass 1.12 and drive high into the confines of a supply zone at 1.1214/1.1204, formed early January this year. This area sits just north of the current H4 supply zone mentioned above at 1.1190/1.1172 and is glued to the underside of daily supply at 1.1281/1.1208.

Moves higher today could lead to the 1.1239 December 31st high making an appearance, while a rejection has the top edge of daily supply-turned demand at 1.1117, followed by the top edge of H4 supply-turned demand at 1.1109 and then the 1.11 handle on the H1 timeframe.

The RSI is seen producing bearish divergence, with the value recently dipping south of overbought terrain.

Structures of Interest:

Monthly price has eyes for higher prices, but in order to reach upside targets, daily price must overcome 1.1281/1.1208.

Lower on the curve, H4 supply at 1.1190/1.1172 is under threat, with eyes for a potential approach to 1.1239 forming. H1 is currently contained by supply at 1.1214/1.1204.

Despite H4 supply suffering a rather monstrous whipsaw yesterday, H1 supply survived and boasts additional support from daily supply. The top edge of daily supply-turned demand at 1.1117, followed by the top edge of H4 supply-turned demand at 1.1109 and then the 1.11 handle on the H1 timeframe, as highlighted above could enter the mix in the event of a downturn today.

A push through 1.12 will likely have traders attempting breakout scenarios; 1.1239, however, may cap upside.

March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00, 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 remains in the fight, yet price struggles to chalk up anything meaningful to the upside. An eventual break of the said demand zone has another layer of demand close by at 0.6094/0.5866, while a recovery could eventually lead to trendline support-turned resistance (0.4776) making an appearance, followed by supply at 0.8303/0.8082.

Daily timeframe:

Supply at 1.6585/1.6625 came under siege Tuesday, leading to highs of 0.6645. 0.6680ish offers resistance (red oval), while proven supply can be seen at 0.6778/0.6731, which aligns with trendline resistance (0.7393).

The RSI recently exited oversold territory, trading south of 40.00.

H4 timeframe:

Supply at 0.6655/0.6629 aided a reasonably spirited recovery in the later hours of trade Tuesday. Technical developments here reveal channel resistance (0.6567) and trendline resistance (0.7031) also merge with the said supply base.

Despite the recently formed bearish candle, closing a touch off lows at 0.6583, a break of channel support (0.6434) is potentially eyed in order to help confirm additional downside.

H1 timeframe:

Following Tuesday’s Fed-induced advance through 0.66 to highs just south of 0.6655 and a 161.8% Fibonacci ext. at 0.6648, the pair retreated and reclaimed 0.66 into the close. You will also note the H1 candles retested the underside of 0.66 before turning to lows of 0.6579.

Although minor support may emerge off 0.6567 (yellow oval) 0.6550 represents healthy support, having seen the 100-period SMA drifting a few points beneath the level.

The RSI recently dipped from peaks of 76.00, now poised to revisit 50.00.

Structures of Interest:

Monthly demand at 0.6358/0.6839 is rapidly deteriorating, despite recent recovery. Daily price blew through the top edge of supply at 1.6585/1.6625, potentially weakening its foundation and signalling higher prices could be on the horizon.

Despite conflicting signals on the higher timeframes, H4 price shows promise to the downside, more so if we’re able to penetrate the current channel support. The retest at 0.66 on H1 suggests intraday sellers still likely have the upper hand, with 0.6550 next on tap as support. To reach this level, though, entails a break of the said H4 channel support.

March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00, 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. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle to 112.22, and retreated lower, forming a shooting star pattern into February’s end.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.

Daily timeframe:

The 200-day SMA, currently circulating around 108.37, capped upside yesterday, leaving channel support-turned resistance (104.44) unchallenged. Tuesday’s 120-point downside move drew the candle into the jaws of demand coming in at 106.60/107.09, which witnessed a minor breach in October 2019.

Demand at 105.57/106.17, albeit not the prettiest of areas given the lack of momentum drawn from the base, is next in line should we push lower today.

The RSI indicator also recently voyaged through the 50.0 value into oversold levels.

H4 timeframe:

Demand at 108.41/108.70 continued to offer the market an area of supply yesterday, holding price lower on two occasions. This comes after the pair likely run stops south of the 107.65 January 7th low on Friday.

Demand at 106.94/107.30, in recent hours, came under pressure, having its lower boundary engulfed. This may trigger further downside today, with the next layer of demand not stepping into the fold until 105.64/105.89.

H1 timeframe:

The Federal Reserve, the Fed, lowered rates by half a percentage point Tuesday, in attempt to give the US economy a jolt in the face of concerns about the coronavirus outbreak.

Price action, however, trades beneath the 107.50 point, mingling with the 107 handle in the shape of a hammer candlestick signal (considered bullish), which happens to be reinforced by demand fixed from 106.77/106.94 and the RSI producing bullish divergence.

Structures of Interest:

Daily demand at 106.60/107.09 entered the mix yesterday, which could contain downside today. H4 demand at 106.94/107.30 suggests buyers are weak in this market, holding on by a thread. Therefore, daily demand at 105.57/106.17 may make an entry.

Intraday, we have H1 price fading 107, formed by way of a hammer candlestick bullish pattern, RSI confirmation and H1 demand at 106.77/106.94. As such, 107.50 could shift into focus today, with a break exposing 108. Note the 200-day SMA also resides around 108.37.

Price will likely struggle beyond 108, having noted monthly price recently forming a shooting star candlestick pattern off monthly structure.

March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00, 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% Fibonacci 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, however, declined nearly 3.00%.

Daily timeframe:

Partially altered outlook from previous analysis –

Demand formed at 1.2649/1.2799 entered view in recent movement, refreshing YTD lows at 1.2725. Traders will note this area held price higher on two occasions, once in October and again in November (2019), and is potentially confirmed by the RSI heading towards oversold levels.

The 200-day SMA also resides within the current demand zone, circulating around 1.2695.

North of price we have a local trendline resistance (1.3514), with supply seen at 1.3303/1.3184 in the event we travel further north this week.

H4 timeframe:

Partially altered outlook from previous analysis –

H4 demand-turned supply at 1.2806/1.2833 remains a reasonably dominant fixture on this timeframe, capping upside, while 1.2718/1.2751, an area comprised of 161.8% Fibonacci ext. studies, continues to cap downside. This area is also housed within current daily demand.

1.2806/1.2833 may continue to offer the market a platform of resistance this week, having seen its history as an area of support. In the absence of this, though, follow-through buying to relatively dominant supply at 1.2868/1.2894 is possible.

H1 timeframe:

Technically, we’re holding 1.28, though struggling to gain traction thanks to the 100-period SMA capping upside. Interestingly, as underscored in yesterday’s analysis, 1.2850 still offers a particularly attractive area of resistance, bolstered by a trendline support-turned resistance (1.2849), a 61.8% Fibonacci retracement at 1.2861 and a 50.0% retracement at 1.2870. Traders are, however, urged to pencil in the 127.2% Fibonacci ext. point at 1.2888 (brown line), and 1.29, in the event the zone fails.

Structures of Interest:

Daily demand at 1.2649/1.2799 could hold price higher this week, reinforced by the 200-day SMA.

While longer term we’re trading from demand, a successful retest at the underside of 1.2870/1.2850 on the H1 could occur. In light of its confluence, this could draw 1.28 back into view as an initial downside target, with a break possibly driving for 1.2750.

March 4th 2020: Fed Rate Cut Weighs on Dollar Index; Testing 97.00, 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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