Charts: Trading View
(Italics: Previous Analysis)
Amidst broad dollar enthusiasm, Thursday watched EUR/USD extend lower and erase 1.4 per cent into the European close. Technicians adopting a multi-timeframe view are unlikely surprised by recent events. Weekly Quasimodo supports at $1.0467 and $1.0517 failed to spark bullish interest and subsequently gave way yesterday. Territory beneath the aforesaid barriers shine light on 2nd January low at $1.0340 (2017), pinned a touch under the daily timeframe’s Quasimodo support at $1.0377 which is currently active.
Of technical relevance on the daily chart is the bearish flag pattern, made up between $1.0471 and $1.0593. Thursday’s down move welcomed a breakout of the noted pattern, which led the currency pair to daily Quasimodo support (see above), a base closely shadowed by a 1.272% Fibonacci projection at $1.0305. Interestingly, pattern traders have likely pencilled in the bearish flag’s profit objective within striking distance of parity ($1.0000). Readings out of the daily timeframe’s relative strength index (RSI) reveals the value stepped back into oversold territory after failing to find acceptance north of 38.70. Do remain aware that this indicator can remain oversold for prolonged periods in downtrends.
Quasimodo support on the H4 timeframe at $1.0351 is within reach of welcoming price action, following a decisive one-sided decline through H4 support from $1.0483 (now a marked resistance). Heading into US hours on the H1 timeframe, we can see the currency rebounded from $1.04 and tagged the lower side of a decision point at $1.0444-1.0426, consequently weighing on efforts to hold $1.04. With the aforementioned level ultimately giving way, $1.03 is an obvious support target on the H1 scale.
Despite considerable losses in this market, notable support is on the radar between 2nd January low at $1.0340 (2017) on the weekly timeframe, the H4 Quasimodo support from $1.0351, and daily Quasimodo support at $1.0377. With this in mind, a TEMPORARY recovery effort could be seen in the coming days.
The Australian dollar continued its slump against the US dollar on Thursday, firmly cementing position beneath weekly prime support at $0.6948-0.7242. This unearths weekly support at $0.6673 and a neighbouring 50.0% retracement at $0.6764.
In a market demonstrating a downside bias, with price action also trading south of its 200-day simple moving average at $0.7271, daily flow engulfed Quasimodo support at $0.6901 on Thursday and potentially set the technical stage for an approach towards daily support at $0.6678 (plotted nearby weekly support mentioned above at $0.6673). According to the relative strength index (RSI) on the daily scale, the indicator is shaking hands with oversold levels after failing to shake hands with the underside of the 50.00 centreline. Indicator support also remains sketched in at 21.38.
Against the backdrop of higher timeframe action, H4 Quasimodo support is seen nearby at $0.6801 after price retested the lower side of H4 resistance at $0.6891. Joining the H4 Quasimodo support is the $0.68 figure on the H1 timeframe, clearly seen following a retest of the recently breached daily Quasimodo support.
Following on from yesterday’s bearish episode, additional losses are potentially in the offing as all four timeframes analysed demonstrate scope to navigate lower levels until at least $0.68.
The clear risk-off environment triggered demand for the safe-haven Japanese yen on Thursday and witnessed a sharp decline in USD/JPY. On track to snap a nine-week bullish phase, weekly price is poised to establish a bearish outside reversal on the weekly timeframe which could draw the unit to weekly support at ¥125.54. To the upside on the weekly scale, 28th January high (2002) is evident at ¥135.16.
Supply on the daily timeframe from ¥131.93-131.10 has served well as a technical ceiling, following Monday’s shooting star candlestick formation. Continuation selling remains on the table according to the daily chart, targeting weekly support underlined above at ¥125.54. Also of interest, the daily timeframe reveals price action ruptured the upper boundary of a flag pattern on 28th April, drawn from a high of ¥129.41 and a low of ¥127.80. Assuming buyers regain consciousness and overcome neighbouring supply, traders will be looking to a take-profit objective circa ¥136.63 (drawn by extending the pole’s distance and adding this to the breakout point). Note that this profit objective sits above the weekly timeframe’s ¥135.16 high. Another key note on the daily scale is the relative strength index (RSI) departed from overbought territory. It’s important to recognise that the decisive exit from the overbought area triggered a double-top pattern (neckline stationed around the 66.93 31st March low and peaks were established from indicator resistance at 87.52) and could lead the RSI to familiar support at 40.00-50.00 (a temporary oversold zone since May 2021) which holds the double-top profit objective within at 45.93.
Supporting the recent bearish drive is the H4 timeframe dipping beneath support at ¥128.72 which is now a resistance level. H4 Quasimodo support is seen at ¥127.44, with a break possibly unleashing movement towards current weekly support at ¥125.54. From the H1 timeframe, a clear-cut decision point is present at ¥128.74-128.44 (fixed to the underside of H4 resistance at ¥128.72). Also noteworthy is space beneath ¥128 appears free of support until around the ¥127 neighbourhood.
For now, chart studies indicate a short-term bearish vibe. Should the H1 decision point at ¥128.74-128.44 hold, there’s little in the way of a drop towards ¥127.
Latest developments out of the weekly timeframe on GBP/USD shows the currency pair finally made contact with Quasimodo support coming in at $1.2164, following four back-to-back weekly bearish candles. This is a major technical level so a rebound—if only temporary—is likely anticipated by many traders. However, it’s still important to remember that this market remains entrenched within a strong downtrend since early 2021.
Meanwhile on the daily timeframe, scope for further bearish activity is visible until support coming in from $1.2018, following the retest of Quasimodo support-turned resistance at $1.2334. For those who follow our analysis on a regular basis you may also recall that continued downside followed the formation of a daily bearish flag pattern formed in early May, made up between $1.2411 and $1.2614 (the profit objective can be plotted as far south as $1.18). In terms of the daily timeframe’s relative strength index (RSI) bullish divergence appears unlikely within oversold territory at the moment. Bear in mind that the RSI can register oversold signals for extended periods in a downward facing market.
Quasimodo support is active on the H4 scale from $1.2186, with any break exposing 17th May 2020 low at $1.2075. Upstream, supply awaits at $1.2381-1.2320. A closer examination of price action on the H1 scale shows the pair retested Quasimodo support-turned resistance at $1.2248 and is currently exploring territory under $1.2200. H1 Quasimodo support is seen at $1.2114, followed by the $1.21 region.
The weekly timeframe’s Quasimodo support at $1.2164 along with the H4 timeframe’s Quasimodo support at $1.2186 offers a floor in this market at the moment. On the other side of the field, nonetheless, the daily timeframe indicates a lack of support until $1.2018, together with the H1 timeframe circling below $1.22 with room to approach H1 Quasimodo support at $1.2114.
The above, coupled with the market’s downtrend, signals sellers could remain in the driving seat, despite the possibility of a brief recovery attempt. Downside targets rest around the $1.21 region.
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