Charts: Trading View
(Italics: Previous Analysis)
It was a mixed day for equities, echoing a cautious vibe ahead of Wednesday’s interest rate decision out of the US Federal Reserve. It was also a subdued session for EUR/USD, finishing by way of a daily doji indecision candle.
Technically, the currency pair continues to test the spirit of support on the daily timeframe from $1.0182, though faces rigid headwinds in weekly resistance at $1.0298, closely followed by daily resistance at $1.0377. Also weighing on buyers, of course, is trend. Visible from the weekly timeframe, EUR/USD has been lower since the beginning of 2021. Establishing a series of lower lows and lower highs, the general direction in this market reflects a primary bear trend, with prolonged pullbacks (or sometimes referred to as ‘secondary trends’) in short supply.
Across the page on the H4 and H1 timeframes, the H4 decision point at $1.0276-1.0235—albeit standing its ground—remains vulnerable. It’s essentially open to a whipsaw to weekly resistance mentioned above at $1.0298 and (with some oomph) H4 Quasimodo support-turned resistance from $1.0354. The H1 timeframe has been somewhat monotonous since 19th July, rangebound between $1.0270-1.0155. Outside of the consolidation throws light on $1.03 and $1.01.
Daily support from $1.0182 is unlikely to maintain its presence. In light of weekly, daily and H4 resistance seen between $1.0377 and $1.0298, as well as a decisive downtrend, I feel this will be too much opposition for bulls. As a result, a whipsaw above the upper edge of the H1 range ($1.0270) to test $1.03 could be action that draws bearish attention, having seen this psychological level merge closely with weekly resistance from $1.0298.
The Australian dollar outperformed against the US dollar on Monday, adding 0.5 per cent after a near-to-the-pip retest of support on the daily timeframe at $0.6901. Daily resistance coming in at $0.7039 is seen overhead as an obvious upside objective, complemented by a 38.2% Fibonacci retracement ratio at $0.7051. Buyers are reinforced by the weekly timeframe’s support area between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement). In addition to this, I also see scope to push higher from the H4 timeframe’s supply-turned demand from $0.6901-0.6862 to H4 prime resistance at $0.7062-0.7031, together with the H1 timeframe targeting the $0.70 psychological figure.
In terms of trend studies, direction continues to favour sellers and therefore we may observe a bearish scenario unfold from the daily resistance around $0.7050, which happens to share space with the H4 prime resistance at $0.7062-0.7031.
Given the above technical studies, a whipsaw above $0.70 on the H1 to H4 prime resistance at $0.7062-0.7031 could be a setup the charts see play out to attract bearish players into the market, in line with the overall downtrend.
USD/JPY bulls made a comeback on Monday, advancing by 0.5 per cent on the session. Broadening policy divergence continues to underpin this currency pair in the long term. However, in recent days resistance on the weekly timeframe coming in at ¥137.23 made a show and delivered a healthy bearish rotation that snapped a seven-week bullish phase. Whether this will be enough to wave in additional selling to as far south as weekly support from ¥125.54 is unlikely.
Out of the daily timeframe, nonetheless, supply-turned demand at ¥131.93-131.10 is likely to call for attention should sellers change gears and explore deeper waters. Daily resistance is seen at ¥139.55: a Quasimodo support-turned resistance level. According to the daily timeframe’s relative strength index (RSI), the popular momentum gauge has touched gloves with indicator support between 40.00 and 50.00, an area serving as a ‘temporary’ oversold zone since May 2021 (common in strongly trending environments).
The H4 timeframe reveals price rebounded from what’s often referred to as a Fibonacci cluster between ¥135.40 and ¥135.64. Within this area, technicians will note that we have a 1.618% Fibonacci projection (or an ‘alternate’ AB=CD bullish pattern). Many traders following the AB=CD formation will, therefore, likely pencil in the 38.2% and 61.8% Fibonacci retracement ratios at ¥137.03 and ¥137.92, respectively. Meanwhile on the H1 timeframe, Quasimodo support-turned resistance at ¥136.72 is being tested, with a break unmasking ¥137 and a 100% Fibonacci projection at ¥136.93 (an equivalent AB=CD bearish pattern). Also of technical relevance is supply at ¥137.57-137.30.
The combination of ¥137 and the 100% Fibonacci projection at ¥136.93 on the H1 timeframe, coupled with the H4 timeframe’s 38.2% Fibonacci retracement at ¥137.03 (first upside objective based on the H4 alternate AB=CD bullish pattern), could motivate sellers if tested. Nevertheless, knowing that we have H1 supply prowling above the said resistances at ¥137.57-137.30, a whipsaw above ¥137 resistance to test this supply should not surprise before sellers attempt to make an entrance.
Sterling kicked off the week in the green against its US counterpart on Monday, notching up a third consecutive positive close. Through the lens of a technical trader, price crossed swords with weekly support at $1.1958 in recent weeks and, despite a dip to a low of $1.1760, the base has survived for now. Yet, additional GBP buying is questionable in view of the current downtrend.
Here’s where I left the previous research in terms of trend direction (italics):
Trend direction has been unmistakably bearish since February/May’s double-top formation on the weekly timeframe at around $1.4241 (2021). Furthermore, seen through the monthly timeframe, the long-term downtrend has been soft since late 2007 tops at $2.1161.
From the daily timeframe, here’s where I currently stand:
Reduced support is evident until the 100% Fibonacci projection ratio at $1.1683. Overhead directs focus to trendline resistance, taken from the high $1.3639, and therefore could be a technical point we see sellers surface from in the event of a push higher. In conjunction with the weekly chart’s bearish vibe, the daily timeframe’s relative strength index (RSI) is seen testing resistance around its 50.00 centreline.
Addressing the H4 timeframe, chart pattern enthusiasts will recognise the inverted head and shoulders pattern ($1.1876; $1.1760; $1.1890), joined by a neckline taken from the high $1.2056. As you can see from the H4 chart, buyers and sellers are squaring off around the aforementioned neckline and appear prepared to nudge higher. While today’s H4 close above the neckline has likely drawn pattern traders in long, the H4 decision point at $1.2126-1.2098 must be taken into account. Should we overrun this area, then the pattern’s take-profit objective is seen at $1.2335.
Finally, from the H1 timeframe, the unit is on the verge of approaching the lower side of $1.21, set within the H4 timeframe’s prime resistance area. Below $1.21 casts light on the widely watched $1.20 figure, a psychological level closely sharing chart space with a trendline support, extended from the low $1.1760.
Longer-term technical studies show the rebound from weekly support at $1.1958 may encounter conflict at the daily timeframe’s trendline resistance. This may also hinder H4 head and shoulders traders long on the basis of the recent neckline breach as the daily trendline resistance is fixed beneath the pattern’s profit objective at $1.2335.
Overall, then, my attention remains on the daily trendline resistance around $1.2182, suggesting a bullish breakout north of $1.21 could be in the offing before sellers attempt to make a show from the daily descending line.
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