Charts: Trading View
(Italics: Previous Analysis Due to Limited Price Change)
US Dollar Index (Daily Timeframe):
According to the US dollar index—a geometric weighted average of the buck’s value against six international currencies—the US dollar flexed its financial muscle last week and climbed 1.7 percent.
Clocking a high of 97.44, its highest peak since July 2020, the index came within a whisker of shaking hands with Quasimodo resistance from 97.45 on Friday before withdrawing into the close.
Support falls in close by at 96.89 this week (‘double-top peaks’ from 24th November and 15th December ), and Quasimodo resistance-turned support from 96.40 calls for attention below. North of 97.45, however, throws channel resistance on the hit list, extended from the high 93.19, an ascending line dovetailing with a weekly trendline support-turned resistance, taken from the low 78.91.
Trend studies on the weekly timeframe shows an indecisive market since 2015, fluctuating between 103.82 and 88.25. The daily timeframe, though, has displayed an upside bias since price made contact with support from 89.69 in May (2021), shaped within the walls of an ascending channel, etched from 90.17 and 93.19.
From the relative strength index (RSI), the indicator wrapped up the week on the doorstep of overbought levels and threatens the possibility of bearish divergence. Support between 40.00 and 50.00 has been centre stage since August 2021, a common view within upward trending markets. Therefore, this is an area traders will likely continue to monitor going forward.
- Support at 96.89 and Quasimodo resistance-turned support from 96.40 are perhaps watched levels this week. A dip-buying theme could develop from the aforesaid levels as technical studies suggest the greenback has more fuel in the tank to explore higher levels until daily channel resistance (high 93.19) and weekly trendline support-turned resistance, pencilled in from the low 78.91.
Europe’s single currency was hammered last week, dropping 1.7 percent on the back of a broadly stronger buck and a hawkish Fed.
Long-standing resistance at $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing early January; EUR/USD subsequently tumbled 3.0 percent, or 340 pips into the recent close. Territory below exhibits scope to fall as far south as Quasimodo support coming in at $1.0778.
Strengthening the bearish wind is the currency pair taking out 2nd November low (2020) at $1.1603 in late September (2021), indicating a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s long-term (some would say ‘primary’) downtrend since mid-2008.
In agreement with the weekly chart, Quasimodo support at $1.1213 relinquished position at the tail end of the week. Prime support serves as a downside objective at $1.0941-1.1000, price levels not seen since June 2020.
Momentum studies on this timeframe show the relative strength index (RSI) bound for oversold waters. Indicator support, therefore, could step into the fray at 21.87 sometime this week, a level in play since late 2016.
The decision point at $1.1114-1.1139 elbowed its way into the spotlight on Thursday, and preserved its position on Friday as the currency pair nursed the week’s losses on the back of moderate USD selling (DXY fading session highs of 97.44). Deserving attention are resistance at $1.1193 (stretched from June 2020) and a resistance zone plotted at $1.1205-1.1230.
South of $1.1114-1.1139 shines light on neighbouring Quasimodo resistance-turned support at $1.1088.
A closer reading of price action on the H1 scale recognises $1.12 as possible resistance, arranged within the walls of a decision point from $1.1207-1.1194. It’s also worth noting that $1.11 remains a potential support to be mindful of this week.
Should we hold lows at $1.1138, a 100% Fibonacci projection at $1.1190 is on the radar, a ratio many will identify as an AB=CD bearish pattern. Additional Fibonacci confluence is offered by way of a 38.2% Fibonacci retracement at $1.1194. Both Fibonacci levels share space with the decision point.
Joining a $1.1207-1.1194 test may be the relative strength index (RSI) connecting with overbought levels; the indicator’s value finished the week around the lower side of the 50.00 centreline.
Observed Technical Levels:
Higher timeframe flow demonstrates a soft market, favouring follow-through downside over the coming weeks. Prime support at $1.0941-1.1000 (daily), according to technical studies, stands in as a reasonable downside target on the bigger picture.
Lower on the curve, in keeping with the bearish vibe out of higher timeframes, the H1 decision point at $1.1207-1.1194 represents a key base this week. Joined by a number of H1 technical levels, the area is also glued to the lower side of H4 resistance at $1.1205-1.1230 and shares a connection with H4 resistance at $1.1193.
As a result, a pullback into the H1 area (or H4 resistance zone) could be seen and may draw a bearish scene early week.
Prime support at $0.6968-0.7242 is hanging by a thread. AUD/USD erased 2.5 percent on the week and is consequently nibbling the lower boundary of the aforementioned area. Manoeuvring beneath $0.6968-0.7242 this week reveals support at $0.6673 and a 50.0% retracement at $0.6764.
Since mid-Feb tops at $0.8007 (2021), sellers have taken the wheel. This followed a bullish period since pandemic lows of $0.5506 (March 2020). It is important to note that the monthly timeframe has been entrenched within a large-scale downtrend from mid-2011.
Burrowing through support at $0.7021 Friday invites moves to Quasimodo support at $0.6896 this week, and provides market participants an early cue of a $0.6968-0.7242 (weekly timeframe) breach.
Meanwhile, RSI studies (relative strength index) show the indicator approached oversold space after failing to command attention north of the 50.00 centreline between late December through mid-January.
Adding to the above, the trend on this scale, much like the weekly timeframe, is firmly to the downside right now.
Quasimodo support at $0.6971 (taken from mid-July 2020) entered chart space on Friday after price whacked through the $0.6993 3rd December low (2021). Upstream, a decision point awaits at $0.7046-0.7023—this is an area where a ‘decision’ was made to break the noted low—while under $0.6971 resides a 1.272% Fibonacci projection at $0.6948.
The US Federal Reserve’s hawkish stance, alongside elevated US Treasury yields (particularly shorter-term maturities), a healthy USD and the key psychological figure $0.70 serving as resistance, weighed on upside attempts Friday.
$0.70 printing resistance shines the technical spotlight on support from $0.6965, with additional selling setting the stage to bring in Quasimodo support from $0.6926.
The view out of the relative strength index (RSI) presents a consolidation between 40.00 and 23.00, set around oversold levels. Downward markets often positions the RSI at oversold space, and forms a range between 50.00 and 30.00ish levels. Consequently, traders entering long positions based on the RSI oversold area have likely ended the week in bad shape.
Observed Technical Levels:
Daily support at $0.7021 stepping aside (marked resistance), together with weekly prime support at $0.6968-0.7242 on the brink of relinquishing position, echoes a bearish vibe this week until reaching daily Quasimodo support at $0.6896.
A pullback to the H4 timeframe’s decision point at $0.7046-0.7023, joined by H1 resistance at $0.7042 and neighbouring daily resistance at $0.7021, may be enough structure to prompt a bearish scenario this week.
Alternatively, cracking through H1 support at $0.6965 opens the door for a short-term push towards the H4 timeframe’s 1.272% Fibonacci projection at $0.6948, closely followed by Quasimodo support priced in at $0.6926.
Despite a solid showing from sellers off the 1.272% Fibonacci projection from ¥116.09 at the beginning of the year, USD/JPY bulls reassumed control last week and added 1.4 percent.
Recent bidding is in keeping with the underlying trend on this timeframe: advancing since the beginning of 2021. Further buying on this scale, movement overtaking ¥116.09, may eventually underpin a move to channel resistance, extended from the high ¥110.97.
Against this backdrop, of course, channel support, taken from the low ¥102.59, might re-enter the frame should selling materialise.
Leaving demand at ¥112.66-112.07 unchallenged last week, a base sharing space with a 78.6% Fibonacci retracement at ¥112.00 and a 50.0% retracement from ¥112.55, USD/JPY upside has thrown Quasimodo resistance at ¥116.33 in the firing range. Also of technical note is the double-bottom formation at ¥113.48; price busted through the neckline in recent trading at ¥115.06, perhaps adding fuel to reach ¥116.33.
The trend on this timeframe, like the weekly timeframe, faces northbound. This is reinforced by the relative strength index (RSI) recoiling from support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May—common view in trending markets).
Friday observed mild profit taking into the close, easing from session tops at ¥115.69. Support from ¥115.01 is in the neighbourhood, shadowed by a ¥114.48-114.78 decision point (an area established prior to the upside break of ¥115.01). Technicians will note the aforesaid support dovetails closely with the daily timeframe’s double-top pattern’s neckline at ¥115.06.
Overpowering Friday’s high, nevertheless, paves the way to daily Quasimodo resistance noted above at ¥116.33, given potentially ‘consumed supply’ between ¥115.68 and the daily level (blue arc).
Moderate resistance between ¥115.36 and ¥115.25 made an entrance amid US hours on Friday. ¥115 merits attention, with a break of the psychological figure shifting focus to prime support arranged just north of a 50.0% retracement (¥114.58) at ¥114.61-114.69.
Another technical observation worth noting is if price does indeed level off from current resistance, this could be interpreted as a right shoulder to a head and shoulder’s top pattern. Time will tell.
Emphasising ¥115.36-115.25 resistance is the relative strength index (RSI) cruising below the 50.00 centreline on Friday. Indicating average losses exceed average gains (negative momentum), increased selling is a reasonable assumption early week.
Observed Technical Levels:
Scope to advance further on weekly (to the 1.272% Fibonacci projection from ¥116.09) and daily (to Quasimodo resistance at ¥116.33) timeframes, alongside the daily (double-bottom pattern) neckline breach at ¥115.06, portends a bullish situation this week.
In line with higher timeframes, a dip-buying theme could emerge from either ¥115 (H1)—which has the ‘support’ of H4 support at ¥115.01 and the daily timeframe’s pattern neckline at ¥115.06—or the H4 decision point from ¥114.48-114.78, which houses H1 prime support at ¥114.61-114.69 and the H1 50.0% retracement from ¥114.58.
Since reaching a top at $1.3749 in early January, GBP/USD bears assumed control. This re-opens the door to the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes).
Against this background, of course, is the possibility of upside. ‘Consumed supply’ (blue area) remains nearby between $1.4001 and $1.3830. Considering this, candle action might still be guided as far north as resistance from $1.4371-1.4156 in the event price climbs above $1.3830.
Trend studies, despite the 7.5 percent dip from ‘double-top’ peaks at 1.4250ish, show the weekly timeframe has been higher since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates a moderate upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.
Since shaking hands with the lower side of the 200-day simple moving average (currently circling $1.3717), GBP/USD shed nearly 2.8 percent (or 400 pips). Support remains nearby at $1.3355; a break exposes Quasimodo support at $1.3119.
Trend on this timeframe remains biased to the downside; the relative strength index (RSI) also nudging beneath the 50.00 centreline places a question mark on price support at $1.3355.
The second half of the week, as you can see, addressed a decision point at $1.3340-1.3364 (joining hands closely with a 1.618% Fibonacci projection at $1.3376 and a 61.8% Fibonacci retracement at $1.3385 [green line], as well as the daily support mentioned above at 1.3355) and a resistance zone from $1.3428-1.3444.
An additional decision point is seen at $1.3241-1.3276 in the event sellers resume command.
For those who read Friday’s technical briefing you will likely recall the following (italics):
Daily support seen at $1.3355, coupled with a H4 decision point at $1.3340-1.3364, could lift short-term action back above $1.34 and H1 resistance at $1.3410 (since removed) to potentially take aim at H4 resistance from $1.3428-1.3444.
As evident from the H1 chart, short-term action whipsawed above $1.34 and connected with the H4 resistance zone from $1.3428-1.3444. Not only this, Friday’s run established a D-leg to a harmonic AB=CD configuration, shown through the 100% Fibonacci projection at $1.3423 (connected with a 38.2% Fibonacci retracement at $1.3423).
With the above in mind, and price subsequently settling sub- $1.34 into the close and the relative strength index (RSI) failing to find acceptance above the 50.00 centreline (echoing resistance and negative momentum), the Quasimodo resistance-turned support may be targeted at $1.3333.
Observed Technical Levels:
Daily support at $1.3355 is a key watch this week. While a floor may shape from here, traders are urged to pencil in the possibility of a breach, having noted January’s decisive sell-off.
Although bearish forces ended last week in command, chart studies reveal daily support at $1.3355, the H4 decision point at $1.3340-1.3364 and the H1 timeframe’s Quasimodo resistance-turned support at $1.3333.
Thus between $1.3333 (H1 level) and $1.3364 (upper edge of the H4 decision point), buyers have support to work with early week.
If the H4 decision point is taken this week, a bearish scene could unfold, targeting $1.33 (H1) and the H4 decision point at $1.3241-1.3276.
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