Weekly Technical Market Insight: 11th – 15th May 2020

Weekly Technical Market Insight: 11th – 15th May 2020, FP Markets

US Dollar Index:

The US dollar index, measured by factoring in the exchange rates of six major world economies, staged a vigorous recovery in the early stages of the week. Things turned sour mid-session, however, encountering strong headwinds off 100.40, with Friday’s candle reclaiming much of the earlier growth and closing at its lows.

Technicians favouring chart patterns will note the recent confirmation of a daily double-top pattern from peaks at 100.88 (violating the neckline at 98.82). This will have tempted USD shorts into the market last week, with protective stop-loss orders likely located above the pattern’s peaks.

The take-profit target (purple rectangles) forms by taking the distance between the highest peak in the configuration to the trough and adding the value to the breakout point (the neckline). As evident from the chart, this falls in at demand from 96.88/96.60. Yet, in order to complete the said pattern, demand at 98.18/98.65 and the 200-day simple moving average (SMA), currently circulating around 98.37, will need to be overturned.

Weekly Technical Market Insight: 11th – 15th May 2020, FP Markets

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

March, evident from the monthly chart, left behind a long-legged doji indecision candle, with its extremes crossing paths with heavyweight demand-turned supply at 1.1857/1.1352 (intersects with a long-term trendline resistance [0.6038]) and demand at 1.0488/1.0912.

April, as you can see, spent the best part of the month feasting on the top edge of 1.0488/1.0912, squeezing out a Japanese hammer candlestick pattern, typically viewed as a bullish reversal signal.

May, on the other hand, is tunnelling back into the said demand, so far disregarding April’s candlestick pattern.

With reference to the primary trend, price has exhibited clear lower peaks and troughs since 2008.

Daily timeframe:

Partially altered from previous analysis –

Thursday bottomed a few pips ahead of the 78.6% Fib level at 1.0745, and clawed back a large portion of Wednesday’s slide. Friday, abruptly off best levels, finished the session unmoved, producing a candle wick.

Another constructive development is, albeit on a large scale for this timeframe, the formation of a bearish pennant pattern between 1.1147/1.0635. It is also worth pointing out the 200-day simple moving average (SMA) circles the upper portion of our pennant configuration.

A decisive daily close beneath pattern structure might give rise to a fresh wave of selling this week. Breaking lower would entail tipping 1.0745 and eventually competing with demand at 1.0526/1.0638, an area extended from March 2017.

H4 timeframe:

Trendline resistance-turned support (1.1147) upheld its position Thursday, despite price dipping a toe in waters beneath 1.0770. Upside gained speed shortly after, toppling resistance at 1.0821. Friday offered a somewhat non-committal tone off 1.0821, clouded by neighbouring supply at 1.0906/1.0878.

Beyond the aforementioned supply, another area of supply around 1.0908 (red arrow) has been noted, though this could simply have been a reaction to the base above it at 1.0937 (blue arrow). Directly above these structures, traders will be looking at supply drawn from 1.1057/1.1013 to provide resistance.

H1 timeframe:

US employment for April shattered record books as COVID-19 causes widespread job loss. Non-farm employment fell by 20.5mln, with unemployment rising to a whopping 14.7%, according to the Bureau of Labour Statistics on Friday.

Liquidity in the form of buy-stops above 1.0850 was tripped heading into US trade, causing price to decline from highs at 1.0875. EUR/USD reclaimed 1.0850 and settled the week around the 100-period simple moving average (SMA) at 1.0836, a few pips ahead of trendline support (1.0766). Demand at 1.0803/1.0814 is also on the radar, which also brings light to the 1.08 handle.

Indicator-based traders may want to note the RSI momentum indicator is seen fast approaching clear support from 46.50.

Structures of Interest:

Long term:

The lack of buying interest seen from monthly demand at 1.0488/1.0912, and Friday failing to generate any follow-through movement, reveals we may see the daily bearish pennant pattern breached to the downside this week.

Short term:

H4 support at 1.0821 is of note owing to its history – buyers will not want to let go without a fight. On this basis, a whipsaw through local H1 trendline support (1.0766) to H1 demand at 1.0803/1.0814 could materialise before buyers step in. This may see H4 supply at 1.0906/1.0878 enter play.

Weekly Technical Market Insight: 11th – 15th May 2020, FP Markets

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Overwhelmed by the effects of the coronavirus pandemic, the month of March scored seventeen-year lows at 0.5506 ahead of demand pencilled in from 0.5219/0.5426, before staging an impressive recovery.

April’s 370-pip advance has, as you can see, landed May within striking distance of supply fixed at 0.7029/0.6664, an area intersecting with a long-term trendline resistance (1.0582).

Regarding the market’s primary trend, a downtrend has been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

Thanks to a modest end-of-week advance, daily price faces supply from 0.6618/0.6544. It should also be emphasised this area comes with a 127.2% Fib ext. level at 0.6578 and a nearby 161.8% Fib ext. level at 0.6642. Traders will also likely include the 200-day simple moving average (SMA) at 0.6672.

The fact we failed to print fresh lows from the recent test of the current supply, as well as the series of higher highs/lows formed since testing 0.5506, may fuel buyers.

H4 timeframe:

Thursday witnessed the final leg of a double-bottom scenario form out of demand at 0.6356/0.6384, with action confirming the pattern by breaking through Tuesday’s high at 0.6476 (red arrow). Traders long the breakout will be looking for price to reach 0.6578. Traditionally, take-profit targets for double-bottom patterns are established by measuring the lowest trough within the formation to the peak and adding the value to the breakout point (green).

Buyers likely moved protective stop-loss orders to breakeven ahead of the close Friday. Most, nevertheless, will have held on to their positions over the weekend on the basis we’re also forming what appears to be a bullish flag (0.6547/0.6507). This is generally viewed as a continuation pattern.

H1 timeframe:

Demand at 0.6494/0.6511 made its debut Friday, an area holding the 0.65 handle within. To the upside, 0.6550 may prove troublesome for buyers. However, a break likely seals a H4 close above the H4 bullish flag pattern, potentially triggering a run to H1 supply priced in at 0.6613/0.6578.

Structures of Interest:

Long term:

Monthly price shows room to approach supply at 0.7029/0.6664. In order to reach this far north, daily price must engulf its current supply from 0.6618/0.6544.

Short term:

Intraday traders likely have eyes on moves above 0.6550 today. This will be particularly interesting to breakout buyers, given the H4 bullish flag in motion.

Weekly Technical Market Insight: 11th – 15th May 2020, 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 between 118.66/104.62. The month of March concluded by way of a long-legged doji candlestick pattern, ranging between 111.71/101.18, with extremes piercing the outer limits of the aforementioned descending triangle formation.

April was pretty uneventful, ranging between 109.38/106.35. May, on the other hand, trades marginally lower by 0.50%.

Areas outside of the noted pattern can be seen at supply from 126.10/122.66 and demand coming in at 96.41/100.81.

Daily timeframe:

Buyers appear to be regaining consciousness within the parapets of demand from 105.70/106.66, with Friday extending recovery gains to highs at 106.74. Further buying could refocus attention on the 200-day simple moving average (SMA) at 108.21.

Should the current demand abandon its position this week, nonetheless, we may eventually see demand at 100.68/101.85 make a show.

H4 timeframe:

Partially altered from previous analysis –

A bearish pennant pattern between 106.92/108.07 remains in play on this timeframe. Traditionally, take-profit targets out of bearish pennant patterns are formed by measuring the preceding move (109.38-106.92) and adding the value to the breakout point (black arrows – 104.89).

A local trendline support-turned resistance (106.35) elbowed its way back into the limelight Friday, a level that capped upside on Thursday. This shifts focus towards demand at 105.75/105.17, an area sited just above the bearish pennant’s take-profit target.

H1 timeframe:

The US dollar surged higher against the Japanese yen mid-way into London Friday, though recoiled to 106.38 following US non-farm payrolls.

The 100-period simple moving average (SMA) at 106.42 established a support, allowing buyers to regain a footing back above 106.50 by the close. Trendline resistance (108.04) is seen nearby, joined closely with a channel resistance (106.65), a 127.2% Fib ext. level at 106.84 and a 61.8% Fib level at 106.92. Note this area is positioned just ahead of supply at 106.99/107.16/round number 107.

It may also be worth noting the RSI indicator produced mild bearish divergence ahead of overbought territory.

Structures of Interest:

Long term:

The response out of daily demand at 105.70/106.66 is interesting, though unlikely sufficient to attract buyers at this point, particularly as monthly price shows space to tunnel lower.

Short term:

While the local trendline support-turned resistance (106.35) holds price on the H4 timeframe, H1 action exhibits scope to bring in Fib resistance between 106.92/106.84 and H1 trendline combination, before sellers step in.

Traders will also note the possibility of 107 making an appearance this week, given it’s encapsulated within H1 supply at 106.99/107.16.

Weekly Technical Market Insight: 11th – 15th May 2020, FP Markets

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Although March clocked levels not seen since the 1980s, ahead of a 127.2% Fib ext. level at 1.1297, price staged an impressive recovery and regained approximately 80% of the month’s losses.

Support at 1.1904/1.2235 remains in motion in May. Neighbouring resistance can be seen in the form of a trendline (1.7191).

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008.

Daily timeframe:

Partially altered from previous analysis –

Upside momentum recently diminished as the pair crossed paths with the 200-day simple moving average (SMA) at 1.2647, a value that boasts a close connection to a demand-turned supply at 1.2649/1.2799.

Thursday attempted to make a comeback, though faltered at highs of 1.2418 and wrapped up the session in the form of an indecision candle. Friday put in a mildly better performance but still finished off best levels.

Demand at 1.2212/1.2075 remains in sight as the next point of interest to the downside.

H4 timeframe:

Supply at 1.2477/1.2438 welcomed price action on Friday, after the unit left Thursday rebounding from trendline support (1.2163) by means of a hammer candlestick pattern, generally viewed as a bullish signal.

Technicians will also note a large demand is present between 1.2147/1.2257.

Beyond current supply, resistance is seen nearby at 1.2520 and at 1.2624.

H1 timeframe:

Friday saw limited impetus derived from dismal US non-farm payrolls data; it wasn’t until the early hours of US trade did we see noteworthy movement. In one fell swoop, H1 price unseated 1.24 and rushed buy-stops above 1.2450. Despite this, price failed to preserve its bullish bias and grinded lower into the close, settling at 1.24, a psychological level that joins closely with a local trendline resistance-turned support (1.2418), another trendline support (1.2266), the 100-period simple moving average (SMA) and a 38.2% Fib level at 1.2391.

Structures of Interest:

Long term:

Monthly price exhibits scope to approach 1.2235 (the top edge of support), while daily price also suggests the possibility of a move to 1.2212 (the upper edge of demand).

Short term:

H4 supply at 1.2477/1.2438 is an area worth watching. A move from here to H4 trendline support (1.2163) is possible. However, traders must also take into account that a fakeout through the current supply could take shape, testing H4 resistance at 1.2520. To a degree, the latter is the more likely route, having seen H1 price testing an area of confluence around 1.24.

As a result of the above, buyers could potentially defend 1.24 today and move higher, with 1.2450 on the hit list as an initial target.

Weekly Technical Market Insight: 11th – 15th May 2020, 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.




Start Trading
in Minutes

bullet Access 10,000+ financial instruments
bullet Auto open & close positions
bullet News & economic calendar
bullet Technical indicators & charts
bullet Many more tools included

By supplying your email you agree to FP Markets privacy policy and receive future marketing materials from FP Markets. You can unsubscribe at any time.




Source - cache | Page ID - 22169

Get instant Updates in Telegram