Weekly Technical Market Insight: 16th – 20th March 2020

Weekly Technical Market Insight: 16th – 20th March 2020, FP Markets

US Dollar Index (DXY)

The US dollar index, calculated by factoring in the exchange rates of six major world currencies, is seen closing in on its 99.00 handle after toppling the 200-day SMA around 97.80. The breakdown in oil prices, down nearly 20%, coronavirus evolving into a global epidemic, according to the World Health Organisation (WHO), several central banks slashing interest rates and US treasuries staging an impressive rebound from all-time lows, helped the buck snap a two-week losing streak in recent trading. 

Up 2.7%, aside from 99.00, the DXY has eyes for daily supply at 100.03/99.37 drawn from April 2017, which holds within its upper boundary the widely watched 100.00 figure. Although ripe for further gains this week, technically speaking traders may want to pencil in the possibility of a retest at the 200-day SMA. It might also be worth noting the RSI recently crossed 50.00, currently trading at 57.00. 

Daily downside support beyond the 200-day SMA can be seen at 96.88/96.60, 96.00/95.63 and 95.00/94.56.

Weekly Technical Market Insight: 16th – 20th March 2020, 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 – a noteworthy area given the momentum derived from its base – and pencil in an appealing (bullish) hammer candlestick pattern. 

March, as you can see, manoeuvred the pair into demand-turned supply at 1.1857/1.1352. Leaving long-term trendline resistance (1.6038) unchallenged, price reversed and is now on track to chalk up a shooting star bearish candlestick signal and potentially revisit demand mentioned above at 1.0488/1.0912.

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

Daily timeframe:

Following a precipitous decline from supply at 1.1540/1.1486, an area located within the confines of the said monthly demand-turned supply at 1.1857/1.1352, the 200-day SMA made an appearance in the later stages of the week, set north of a 61.8% Fib retracement at 1.1051. 

Monthly price suggesting lower levels could prompt daily demand at 1.0940/1.1002 to come forward this week, with a break exposing familiar demand at 1.0680/1.0781, located within the walls of monthly demand underlined above at 1.0488/1.0912. 

What’s also notable from a technical perspective is the RSI indicator recently exiting overbought levels, fading peaks at 82.00 (values not seen since March 2008) and eventually breaching the 50.00 value.

H4 timeframe:

Having shown some resilience from demand at 1.1038/1.1072 Thursday (considered significant given it was likely the decision point to break the 1.1095 January 31st high), after elbowing through double-bottom support around 1.1094 (blue arrows), the candles revisited the underside of a demand-turned supply at 1.1218/1.1245. Withstanding a number of upside attempts at 1.1218/1.1245, buyers eventually stepped down with price action returning to the aforementioned demand base into the close.

Should we see another leg down this week, traders’ crosshairs will likely be fixed on 1.1005/1.0979 as potential demand.

H1 timeframe:

Europe’s shared currency failed to maintain an upside presence north of 1.12 vs. the US dollar Friday, weighed by robust USD bidding and a healthy recovery in US Treasury yields. H1 eventually softened beneath 1.11 in the later stages of the day, likely running sell-stop liquidity beneath the round number. 

Bottoming a touch above 1.1050, traders witnessed price marginally reclaim 1.11 into the week’s end. In addition, the RSI shows bullish divergence.

 

Structures of Interest:

Longer term:

Monthly price portends lower moves this week, placing a question mark on the 200-day SMA and 61.8% Fib retracement at 1.1051 on the daily timeframe as potential support. Daily demand at 1.0940/1.1002, therefore, may come forward, though also faces opposition from the monthly time frame.  

The top edge of monthly demand, the next downside target on that timeframe, is seen around 1.0912, 30 points beneath the said daily demand zone.

Shorter term:

Although monthly structure suggests further loss, the combination of H4 demand at 1.1038/1.1072, the 200-day SMA, along with H1 price recently reclaiming 1.11+ status after tripping sell-stops south of the level, could be enough to encourage an upside move in the early stages of the week. Upside targets fall in around 1.12, followed by H4 demand turned supply at 1.1218/1.1245.

Weekly Technical Market Insight: 16th – 20th March 2020, 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 yielded last week, after capping downside since 2016. Overwhelmed by the effects of coronavirus, the pair refreshed multi-year lows and registered losses nearing 5.00% so far in March. Demand at 0.6094/0.5866 is next in the firing line, an area formed back in 2003 that held price higher in late 2008.


Daily timeframe:

AUD/USD powered into demand at 0.6330/0.6245 at the beginning of the week, generating a 270-point recovery. As impressive as it was, price failed to sustain gains above resistance at 0.6680ish (red oval) and resumed a downward trajectory throughout the remainder of the week, eventually dethroning the said demand zone and reaching lows of 0.6123. This may have an unshackled downside to another layer of demand coming in at 0.5926/0.6062 this week, holding a 161.8% Fib ext. level around its upper edge.

H4 timeframe:

The 161.8% Fib ext. level at 0.6241 elbowed its way into the spotlight Thursday, staging a half-hearted recovery and testing resistance at 0.6314, last Monday’s low. 

Renewed downside from 0.6314 emerged Friday, breaking/retesting 0.6241 and drawing a 127.2% Fib ext. into the fight at 0.6122.

H1 timeframe:

AUD/USD swerved to multi-year lows Friday amid broad-based USD strength, mildly snapping through 0.6150 and testing channel support (0.6212). Buyers, as you can see, made a last-ditch attempt to reclaim 0.62, but failed at highs from 0.6241.

Additional technical structures worthy of note on this scale are channel resistance (0.6384), the 0.63 handle and a trend line resistance from 0.6684. To the downside, 0.61 is in sight, closely aligned with a 161.8 Fib ext. at 0.6099. We are also seeing modest bullish divergence out of the RSI indicator.

Structures of Interest:

Longer term:
Breaching monthly demand at 0.6358/0.6839 and daily price nosediving through demand at 0.6330/0.6245 has possibly liberated sellers for a run to monthly demand at 0.6094/0.5866 this week. Note daily demand at 0.5926/0.6062 is housed within 0.6094/0.5866.

Shorter term:
Downside on the H4 faces support of the 127.2% Fib ext. at 0.6122, while H1 displays potential support off 0.6150 and the 0.61 handle. 

In light of the higher-timeframe picture pointing to lower prices this week, intraday sellers may still consider shorts south of 0.62 on the H1, targeting 0.61, which is set around the top edge of monthly demand at 0.6094/0.5866, the next downside target on that scale.

Weekly Technical Market Insight: 16th – 20th March 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 (118.66/104.62). February had price elbow a touch outside the upper boundary of the aforementioned descending triangle to 112.22, though retreated lower and produced a shooting star pattern into the month’s end.

March, so far, breached the lower edge of the descending triangle, yet has recovered in reasonably strong fashion, leaving nearby demand at 96.41/100.81 unchallenged. Note current action trades in the shape of a hammer candlestick signal.

Daily timeframe:
Despite the week showing some resilience off 105.57/106.17 as a demand-turned supply zone, Friday observed a resurgence of bidding take hold that breached not only 105.57/106.17, but also another demand-turned supply at 106.60/107.09.

The move saw the action address a 61.8% Fib retracement at 108.02 and 200-day SMA, currently circulating around 108.25. Continued bidding this week has demand-turned supply at 110.10/109.52 in view. This is a significant area knowing it is the origin of the move to highs at 112.22 and the decision point to cross above the 110.29 January 17th high.

H4 timeframe:
Friday navigating higher ground produced the final D-leg to an AB=CD bearish pattern, terminating around 108.08. Note for this pattern to remain valid, the 161.8% Fib ext. at 108.90 must remain intact. Traditional take-profit targets associated with AB=CD formations generally reside around the 38.2% and 61.8% Fib retracement levels of legs A-D – in this case, at 105.67 and 103.93.

H1 timeframe:
Supply at 108.89/108.50 made a showing in the later stages of Friday’s upside move, after whipsawing through channel resistance (105.91). The two combined likely appeals to price-action based traders, with 107 set as a logical downside target on this timeframe, assuming we take out 108. Also of note is the RSI indicator nudging its way into overbought levels, holding off peaks at 78.00.

Structures of Interest:

Longer term:
Scope to advance this week is visible on the monthly time frame, though involves overthrowing the 61.8% Fib retracement at 108.02 and 200-day SMA on the daily timeframe.

Shorter term:
The combination of daily resistance highlighted above, the H4 AB=CD bearish configuration and H1 action fading supply at 108.89/108.50 as well as a channel resistance (yellow), could weigh on prices this week and draw in the top edge of daily demand at 107.09, followed by the 107 handle on the H1 timeframe.

Conservative sellers may wait for a decisive H1 close south of 108 to be seen before committing.

Weekly Technical Market Insight: 16th – 20th March 2020, 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% Fib 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 declined nearly 3.00%, with March currently extending losses, poised to reconnect with 1.1904/1.2235.

 

Daily timeframe:
Four out of five days, shaped by way of near-full-bodied bearish candles, saw the pound register dominant losses last week. Thursday witnessed demand at 1.2649/1.2799 yield ground, with Friday also taking demand drawn from 1.2404/1.2470.

With the RSI indicator tunnelling into oversold territory, technical support on this timeframe resides at a 161.8% Fib ext. from1.2231, shadowed by demand coming in at 1.2178/1.2061.

H4 timeframe:
After retesting the underside of a demand-turned supply at 1.2696/1.2602, demand at 1.2404/1.2470 came under pressure and left the week closing within striking distance of another demand seen from 1.2162/1.2220 (extended from September 2017).

H1 timeframe:

Friday had 1.2998/1.2981 retested again, representing a durable supply-turned demand area, which brings with it an additional beat from the widely watched key figure 1.30. Supply at 1.3071/1.3046, drawn from early February, remains in motion, with the pair closing around the underside of this base into the close. A break north this week draws focus to the 1.31 handle, boasting reasonably sound history since the beginning of the year.

Note the current H1 supply is located a few points beneath H4 supply highlighted above at 1.3110/1.3074, and the 100-period SMA is seen drifting north after bottoming off 1.2815.

The RSI, a momentum oscillator, shows overbought conditions on this timeframe, dipping from a recent peak at 80.74 and producing bearish divergence.

Structures of Interest:

Longer term:
1.2235, the top edge of a monthly support area, is in view this week, converging closely with the daily 161.8% Fib ext. at 1.2231 that’s sited just ahead of daily demand at 1.2178/1.2061.

Shorter term:
According to chart studies on the H4 timeframe, scope to explore lower levels is possible this week, with demand at 1.2162/1.2220 in sight. Interestingly, this H4 demand area is glued to the upper edge of daily demand at 1.2178/1.2061. The H1 close beneath 1.23 is considered a bearish indicator and may draw upon 1.22 this week, assuming channel support does not throw a spanner in the works.

Overall, sellers appear to have the upper hand at the moment, likely prompting further downside south of 1.23 this week, targeting the top edge of monthly demand at 1.2235 as the initial base.

Weekly Technical Market Insight: 16th – 20th March 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.




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