Note—Charts provided by Trading View
US Dollar Index (Daily Timeframe):
Measured by the US dollar index, the greenback fashioned a firm recovery last week, adding 0.6 percent and snapping a two-week bearish phase.
Leaving support at 89.34 unchallenged, USD bulls are likely taking aim at February 17 peak around 91.05, with subsequent outperformance to perhaps shake hands with the 127.2% Fib projection at 91.44. Additional resistances to observe this week are 92.26, a level surrounded by a 61.8% Fib level, a 127.2% Fib projection and a 100% Fib extension at 92.38, 92.36 and 91.96, respectively. Traders may also acknowledge the 200-day simple moving average lurking at 93.12—these dynamic values commonly provide support and resistance, therefore worth keeping an eye on in the first full week of March should we take on higher terrain.
Trend studies, as highlighted in previous weekly writing, show the buck has echoed a downside bias since topping south of the 103.00 figure in March 2020. This, of course, adds weight to the aforementioned resistances this week. Submerging support at 89.34 possibly adds conviction to the bearish narrative and may also spur longer-term breakout selling interest.
Against the backdrop of technical price action, the RSI indicator finished last week north of the 50.00 centreline and is currently stalking the underside of channel support-turned resistance.
February, as you can see, eked out marginal losses (0.5 percent), ranging between 1.2243 and 1.1952.
Upriver, March could reach for ascending resistance (prior support – 1.1641), while lower on the curve 1.1857/1.1352 represents demand.
In terms of trend, the primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.
Following Thursday’s clear-cut shooting star pattern, missing Quasimodo resistance at 1.2278 by a whisker, Friday fell sharply. The firm month-end USD bid was the main driver behind EUR/USD weakness, a move shining the technical spotlight on demand from 1.1923/1.2001 this week, an area housing support at 1.1965 (a previous Quasimodo resistance).
Out of the RSI, the indicator rotated south a touch below resistance at 60.30, pulling the value beneath the 50.00 centreline.
Friday’s one-sided decline squeezed through bids at Quasimodo support from 1.2135, with price action subsequently retesting the underside of the level as resistance. This led to the unit marginally breaching trendline support heading into the close, pencilled in from the low 1.1952.
Ultimately, the trendline break could welcome demand at 1.2019/1.2037 this week, an area withstanding downside pressure mid-February.
Friday was a day for taking stops on the H1 scale.
Early London observed trendline support give way (etched from the low 1.2023), trapping buyers and unlocking the door for breakout sellers. Subsequently, the 1.21 level, although supportive for a brief period, also caved and trapped buyers.
Breakout sellers south of the big figure are likely setting their sights on demand from 1.2036/1.2053 (glued to the upper side of H4 demand at 1.2019/1.2037), and possibly the 1.20 figure.
Interestingly, the RSI bumped heads with oversold territory on Friday, with support at 20.64 also in sight.
While the monthly chart exhibits scope to climb over the coming weeks, a dip to daily demand at 1.1923/1.2001 could be in store before buyers attempt to make an entrance.
The H4 trendline support violation, alongside Friday’s spirited decline, has potentially opened the door to further downside early week.
To reach 1.20 on the H1 (blends with the upper side of daily demand at 1.2001), sellers must break H1 demand at 1.2036/1.2053 and also H4 demand from 1.2019/1.2037.
February finished considerably off best levels, forming what many candlestick fans call a shooting star pattern—a bearish signal typically found at peaks. Also interesting was price came within striking distance of trendline resistance (prior support – 0.4776), sheltered under supply from 0.8303/0.8082.
In the context of trend (despite the trendline resistance [1.0582] breach in July 2020), the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high ).
In one fell swoop, the Australian dollar fell more than 2 percent versus the US dollar on Friday, generating enough force to unnerve longs around trendline support, taken from the low 0.5506. This followed Thursday’s bearish outside reversal pattern from supply at 0.8045/0.7985 (located south of monthly supply at 0.8303/0.8082), a move supported by RSI bearish divergence (note Friday ended beneath the 50.00 centreline).
The trendline support breach throws light on February 2nd low at 0.7563 this week, with a break here unmasking demand at 0.7453/0.7384 (prior supply).
Bearish forces unseated demand at 0.7848/0.7867, followed by support from 0.7805, and, towards the closing hour, price also clipped the lower side of demand coming in from 0.7696/0.7715.
Additional demand areas to be mindful of this week are 0.7650/0.7681 and 0.7601/0.7627, as well as Quasimodo support at 0.7592.
Heading into the close, price embraced the 0.77 figure and saw buyers modestly step forward.
Demand at 0.7668/0.7688 resides just below (plotted nearby support at 0.7660), with resistance parked above at 0.7724.
RSI movement, as you can see, spent Friday trekking oversold terrain with the indicator also chalking up bullish divergence towards the end of the session.
The monthly timeframe’s shooting star pattern, combined with the daily timeframe’s trendline support breach, signals additional selling may develop this week, targeting February 2nd low at 0.7563.
H1 demand at 0.7668/0.7688 (and nearby support at 0.7660) is worth noting in early trading this week as an area buyers may welcome, glued to H4 demand at 0.7650/0.7681. However, given the higher timeframes point to lower levels, traders must be prepared for short-lived upside.
Following January’s bullish engulfing candle, price action printed further outperformance in February, adding 1.8 percent.
Descending resistance (not considered traditional trendline resistance) governs the spotlight to the upside, etched from the high 118.66, whereas support inhabits 101.70.
Supply at 106.33/105.78, an area capping upside since October 2020, ceded ground Friday, allowing Quasimodo resistance at 106.58 to enter the fight. Supply at 107.58/106.85 is also an area that deserves notice this week.
While price action registered a fourth successive bullish close in recent trading, traders may wish to note the RSI indicator is testing overbought territory and forming bearish divergence.
Resistance-turned support at 106.11 entered the fray early Friday, bolstered on the back of broad-based USD buying (DXY nearing 91.00).
Providing USD bids maintain a presence north of 106.11, the Fib resistance cluster between 106.84 and 106.73 (green—shares space with the underside of daily supply at 107.58/106.85) could make a show in early trading this week.
Additional areas worthy of attention are support at 105.74 (prior Quasimodo resistance) and trendline support, drawn from the low 102.59.
In view of the uptrend, sellers are likely to be guarded at supply from 106.69/106.62. A H1 close sub 106.50, however, may persuade additional selling, targeting trendline support, derived from the low 104.92, followed by the 106 figure. Any sustained bullish move above the aforesaid supply this week shifts attention to the 107 figure.
Technically, we’re also seeing bearish divergence form out of the RSI indicator, a touch below overbought space.
The stops taken above daily supply from 106.33/105.78 and the subsequent test of Quasimodo resistance at 106.58 unearths a possible bearish theme this week. Though before sellers step forward, price may shake hands with nearby supply at 107.58/106.85.
The above, of course, is somewhat out of tune with the monthly timeframe’s direction, bound for possible follow-through buying towards descending resistance.
Across the page, the H4 timeframe shines light on a Fib resistance cluster between 106.84 and 106.73. Glued to the lower edge of daily supply at 107.58/106.85, this may be a zone sellers welcome this week. However, in order for this to occur, a minor whipsaw above H1 supply at 106.69/106.62 must form—stop run?
Following December’s 2.5 percent advance—movement that stirred major trendline resistance (2.1161)—February refreshed 2021 highs at 1.4241, levels not seen for three years.
Despite the trendline breach—a sign buyers have taken the wheel—primary trend structure on the monthly scale reveals the trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way—April high, 2018.
Given February’s movement, 1.4376 represents the next upside objective.
Mid-week trading established tops just south of Quasimodo resistance at 1.4250, underpinning a sharp slump heading into the latter part of the week.
Support at 1.4011 delivered little in terms of bullish flow, with Friday’s break throwing light on trendline support, drawn from the low 1.1409, a level sharing space with support at 1.3755.
RSI resistance made an entrance at 76.14, capping upside since late 2017, with the value exiting overbought terrain and settling within a whisker of the 50.00 centreline.
Trendline support, extended from the low 1.3566, was taken in early trading on Friday, leading to a test of demand from 1.3942/1.3900 (previous supply).
As you can see, Friday’s reply from demand was mostly unresponsive, hinting at a test of support from 1.3852, with additional downside bringing light to familiar demand at 1.3761/1.3789 (fixed north of daily support mentioned above at 1.3755).
Despite a decline in early Asia, buyers and sellers subsequently squared off around the 1.39 figure and prompted a pullback to 1.3959 resistance—a previous Quasimodo support base plotted just under the key figure 1.40.
Above 1.40, the 100-period simple moving average is seen circling 1.4075, while territory sub 1.39 unearths two Quasimodo supports at 1.3861 and 1.3847.
The RSI oscillator, as you can see, made its way from oversold terrain on Friday and mildly topped ahead of the 50.00 centreline.
Monthly flow suggests room to approach higher levels over the coming weeks until reaching the 1.4376 top. Before the above graces the charts, a retest of daily support at 1.3755 and intersecting trendline support could be on the cards, a move likely welcomed by dip-buyers.
H4 demand at 1.3942/1.3900 appears on thin ground, highlighting a short-term dip to support at 1.3852 may be seen in early trade this week. Interestingly, this would draw H1 price through 1.39 bids (tripping stops) to test H1 Quasimodo supports at 1.3861 and 1.3847 (aligns with H4 support).
Therefore, the above may attract a short-term bearish theme in early trading, with a possible bullish defence entering the fight off 1.3850ish.