Weekly Technical Market Insight: 20th – 24th July 2020

Weekly Technical Market Insight: 20th – 24th July 2020, FP Markets

US Dollar Index:

The June 10 recovery off daily support at 95.84, as you can see, launched a bear flag between 95.72/97.45. Recent weeks, though, observed price slip through the aforesaid flag’s lower boundary, introducing a sell signal and projecting moves as far south as 92.72 (take-profit target measured by calculating the preceding move and adding the value to the breakout point – purple). Daily support at 95.84 also re-entered the frame last week and so far, has withstood downside attempts.

In addition to the above, as featured in previous weekly reports, late May witnessed a push through the lower limit of a large bearish pennant configuration (98.27). Traders familiar with this pattern, therefore, may still acknowledge the possibility of moves forming as low as 93.97: the pennant take-profit target, measured by calculating the distance of the preceding move and adding the value to the breakout point (yellow).

Also referred to as half-mast formations, flags and pennants are considered continuation patterns and imply the US dollar index, or DXY, could dip beyond daily support underlined above at 95.84 this week.

Weekly Technical Market Insight: 20th – 24th July 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 May, as you can see, recovered off worst levels out of demand from 1.0488/1.0912 and closed firm. This prompted an extension in June to highs at 1.1422, adding 1.2% despite running into opposition at the lower ledge of nearby supply from 1.1857/1.1352 (unites with long-term trendline resistance [1.6038]).

Interestingly, July, currently trading +1.7%, is crossing paths with the aforesaid trendline resistance.

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

Daily timeframe:

Partially altered from previous analysis –

The month of June observed EUR/USD address a potential reversal zone (PRZ), derived from a harmonic bearish bat pattern. The base is comprised of an 88.6% Fib level at 1.1395, a 161.8% BC projection at 1.1410 and a 161.8% Fib ext. level at 1.1462 (red oval). It’s typical, in the case of bearish bat formations, to see traders sell PRZs and place protective stop-loss orders above the X point (1.1495). Take-profit targets fall in at the 38.2% and 61.8% Fib levels (of legs A/D) at 1.1106 and 1.0926, respectively.

After touching 1.1168 (June 19) a mild bid has been observed, which witnessed mid-week trade gather traction and retest the aforesaid PRZ. With daily support at 95.84 on the DXY offering a feeble tone right now, traders must prepare for the prospect of additional EUR/USD upside this week.

H4 timeframe:

Partially altered from previous analysis –

Overhead, supply at 1.1470/1.1447, an area drawn from February 2019, continues to offer an upper limit on the H4 chart, closely bolstered by another area of supply at 1.1495/1.1472. Additionally, as you can see, traders also have channel resistance (1.1345) to work with here.

Holding under channel resistance this week has demand at 1.1324/1.1345 pinned as the next point of consideration, aligning with neighbouring channel support (1.1185). This assumes we pass Thursday’s low 1.1370.

H1 timeframe:

Early Europe Friday voyaged above 1.14 in dominant fashion, after establishing a bottom off demand at 1.1361/1.1377. With sellers cutting their losses, price movement peaked just ahead of 1.1450 resistance, a touch above Thursday’s high.

Travelling through 1.1450 this week could lead to a push for the 1.15 neighbourhood, while a dip to 1.14 (and 100-period simple moving average) could also be in the offing.

Structures of Interest:

Long term:

Monthly supply at 1.1857/1.1352 and neighbouring long-term trendline resistance is likely to eventually hamper upside in this market.

The daily PRZ between 1.1462/1.1395 re-entered the frame last week. Although considerable structure, buyers appear to have the upper hand here for now.

As things stand, we have two conflicting signals on the higher timeframes this week.

Short term:

H4 supply at 1.1470/1.1447 and 1.1495/1.1472 are likely to be key zones this week for sellers. This may draw 1.1450 resistance back into view, given the level joins with the lower ledge of H4 supply at 1.1447. Alternatively, selling pressure could draw H1 to 1.14, a level intraday buyers may attempt to make a stand from.

Weekly Technical Market Insight: 20th – 24th July 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

May’s extension, together with June’s follow-through, has supply at 0.7029/0.6664 echoing a vulnerable tone in July, particularly as intersecting long-term trendline resistance (1.0582) demonstrates signs of giving way.

Regarding the market’s primary trend, however, a series of lower lows and lower highs have been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

Since ousting resistance at 0.6931 the level has been featured as support, with two nearby trendline resistances (prior supports – 0.6744/0.6671) visible to the upside.

Moves under 0.6931 this week positions support at 0.6755 in the frame, while exploring higher levels has 0.7197 resistance to target.

In terms of the RSI oscillator, the value has been hovering south of overbought levels since mid-June.

H4 timeframe:

Well-grounded support at 0.6926 could be a level we work with this week, located a few pips under trendline support (0.6776). Traders will note the aforesaid support also forms a close connection to daily support at 0.6931.

Supply at 0.7058/0.7029 is another base that deserves attention this week, an active zone since the beginning of the year.

H1 timeframe:

Following a brief retest at the 100-period simple moving average heading into US hours Friday, sited just ahead of demand at 0.6961/0.6971, H1 rallied and mildly whipsawed through orders at 0.70.

Above 0.70 this week, traders must contend with neighbouring resistance at 0.7011 and a 161.8% Fib ext. point from 0.7013.

Structures of Interest:

Long term:

Monthly reveals the possibility of closing above supply at 0.7029/0.6664, while buyers and sellers on the daily timeframe battle for position between support at 0.6931 and two trendline resistances.

Short term:

H4 support at 0.6926, a level converging closely with daily support at 0.6931, is likely a floor on the watchlist this week.

Monday, however, could revisit H1 demand at 0.6961/0.6971. An alternative scenario is another whipsaw above 0.70, though this time may have the candles draw in additional sellers from resistance at 0.7011. A H1 close back beneath 0.70 will then likely be interpreted as a bearish signal.

Weekly Technical Market Insight: 20th – 24th July 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 carving out a descending triangle pattern between 118.66/104.62.

April and May were pretty uneventful, with June also wrapping up indecisively in the shape of a neutral doji candlestick pattern.

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

Daily timeframe:

Brought forward from previous analysis –

Demand at 105.70/106.66 remains in focus on the daily timeframe this week. Although a reasonably hardwearing zone since early May, buyers appear to be lacking spirit. The previous reaction on June 23, as you can see, failed to reach the 200-day simple moving average at 108.36 before rotating lower, emphasising buyer weakness.

Moves below current demand re-opens the risk of a return to support at 105.01.

H4 timeframe:

Recent developments on the H4 timeframe reveal price movement is essentially consolidating between supply at 107.60/107.42 and demand coming in from 106.39/106.64. Traders will also note the latter comes with a 161.8% Fib ext. point at 106.67 and is situated within the upper boundary of daily demand from 105.70/106.66.

Outside of the aforesaid range, peaks around 107.77 and the 108.09 level represents resistance, while through demand we can see support at 105.99.

H1 timeframe:

US trading Friday witnessed USD/JPY test trendline resistance (prior support – 106.66) and squeeze through the 100-period simple moving average. This left the pathway clear for 107, which, despite a mild whipsaw to lows at 106.94, held into the week’s end.

Under 107, 106.70 support resides close by, whereas a healthy bid in early trade this week may take the currency pair to supply at 107.24/107.16.

Structures of Interest:

Long term:

Monthly price is somewhat directionless at the moment, caught within a descending triangle pattern.

Daily demand at 105.70/106.66 recently re-joined the fight, albeit echoing a fragile tone.

Short term:

Supply at 107.60/107.42 and demand from 106.39/106.64 on the H4 are likely on the radar this week, particularly the latter owing to the confluence it brings to the table.

Friday’s whipsaw below 107 was potentially a painful ordeal for intraday buyers, a move which likely tripped protective stop loss orders. The close back above 107 may draw in early buyers this week, targeting at least H1 supply at 107.24/107.16 (strong supply), followed by the lower ledge of H4 supply at 107.42.

Weekly Technical Market Insight: 20th – 24th July 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

Support at 1.1904/1.2235 and long-term trendline resistance (1.7191) offers clear structure to work with on the monthly timeframe, with the latter prompting a notable upper shadow in June.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008, placing 1.1904/1.2235 support in a vulnerable position.

Daily timeframe:

Brought forward from previous analysis –

Buyers and sellers, as you can see, continue to mingle below the 200-day simple moving average at 1.2696. Several candlestick patterns emerged over the week, however, providing a mixture of bullish and bearish signals.

Demand at 1.2192/1.2361 remains in view, as does supply from 1.3021/1.2844, situated above the aforesaid simple moving average.

H4 timeframe:

Brought forward from previous analysis –

After splitting channel support (1.2257) on the H4 timeframe, two core areas became available, demand at 1.2462/1.2506 and supply from 1.2720/1.2682. The former already made its presence known last Tuesday, generously rebounding price by way of a bullish engulfing candle.

Additional areas of interest fall in at support from 1.2453 and peaks (red oval) around 1.2667, which may delay price from reaching the aforesaid supply zone.

H1 timeframe:

Leaving 1.25 unopposed, US trade entertained a recovery play Friday, pulling the H1 candles above 1.2550 resistance and the 100-period simple moving average.

To the north of price, we have the 1.26 level to contend with, shadowed by supply coming in from 1.2627/1.2604.

Structures of Interest:

Long term:

Monthly price is currently sandwiched between trendline resistance and support from 1.1904/1.2235.

The 200-day simple moving average at 1.2696 on the daily timeframe may make an appearance this week and provide resistance, though traders will also have eyes on demand at 1.2192/1.2361 and supply from 1.3021/1.2844.

Short term:

1.26 offers valid resistance on the H1 this week, yet traders may want to note the possibility of a whipsaw forming through the round number into H1 supply coming in from 1.2627/1.2604. A H1 close beneath 1.26, after testing the aforesaid supply, would likely serve as a bearish signal towards at least the 100-period simple moving average.

Should we reach as far south as 1.25 on the H1 this week, a recovery from the base is a possibility, having seen the round number align with the upper boundary of H4 demand at 1.2506.

Weekly Technical Market Insight: 20th – 24th July 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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