Weekly Technical Market Insight: 24 th – 28 th February 2020

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets

US Dollar Index:

The US dollar index (’DXY’), which measures the value of the US dollar relative to a basket of foreign currencies,
firmed for a third successive week, gaining 0.18%.

After eclipsing the 99.67 October 1 st high, the index clocked highs at 99.91, just south of the 100.00 handle which
is enclosed within long-term supply at 100.03/99.37. As evident from the daily chart, the unit turned lower at the
tail end of the week, consequently reclaiming a large portion of the week’s gains and forming a shooting star
pattern on the weekly timeframe (considered a bearish signal at peaks). As a result, increased selling could be on
the cards this week for the greenback, with supply-turned demand at 98.65/98.19 in focus.

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets


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

Despite a healthy attempt at recovery from demand at 1.0488/1.0912 in October 2019 – a particularly noteworthy
area given the momentum derived from its base – EUR/USD failed to sustain gains and begun tunnelling its way
back into the said demand last week.

Although down 2.19% on the month and in-line with the primary downtrend, which has been lower since 2008, we
cannot rule out the possibility of fresh upside attempts from current demand.
Additional structure worth noting on the monthly timeframe is demand-turned supply at 1.1857/1.1352, a long-
term trendline resistance (1.6038) and a reasonably ‘fresh’ demand area coming in at 0.9581/1.0221. Note this
area boasts history dating back as far as 2003.

Daily timeframe:
Partially altered outlook from previous analysis

Since retesting supply at 1.1117/1.1078, the unit has retained a strong underlying offer, consuming a demand
zone at 1.1001/1.0946, the 1.0879 October 1 st low and recently getting to know demand at 1.0680/1.0781. This
area, formed April 2017, also houses a 127.2% Fibonacci ext. point within at 1.0724. Interestingly, the US dollar
index (see above), which boasts a healthy inverse correlation to EUR/USD, is seen rejecting supply at

Despite Thursday finishing in the shape of a daily bearish outside pattern (considered a sign of seller intent) on
EUR/USD, Friday pencilled in a stronger-than-expected recovery off the top edge of the said demand and shined
the spotlight on a possible run higher this week to resistance at 1.0924, as well as the demand-turned supply
zone at 1.1001/1.0946.

The RSI indicator recovered from channel support, and is poised to approach channel resistance this week, with
a break likely triggering further buying to overbought waters.

H4 timeframe:
After bottoming a few points ahead of supply-turned demand drawn from 1.0738/1.0774 and snapping a five-day
losing streak, EUR/USD journeyed into demand-turned supply at 1.0832/1.0877. Technically this area has an
additional area of supply glued to the top edge of the base at 1.0890/1.0870 – this was the decision point to
break the lower edge of the larger area 1.0832/1.0877 mid-February. Note also 1.0890/1.0870 joins closely with
channel support-turned resistance (1.0992).

H1 timeframe:
Intraday action for EUR/USD Friday staged an impressive run north of 1.08 to highs at 1.0863, cutting through a
number of key technical resistances before landing at familiar supply drawn from 1.0869/1.0858 and modestly
paring gains into the week’s end. The upward lift stemmed from encouraging Flash PMI data (February) out of
the Eurozone, and less-than-stellar US flash PMI data.

Market key findings (US):
– Flash US Composite Output Index at 49.6 (53.3 in January). 76-month low.
– Flash US Services Business Activity Index at 49.4 (53.4 in January). 76-month low.
– Flash US Manufacturing PMI at 50.8 (51.9 in January). 6-month low.

Friday’s reaction out of supply at 1.0869/1.0858 suggests a retest at 1.0837/1.0824, a supply-turned demand
zone. With respect to the 50/100-period SMAs, the faster average appears to be preparing to cross above its
slower counterpart. RSI traders will also see the indicator recently tugged at the overbought region and turned
mildly lower into the close.

Longer term:
Further upside is a possibility, thanks to daily demand holding at 1.0680/1.0781, and monthly price continuing to
trade around the upper boundary of demand at 1.0488/1.0912. As underlined above, daily resistance at 1.0924,
as well as the demand-turned supply zone at 1.1001/1.0946, rest as the next higher-timeframe resistances to be
aware of this week.

Shorter term:
Against the backdrop of higher-timeframe price structure, shorter-term movement eyes a retest at H1 supply-
turned demand at 1.0837/1.0824. While the bigger picture portends further buying, the said zone may fail given
the current H4 supplies in motion, along with channel support-turned resistance. Therefore, trade long entries
with caution; a move back to 1.08 should not surprise.

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets


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 remains in the fight, yet price struggles to chalk up anything meaningful to the upside.
An eventual break of the said demand zone has another layer of demand close by at 0.6094/0.5866, while a
recovery could lead to trend-line support-turned resistance (0.4776) making an appearance, followed by supply at

Currently, the pair trades -1.00% on the month.

Daily timeframe:
Thursday, by way of a near-full-bodied bearish candle, dug in and drove into a bulky supply-turned demand at
0.6642/0.6520. Note we’re now trading at decade lows.
0.6642/0.6520 is a large zone and fills a portion of the current monthly demand highlighted above at
0.6358/0.6839. Should the candles kick back and exit the said zone, the 0.6662 February 7 th low may delay a
recovery, with moves higher targeting familiar supply coming in at 0.6778/0.6731, which happens to intersect with
trendline resistance (0.7393).

The RSI recently re-entered oversold territory, and is on track to chalk up bullish divergence.

H4 timeframe:
Friday’s report highlighted an area of support comprised of Fibonacci studies (161.8% Fibonacci ext. point and
the 127.2% Fibonacci ext. point – green) between 0.6591/0.6606, which, as you can see, held firm Friday.
Limited supply is visible to the left of current price; the next base falls in around 0.6695/0.6676, coupled with an
intersecting trendline resistance (0.7031).

H1 timeframe:
0.66 elbowed its way into the spotlight Friday, albeit suffering a whipsaw to lows at 0.6585 in early London.
Psychological levels are susceptible to whipsaws due to the number of orders the figures attract.
Confirmed by mild bullish divergence forming out of oversold terrain and a falling wedge pattern (0.6654/0.6630),
and a helping hand from disappointing flash PMIs out of the US, AUD/USD rotated above 0.66 and settled the
week testing the 50-period SMA and mildly fading highs of 0.6638.

Longer term:
The monthly timeframe continues to challenge demand at 0.6358/0.6839, with daily price also recently getting to
know supply-turned demand at 0.6642/0.6520. As such, we cannot rule out the possibility of fresh upside
attempts, despite the primary trend facing south since mid-2011.

Shorter term:
The H1 candles are seen retesting the 50-period SMA, eyeing 0.6650 as possible resistance, closely followed by
the 100-period SMA and, with a little oomph, supply at 0.6695/0.6685. Having seen the market trading from areas
of support/demand on the higher timeframes, continued bidding could be in store today, with the option of adding
to positions north of 0.6650.

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets


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. The breakout for this
configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In
recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle
to 112.22.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a
demand area at 96.41/100.81.

Currently, the pair trades +2.93% on the month.

Daily timeframe:
Partially altered outlook from previous analysis
Wednesday’s 150-point advance jumped through channel resistance (109.48) and reached highs of 111.59.
Thursday capitalised on recent upside, journeying to highs at 112.22 and linking with channel resistance (red)
from 108.47, and supply at 112.66/112.08, where Friday ended the week moderately trimming gains into the
close. Additional supply, in the event we turn higher this week, can be found at 113.42/112.81, whereas channel
resistance-turned support (109.48) is set as the next downside target.
Recent moves higher also formed a ‘rally-base-rally’ demand at 109.52/109.99. The RSI indicator also voyaged
into overbought terrain and peaked at 77.00.

H4 timeframe
Leaving supply at 112.63/112.25 unchallenged, USD/JPY explored lower ground and revisited supply-turned
demand at 111.68/111.42 which intersects with channel resistance-turned support (109.98).
So far, price action has yet to chalk up anything meaningful to the upside from 111.68/111.42, therefore supply-
turned demand at 110.84/110.57 could be in the offing this week. This should not come as a surprise, knowing
we’re coming from monthly and daily resistances.

H1 timeframe
Despite closing above 112, likely triggering a number of buy stops, we turned lower Friday and retested the 50-
period SMA and the 111.50 barrier, which is seen reinforced by demand fixed from 111.32/111.49. Aside from
the 111.11 February 20 th low, the next base of support on this timeframe is 111. From an order flow perspective,
sell-stop liquidity beneath 111.11 is likely enough to tempt a rebound from 111 this week, though whether we’d
reach 111.32/111.49 as supply is difficult to judge.
Interestingly, the RSI indicator is seen fast approaching oversold soil.

Longer term:
Knowing we’re trading from daily supply at 112.66/112.08 and monthly structure, sellers may have the upper
hand this week, targeting daily channel resistance-turned support (109.48) as the initial base.

Shorter term:
A rebound from H1 demand at 111.32/111.49, although glued to the underside of H4 supply-turned demand at
111.68/111.42 and boasting a connection with H4 channel resistance-turned support (109.98), is likely to be
hampered by the 50-period SMA plotted nearby. This – coupled with higher-timeframe resistance in motion –
could see sellers strengthen their grip and head for 111. Therefore, intraday bearish scenarios are a possibility
south of H1 demand today/early week.

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets

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% Fibonacci 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, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and
breaking the 1.3380 March 2019 high.

Currently, the pair trades at -1.88% on the month.

Daily timeframe:
Demand at 1.2823/1.2910, represents the lower edge of a multi-month range (supply at 1.3303/1.3184 caps
upside), contained downside last week, staging a healthy advance to highs at 1.2981 and snapping a four-day
losing streak.

Local trend-line resistance (1.3514) could make an appearance this week, as could the supply zone mentioned
above at 1.3303/1.3184. Beyond the current demand, another port of demand, a touch larger than the current,
resides at 1.2649/1.2799, which happens to house the 200-day SMA (1.2688).
In terms of the RSI indicator, since the beginning of the year we have been compressing within a descending
channel (black lines), with the value currently rejecting its channel support.

H4 timeframe:
After dethroning demand at 1.2868/1.2894 last Thursday and leaving demand at 1.2806/1.2833 unopposed,
GBP/USD set off to the upside Friday, benefitting on the back of upbeat UK flash manufacturing PMIs and the
dollar’s demise across the board.
Buyers appear to have lost their flavour ahead of supply at 1.3023/1.3006, fading highs at 1.2981 and closing the
session in the form of a moderately dominant bearish candle.
It may also interest some traders to note that we likely have sellers attempting to fade the recent pullback from
1.2849, due to the 1.3070 double top formation recently confirming (breaking the 1.2872 low, the trough between
the two peaks, marked with a blue arrow, offers double-top confirmation). The take-profit target (1.2672) for
confirmed double-top patterns can be calculated by taking the distance between the highest peak and the trough
and projecting this value south of the trough.

H1 timeframe:
Friday lifted through orders at 1.29 in early London, and eventually ran through both the 50/100-period SMAs
until reaching demand-turned supply at 1.2965/1.2987 going into the US session. Note this supply zone is
stationed a touch south of the key figure 1.30.

Longer term:
Longer term on the daily timeframe the unit exhibits scope to explore higher ground this week, aiming for a retest
at trend-line resistance (1.3514). However, the fact the February 11 th rebound failed to post fresh highs indicates
possible weakness out of the current demand.

Shorter term:
The key figure 1.30 is likely watched by many traders today/early week as possible resistance, even more so
when price-action based traders take into account we also have supply on the H4 drawn from 1.3023/1.3006
encapsulating any whipsaw that may occur above 1.30 this week.
Buy-stop liquidity above 1.30 will likely provide enough fuel for larger sellers to fade the H4 supply area at
1.3023/1.3006, with the possibility of a sizable selloff emerging, based on the recent (H4) double-top’s take profit
target suggesting moves to as low as 1.2672, seen deep within daily demand at 1.2649/1.2799.

Weekly Technical Market Insight: 24 th – 28 th February 2020, FP Markets

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