Weekly Technical Market Insight: 27th – 31st July 2020

Weekly Technical Market Insight: 27th – 31st July 2020, FP Markets

US Dollar Index:

Cementing a strong bearing underneath support at 95.84 in early trade, the US dollar index, a measure of the USD’s value against a weighted basket of foreign currencies, logged a fifth successive bearish close last week and erased 1.7%.

With 95.84 potentially now a distant memory, 93.97 takes centre stage this week, a long-term bearish pennant take-profit target (yellow – measured by calculating the distance of the preceding move and adding the value to the breakout point).

Also notable is a fresh bear flag shaped between 95.72/97.45, introducing itself at the beginning of July. Swallowing 93.97 in upcoming trade theoretically projects moves as far south as 92.72 (the bear flag take-profit target measured by calculating the preceding move and adding the value to the breakout point – purple).

Indicator-based traders will also note the RSI oscillator recently elbowed into oversold territory, circling 23.27 as of the close of trade.

Weekly Technical Market Insight: 27th – 31st 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 also 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 +3.8%, is on course to overthrow the aforesaid trendline resistance.

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

Daily timeframe:

Rolling out a sixth successive bullish candle Friday, stirring a mid-week close above resistance at 1.1553, price hurled EUR/USD to within reach of a 5-wave completion around 1.1669 (when wave 3 of an impulse wave is extended, wave 5 is expected to equal wave 1).

Indicator-based traders will also want to note the RSI oscillator recently entered overbought territory, closing just ahead of 80.00.

H4 timeframe:

Following Thursday’s retest at demand (prior supply) from 1.1545/1.1518, a spirited recovery into, and eventually beyond, supply at 1.1628/1.1600 occurred Friday.

Skies above the aforesaid supply appear to be relatively clear for an approach to resistance at 1.1722 this week, though prudent traders will take note of the possibility of a retest forming at 1.1628/1.1600 before climbing.

H1 timeframe:

Led by further decline in the US dollar index, EUR/USD took on supply at 1.1631/1.1614 Friday, an area extended from September 2018 (shows a connection to 1.1628/1.1600 on the H4), and wrapped up the week mildly surpassing 1.1650 resistance.

While there’s not really much to look at north of 1.1650 until crossing paths with the 1.17 level, a dip to gather unfilled buy orders at 1.1631/1.1614 could still emerge before buyers make a move for 1.17.

It should also be noted the RSI indicator is seen fast approaching overbought territory.

Structures of Interest:

Long term:

Monthly price trades above trendline resistance, albeit still sheltered within the parapets of supply.

Daily action, after dethroning resistance at 1.1553, has eyes for a 5-wave completion around 1.1669, perhaps hampering upside this week.

Short term:

H4, after toppling supply at 1.1628/1.1600, shines the spotlight on a possible run to resistance at 1.1722. In conjunction with H4 activity, H1 similarly reveals a clear path to the 1.17 region this week.

Breakout buyers above H4 supply and 1.1650 resistance on the H1 are urged to remain vigilant to the possibility of a dip to retest recently penetrated areas.

Weekly Technical Market Insight: 27th – 31st 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 and July’s follow-through witnessed supply at 0.7029/0.6664, and intersecting long-term trendline resistance (1.0582), relinquish ground in recent trading. Technically, buyers are now potentially free to run as far north as 0.8303/0.8082, a supply zone that aligns closely with trendline resistance (prior support – 0.4776).

Despite the above, the market’s primary trend still points south, demonstrating a series of lower lows and lower highs since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

Since ousting resistance at 0.6931, the level has been featured as support.

Wednesday’s action came within a stone’s throw away from reaching 0.7197 resistance, with Thursday delivering a bearish candle and snapping a four-day winning streak. Friday, however, lacked direction and produced what appears to be a neutral doji candlestick pattern.

In terms of the RSI oscillator, the value recently exited overbought territory and is producing bearish divergence.

H4 timeframe:

Following Wednesday’s rejection at supply from 0.7198/0.7179, an area which houses daily resistance underlined above at 0.7197, Friday dipped a toe in waters just north of support at 0.7043. Although putting forward a mild recovery into the week’s end, 0.7043 is likely on watchlists as a downside target this week, as well as demand from 0.7015/0.7035 (and nearby trendline supports). 0.7015/0.7035 is an interesting zone; it is marked as a point where a strong decision was made to break through neighbouring highs.

H1 timeframe:

Renewed upside amid US trade Friday delivered candles to the underside of 0.71, sharing space with a 100-period simple moving average, currently trading at 0.7105.

Nearby supply at 0.7118/0.7146 is well placed to receive price should bulls decide to take over 0.71 today, located just beneath 0.7150 resistance.

H4 demand underscored above at 0.7015/0.7035 can also be seen under 0.7050 support.

With respect to the RSI oscillator, we recently trekked above 50.00 which indicates momentum is on the rise.

Structures of Interest:

Long term:

Struggling monthly supply at 0.7029/0.6664 and intersecting trend line resistance implies long-term bulls may be looking to explore higher terrain over the coming weeks. Cranking through daily resistance at 0.7197 will help confirm an upside bias. Dips on the daily timeframe this week, however, could draw support at 0.6931 back into the frame.

Short term:

H4 exhibits scope to probe lower this week until support at 0.7043 and neighbouring demand at 0.7015/0.7035. This, therefore, positions 0.71 as possible resistance on the H1 in early trade, as well as supply at 0.7118/0.7146 in the event of a pop higher.

Weekly Technical Market Insight: 27th – 31st 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. July, nonetheless, currently trades lower by 1.7%.

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:

Demand at 105.70/106.66 welcomed price action Friday, receiving a mild blow to its lower border.

Going into the new week, the area is unlikely to revive buying, reopening the risk of a return to support at 105.01.

H4 timeframe:

Following rangebound trade since July 9 where swings were more 2-way and indecisive, Friday watched USD/JPY voyage through range support at 106.39/106.64 and heavily collide into 106.07 support.

As you can see, the session wrapped up with price retesting the underside of 106.07, a level which may serve as resistance amid early trade this week. Large demand at 104.50/105.29 is featured as the next point of interest to the downside.

H1 timeframe:

Leaving behind 105.50 support, 106 resistance unlocked its doors heading into the week’s close, with price squeezing out intraday sellers fading 106 and reaching highs at 106.16.

An interesting supply stands out above 106 at 106.49/106.38, joined by 106.50 resistance and a 38.2% Fib level at 106.39.

The RSI momentum oscillator, since Thursday, has been bottoming within oversold terrain, with Friday pulling the value to 42.00.

Structures of Interest:

Long term:

Daily demand at 105.70/106.66 is seen hanging on by a thread right now, threatening moves to daily support at 105.01 this week.

Short term:

106.07 resistance on the H4 entered the fold Friday, after banging out a low at 105.68. Downside from this angle could potentially stretch as far south as demand at 104.50/105.29. H1 flow, on the other hand, recently reclaimed 106 to the upside, which may see supply at 106.49/106.38 surface (along with 38.2% Fib resistance at 106.39 and 106.50 resistance) early trade.

On account of the above, and noting H1 supply at 106.49/106.38 boasts a connection with H4 supply at 106.39/106.64 (prior demand), along with daily demand at 105.70/106.66 also struggling, a test of the aforesaid H1 supply this week could have active sellers make an entrance.

Weekly Technical Market Insight: 27th – 31st 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)

GBP/USD trades higher by 3.2% in July, with price action attempting to swarm long-term trendline resistance (1.7191) after support at 1.1904/1.2235 withstood downside attempts in April and May.

Despite the primary trend facing lower since early 2008, rupturing current trendline resistance could have buyers work towards another prominent trendline resistance (2.1161).

Daily timeframe:

Partially altered from previous analysis –

After mingling below the 200-day simple moving average at 1.2697 since July 9, Tuesday squeezed above the aforesaid value followed by a mid-week retest as support. Consequent to this, price action could work towards supply coming in from 1.3021/1.2844 this week.

The RSI oscillator, as you can see, is also closing in on overbought levels.

H4 timeframe:

Last week’s analysis noted the possibility of a bullish pennant formation between 1.2768/1.2644. As you can see, Friday kicked through the upper borderline of the aforesaid pattern and docked just ahead of supply at 1.2851/1.2805.

The break of the bullish pennant, generally considered continuation patterns, potentially stirred a buy signal Friday, targeting 1.3008 (measured by calculating the preceding move and adding this value to the breakout point – pink). This implies we might observe a break of current supply this week.

H1 timeframe:

Heading into the closing stages of Friday’s session, following an earlier run above 1.2750 resistance, price action addressed the underside of 1.28 and produced a shooting star candlestick pattern, considered a bearish signal at peaks. This also saw the RSI oscillator form bearish divergence south of overbought levels.

Taking on 1.28 this week has large supply to contend with at 1.2936/1.2862, positioned within daily supply at 1.3021/1.2844 and sited just above H4 supply at 1.2851/1.2805.

Structures of Interest:

Long term:

While monthly traders are seen attempting to secure position above trendline resistance, daily price is closing in on supply at 1.3021/1.2844 which is likely to hamper upside.

Short term:

There is a chance of a mild whipsaw through 1.28 into H4 supply at 1.2851/1.2805 early week, which may encourage a sell-off. How much of a sell-off, however, is the million-dollar question given the H4 bullish pennant pattern recently making its presence felt and monthly showing signs of reaching for higher levels, as well as daily price displaying scope to challenge at least 1.2844 (lower ledge of supply).

A H1 close above 1.28 this week would, therefore, potentially be well received by buyers, taking aim at the underside of daily supply at 1.2844 as an initial base.

Weekly Technical Market Insight: 27th – 31st 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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