Charts: Trading View
(Italics: Previous Analysis)
US Dollar Index (Daily Timeframe):
Against a basket of six foreign currencies, including Europe’s single currency, the US Dollar Index (USDX) climbed 1.3 percent last week. Extending its rally to a seventh daily session, this cleared the path to refresh year-to-date tops and shake hands with 100.00. This psychological figure is accompanied by channel resistance, taken from the high 96.94, together with a neighbouring resistance zone at 100.91-100.32 as well as Friday’s shooting star pattern (bearish candlestick signal). In the event of a reversal from said resistances, support resides at 97.45-97.76, an area sharing space with the 50-day simple moving average at 97.55.
Trend on the USDX exhibits well-defined upward movement. Since price made contact with daily support from 89.69 in May 2021, the unit has shaped a series of higher highs and higher lows. The upside bias is also shown through the 50-day simple moving average crossing above the 200-day simple moving average at 95.06 (‘Golden Cross’). Further adding to trend studies, we can see the weekly timeframe, although displaying a long-term range since 2015 (fluctuating between 103.82 and 88.25), was entrenched within a dominant bullish up move since May 2011 (72.70). For that reason, the overall trend is supportive of the 10-month up move seen on the daily scale. However, recognising that daily price is touching gloves with resistance, this could be a potential ceiling for bulls this week.
Momentum, based on the relative strength index (RSI), remains positive (average gains exceeding average losses) after recoiling from indicator support between 40.00 and 50.00 (a temporary oversold region since August 2021—common view in uptrends). Overbought territory, therefore, will likely be a watched base this week (indicator resistance seen at 79.23).
While the USDX flexed its financial muscle last week, in a market decisively trending higher since mid-2021, the resistance area at 100.91-100.32, alongside channel resistance and the 100.00 figure, is a possible headwind for the buck this week. As a result, traders are urged to pencil in the possibility of a USD decline, perhaps targeting support at 97.45-97.76.
The dollar’s aggressive appreciation unearthed a bearish narrative on EUR/USD last week, settling lower by 1.6 percent. Aided by the prior week’s rejection of weekly resistance from $1.1174, the currency pair is now in the neighbourhood of weekly Quasimodo support at $1.0778 and weekly channel support, extended from the low $1.1186. Aside from the $1.0636 (2020) low, limited support is visible south of $1.0778 until another Quasimodo formation at $1.0517.
Meanwhile the daily timeframe has buyers and sellers squaring off around a decision point from $1.0788-1.0854, complemented by ascending support, drawn from the $1.0340 3rd January low 2017. This followed successive daily losses, movement sparked by the bearish outside reversal printed south of resistance at $1.1224 on 31st March. Interestingly, downside momentum slowed at the tail end of the week, evident not only through price action, but also the relative strength index (RSI) levelling off around the 37.00 area.
Trend on the bigger picture continues to echo a downside bias, placing a question mark on current weekly and daily supports. Price has reflected bearish status since topping at $1.2350 at the beginning of January (2021). This is strengthened by a trendline support breach on the weekly scale, drawn from the low $1.0636, together with the recent test of weekly resistance following year-to-date lows at $1.0806 in early March.
Reinforcing the bearish perspective is H4 trendline resistance-turned support, etched from the high $1.1495. The lack of commitment from buyers here highlights a potential drop to prime support from $1.0785-1.0820 this week. On the other hand, the $1.0990-1.0963 decision point resides upstream on the H4, a zone likely challenged should buyers regain consciousness.
H1 Quasimodo support-turned resistance at $1.0931 proved an effective ceiling last week—$1.09 was largely ignored (painful for those attempting to fade the level and trade breakouts). Nevertheless, the second half of the week concluded sub $1.09, with scope to approach Quasimodo support at $1.0821 (to the left of price, [potential] consumed demand is present between $1.0848 and $1.0890 [8th March]).
Interest will likely be focussed on weekly Quasimodo support from $1.0778 (and weekly channel support, extended from the low $1.1186). With that being said, though, buyers displayed interest from $1.0788-1.0854 on Friday, a daily decision point positioned 10 pips north of weekly levels. Thus, buyers could make a stand and leave weekly structure unchallenged.
For those who read previous daily technical reports you may recall the following (italics):
Should H1 price manage to remain under $1.09, a bearish scene may unfold, targeting the upper edge of the daily decision point at $1.0854, followed by H1 Quasimodo support at $1.0821 (merges with the upper side of H4 prime support at $1.0820).
As evident from the charts, H1 action remained under $1.09 and tested the daily decision point area. Going forward, this might be sufficient to attract profit taking and countertrend traders this week. A H1 close north of $1.09 would help ‘confirm’ a bullish vibe, targeting H1 resistances between $1.0950 and $1.0931, followed by the H4 decision point at $1.0990-1.0963.
Versus the US dollar, the Australian dollar finished the week off best levels and joined the lower side of prime resistance at $0.7849-0.7599 on the weekly timeframe. Candlestick enthusiasts will also acknowledge the week carved out a shooting star pattern—a bearish signal. $0.7849-0.7599 was an area highlighted in previous writing, and for good reason. Take note of recent trend studies:
The trend suggests that surpassing the noted weekly prime resistance may be problematic. The monthly timeframe has portrayed a downtrend since August 2011, indicating the pullback (February 2022 to current) on the weekly timeframe might be viewed as a ‘sell-on-rally’ theme and not a ‘dip-buying’ opportunity from within the 2020 advance from pandemic lows of $0.5506 (march 2021).
Continuation selling from weekly prime resistance this week, therefore, could zero in on weekly prime support from $0.6948-0.7242. If a $0.6948-0.7242 break lower should come to pass, weekly support at $0.6673 and a 50% retracement at $0.6764 are observable.
Price action on the daily timeframe continued to extend its retracement slide from $0.7660: a daily double-bottom pattern’s ($0.6991) profit objective that dovetailed with a 100% Fibonacci projection at $0.7645 (AB=CD harmonic structure). Further declines in the currency pair shines light on trendline resistance-turned support, extended from the high $0.8007, and the 200-day simple moving average, currently circling $0.7296.
Elsewhere, the currency pair dropped in on H4 Quasimodo resistance-turned support at $0.7451 late Friday and chalked up a hammer candlestick pattern (bullish signal). Note that the unit also swept through the $0.7456 29th March low, highlighting a possible trend reversal. Sailing beneath $0.7451 this week deprives the market of support on the H4 until another Quasimodo resistance-turned support at $0.7349. In light of the higher timeframes potentially seeking deeper terrain, any upside attempts from $0.7451 is likely to be unstable.
A closer reading of price action on the H1 timeframe ended the week poised to test resistance at $0.7467, following an earlier rebound from just ahead of Quasimodo resistance-turned support at $0.7424 on Friday (set beneath H4 support mentioned above at $0.7451). Finding acceptance above $0.7467 early week casts light on $0.75 and prime resistance sheltering the level at $0.7509-0.7527.
The weekly timeframe rejecting prime resistance at $0.7849-0.7599, in the shape of a shooting star candlestick pattern, and the daily timeframe demonstrating space to explore lower suggests sellers might strengthen their grip this week.
In view of the higher timeframes indicating that sellers may have fuel left in the tank, moving above H1 resistance at $0.7467 unlocks the possibility of a sell-on-rally scenario from $0.75. In fact, a whipsaw above the noted psychological figure to H1 prime resistance at $0.7509-0.7527 could be sufficient to encourage a bearish scene, in line with the bigger picture.
Technically, the market remains entrenched within a dominant uptrend. You might recall the following text from previous analysis:
Along with the daily timeframe holding above its 200-day simple moving average at ¥113.66 since February 2021, the overall longer-term trend has been higher since 2012 (check monthly timeframe). The 21.5 percent correction from June 2015 to June 2016 provided a dip-buying opportunity, as did a subsequent 14.8 percent correction from December 2016 to pandemic lows formed early March 2020. Adding to this, we broke the ¥118.66 December 2016 high in mid-March.
USD/JPY, as you can see, was a notable performer on the week, rallying 1.5 percent and adding to March’s eye-popping 5.8 percent rise. Weekly Quasimodo resistance at ¥124.42 remains in the picture, while upstream exposes the ¥125.86 1st June high (2015). Any downside rejection this week shows weekly support falls in at ¥118.66. Bracing the bullish narrative, however, is last week’s rebound from the daily timeframe’s decision point at ¥121.16-122.51. Daily Quasimodo resistance can also be seen at ¥125.11.
Adding to the daily timeframe’s technical picture, we can see the relative strength index (RSI) peaked around 87.52 (a level not seen since 2014) in late March. Despite an immediate push lower, dipping a toe under the 70.00 threshold, the value ended the week within overbought territory. Exiting overbought space is considered a bearish indication by many technicians. However, in upward facing markets, such as the one we’re in now, false bearish signals are common. If the RSI value does eventually tunnel lower, the 40.00-50.00 area of support may be targeted (served as a ‘temporary oversold’ base since May 2021).
Looking across to the lower timeframes, H1 trendline support, drawn from the low ¥121.28, welcomed buyers in early trading on Friday. Subsequent trading watched price reclaim ¥124+ status in early Europe to reach a high of ¥124.68 heading into US hours. The end-of-session reversal directs focus back to trendline support, coupled with the ¥124 figure and demand from ¥123.75-124.00.
Upside gaining speed last week confirms bullish interest remains strong in this market, despite confronting weekly Quasimodo resistance from ¥124.42. This hints at a ¥124.42 breach and possible test of daily Quasimodo resistance at ¥125.11 and the ¥125.86 1st June high (2015).
Recognising the bullish landscape on the higher timeframes, a short-term dip-buying scenario may unfold at ¥124 this week, a psychological level sharing space with H1 demand at ¥123.75-124.00 and H1 trendline support.
Sterling fell victim to a broadly stronger US dollar last week, extending its decline to a second weekly session. Technically, GBP/USD weakness is not a surprise. Weekly prime resistance at $1.3473-1.3203 welcoming price action in March, in a market trending lower, demonstrates freedom for the currency pair to drop as far south as weekly support from $1.2719. Recent writing also highlighted the following in regards to trend (italics):
Trend direction on the weekly chart has been southbound since late 2007 tops at $2.1161. As a result, the 25 percent move from pandemic lows ($1.1410) in March 2020 to February 2021 might be viewed as a pullback within the larger downtrend. This, of course, places a question mark on the 8.5 percent ‘correction’ from February 2021 ($1.4241) to April 2022, suggesting the possibility of continuation selling.
Coming from weekly prime resistance and the trend facing southbound placed daily support at $1.3082 in a vulnerable situation. Therefore, Friday cementing position beneath the noted level was expected, with the level now serving as resistance and price perhaps eyeballing daily channel support (drawn from the low $1.3160) this week. The downside break was supported by the daily timeframe’s relative strength index (RSI) pulling lower from the 50.00 centreline (negative momentum) and the pair continuing to operate south of the 200-day simple moving average at $1.3538—a (technical) bearish view.
Refreshing year-to-date lows late on Friday at $1.2982 (through a H4 hammer candlestick pattern) shifts attention to H4 support at $1.2965 and a 100% Fibonacci projection coming in from $1.2936 (AB=CD structure). Also of particular note is H4 resistance at $1.3051.
From the H1 timeframe, the $1.3054-1.3040 decision point area is now within reach, following Friday’s spirited rebound from the 100% Fibonacci projection at $1.2985 (and key figure $1.30). If the unit clears the current decision point area, and takes on $1.3074, the chart shows little stopping price from reaching $1.31.
Given weekly prime resistance at $1.3473-1.3203 receiving price action, in addition to trend direction facing southbound and daily price dropping beneath support at $1.3082, chart studies indicate a bearish theme this week.
With higher timeframes looking at lower levels, the H1 decision point zone at $1.3054-1.3040 and H4 resistance from $1.3051 are likely on traders’ watchlists early week.
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