Weekly Technical Market Insight: 17th – 21st February 2020

Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets

US Dollar Index:

The US dollar index, or ‘DXY’, a measure of the value of the USD relative to a basket of foreign currencies, climbed
nine out of ten days.

After retesting the 200-day SMA (97.76) and a supply-turned demand zone at 97.35/97.85, the index retained a
strong underlying bid, toppling a familiar supply area at 98.65/98.19. Upside momentum, particularly through
Thursday and Friday last week, however, diminished, and could prove unsustainable.

Also in favour of a pullback this week is ‘stacked supply’ between 100.03/99.37 and 99.41/99.05 – this is essentially
supply areas overlapping one another – a 161.8% Fibonacci extension point at 99.27 and the RSI generating hidden
bearish divergence within overbought ground.

Chart action, therefore, indicates a pullback in the broad dollar market over the coming week, with supply-turned
demand at 98.65/98.19 based as the opening support target.


Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets


Monthly timeframe:
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 had the unit retesting the
upper boundary last week.

Although down 2.36% on the month and in-line with the primary downtrend, 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 and a reasonably ‘fresh’ demand area coming in at 0.9581/1.0221.

Daily timeframe:
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 and dethroning the 1.0879 October 1 st low.
Continued downside from here is a possibility, which would draw demand at 1.0680/1.0781 to surface (formed April
The RSI also drove further into oversold territory – currently trades at 23.32.

H4 timeframe:
Demand at 1.0832/1.0877 is proving somewhat fragile, having its lower edge absorbed Friday after finding a ceiling of
resistance off the underside of a channel support-turned resistance (1.1034 – yellow). Another area of interest in sight
is more of a local supply zone at 1.0890/1.0870. Though with sell stops under pressure beneath the current demand,
its unlikely price will reach 1.0890/1.0870 in the next few sessions.

Should the euro sustain its downside momentum this week, demand at 1.0738/1.0774 is seen in the firing range.

H1 timeframe:

As can be seen from the H1 timeframe, Friday found resistance off supply at 1.0869/1.0858, which aligned with the
50-period SMA. Selling guided the candles back into a descending channel (1.0925/1.0865) and exposed a possible
area of support between the 1.08 handle and a 127.2% Fibonacci extension at 1.0813.
Traders may also find use in noting the RSI’s current ascending channel, with the indicator poised to visit channel
In terms of Friday’s data:
– Flash Q4 GDP reading in Germany reported lower-than-expected figures (0.0% vs. consensus 0.1%). WIESBADEN – The gross domestic product (GDP) did not continue to rise in the fourth quarter of 2019 compared with the third quarter of 2019 after adjustment for price, seasonal and calendar variations.
– US Retail Sales expanded in line with expectations in January, though the value of overall sales climbed 0.3%, Commerce Department figures showed Friday.
– The University of Michigan’s preliminary gauge of US Consumer Sentiment for the current month rose to 100.9, beating the 99.5 consensus. Surveys of Consumers chief economist, Richard Curtin noted, Consumer sentiment rose to 100.9 in early February to nearly match the expansion peak of 101.4, set two years ago in March 2018. The Expectations Index, the main gauge of future economic conditions, rose to 92.6, also its second highest level in this long expansion.

Longer term:
A rebound higher could be on the cards from monthly demand at 1.0488/1.0912, though given daily price displays
scope to test demand at 1.0680/1.0781, a dip lower may be seen before buyers step in.

Shorter term:
Increased selling is expected early week, having seen H4 demand weaken at 1.0832/1.0877 and H4 channel support-turned resistance cap upside. Selling back into the H1 channel could be something to consider, with a downside target set at 1.08/1.0813. This area may hold price but the move could prove unsustainable, in light of daily price likely wanting the top edge of demand at 1.0781.

Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets


Monthly timeframe:
Demand at 0.6358/0.6839 remains in the fight, yet price is struggling 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 0.8303/0.8082.

Currently, the pair trades +0.28% on the month.

Daily timeframe:
Technical research on the daily timeframe has the couple rebounding from support at 0.6670. Another point of interest on this timeframe falls in at a trend-line support-turned resistance level (0.7393) and a supply zone highlighted at 0.6855/0.6823.

The RSI, for those who follow indicators, recently emerged from oversold territory, though has so far failed to connect with the 50.0 value.

H4 timeframe:
Since the beginning of last week, AUD/USD has been busy carving out a consolidation between supply drawn from
0.6761/0.6741 and a demand area coming in at 0.6699/0.6715. Also recently entering the picture is a trendline resistance (0.7031).

Directly north of the current supply rests another potential point of resistance, comprised of a 50.0% retracement at
0.6770 and a 38.2% Fibonacci retracement ratio at 0.6765. South of the current demand, however, limited support is
seen until we tackle the 0.6662 February 7 th low.

H1 timeframe:
Analysis of H1 price movement reveals buyers and sellers to be squaring off within demand at 0.6707/0.6715 (located within the H4 demand zone at 0.6699/0.6715). The 50-period SMA (blue) capped upside Friday, with price making its way through the 100-period SMA (orange) into the week’s close.

Beyond demand we have the 0.67 handle to contend with, while a push higher could approach 0.6750 and supply at 0.6772/0.6754.

Longer term:
The monthly timeframe is seen testing demand at 0.6358/0.6839, with daily price finding support of 0.6670. So, despite the primary trend facing south, further recovery could be in store.

Shorter term:
H4 and H1 demand is in play right now at 0.6699/0.6715 and 0.6707/0.6715, respectively. A break above the 50- period SMA on the H1 could trigger buying, with an initial upside objective set at the H4 trend line resistance, followed by 0.6750 on the H1 and H1 supply at 0.6772/0.6754.

Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets


Monthly timeframe:

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. 

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 +1.30% on the month.

Daily timeframe:
Despite a reasonably healthy recovery since August 2019, involving the upper edge of a supply area being absorbed, long-term trend-line resistance (114.54) has capped upside. 

Should we eventually overthrow the said trendline, resistance resides close by in the form of a channel resistance (109.48) and a 78.6% Fibonacci retracement at 110.71 (red level). A rejection, on the other hand, has the 108.31 January 31st low to contend with, as well as nearby channel support (106.48) and demand at 107.82/108.04.

H4 timeframe:
Since early February, price action has stamped out a consolidation between a supply zone coming in at 110.23/110.04 and a supply-turned demand area at 109.65/109.49. 

Let’s take into account the upper edge of this range is bolstered by a daily trendline resistance, which may lead to a breakout south to H4 demand at 109.30/109.42.

H1 timeframe:
Lacklustre US retail sales figures Friday had the USD/JPY rooted within a relatively tight range between 109.91/109.69, capped at the underside of the 100/50-period SMAs (109.84/109.81). 

Aside from a couple of intraday low points, the path appears reasonably free to connect with 109.50 on this timeframe, followed by supply-turned demand at 109.32/109.17. Higher on the curve, nevertheless, the 110 handle is featured as a prominent resistance, with a break revealing supply at 110.25/110.15.


Longer term:
The daily trend-line resistance, coupled with daily supply at 110.73/110.31, although it had its upper edge engulfed, could weigh on price action this week.

Shorter term:
With the 100/50-period SMAs capping upside, this could be a potential location to seek intraday bearish themes, with an initial downside target at 109.50. However, while we are coming from daily resistances, there’s still a threat of buying on the H4 timeframe from demand at 109.65/109.49.

Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets


Monthly timeframe:
Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and 38.2% Fibonacci retracement combination (red). This 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. With breaking the 1.3380 March 2019 high, we could be heading for a retest of 1.4520/1.3893 in the coming weeks. 

Currently, the pair trades at -1.20% on the month.

Daily timeframe:
Demand at 1.2823/1.2910 held price action higher last week, landing the unit within close proximity of a local trend-line resistance (1.3514), with a break of here revealing a supply area at 1.3303/1.3184.

Beyond the current demand, we also have another port of demand, a touch larger than the current, at 1.2649/1.2799, which happens to house the 200-day SMA (1.2688). 

H4 timeframe:
In recent sessions, the February 5th high 1.3070 was challenged, with price marginally paring weekly gains into the close. This level, a potential double-top formation (red arrows), is also closely positioned to a 61.8% Fibonacci retracement at 1.3079.

An upward lift would likely tip price in favour of an advance to an engulfed supply area pencilled in from 1.3175/1.3142. Continued selling off 1.3070, nonetheless, has demand at 1.2916/1.2942 to target.

H1 timeframe:
Friday saw cable find support off the 50-period SMA, sited a few points ahead of the key figure 1.30. Aside from last Thursday’s high 1.3069, the next post of supply is seen at 1.3106/1.3091. Traders may wish to acknowledge this was a prior demand area, and holds the 1.31 handle within and a 127.2% Fibonacci extension at 1.3103.

In case of a downturn in price this week, areas south of 1.30 fall in at demand drawn from 1.2965/1.2987, closely shadowed by another layer of demand at 1.2916/1.2938.

Longer term:
Monthly price exhibits scope for a move higher to 1.4520/1.3893, while daily price could perhaps hinder upside at trend-line resistance and a supply area noted at 1.3303/1.3184.

Shorter term:
The 1.31 handle is an interesting level. Not only is the base a widely watched number by and of itself, it comes together with daily trendline resistance, a H1 supply zone at 1.3106/1.3091 and a 127.2% Fibonacci extension. Therefore, short sales from here are certainly an option this week.  

Weekly Technical Market Insight: 17th – 21st February 2020, FP Markets

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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