January 20th 2022: Technical Outlook
Charts: Trading View
(Italics: Previous Analysis Due to Limited Price Change)
Long-standing resistance from $1.1473-1.1583 (active S/R since late 2017) entertained a bearish showing last week, with this week currently underwater by 0.6 percent. Familiar support resides at $1.1237-1.1281. Made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237, this area, as you can see, delivered a floor heading into the close of 2021. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation (extended D leg).
Strengthening the aforementioned resistance area’s presence, EUR/USD took out 2nd November low (2020) at $1.1603 in late September (2021), suggesting a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s long-term (some would say ‘primary’) downtrend since mid-2008.
Joining the lower edge of weekly resistance at $1.1473-1.1583, price recently whipsawed above a 7-month trendline resistance, extended from the high $1.2254, established by way of a bearish engulfing candle (a reversal pattern in which focus is directed to the real candle body rather than upper and lower shadows). Despite a mild recovery attempt on Wednesday, sellers continue to have the upper hand. Should bearish follow-through emerge, Quasimodo support offers an obvious target at $1.1213.
Momentum studies, taken from the relative strength index (RSI), has the indicator’s value hugging the 50.00 centreline, following a near-test of resistance at 63.66 last week. Crossing under the 50.00 centreline (average losses outweighing average gains: negative momentum) will help validate the near-term bearish landscape.
Trend on this scale has also been lower since June 2021.
Discovering a floor ahead of 11th January low $1.1313, and two neighbouring trendline supports (drawn from the low $1.1186 and $1.1235), subsequent movement led the candles to resistance at $1.1354-1.1379—a prior decision point positioned a handful of pips beneath resistance at $1.1382.
Although $1.1354-1.1379 is in ‘agreement’ with higher timeframe direction, traders are urged to consider the possibility of a whipsaw to resistance at $1.1382 (or even the decision point located between $1.1435 and $1.1399) before sellers attempt to make a show.
The technical framework out of the H1 chart exposes demand-turned supply from $1.1363-1.1375 and intersecting trendline resistance, extended from the high $1.1483. Couple this area with H4 resistance underlined above at $1.1354-1.1379, a bearish narrative may develop from here.
In terms of where we stand on the relative strength index (RSI) at the moment, the value is circling the 50.00 centreline after rebounding from oversold. Resistance derived from this mid-point adds confluence to the aforementioned price resistances.
Observed Technical Levels:
The weekly timeframe coming from resistance at $1.1473-1.1583, together with the daily timeframe holding south of trendline resistance, throws positive light on H4 resistance at $1.1354-1.1379 which holds H1 supply within at $1.1363-1.1375.
Downside targets from the noted H4 and H1 zones is $1.13 on the H1, followed by the upper edge of weekly support at $1.1281.
Prime support at $0.6968-0.7242 continues to play a crucial role on the weekly timeframe. Bulls, as you can see, embraced a modestly bullish stance into the close of 2021. 2022, on the other hand, has been undecided so far. Should buyers continue pressing higher, resistance is formed at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.
Since mid-Feb 2021, a modest downside bias has been seen. This followed higher prices since pandemic lows of $0.5506 (March 2020). However, it is important to note that from the monthly timeframe the unit has been entrenched within a large-scale downtrend from mid-2011.
Following the near-test of resistance between $0.7416 (the 200-day simple moving average) and $0.7315 (a 100% Fibonacci projection), the unit clocked a low of $0.7170 on Tuesday and printed a noticeable comeback on Wednesday.
Aside from the $0.7130 low (7th January) and the $0.7082 (20th December ) low, obvious support at $0.7021 calls for attention in the event sellers regain control.
The relative strength index (RSI) continues to circle the 50.00 centreline. $0.7416-0.7315 sellers, therefore, will likely be watching for the indicator to secure position beneath the 50.00 neighbourhood, movement informing market participants that average losses exceed average gains.
AUD/USD bulls entered an offensive phase out of $0.7169-0.7187 demand yesterday (sat just above Quasimodo support from $0.7146), elevating the currency pair to within close proximity of resistance at $0.7250. Beyond resistance, price is likely to readdress prime resistance at $0.7323-0.7308.
Leaving Quasimodo support at $0.7168 unchallenged, London’s morning session on Wednesday witnessed price reclaim $0.72+ status and whipsaw above local (double-top) peaks at $0.7229 to touch gloves with a moderate decision point at $0.7254-0.7238 as we entered US trading. Note that this area houses the H4 resistance at $0.7250 within its upper boundary.
The relative strength index (RSI), in line with price movement greeting the decision point, touched overbought space and, as of writing, is attempting to drop through 60.00.
Observed Technical Levels:
The H1 decision point at $0.7254-0.7238 and converging H4 resistance from $0.7250 are likely to offer sellers something to work with, targeting $0.72 on the H1 and the upper limit of H4 demand at $0.7187. The bearish reading is largely based on the lack of buying out of weekly prime support at $0.6968-0.7242 and recent reaction from daily resistance between $0.7416-0.7315.
After touching gloves with a 1.272% Fibonacci projection from ¥116.09 in the shape of a shooting star and refreshing multi-year pinnacles, USD/JPY tumbled 1.2 percent last week. While modest recovery efforts developed in recent trading, sellers remain at the wheel with the path of least resistance towards support at ¥112.16.
In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61. In consideration of the trend, a dip-buying theme from ¥112.16 is a reasonable assumption.
Tuesday settling in the shape of a shooting star candlestick formation attracted a bearish following on Wednesday.
The technical framework to be mindful of on this chart has Quasimodo resistance to target at ¥116.33, whereas downstream shines light on demand at ¥112.66-112.07, tailed closely by a decision point from ¥111.18-111.79 and the 200-day simple moving average at ¥111.40.
In terms of the relative strength index (RSI), support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May) remains active.
Much like the weekly timeframe, trend on the daily scale points to the upside.
Quasimodo support-turned resistance at ¥114.71 elbowed into the frame Tuesday and, held a bearish vibe on Wednesday. Pursuing lower prices highlights a familiar decision point at ¥113.54-113.78, set a few pips above Quasimodo support at ¥113.22.
The ¥115 reaction shows limited support until reaching ¥114. However, ¥114 also advertises itself as a weak level exhibiting little confluence to write about. Beyond the round number, Quasimodo support sits at ¥113.64, closely shadowed by two support levels at ¥113.34 and ¥113.56.
Also worth noting is the relative strength index (RSI) nearing oversold terrain after retesting the lower side of the 50.00 centreline.
Observed Technical Levels:
Keeping it simple, chart studies indicate a ¥114 breach on the H1 timeframe. Short-term players are likely to take aim at H1 Quasimodo support at ¥113.64, and perhaps support at ¥113.34 and ¥113.56.
The current 4-week bid—initiated ahead of the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes)—is echoing a mildly weaker tone this week, down 0.3 percent. ‘Consumed supply’ (blue area) is nearby between $1.4001 and $1.3830. Considering this, candle action may still be guided as far north as resistance from $1.4371-1.4156 in the coming weeks.
In regards to trend, the weekly timeframe’s position shows higher prices since early 2020. However, it’s important to recognise that while the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s long-term trend has been lower since late 2007.
Three back-to-back daily bearish candles delivered the currency pair to support at $1.3602, deriving technical impetus from the lower side of the 200-day simple moving average at $1.3731. Drawing a bid from current support on Wednesday knocked some of the wind out of the GBP decline and underscores the prospect of a bullish challenge.
Below $1.3602 re-opens the door for a return to neighbouring trendline resistance-turned support, taken from the high $1.4250.
Momentum, according to the relative strength index (RSI), is seen attempting to regain some poise around the 60.00ish region. Though rupturing this number casts light on the 50.00 centreline.
Wednesday settled around resistance at $1.3622-1.3646—plotted just south of resistance at $1.3668—and provided candlestick enthusiasts a shooting star formation, generally recognised as a bearish signal. If sellers take control, aside from a number of ‘local’ lows, demand is visible at $1.3428-1.3444.
However, by entering short at this point, traders are effectively selling into daily support from $1.3602. Conservative traders, therefore, may elect to wait for a price close beneath $1.36.
Following a whipsaw under $1.36, Quasimodo support stepped in at $1.3580 and encouraged a bid back over $1.36 and also pulled the relative strength index (RSI) above the 50.00 centreline. Note the latter is set to be retested as support.
Resistance calls for attention around $1.37, a psychological barrier that’s served well as support and resistance since early November 2021.
Observed Technical Levels:
The daily timeframe is seen testing support at $1.3602; the H4 timeframe is seen testing a resistance area at $1.3622-1.3646, and the H1 appears poised to revisit $1.36.
The above presents a difficult trading picture, technically speaking. As a result, traders are likely to wait and see if H1 can punch through $1.36 and H1 Quasimodo support at $1.3580 before taking a bearish position, targeting H1 support at $1.3533 and $1.35 (aligns closely with the daily timeframe’s trendline resistance-turned support, taken from the high $1.4250).
In terms of long positions, technicians are likely to want to see a price close above H4 resistance at $1.3668 form, clearing space to $1.37 on the H1.
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