January 28th 2022: Technical Outlook
Charts: Trading View
(Italics: Previous Analysis Due to Limited Price Change)
Europe’s single currency has been hammered so far this week, dropping nearly 2.0 percent against a broadly stronger buck. Consequently, Fibonacci support 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, has been overthrown. This follows a decisive rejection from long-standing resistance at $1.1473-1.1583 (active S/R since late 2017).
Further selling on the weekly timeframe could lead EUR/USD as far south as Quasimodo support coming in at $1.0778.
Strengthening the bearish wind is the currency pair taking 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.
In conjunction with the weekly timeframe’s ‘technical presence’, Quasimodo support at $1.1213 backed off on Thursday. Prime support serves as a downside objective on the daily scale at $1.0941-1.1000 (not visible on the screen).
Momentum studies on this timeframe show the relative strength index (RSI) is bound for oversold waters. Indicator support, therefore, could step into the fray at 21.87.
The decision point at $1.1114-1.1139 elbowed its way into the spotlight on Thursday, following a one-sided decline through $1.1205-1.1230, an area delivering possible resistance should a pullback emerge.
South of $1.1114-1.1139 shines light on neighbouring Quasimodo resistance-turned support at $1.1088.
Touching gloves with its lowest level since mid-2020, EUR/USD is on the doorstep of $1.11, dropping 0.8 percent into London’s close yesterday. Recent downside also established a clean decision point from $1.1207-1.1194 to watch in the event buyers re-enter the fight.
As seen from the relative strength index (RSI), the value is deep within oversold territory. Although a location buyers can make a show from, traders are urged to pencil in the possibility of a range forming between 50.00 and the oversold area (common viewing in downward markets).
Observed Technical Levels:
According to current chart studies, all except the H4 timeframe (engaging a decision point at $1.1114-1.1139) echo a bearish tone, targeting at least $1.11 on the H1 scale.
Should the unit reach $1.11, keep an eye out for a potential whipsaw through the psychological level to H4 Quasimodo resistance-turned support at $1.1088.
Prime support at $0.6968-0.7242 is under pressure; price failed to find grip above $0.7314 mid-January. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6764.
Since mid-Feb tops at $0.8007 (2021), sellers have taken the wheel. This followed a bullish period since pandemic lows of $0.5506 (March 2020). It is important to note that the monthly timeframe has been entrenched within a large-scale downtrend from mid-2011.
Latest developments out of the daily chart reveals AUD/USD zeroing in on support at $0.7021 (offering clear S/R since October 2018). Clearance of the latter re-opens the risk of a return to Quasimodo support at $0.6896.
Meanwhile, RSI studies (relative strength index) show the indicator fast approaching oversold space after failing to command attention north of the 50.00 centreline.
Following a support-turned resistance test at $0.7097, bearish forces are within range of daily support mentioned above at $0.7021. Note the latter is plotted nearby a 100% Fibonacci projection from $0.6998 (harmonic traders will acknowledge this as a possible AB=CD formation).
A near-retest of $0.71 during London’s morning session on Thursday unlocked the door for an intraday selloff heading into US hours. Forming a supply zone at $0.7088-0.7073, price ended the session tunnelling through support at $0.7042. With the aforementioned support poised to offer resistance, the big figure $0.70 warrants attention.
The relative strength index (RSI) currently circles the oversold area, offering a temporary bottom around the 23.00ish region.
Observed Technical Levels:
Daily support at $0.7021 is a key watch in this market, though before a bullish showing develops (if at all) traders could witness a whipsaw through the level to draw in willing bids from the H4 timeframe’s 100% Fibonacci projection from $0.6998. Note this level also shares chart space with the widely watched $0.70 psychological figure on the H1.
Despite a solid showing from sellers off the 1.272% Fibonacci projection from ¥116.09 at the beginning of the year, in the shape of a shooting star, USD/JPY bulls reassumed control this week. This is in line with price advancing since the beginning of 2021 (reasonably clear uptrend).
Leaving demand at ¥112.66-112.07 unchallenged, which happens to share space with a 78.6% Fibonacci retracement at ¥112.00 and a 50.0% retracement from ¥112.55, Quasimodo resistance at ¥116.33 is in the firing range.
Also of technical note is the double-bottom formation at ¥113.48; price busted through the neckline in recent trading at ¥115.06, perhaps fuelling a run to ¥116.33.
The trend on this timeframe, like the weekly timeframe, faces northbound. This is reinforced by the relative strength index (RSI) recoiling from support between 40.00 and 50.00 (a ‘temporary’ oversold range since 10th May—common view in trending markets).
Overpowering trendline resistance, drawn from the high ¥116.35, and resistance from ¥115.01 has thrown the ¥115.49-115.24 decision point into the mix on the H4 scale. The subdued bearish response from the aforesaid barrier indicates follow-through buying may be on the menu towards daily Quasimodo resistance noted above at ¥116.33.
After short-term action adopted ¥114.42 in the form of support, ¥115 was taken out and resistance nudged into view at ¥115.48.
With ¥115.48 arranged within the upper range of the H4 decision point at ¥115.49-115.24, a return to ¥115 could be seen, complemented by prime support at ¥114.90-115.00.
Regarding the relative strength index (RSI), we see the value recently exited overbought space, following a peak at 88.00.
Observed Technical Levels:
A retest of ¥115 could be enough to tempt a dip-buying scenario, a psychological level benefitting from a H1 prime support at ¥114.90-115.00 and a support level from the H4 timeframe at ¥115.01.
Note that a bounce from ¥115 is also in line with the immediate trend in this market.
Since reaching a top at $1.3749 in early January, GBP/USD bears assumed control. This re-opens the door to the double-top pattern’s ($1.4241) profit objective around $1.3093 (red boxes).
Against this background, of course, is the possibility of upside. ‘Consumed supply’ (blue area) remains 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.
Trend studies show the weekly timeframe has been higher 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.
Since shaking hands with the lower side of the 200-day simple moving average (currently circling $1.3719), GBP/USD shed nearly 3.0 percent (or nearly 400 pips). Support is nearby at $1.3355, with a break triggering additional bearish flow, perhaps setting the stage for a test of Quasimodo support at $1.3119.
Trend on this timeframe remains biased to the downside, with the relative strength index (RSI) also recently nudging beneath the 50.00 centreline, signalling negative momentum (average losses exceeding average gains).
Thursday led price through $1.3428-1.3444—now a resistance zone—to test a decision point at $1.3340-1.3364, joining hands with a 1.618% Fibonacci projection at $1.3376. An additional decision point is seen at $1.3241-1.3276 in the event sellers resume command.
US hours on Thursday entered a tight range between $1.34 and a 1.272% Fibonacci expansion at $1.3376 and a 1.618% Fibonacci extension at $1.3383. North of $1.34 calls on a nearby Quasimodo support-turned resistance at $1.3414, whereas under the noted Fibonacci levels, the radar is fixed on a Quasimodo resistance-turned support at $1.3333.
As for the relative strength index (RSI), the value is attempting to bottom within oversold terrain and recently pencilled in a departure from the oversold area. Traders will, therefore, likely be watching this area closely today.
Observed Technical Levels:
Daily support seen at $1.3355, coupled with a H4 decision point at $1.3340-1.3364, could lift short-term action back above $1.34 and H1 resistance at $1.3410 to potentially take aim at H4 resistance from $1.3428-1.3444.
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