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October 6th 2021: Dollar Inches Higher Ahead of ADP Non-Farm Employment Data

By:
Aaron Hill
Published: Oct 5, 2021, 21:55 UTC

EUR/USD attempting to defend $1.16 support; AUD/USD eyeing a whipsaw north of $0.73 and GBP/USD looking at resistance from $1.3658—read on for detailed analysis.

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Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Weekly timeframe:

Focus remains on prime support at $1.1473-1.1583, a long-term base sharing chart space with a 100% Fibonacci projection at $1.1613 and a 1.27% Fibonacci extension at $1.1550. Note the 100% value represents a harmonic AB=CD bullish point, bringing a 1.13% BC Fibonacci extension to the table at $1.1623.

Also technically interesting on the weekly scale is the possibility of long-term sell-stops being tripped south of late September lows at $1.1612 (2020). Sell-stops could help fuel larger buyer interest from $1.1473-1.1583.

Trend studies show that with the break of $1.1612 lows, the pair is perhaps in the early phase of a trend change to the downside.

Daily timeframe:

Improved risk sentiment weighed on USD upside Tuesday—the US dollar index finished the session considerably off best levels around 94.06, consequently elevating EUR/USD off session troughs at $1.1581.

Technical structure remains concentrated on Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583) and Quasimodo support-turned resistance at $1.1689.

From the relative strength index (RSI), the indicator’s value exited oversold territory in recent trading. Continued upside brings attention to the 50.00 centreline. Therefore, this will be a level to keep a tab on going forward.

H4 timeframe:

As evident from the H4 scale, the blend of resistance at $1.1622, a previous Quasimodo support, and descending resistance, extended from the low $1.1794, enticed selling on Tuesday, clocking a low of $1.1581 (ahead of Quasimodo support from $1.1563).

Maintaining current lows, and clearing the aforesaid resistances, resistance at $1.1666 is visible, sharing space with a 50.00% retracement at $1.1659 and a 100% Fibonacci projection at $1.1656.

With medium-term flow facing lower since June, sellers still likely have the upper hand in this market.

H1 timeframe:

The majority of Tuesday’s action was centred around $1.16. US hours witnessed a dip to session lows, with the unit subsequently reclaiming $1.16+ position in recent movement. Trendline resistance, drawn from the high $1.1846, calls for attention as a possible upside target, followed by H4 resistance underlined above at $1.1666.

Below $1.16, H4 Quasimodo support at $1.1563 is a floor to watch.

Observed Technical Levels:

In the event buyers defend $1.16 on the H1, this implies an advance to H1 trendline resistance, drawn from the high $1.1846. Ultimately, a move above the said trendline would likely push the currency pair to H4 resistance at $1.1666, which is joined by Fibonacci studies on the H4 around $1.1656.

Action sub $1.16, on the other hand, could lead to H4 Quasimodo support at $1.1563.

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AUD/USD:

(Italics: previous analysis)

Weekly timeframe:

Buyers and sellers remain battling for position around the upper perimeter of prime support at $0.6968-0.7242.

$0.6968-0.7242 buyers have prime resistance at $0.7849-0.7599 to target; failure to command position from $0.6968-0.7242, on the other hand, opens up support at $0.6673.

Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, any decisive response from $0.6968-0.7242 might be the start of a dip-buying attempt to join the current trend.

Daily timeframe:

A closer examination of price action on the daily timeframe shows the Australian dollar finished Tuesday mostly unmoved against its US counterpart.

Fibonacci support between $0.7057 and $0.7126 is a key base on this timeframe, as is prime resistance at $0.7506-0.7474. Immediately above, we also see Quasimodo support-turned resistance at $0.7621, which happens to join closely with the 200-day simple moving average at $0.7583, a 61.8% Fibonacci retracement at $0.7585 and a 100% Fibonacci projection at $0.7551.

From the relative strength index (RSI), the value is seen touching the lower side of the 50.00 centreline. Journeying higher remains something to keep an eye out for, action advising traders that average gains exceed average losses.

H4 timeframe:

Similar to Tuesday’s technical briefing, the technical framework is unchanged as we move into Wednesday’s session.

Price continues to hover just south of resistance at $0.7317. Area above the level shows (potential) stacked supply between $0.7376 and $0.7347 and Quasimodo resistance at $0.7394.

In the event sellers take the wheel from current price, support is at $0.7223.

H1 timeframe:

Early trade observed an absence of AUD support, responding to risk aversion and the Reserve Bank of Australia maintaining current policy. Improved risk sentiment bolstered the risk-sensitive Australian dollar in later trade, drawing the currency pair to $0.73.

It’d be unwise to rule out additional selling from $0.73, though clearing the psychological level unlocks the trapdoor to Quasimodo resistance coming in at $0.7339, a level dovetailing with a 1.618% Fibonacci projection at 0.7333 and a 1.272% Fibonacci expansion at $0.7336.

However, a whipsaw above $0.73 to H4 resistance at $0.7317 remains a possible scenario that could draw short-term selling.

Observed Technical Levels:

Of immediate interest is the likelihood of H1 price snapping above $0.73 offers and bringing in bearish orders from H4 resistance at $0.7317. Downside momentum drawn from a $0.73 whipsaw, nevertheless, could be limited, thanks to weekly price engaging prime support at $0.6968-0.7242. Therefore, $0.7317 shorts are urged to work with strict trade management rules.

In terms of downside targets on this timeframe, H1 support carries weight at $0.7258.

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USD/JPY:

(Italics: previous analysis)

Weekly timeframe:

Despite USD/JPY concluding last week off 19-month highs at ¥112.08 and establishing a shooting star candlestick pattern (bearish signal) ahead of supply at ¥113.81-112.22, buyers are now on the offensive.

A bearish scene, nonetheless, directs flow to familiar demand at ¥108.40-109.41—arranged north of descending resistance-turned support, taken from the high ¥118.61.

Daily timeframe:

Leaving support at ¥110.70 unchallenged, USD/JPY accelerated to highs of ¥111.56 Tuesday and nudged the 1.618% Fibonacci expansion at ¥112.05 in sight—a level drawing bearish movement last week.

Technical eyes will note yesterday’s advance was joined with additional support from the relative strength index (RSI) at 56.85.

H4 timeframe:

Despite a deep test of supply-turned demand (formed early July) from ¥110.99-110.79 over recent candles—appearing ready to throw in the towel—recent interest to the upside maintained the area and lifted price action to nearby resistance at ¥111.60.

Clearing the aforesaid resistance shines light on Quasimodo resistance at ¥112.70, arranged a handful of pips north of yearly peaks at ¥112.08.

H1 timeframe:

Commanding support from ¥111, along with the 38.2% Fibonacci retracement at ¥110.95, delivered a bullish theme on Tuesday. Brushing aside a number of local highs landed movement within a stone’s throw from Quasimodo resistance at ¥111.68, a 61.8% Fibonacci retracement at ¥111.60 and a 1.272% Fibonacci projection at ¥111.61. As such, this is an area sellers could be drawn to.

Air space north of the noted levels directs attention to the ¥112 figure.

Observed Technical Levels:

Short-term action looks poised to address H1 resistance between ¥111.68 and ¥111.60, which happens to accommodate H4 resistance at ¥111.60.

Although the said resistances command attention, traders are urged to take into consideration both the weekly and daily timeframes exhibit scope to approach area north of ¥112.

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GBP/USD:

(Italics: previous analysis)

Weekly timeframe:

Supply-turned demand at $1.3629-1.3456 continues to emphasise a distressed vibe after having its lower limits clipped in recent trading. In spite of recovery gains developing this week, price action closing below a double-top pattern’s ($1.4241) neckline at $1.3669 signals bears are looking to take charge.

The double-top pattern’s profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the neckline—sits around $1.3093. Conservative pattern sellers are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Daily timeframe:

The $1.3736-1.3659 decision point is now centre of attention on the daily scale, as sterling chalked up a fourth consecutive bullish close yesterday. Set beneath trendline resistance, taken from the high $1.4250, and the 200-day simple moving average at $1.3839, this is an area sellers may welcome.

Additional technical elements bolstering the current decision point are the southbound market since June, and the relative strength index (RSI) closing in on the lower side of the 50.00 centreline to perhaps forge resistance.

H4 timeframe:

Tuesday had price action overthrow trendline resistance, extended from the high $1.3913, to bring in resistance at $1.3640. Note the breached trendline now offers support.

Nearby, support is visible at $1.3570, while above $1.3640 points to a decision point at $1.3750-1.3721.

H1 timeframe:

$1.36 delivered a supportive floor Tuesday, despite a brief spell south of the round number in Asia. Resistance is set to receive price at $1.3658, joined by a 50.00% retracement at $1.3662 and a 78.6% Fibonacci retracement at $1.3661. Further buying, however, opens up the $1.37 level.

Observed Technical Levels:

With the weekly timeframe informing traders that sellers are looking to take the reins, the lower limit of the daily decision point at $1.3659 and H1 resistance coming in from $1.3658, is a location sellers could warm to if tested. Any downside attempt from the said resistances shows a $1.36 breach might be in the offing.

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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.

About the Author

Aaron Hillcontributor

Aaron graduated from the Open University and pursued a career in teaching, though soon discovered a passion for trading, personal finance and writing.

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