September 29th 2021: Dollar Index Clocks 10-Month Tops Amid Rise in US Treasury Yields

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Weekly timeframe:

EUR/USD—down 0.4 percent on the week—is approaching mid-August troughs at $1.1664. Rupturing the said level shines the technical spotlight 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 residing south of late September lows at $1.1612 (2020).

In addition to the above, we see trend on the weekly chart has largely been bullish since early 2020.

Daily timeframe:

It was aired in Tuesday’s technical briefing that Quasimodo support at $1.1689 lacked energy since welcoming price in the second half of last week. This is despite hidden bullish divergence out of the relative strength index (RSI) reinforcing the Quasimodo. An RSI 50.00 centreline cross to the upside would help validate buyer intent.

Failure to command a bullish position above $1.1689 swings the technical pendulum in favour of eventually reaching 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).

Progressing to the upside, nevertheless, seats $1.1900ish resistance in sight. The opening above $1.1900 shines light on prime resistance at $1.2115-1.1990 and the 200-day simple moving average at $1.1975.

H4 timeframe:

The $1.1690-1.1705 decision point finally abandoned position Tuesday and subsequently accepted sellers in the form of resistance. Quasimodo support is seen at $1.1666 as a downside objective, followed by additional Quasimodo support drawn from $1.1622.

In the event $1.1690-1.1705 fails to deliver further resistance, traders are urged to pencil in resistance at $1.1742.

H1 timeframe:

An increase in US Treasury yields Tuesday—the benchmark 10-year note rallied north of 1.50 percent—generated strong demand for the US dollar. The DXY (US dollar index) clocked highs of 93.81, levels not seen since November 2020, consequently weighing on EUR/USD sub $1.17 and pressuring buyers at demand from $1.1675-1.1686 to test neighbouring Quasimodo support at $1.1673.

Directly beneath $1.1673, H4 Quasimodo support is present at $1.1666.

Observed Technical Levels:

Short term, chart studies indicate a bearish stage at the moment, targeting H4 Quasimodo support at $1.1666.

Voyaging below $1.1666 not only directs the technical radar to H4 Quasimodo support at $1.1622 (which aligns closely with the upper boundary of weekly Fibonacci structure at $1.1623), it confirms a lack of buying interest at daily Quasimodo support from $1.1689.

AUD/USD:

(Italics: previous analysis)

Weekly timeframe:

According to the weekly chart, buyers and sellers remain battling for position around the upper perimeter of prime support at $0.6968-0.7242. Current price movement emphasises a modest bearish tone, perhaps setting the stage for a deeper move within the said support over the coming weeks.

Buyers regaining consciousness 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 additional response from $0.6968-0.7242 might be the start of a dip-buying attempt to join the current trend.

Daily timeframe:

Latest developments out of the daily chart show price carved out a dominating bearish outside reversal candle on Tuesday (although these formations are best served following an up move).

In terms of technical structure, attention remains concentrated on Fibonacci support at $0.7057-0.7126 and prime resistance at $0.7506-0.7474.

Beyond the aforementioned areas, Quasimodo support-turned resistance at $0.7621 and the 200-day simple moving average at $0.7591 are visible. Nearby we also note a 100% Fibonacci projection at $0.7604, a 61.8% Fibonacci retracement at $0.7585 and a 1.618% Fibonacci extension at $0.7644.

To the downside, support falls in around $0.7021.

Momentum is seen levelling off within touching distance of the 50.00 centreline, according to the relative strength index (RSI). The indicator value maintaining position below 50.00 signals downside momentum: average losses exceeding average gains.

H4 timeframe:

Despite an early advance, a mixture of market elements pressured the Australian dollar lower against its US counterpart Tuesday: Increased demand for the US dollar on the back of advancing US Treasury yields, alongside a clear risk-off impulse.

Technically, price action came within range of resistance at $0.7317 prior to switching gears and heading lower, consequently landing the unit on the doorstep of a decision point at $0.7200-0.7218. Sustained interest to the downside, however, could eventually unlock the trapdoor to Quasimodo support at $0.7144 and a deep 88.6% Fibonacci retracement at $0.7146.

H1 timeframe:

For those who read Tuesday’s technical briefing you may recall the following (italics):

US hours establishing session lows at $0.7250 in the form of a bullish outside reversal, positions the candles within touching distance of the $0.73 big figure. Traders may also note that tucked a few pips above this barrier we have two Fibonacci clusters, with the lowest of the two coming in between $0.7307 and $0.7302, and the higher base drawn between $0.7320 and $0.7315, which already welcomed a whipsaw above the $0.73 big figure last week.

Should the unit continue exploring higher terrain and test $0.73, another whipsaw could be in the offing. Between $0.7320-0.7315 and $0.7307-0.7302, therefore, is a location sellers may be willing to short into buy-stops north of $0.73.

As evident from the chart, Tuesday did indeed snap above $0.73 and test Fibonacci resistance between $0.7307 and $0.7302 before collapsing in early Europe. Running through several swing low points, support at $0.7221 is close by. Space below points to Quasimodo support at $0.7205 and the $0.72 figure.

Observed Technical Levels:

Owing to H1 support at $0.7221 capping downside since late August, the level is likely to draw interest. With that said, H1 Quasimodo support at $0.7205 and the $0.72 figure—both located within the H4 decision point at $0.7200-0.7218—may tempt a whipsaw south of $0.7221.

Price snapping below $0.7221 and testing $0.7205, as well as printing a H1 close back above $0.7221, might be enough to tempt a short-term bullish wave.

USD/JPY:

(Italics: previous analysis)

Weekly timeframe:

Continuation buying is well underway, following last week’s stronger-than-expected ¥108.40-109.41 demand test. USD/JPY bulls remaining on the offensive has ¥113.81-112.22 supply to target.

Should sellers eventually take control and navigate sub ¥108.40-109.41, lying in wait is descending resistance-turned support, extended from the high ¥118.61.

Daily timeframe:

Notching up a fifth successive day in the green on Tuesday, price action is within a pip of challenging early July tops at ¥111.66—arranged just under a 1.272% Fibonacci projection at ¥111.74 and a 1.618% Fibonacci expansion at ¥112.05.

Any bearish response from the said levels highlights support at ¥111.11 as a possible target, a previous Quasimodo resistance level.

Technicians may also acknowledge the relative strength index (RSI) is closing in on overbought territory, after running above range resistance at 56.85.

H4 timeframe:

After overthrowing supply at ¥110.99-110.79 and creating a decision point at ¥110.93-111.03, USD/JPY has crossed swords with resistance at ¥111.60.

Selling interest appears brittle at current resistance, incapable of pressing below ¥111.23. Travelling higher, therefore, throws light on an aged Quasimodo resistance at ¥112.17, a level drawn from April 2019.

H1 timeframe:

Quasimodo resistance at ¥111.63 made an entrance heading into US hours on Tuesday, a horizontal base merging with channel resistance, extended from the high ¥109.90.

Channel support, etched from the low ¥109.12, demands attention lower on the curve, while a ¥111.63 breach guides technical flow in the direction of the ¥112 figure.

Observed Technical Levels:

Observing weekly price honing in on supply from ¥113.81-112.22, and daily price drawing Fibonacci resistance from ¥112.05-111.74, a break of H4 resistance at ¥111.60 and H1 Quasimodo resistance at ¥111.63 could be on the cards.

Any upside is likely to take aim at the ¥112 round number.

GBP/USD:

(Italics: previous analysis)

Weekly timeframe:

Underwater by 1.0 percent this week, supply-turned demand at $1.3629-1.3456 is in a precarious position. Noting a shortage of decisive buying interest since mid-July, and price action closing below a double-top pattern’s ($1.4241) neckline at $1.3669, does this advertise a long-term sell signal? 

Conservative pattern sellers are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Daily timeframe:

Quasimodo support at $1.3609, albeit withstanding multiple downside attempts, stepped aside on Tuesday. Sub $1.3609, limited support is visible until around $1.3168 (a 38.2% Fibonacci retracement and a 50.00% retracement). Note demand to the left of price also appears to be consumed.

As for the relative strength index (RSI), the indicator’s value sliced back under 40.00, leaving the 50.00 centreline unopposed. This informs traders momentum is currently to the downside, and highlights to keep a tab on the possibility of dipping a toe in oversold territory.

H4 timeframe:

Hampered by rising US Treasury yields and a shortage of fuel across Britain, sterling shed more than 1 percent against the US dollar on Tuesday.

Following Monday’s test of the $1.3750-1.3721 decision point, GBP/USD blew through Quasimodo support at $1.3640 and subsequently challenged a 100% Fibonacci projection at $1.3535, a 1.27% Fibonacci extension at $1.3519 as well as a 1.272% Fibonacci expansion at $1.3229. Interestingly, should this harmonic floor give way, technical studies show that aside from 11^th January low at $1.3451 and 28^th December low (2020) from $1.3429, limited support is seen until reaching Quasimodo support at $1.3380.

H1 timeframe:

From the H1 timeframe, we can see that following a one-sided decline throughout the London morning session on Tuesday, movement dethroning a number of key support levels, downside momentum faded amid US hours.

With respect to technical levels on the radar, the $1.35 figure delivering support is a possibility (below here demand is seen at $1.3400-1.3432), whereas a pullback might direct flow to $1.36, as well as supply at $1.3615-1.3594 and resistance from $1.3616, a prior Quasimodo support base.

Observed Technical Levels:

Long-term action showing an absence of strong buying interest from supply-turned demand at $1.3629-1.3456 on the weekly timeframe, in addition to price action closing below a double-top pattern’s ($1.4241) neckline at $1.3669, delivers a potential bearish situation. This, coupled with daily price closing under Quasimodo support at $1.3609, informs technical traders that any upside generated from the H4 timeframe’s Fibonacci support between $1.3519 and $1.3535 is unlikely to be anything to write home about. A pullback with enough energy to reach H1 supply at $1.3615-1.3594, however, may be enough to entice bearish flow, in line with weekly and daily timeframes.

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