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Technical Market Outlook and Review for 24 January

By:
Aaron Hill
Published: Jan 23, 2023, 20:04 UTC

As markets shift their attention to the manufacturing and services PMIs, check out the latest technical report, covering key markets.

NYSE, FX Empire

In this article:

EUR/USD

Early London on Monday observed price whipsaw above the $1.09 handle, reaching a peak of $1.0927 before erasing earlier gains and touching gloves with the upper edge of the H1 consolidation between $1.0780 and $1.0868 (active since 12 January). The run of orders above $1.09 is interesting, due to the location that the currency pair is positioned on the weekly and daily timeframes.

The research team noted the following in recent research concerning the bigger picture (italics):

The weekly timeframe has been entrenched within a downtrend since topping in 2021 and the pullback off the late September lows at $0.9536 might be viewed as a long-term sell-on-rally opportunity. Hence, the Quasimodo support-turned resistance at $1.0888 recently entering the frame will be key to monitor this week as rupturing the level exposes resistance coming in at $1.1174.

On the daily chart, however, an uptrend is clear through the recent series of higher highs/lows, as well as price crossing above its 200-day simple moving average, currently fluctuating around $1.0308. We can also see that the moving average is starting to level off from its down move: another sign of a potential trend reversal to the upside. The Relative Strength Index (RSI), nonetheless, is seen printing early negative divergence, effectively backing a downside move from the daily prime resistance that converges with weekly resistance at $1.0954-1.0864.

So, what does this potentially mean going forward?

The $1.09 whipsaw, along with weekly and daily resistances in play, could encourage a bearish showing over the coming days. This may haul H1 price deeper into the H1 consolidation mentioned above, perhaps targeting $1.08. Consequently, short-term traders might begin to seek bearish setups.

EUR/USD Weekly (top left), daily (bottom left) and 1 hour charts. Source: TradingView

S&P 500

The week kicked off in fine form for the US stock market on Monday, rallying more than 1.0% by midday New York.

Was the recent move higher expected? According to the charts, it was.

Regular readers of the technical market outlook may recall the following analysis on the monthly, weekly and daily charts (italics):

The monthly chart has remained in a dominant uptrend since early 2009. We had two notable corrections in that time, one in early 2020 (COVID), dropping 35%, and one in play since early 2022 (down 27% from 4,818, as of writing) which was accompanied by negative divergence out of the Relative Strength Index (RSI).

Across the page on the weekly timeframe, price action has respected trendline resistance (drawn from the high mentioned above at 4,818) during the latest correction mentioned on the monthly chart. Still, following the rebound from support at 3,589 and a 50.0% retracement at 3,512 in mid-October (2022), price appears set to dethrone the noted trendline resistance (lack of bearish interest).

Technically, a disruption here would help reaffirm the monthly chart’s uptrend. Adding to this, the RSI, since March 2022, has been establishing an ascending triangle between 53.60 and 30.47. While these patterns are frequently seen in uptrends, they can represent reversal structure in downtrends. Consequently, a breakout above both the triangle formation, together with the noted trendline resistance, may underpin a longer-term bid in this market.

Directing attention to the daily timeframe, price is working between support at 3,796 and resistance drawn from 4,087. Harmonic traders might also note the possible AB=CD bearish formation at 4,137, marked by a 100% projection, and a nearby 78.6% Fibonacci retracement ratio at 4,146.

The jump higher on Monday has seen the unit begin breaking the weekly trendline resistance. It is worth adding (not underlined in Monday’s weekly report) that the daily price is now attempting to cement position above the 200-day simple moving average, currently trading at 3,966. Should buyers maintain their position this week and discover higher levels, the possibility of whipsawing above daily resistance at 4,087 and crossing swords with the AB=CD resistance at 4,137 is on the table.

Given the above, it remains a buyers’ market for the time being.

Shorter term, price is bound for Quasimodo resistance at 4,050, which according to the higher timeframes, is likely to give way. Limited resistance is then seen until the daily resistance level mentioned above at 4,087.

S&P 500 monthly, weekly and daily charts. Source: TradingView
S&P 500 1 hour chart

XAU/USD (Gold)

Although gold was somewhat indecisive on Monday, this market remains on the side of buyers.

First and foremost, price action on the weekly timeframe is retesting resistance-turned support from $1,916. Although buyers have yet to make an inspiring appearance here, scope to run higher is seen until around the double-top pattern’s peaks at $2,070. This, coupled with the daily timeframe demonstrating scope to explore higher levels until Quasimodo resistance at $1,966, adds evidence backing a bullish scene.

Supporting buyers is the following (previous) technical research on trend (italics):

The trend is now technically higher. The reversal presented itself in early December last year following the break of the $1,786 previous high in November 2022. Since then, the precious metal also recently welcomed what is known as a Golden Cross, which is the 50-day simple moving average ($1,814) crossing above the 200-day simple moving average ($1,777. This is a pattern trend followers tend to watch and can signal the possibility of a long-term uptrend.

However, on the side of sellers are the two overbought signals seen on weekly and daily timeframes from the Relative Strength Index (RSI). Should sellers push for lower levels, the decision point at $1,867-1,886, which was left unchallenged last week, serves as a reasonable downside objective and a location buyers could emerge from.

Across the page, the H1 chart has price action rebounding from support, made up of a 1.272% Fibonacci projection at $1,914 (commonly referred to as an AB=CD ‘alternate’ formation) and a 61.8% Fibonacci retracement at $1,912. This area also benefits from the nearby weekly resistance-turned support level at $1,916 and the uptrend. If the noted H1 support holds, this places H1 resistance on the radar at $1,939. Failure at the H1 supports opens the gate for a fall towards H1 trendline support, extended from the low $1,797.

Gold weekly, daily and 1 hour chart. Source: TradingView

BTC/USD

Beginning with the H1 timeframe, the price of BTC/USD recently forged a breakout above a bullish flag pattern, carved between $23,363 and $22,622. Subsequent to this, a retest of the breached pattern boundary materialised and allowed chart pattern traders to project an upside objective as far north as $25,417 (black arrows). Overhead, adjacent resistances on the H1 are realised at $23,267 and $23,598, while support resides at $22,490, in the shape of a Quasimodo resistance-turned support.

Importantly, the weekly and daily timeframes are largely in favour of further buying. Regarding the aforementioned timeframes, the research team noted much of the following in Monday’s technical briefing (italics):

The weekly timeframe shows BTC/USD gained some grip north of support at $11,855 and hammered through the upper limit of a falling wedge pattern (reversal structure), drawn between $25,214 and $17,567. You will note this was accompanied by the Relative Strength Index (RSI) chalking up positive divergence ahead of oversold territory (the indicator also recently crossed above its 50.00 centreline [positive momentum]). Aside from the local price tops (evident on the daily chart), the falling wedge pattern profit objective is set at $25,698, closely trailed by resistance at $28,844.

Meanwhile, the daily timeframe shows the price of the major cryptocurrency convincingly scaled through resistance at $21,924, which is now marked as support. As of writing, the unit has overthrown the $22,800 13 September high (2022) which could pave the way for follow-through buying to as far north as Quasimodo resistance at $24,666. Note that this level is arranged just south of the weekly timeframe’s falling wedge pattern profit objective at $25,698.

But it needs to be noted that while the weekly timeframe’s RSI is exploring above its 50.00 centreline, the daily chart’s RSI confronted indicator resistance at 89.35, testing levels not seen since the beginning of 2021 (indicating a potential bearish move/correction). Still, on the daily scale, we can see that the recent outperformance in early January forged a fresh higher high (breaking the $18,385 14 December high), and crossed above both the 50-day and 200-day simple moving averages, currently trading at $18,000 and $19,593, respectively. Therefore, the trend is showing early signs of an upside reversal.

In light of the above, buyers remain in the driving seat for the time being. Breakout buyers above the H1 bullish flag are likely seeking to reduce risk to breakeven, and potentially liquidate partial profits at H1 resistance from $23,267. Those who missed the pattern breakout will perhaps target a breakout bullish scenario above $23,267, targeting $23,598 and $24,000.

Bitcoin weekly, daily and 1 hour charts. Source: TradingView

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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