Technical View for 11th October: UK Jobs Data Eyed

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

It was another day of red for the common currency on Monday as the US dollar, according to the US Dollar Index, extended recovery gains. From a technical perspective, further deterioration in the EUR/USD should not surprise.

Since 2021, aside from momentary pullbacks, sellers have commanded a healthy presence. And, as detailed in Monday’s weekly technical briefing, price action continues to work under its 200-day simple moving average ($1.0608), which, for many trend followers, is consistent with a downtrend.

Last week’s weekly ‘shooting star’, albeit void of a meaningful prior advance, implies feeble demand. Weekly support from $0.9606, a base which facilitated a rebound from 20-year lows ($0.9536), is now back in the spotlight and echoes a vulnerable tone—south of here is weekly Quasimodo support at $0.9241. The outlook from the daily timeframe is not much brighter.

Last week’s rejection just ahead of trendline resistance, extended from the high $1.1495, and neighbouring Quasimodo resistance from $1.0090, opens the door back to Quasimodo resistance-turned support at $0.9573, closely shadowed by support at $0.9377. The daily timeframe’s relative strength index (RSI) resistance area at 60.00-50.00, which has been in place since 28^th October 2021, also received the indicator’s value last week and has pivoted lower (resistance formed between 60.00 and 50.00 is common in downtrends).

I also noted in Monday’s weekly technical briefing that clearing $0.97 on the H1 scale may persuade follow-through breakout selling in the direction of Quasimodo support at $0.9655. As evident from the chart, buyers have attempted to rejuvenate a bid from $0.97 and thus far buyers and sellers are even.

Technical Expectation:

Overall, according to chart studies, sellers have the upper hand.

A break of weekly support from $0.9606 and daily Quasimodo resistance-turned support from $0.9573 is perhaps on the table. As a result, shorter-term flow, given the lack of interest from buyers at $0.97 on the H1 timeframe, discovering terrain south of the psychological figure is a possibility, pursuing at least H1 Quasimodo support from $0.9655.

AUD/USD:

The Australian dollar extended losses against a broadly stronger greenback on Monday, refreshing a multi-year low at $0.6275. Following Friday tunnelling through support on the daily timeframe at $0.6401 and closing at session lows, I felt this was a ‘technical wake-up call’; weekly support from $0.6351-0.6468 (Fibonacci support: 1.272% Fibonacci projection [alternate AB=CD formation]) and a 61.8% Fibonacci retracement) was already hanging by a thread, and the daily close under support, technically, represented a sturdy warning sign that additional selling was around the corner. As evident from the weekly and daily chart, we are now under weekly support and within reach of shaking hands with daily Quasimodo support coming in at $0.6263.

On top of the support breach, direction has reflected a bear trend since $0.8007 (22nd Feb high [2021]). This is joined by daily candles working beneath the 200-day simple moving average at $0.7049 since April. The daily chart’s relative strength index (RSI) also remains south of its trendline resistance, drawn from the high 64.39, and has continued to explore space beneath 50.00 since August: negative momentum.

Against the backdrop of the higher timeframes, H1 price action slipped below $0.63 and directed the technical spotlight towards Quasimodo support at $0.6264. Rupturing the aforementioned level places interest in another Quasimodo support from $0.6209, and the $0.62 psychological figure. You may recall I also highlighted the bearish pennant pattern between $0.6363 and $0.6531 in recent writing. The profit objective for the pennant pattern is located beneath $0.62 at $0.6137.

Technical Expectation:

H1 sellers appear poised to settle below $0.63, informing short-term flow that the aforesaid round number could serve as resistance and continuation selling towards H1 Quasimodo supports from $0.6264 and $0.6209 may materialise. This bearish scenario is in line with the weekly and daily timeframes. In fact, Quasimodo support on the daily scale at $0.6263 (the next downside target on that timeframe) aligns almost to-the-pip with H1 Quasimodo support from $0.6264.

USD/JPY:

Latest developments for the USD/JPY has the currency pair on the brink of challenging year-to-date tops at ¥145.90—22^nd September high. For many technicians, this was an expected move; and further outperformance is anticipated, with a ¥145.90 break refreshing a 24-year high.

Trending since the early months of 2021, consisting of parabolic upside in March and April (2022), the unit is now within a stone’s throw of weekly Quasimodo resistance at ¥146.79. Note that directly above ¥146.79 resides a weekly 100% projection at ¥149.66 (an AB=CD bearish pattern). In terms of supportive structure, daily support falls in at ¥139.55, closely followed by weekly support at ¥137.23.

Further adding to trend identification, price has been trading north of the 200-day simple moving average, currently around ¥128.84, since February 2021. Additionally, the SMA has pointed higher since April 2021: a widely used trend-following technique.

Shifting attention to the H1 timeframe, heading into the early hours of European trading, a shallow retest of resistance-turned support at ¥145.32 emerged. Renewed bidding subsequently developed and, as noted above, has placed price within reach of the ¥145.90 top (22^nd September) and ¥146; a break of this region would see the currency pair refresh 24-month pinnacles and perhaps begin cutting a path towards the weekly timeframe’s Quasimodo resistance from ¥146.79.

Technical Expectation:

Thanks to the current uptrend, 22^nd September high at ¥145.90 is likely to be challenged on the H1, with a push possibly igniting breakout buying to take on ¥146. It is above here that may also appeal to breakout buyers, zeroing in on the weekly Quasimodo resistance level at ¥146.79.

GBP/USD:

The British pound continued its slide versus the US dollar on Monday, extending last week’s retracement following the $1.1495 peak forged on Wednesday. The healthy dollar bid—underpinned amid bets that the Fed is to continue hiking rates—alongside the technical position, projects further GBP/USD weakness.

I noted the following in regards to the weekly timeframe in Monday’s technical briefing (italics):

The weekly timeframe’s price action emphasises a bearish environment. At the forefront of the technical observations, of course, is the clear-cut bearish trend seen since topping at $1.4250 in June 2021. I also drew attention to resistance at $1.1410 and neighbouring decision point at $1.1751-1.1413 in previous writing as a critical juncture for the currency pair. Price tested the aforementioned areas last week and chalked up a shooting star candlestick formation. For candlestick supporters, this bearish pattern, alongside the surrounding technical elements mentioned above, adds to the bearish atmosphere on the weekly scale.

Meanwhile on the daily timeframe, movement tested (and respected) trendline resistance last week, taken from the high $1.2278 (note that price topped within reach of trendline resistance, extended from the high $1.3639). This focusses the spotlight back on the February 1985 low at $1.0520 (and the record low of $1.0357). The daily chart also shows the relative strength index (RSI) rejected indicator resistance forged from 60.00 and 50.00 (a common sight in downtrends).

From the H1 chart, buyers have moderately responded to the AB=CD ‘alternative’ bullish structure at $1.1046 (the 1.272% Fibonacci projection). Overhead is $1.11 (potential psychological resistance) while south of $1.1046 calls for $1.10. In Monday’s weekly technical briefing, I also communicated that beneath this base, limited support exists until $1.09.

Technical Expectation:

In light of the lacklustre price movement yesterday, the majority of my Technical Expectation remains in place (italics):

From a medium-term perspective, bearish players remain in the driving seat and, according to chart studies, may take aim at the February 1985 low at $1.0520 (and the record low of $1.0357).

This shifts attention to the possibility of a $1.10 break on the H1 timeframe, and the likelihood of continuation selling to at least $1.09. Therefore, a retest at the underside of $1.11 may unearth a bearish scenario for short-term sellers.

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.