Technical View for 12th October: US Inflation Data and the Latest FOMC Minutes in Sight

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

As evident from the H1 chart, buyers and sellers continued to square off around the $0.97 figure on Tuesday with either side failing to abandon their position.

Down 0.4% week to date, EUR/USD continues to reflect a bearish story in the medium and short term. Sellers, aside from a handful of paltry medium-term pullbacks, possess a secure grip on things at the moment. In addition to the daily timeframe’s price action sitting comfortable south of its 200-day simple moving average, currently fluctuating around $1.0600, the trend has been southbound since 2021 topped at $1.2350 (visible from the weekly timeframe).

This, coupled with the daily relative strength index (RSI) rejecting the lower side of resistance at 60.00-50.00, highlights weakness at current higher timeframe supports: weekly support from $0.9606 and daily Quasimodo resistance-turned support at $0.9573.

Short-term price action on the H1, given the sour demand out of the higher timeframes, delivers a gloomy picture for any $0.97 longs. In fact, recent advances from the psychological level have been restricted at around $0.9735. Should sellers dethrone $0.97, limited support is seen until we shake hands with H1 Quasimodo support from $0.9655, which if breached, could have the unit call in on $0.96.

Technical Expectation:

$0.97 is technically in a vulnerable position.

Technical studies indicate buyers are likely to take a back seat, with thin $0.97 bids evident. Short-term breakout traders are perhaps positioned under the figure, anticipating a run for at least H1 Quasimodo support from $0.9655.

AUD/USD:

We’re at an interesting technical juncture on the weekly and daily timeframes.

Shedding 1.2% week to date, it’s fair to say the AUD/USD has seen better days. The weekly timeframe, clearly demonstrating a downside bias since mid-February (2021), appears poised to cross swords with a demand area from $0.5975-0.6166. For any harmonic traders reading, you may also acknowledge the ‘Alternate’ AB=CD pattern housed within the lower boundary of the demand, displayed by way of a 1.618% Fibonacci projection at $0.6024 (Golden Ratio [Phi]).

However, before connecting with the aforesaid areas, Quasimodo support on the daily timeframe at $0.6263 could have something to say. With the daily chart’s relative strength index (RSI) roaming around oversold territory and threatening to form positive (regular) divergence, a recovery attempt from the daily level may unfold (a combination of profit taking and [some might say] courageous counter-trend longs).

Shorter term, the H1 timeframe shifted attention to Quasimodo support from $0.6264 and the lower side of $0.63. Interestingly, Quasimodo support on the daily scale at $0.6263 aligns almost to-the-pip with H1 Quasimodo support. Whether this will be sufficient to encourage a bullish takeover of $0.63 is difficult to estimate, in light of the longer-term downtrend.

Should buyers regain consciousness, nevertheless, a run to H1 Quasimodo support-turned resistance is not out of the question at $0.6352. Though if sellers, once again, assume control, as suggested by the weekly timeframe, tunnelling through $0.6246 is likely to inspire further selling to the $0.62 region and place the currency pair within striking distance of weekly demand mentioned above at $0.5975-0.6166.

Technical Expectation:

This remains a sellers’ market.

Yes, price is responding from daily Quasimodo support at $0.6263 (and H1 Quasimodo support from $0.6264), yet reaching for counter-trend trading strategies at this point is considered precarious until weekly demand makes a show at $0.5975-0.6166.

As such, sellers are likely monitoring short-term (H1) resistances at $0.6352 and $0.63.

USD/JPY:

It was a mundane day for the USD/JPY on Tuesday, with buyers and sellers asleep at the wheel a touch south of ¥146.

The H1 timeframe, nonetheless, did drop in on a steep trendline support, extended from the low ¥143.53, and for the time being price has reacted in favour of longs. Overhead calls attention at ¥145.90—22^nd September high, while navigating under the current trendline reveals H1 resistance-turned support coming in at ¥145.32.

¥145.90 is an important barrier to have noted; ascending north of this level not only throws light on ¥146, but it refreshes a 24-year high. Notably, clearing ¥146 also favours an approach to weekly Quasimodo resistance at ¥146.79.

Trending higher 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 not only the aforementioned weekly Quasimodo resistance, but also a weekly 100% projection at ¥149.66 (an AB=CD bearish pattern). Higher timeframe support can be found at ¥139.55 (daily), followed by weekly support at ¥137.23.

I noted the following in support of the current uptrend in recent analysis (italics):

Further adding to trend identification, price has been trading north of the 200-day simple moving average, currently around ¥128.99, since February 2021. Additionally, the SMA has pointed higher since April 2021: a widely used trend-following technique.

Technical Expectation:

Thanks to the current uptrend, 22^nd September high at ¥145.90 is likely to be challenged on the H1, bolstered by the recent short-term rebound from H1 trendline support, taken from the low ¥143.53. A push through the aforementioned level exposes ¥146, though it is above here that is likely to appeal to bullish breakout buyers, zeroing in on the weekly Quasimodo resistance level at ¥146.79.

GBP/USD:

Snapping a four-day bearish phase, GBP/USD bulls went on the offensive Tuesday.

However, last week’s spike into resistance at $1.1410 and neighbouring decision point at $1.1751-1.1413 on the weekly timeframe, together with the 20-month downtrend since topping at $1.4241 in February 2021, continues to favour sellers.

A closer reading of price action on the daily timeframe displays a similar bearish picture, with price action sheltered by two trendline resistances (drawn from highs of $1.2277 and $1.3639). In addition to this, the currency pair has been working under the 200-day simple moving average, fluctuating around $1.2512, since August 2021, as well as the relative strength index (RSI) rejecting indicator resistance forged from 60.00 and 50.00 (a common sight in downtrends).

With respect to support on the higher timeframes, I remain focussed on the February 1985 low at $1.0520 (and the record low of $1.0357).

Out of the H1 timeframe, support formed between the $1.10 psychological figure and an ‘Alternative’ AB=CD bullish structure at $1.1046 (the 1.272% Fibonacci projection) put in an appearance in recent trading. Recent flow engulfed $1.11 to the upside and cast light on $1.12 and a neighbouring Fibonacci cluster (50% retracement is not considered a Fibonacci ratio). North of here, though, is a decision point at $1.1287-1.1241, placed well to facilitate a stop-run above $1.12—a scenario likely to be welcomed by short-term bears.

Technical Expectation:

Short-term ‘eyes’ are likely to be positioned around the $1.12 figure, having noted the Fibonacci confluence supporting the level and, of course, the clear downtrend the pound is in. Nevertheless, as alluded to above, the H1 decision point from $1.1287-1.1241 is also an area of resistance which could arouse bearish interest if challenged.

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