Technical View for 5th October

Charts: Trading View

(Italics: Previous Analysis)

EUR/USD:

The US dollar extended its decline on Tuesday, largely coinciding with the correction seen in US Treasury yields (albeit cooling somewhat in recent trading). Dollar softness, of course, aided EUR/USD’s recovery gains from 20-year troughs established last week ($0.9536). In terms of US risk events, US job openings shrank to 10.1 million in August, according to the US Bureau of Labour Statistics, which weighed on the US Dollar Index (trading 1.2 per cent in the red, as of writing). Markets, however, still expect the US Federal Reserve to push forward with a 75 basis-point hike in November (66 per cent probability), according to the CME Group’s FedWatch tool.

Technically, the daily timeframe’s relative strength index (RSI) voyaged above its 50.00 centreline (a move demonstrating positive momentum [average gains exceeding average losses]). Indicator resistance is seen overhead at 63.66. Price movement, following a sharp recovery from daily Quasimodo resistance-turned support at $0.9573, also exhibits scope to reach for Quasimodo resistance on the daily chart at $1.0090 and neighbouring trendline resistance, extended from the high $1.1495. Alongside daily flow, price action on the weekly timeframe reveals space to rally (or pullback) as far north as resistance at $1.0298.

Concerning trend direction, nonetheless, the bigger picture continues to reflect a bearish tone for EUR/USD. Shaped by way of a series of lower lows and lower highs, a primary bear trend has graced the chart since early 2021. You will also note that the monthly timeframe shows the currency pair has been bearish since mid-2008.

A little closer to home, shorter-term flow on the H1 chart is now within reach of parity ($1.00) after muscularly forcing above $0.99 on Tuesday. Directly above parity resides H1 prime resistance from $1.0048 and $1.0008. Note that this area is joined by H4 Quasimodo resistance at $1.0037, plotted a touch under H4 prime resistance at $1.0099-1.0070.

Technical Expectation:

Daily Quasimodo resistance at $1.0090, together with daily trendline resistance, are likely to be monitored.

Lower on the curve, however, prior to $1.0090, parity is on the table as probable resistance. $1.00, H1 prime resistance drawn from $1.0048-1.0008, and H4 Quasimodo resistance at $1.0037 represent obvious technical headwinds in this market.

AUD/USD:

Tuesday witnessed the Reserve Bank of Australia (RBA) increase the cash rate target by 25 basis points to 2.6 per cent—25 basis points short of market consensus. This momentarily directed AUD/USD aggressively south, touching a low of $0.6451. Yesterday’s risk-on environment, in addition to lower-than-anticipated US job openings data, weighed on the US dollar and ultimately provided some support for the currency pair.

I noted the following in regards to the weekly and daily timeframes in recent analysis (italics):

Working with a support area on the weekly timeframe—made up of a 1.272% Fibonacci projection from $0.6351 and a 61.8% Fibonacci retracement at $0.6468—the AUD/USD staged an impressive rebound on Monday and trimmed a portion of last month’s 6.5 per cent decline; resistance warrants consideration at $0.6673.

Aligning with weekly support is a daily support barrier at $0.6401, assisted by the (daily) relative strength index (RSI) exiting oversold territory (eyeing trendline resistance, drawn from the high 64.39). Daily resistance is seen at $0.6678 (nearby weekly resistance at $0.6673), whereas a bearish offensive throws light on daily Quasimodo support from $0.6263.

In similar fashion to Monday’s analysis, we can see H4 price action continues to nibble at the lower side of Quasimodo support-turned resistance at $0.6528, which shares chart space with an AB=CD bearish pattern (100% projection at $0.6562) alongside a number of Fibonacci ratios between $0.6575 and $0.6554 (note that the 50.0% retracement is not a Fibonacci value). Adding to current chart studies, I also see an early bearish pennant pattern emerging between $0.6363 and $0.6531.

Out of the H1 timeframe, we can see price recently snapped above $0.65 and touched gloves with prime resistance at $0.6553-0.6537. Further downside throws light on $0.64, a psychological level that held firm as support late in September.

Technical Expectation:

Weekly and daily timeframes, although the currency pair is entrenched within a clear-cut downtrend, are still rebounding from support.

The H4 AB=CD bearish formation at $0.6562 was an initial upside target, yet the H1 prime resistance offered a ceiling at $0.6553-0.6537. This, given H1 price remains under $0.65, could lead to a test of $0.64 in the short term. However, should buyers regain consciousness, a test of $0.6562 could still be in the offing in light of the bigger picture’s direction (south).

USD/JPY:

Eking out a minus 0.2 per cent decline, it was another monotonous day of trading for the USD/JPY on Tuesday.

As a result, weekly, daily and H4 timeframes remain unchanged in regard to their technical position.

The weekly timeframe’s price action continues to cement position north of support at ¥137.23, inching towards forging a fresh 24-year high with scope to climb to weekly Quasimodo resistance at ¥146.79 (in line with the current primary bull trend). Note that directly above the aforementioned resistance 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.

Interestingly, the daily timeframe’s relative strength index (RSI) ventured outside of its overbought territory (70.00) and is establishing what I see as early bearish divergence (negative divergence). This informs market participants that upside momentum is slowing and that a test of weekly Quasimodo resistance could trigger a bearish scenario.

As evident from the H4 timeframe, resistance is featured in the form of a 1.618% Fibonacci projection at ¥145.64, and support demands attention from ¥141.72.

Price action based on the H1 timeframe saw the currency pair dip to ¥144 and, for now at least, hold steady. Absence of support on the higher timeframes, attention is likely drawn to H1 prime support coming in from ¥143.20-143.39 which is stationed above ¥143.

Technical Expectation:

Weekly Quasimodo resistance at ¥146.79 is a level that traders are likely to have on their watchlists in light of the slowdown in momentum.

However, before reaching this far north, a drop under ¥144 on the H1 to test H1 prime support at ¥143.20-143.39 could be on the table to draw in fresh buyers. This is due to the lack of obvious support seen between current price and the aforementioned prime support and, of course, the liquidity below ¥144.

GBP/USD:

Sterling concluded Tuesday higher for a sixth successive session, adding 1.0 per cent versus its US counterpart. Following the one-sided recovery from the record low established on 26^th September at $1.0357, GBP/USD has rallied 10.0 per cent amid the UK government’s tax U-turn and dollar softness.

Through the lens of a technical trader, price action on the weekly timeframe is shaking hands with resistance at $1.1410 and a neighbouring decision point at $1.1751-1.1413, which houses a daily trendline resistance, extended from the high $1.3639. The daily chart also shows the relative strength index (RSI) testing the mettle of resistance forged from 60.00 and 50.00 (a common sight in downtrends).

Longer-term trend direction also supports current price/indicator resistance, pencilling in a series of lower lows and lower highs since early 2021, and daily price has remained under its 200-day simple moving average ($1.2570) since August 2021.

The H4 timeframe, as you can see, is testing resistance marked at $1.1463, with a break likely calling for continuation buying towards resistance at $1.1760. The H1 timeframe, nevertheless, is at an interesting location: at the underside of $1.15 and prime resistance from $1.1532-1.1512, with downside space drawing attention to a decision point at $1.1350-1.1389 and an ascending support, taken from the low $1.0770.

Technical Expectation:

The weekly decision point at $1.1751-1.1413 (merging with daily trendline resistance), $1.1410 resistance on the weekly chart and daily RSI resistance between 60.00 and 50.00 places a favourable (technical) bearish light on a whipsaw materialising above $1.15 into H1 prime resistance at $1.1532-1.1512.

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