Technical View for June 29th 2022
Charts: Trading View
(Italics: Previous Analysis)
Sellers strengthened their grip on Tuesday; EUR/USD dipped to a low of $1.0503 and erased 0.5 per cent on the session. US consumer confidence fell for a second consecutive month in June to 98.7, its lowest levels since early 2021. The aftermath saw major US equity indices slide, which raised demand for the safe-haven buck (US Dollar Index) and ultimately weighed on the euro (controls the largest weighting within the Dollar Index).
From a technical standpoint, momentum to the upside has been lacklustre since weekly price shook hands with support at $1.0298-1.0445, made up of a Quasimodo resistance-turned support at $1.0298, 2nd January low at $1.0340 (2017), and a 100% Fibonacci projection at $1.0445 (AB=CD harmonic bullish formation). Subdued interest to the upside is also seen through the relative strength index (RSI) on the daily timeframe (unable to rupture the 50.00 centreline), as well as through the H4 timeframe as price compresses between two converging trendlines ($1.0601 and $1.0445).
In support of sellers, trend direction favours further selling. The general trend in this market reflects a primary bear trend, establishing a series of lower lows and lower highs since 2021. Adding to this, seen from the weekly timeframe, the vibe has been to the downside since topping in April 2008. The trend, therefore, is likely one of the main factors discouraging any meaningful buying from current weekly support.
Should H4 price tunnel through its current trendline support, the push lower could be dramatic given the lack of active demand to the left of price on the H4 chart. The next obvious technical support falls in around $1.0354, a Quasimodo formation. From the H1 timeframe, price is in the vicinity of $1.05 after defending the lower side of $1.06. Clearing $1.05 would help add fuel to the bearish landscape and perhaps clear the river as far south as $1.04.
It’s all about the $1.05 level. In light of the technical evidence (lacklustre demand out of weekly support at $1.0298-1.0445, softened buying and a lack of support visible under $1.05), this suggests an attack on the aforesaid barrier, and perhaps a subsequent drop to at least $1.04.
In line with downbeat risk sentiment—triggered on the back of sour US consumer confidence—the Australian dollar finished Tuesday off best levels. As the Dollar Index responds to safe-haven demand, AUD/USD rotated lower from H1 resistance at $0.6950 and placed the currency pair within reach of $0.69 and a familiar H1 prime support from $0.6863-0.6892. Territory beneath here shines light on H1 Quasimodo support from $0.6842, followed by H4 support at $0.6833.
Overall, this remains a sellers’ market, according to trend direction, together with scope to drop lower on the weekly timeframe to support between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement), a lack of bullish interest from daily Quasimodo support at $0.6901, daily flow circling beneath its 200-day simple moving average ($0.7227), and the relative strength index (RSI) set beneath its 50.00 centreline (negative momentum).
Here’s what I had to say regarding trend in previous writing:
The monthly timeframe has portrayed a downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among long-term chartists. Downside from the 2021 February top (an early primary bear trend), therefore, is potentially seen as a move to explore lower over the coming weeks.
This is clearly a bearish market, echoing a possible break of $0.69 and neighbouring H1 prime support from $0.6863-0.6892. Although further losses are in the offing (according to chart studies), H1 Quasimodo support from $0.6842 and H4 support from $0.6833 deliver immediate downside targets to work with.
From China easing quarantine restrictions, and US consumer confidence taking a hit, risk sentiment soured during US hours and consequently saw a safe-haven USD bid.
USD/JPY is now threatening to refresh multi-year highs as weekly price confronts resistance between ¥137.23 and ¥136.04. Support on this timeframe remains obvious at ¥125.54 (tucked under the ¥126.36 swing low [24th May]). Supply-turned demand at ¥131.93-131.10 on the daily chart rebounded price mid-June and could travel as far north as Quasimodo support-turned resistance at ¥139.55.
Across the page on the H4 timeframe, the decision point from ¥134.49-135.43 did a good job of withholding sellers, despite having its lower edge breached in recent trading. I noted in yesterday’s report that having H1 reclaim ¥135+ status, together with room to climb on the daily timeframe (to ¥139.55) in a market clearly trending northbound since 2021, might prove sufficient for buyers to take aim at ¥136 on the H1 scale.
As we engulfed the ¥136 and retested the base as support, additional buying could take shape in the direction of ¥137 which happens to join closely with the upper edge of weekly resistance at ¥137.23.
Technical studies favour buyers; should H1 price maintain position above ¥136, this helps confirm a bullish setting to ¥137. In fact, the ¥136 retest (as support) likely already drew the attention of a number of traders seeking to buy into this market’s upside momentum.
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