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Aaron Hill
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Charts: Trading View

US Dollar Index:

The US dollar—according to the US dollar index—staged a comeback last week, snapping a two-week bearish phase.

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Supply-turned demand at 91.13-87.76 remains the centre of attention on the monthly timeframe, underpinning this year’s USD advance. In terms of trend, the greenback has been higher since bottoming in 2008. Though minimising the chart highlights the longer-term trend is in fact south, meaning the 2008 up move could simply be a pullback. Breaching 91.13-87.76 would help confirm a bearish standpoint.

A closer interpretation of price action on the daily timeframe shows that since mid-June the DXY has demonstrated a lack of interest to the upside. This is further confirmed by the relative strength index (RSI) displaying bearish divergence: average losses exceeding average gains. In addition, the indicator voyaged south of the 50.00 centreline, highlighting the bearish vibe and throwing light on the possibility of a price move towards support at 91.42 this week.

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EUR/USD:

(Italics: previous analysis)

Europe’s single currency finished the week on the back foot against the buck, paring a portion of the recent two-week advance.

Technically speaking, prime support on the weekly timeframe resides at $1.1473-1.1583—sharing space with a 100% Fib projection at $1.1613 as well as a 1.27% Fib extension at $1.1550. Interestingly, long-term stops likely rest south of the $1.1640ish lows and perhaps accommodate enough energy to fill $1.1473-1.1583 bids. To the upside, the spotlight is on supply at $1.2412-1.2214. With respect to trend, we can see the market has largely been higher since the early months of 2020.

Lower on the curve, the daily chart remains languishing beneath late July tops at $1.1909. North of here, buy-stops could fuel moves to prime resistance at $1.2115-1.1990, a place active sellers may reside. The flip side, of course, is a run south back to Quasimodo support at $1.1689.

Against the backdrop of higher timeframes, H4 demand at $1.1783-1.1810, as expected, delivered little at the tail end of the week. Prime support inhabits $1.1764-1.1776, with sell-stops beneath the aforementioned demand potentially fuelling willing $1.1764-1.1776 bids.

The H1 chart shares a similar energy. Topping just ahead of a Fibonacci cluster around $1.1855ish, Friday took on lower price levels amidst a DXY recovery off session lows, reinforced by a solid US PPI print at 0.7 percent in August versus a 0.6 percent forecast. The chart’s focus has shifted to $1.18. Although $1.18 joins hands with a 61.8% Fib retracement and a 1.618% Fib projection at $1.1797, Quasimodo resistance-turned support at $1.1775 (unites with prime H4 support at $1.1764-1.1776) is positioned to welcome any $1.18 whipsaw.

Observed Levels:

Long term:

Higher timeframe analysis points to stops and possible breakout buying interest north of late July tops at $1.1909 on the daily scale. Chart studies, nonetheless, indicate breakout buying above $1.1909 may be short-lived as prime resistance at $1.2115-1.1990 is within touching distance.

Short term:

Lower timeframes show H4 demand at $1.1783-1.1810 and the $1.18 base (H1) merging. Both echo vulnerability this week, underpinning a possible whipsaw to H1 Quasimodo resistance-turned support at $1.1775, which overlaps with H4 prime support at $1.1764-1.1776.

AUD/USD:

(Italics: previous analysis)

Despite printing solid gains out of prime support at $0.6968-0.7242 on the weekly timeframe, buyers took a back seat last week. Should buyers regain consciousness, prime resistance at $0.7849-0.7599 calls for attention. With respect to trend, we’ve been higher since early 2020. Therefore, the response from $0.6968-0.7242 could be a dip-buying attempt.

In tandem with the weekly picture, prime support on the daily timeframe at $0.7286-0.7355 put in an appearance in the second half of the week. This followed a one-sided drop from prime resistance at $0.7506-0.7474. Candlestick movement out of current support, as you can see, implies a lack of buying interest, re-opening the risk of a decline back to the 1.618% Fib projection at $0.7126 this week.

Out of the H4 timeframe, technicians may argue the decision point from $0.7395-0.7410 aided Friday’s sell-off. Clear decision points commonly serve as resistance upon failing to deliver support at the initial test. Stacked demand is now close by between $0.7282 and $0.7343, and prime support rests at $0.7236-0.7266.

Risk aversion took hold Friday, weighing on risk currencies. Earlier, though, short-term flow on the H1 carved a picture-perfect stop run north of $0.74 into Fibonacci resistance between $0.7416 and $0.7409. Not only did this snare breakout buyers (bull trap), it tripped a portion of stops from sellers attempting to fade $0.74. Recent selling underlines the possibility of a whipsaw through demand at $0.7331-0.7350 to prime support at $0.7310-0.7322 (joined by a decision point at $0.7307-0.7324) this week.

Observed Levels:

Long term:

Despite a dull reception, prime support on the daily timeframe at $0.7286-0.7355 remains a focal point, braced by the fact weekly price exited prime support at $0.6968-0.7242. Consequently, long term suggests a bullish picture until daily prime resistance at $0.7506-0.7474.

Short term:

Focus is on the H1 timeframe early week. Friday nosediving below $0.74 renews the potential for a whipsaw below demand at $0.7331-0.7350 to prime support coming in at $0.7310-0.7322. Assuming the setup comes to fruition and $0.7310-0.7322 bids respond, this is in line with higher timeframe direction.

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance is likely to welcome familiar supply at ¥113.81-112.22.

The lacklustre vibe out of weekly demand is established through a range on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. The reluctance to commit outside of these areas toughens the consolidation. Range limits, therefore, are likely on the watchlist this week.

Relatively large-scale supply exists on the H4 timeframe at ¥110.82-110.39, an area capping upside since mid-July. With this area making an entrance twice in September thus far and price developing a possible double-top pattern around ¥110.44, a break of the formation’s neckline at ¥109.59 could spark bearish movement. The caveat, of course, is Quasimodo support at ¥109.48. This level—technically speaking—informs traders that a bear trap could be in the making. This means a whipsaw through the neckline (which forms support alongside the ¥109.59 31st August low) may fill sell stops that feed ¥109.48 bids.

The H1 timeframe has ¥110 in sight, an objective base that many traders will be watching early week. The interesting thing here is the prime resistances situated above between ¥110.15-110.12 and ¥110.13-110.07. Round numbers such as ¥110 often attract attention and when coming from below has traders attempting to fade the number and also play any breakout above. With prime resistance located directly above, this has ‘stop run’ written all over it, as per the black arrows.

Observed Levels:

Long term:

The daily timeframe’s range between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27 offers clear perimeters this week. Knowing the weekly timeframe has price modestly holding demand at ¥108.40-109.41, daily range support is interesting.

Short term:

The H4 timeframe emphasises either a decline this week based on the double-top configuration at ¥110.44, or a bullish scene in the form of a whipsaw through the formation’s neckline at ¥109.59 to Quasimodo support at ¥109.48. Prior to this occurring (if at all), H1 suggests a whipsaw through ¥110 into prime resistances between ¥110.15-110.12 and ¥110.13-110.07 to set up a potential short-term bearish theme early week.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone, as you can see, remains active, welcoming an additional test mid-August. Yet, pattern traders will note August’s move closed south of a double-top pattern’s neckline at $1.3664, consequently broadcasting a long-term bearish warning. Conservative pattern sellers, however, are likely to seek a candle close beneath $1.3629-1.3456 before pulling the trigger.

More of a detailed view on the daily timeframe communicates a rangebound atmosphere. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and a Quasimodo support from $1.3609. Directly above the consolidation, two tight-knit 100% Fib projections are seen around $1.4017—a double AB=CD bearish configuration for any harmonic traders reading. Momentum studies, according to the relative strength index (RSI), made its way above the 50.00 centreline and retested the barrier: average gains exceed average losses.

H4 prime resistance at $1.3940-1.3888 put in another appearance on Friday, forcing buyers to step aside. Although this implies a bearish follow-through this week, targeting prime support at $1.3689-1.3724, the fact we tested this area early September (orange arrow) might discourage further selling. What’s technically interesting on the H4 scale is above $1.3940-1.3888 we have the upper edge of the daily range at $1.3991 and the 100% Fib projections seen around $1.4017. Understanding this, traders could get the impression a medium-term stop run may materialise, taking stops not only from the H4 prime resistance, but also daily range resistance at $1.3991. The 100% Fib projections, therefore, could be an area we see healthy sellers attack the market this week.

Leaving $1.39 unchallenged Friday, sterling pared earlier gains off one-week tops versus the greenback. The session wrapped up exploring space south of the $1.3832 low—an important short-term level forming prior to Friday’s high $1.3888. Breaking beneath this has likely tripped intraday sell-stops, which perhaps contain enough fuel to fill bids at prime support from $1.3803-1.3819 early week, with an initial target of $1.3838.

Observed Levels:

Long term:

It’s a bit of a mixed bag on the weekly timeframe. On the one hand, supply-turned demand at $1.3629-1.3456 is in play, though on the other hand, price recently closed beneath a double-top pattern’s neckline at $1.3664 (bearish signal). In addition, we’re rangebound on the daily scale between $1.3991 and $1.3609.

Ultimately, longer-term traders are likely to keep a close eye on the daily chart’s range limits this week.

Short term:

In terms of the H1 timeframe, prime support at $1.3803-1.3819 is a key watch early week. A rebound from here targets at least $1.3838ish. Further upside may also hinder downside movement out of the H4 timeframe’s prime resistance at $1.3940-1.3888.

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.

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