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Currency

Charts: Trading View

US Dollar Index (Daily Timeframe):

Last week’s session observed the US dollar—according to the US dollar index—abandon its two-week indecisive phase and establish moderate gains (0.4 percent).

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Earlier weekly reports shined the technical spotlight on a descending wedge pattern (a shape exhibiting decreased downside momentum within converging walls [91.43/90.42]). Traders will note both converging lines received at least two tests, yet some textbooks require three to form at the upper base. Nevertheless, the beginning of June had the unit retest the upper boundary of the wedge and develop support, following a breakout higher on May 28th.

Recent analysis also highlighted the following points (italics):

  • Since the DXY topped out at the 93.43 31st March peak, and cooked up reasonably decisive downside movement, the wedge, and subsequent upside breach, is perhaps a reversal signal.
  • The pattern’s upside target rests beneath resistance at 91.36 (red), stationed south of the 200-day simple moving average, circling 91.56. Should pattern bids hold the buck higher this week, price targeting 91.36 is a reasonably logical approach.
  • However, it’s important to note a bearish narrative has clouded the greenback since the early months of 2020, by way of well-defined lower lows and lower highs. Many analysts likely refer to this downward movement as a primary trend, as it’s visible structure from the weekly scale. Consequently, this unlocks the possibility of fresh lower lows beyond 89.34 support over the coming weeks (see black arrows), with sellers taking aim at Quasimodo support from 88.43.

Momentum studies, through the RSI indicator, shows the line elbowed north of the 50.00 centreline last week and finished on the doorstep of indicator resistance at 55.67.

Should an extension to the current pullback materialise, a bearish scenario—in line with the current downtrend—unfolding off 91.36 resistance remains a possible scenario this week. 91.36 is reinforced not only by a nearby 200-day simple moving average (dynamic resistance) at 91.56, but also the wedge pattern’s take-profit target around 91.32. At the same time, failure to maintain gains may result in a dip to support at 89.34, a level which echoes vulnerability and could unlock the door to Quasimodo support at 88.43.

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EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, support at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close. May also extended recovery gains, trading higher by 1.7 percent. June, however, is off to a mildly rocky start, down 1 percent as of current trade.

April upside—alongside May’s optimism—throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price breached major trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

A closer reading of price action on the daily chart shows the single currency cut away at recent attempts to explore higher.

Quasimodo resistance at 1.2278, as you can see, was left untested in recent weeks, with latest downside tipping the scales in favour of testing dynamic support around 1.1987: the 200-day simple moving average. Technicians will note the aforementioned SMA shares chart space with a 50.00% retracement ratio at 1.1986.

Adding weight to the downside is the RSI indicator. As sellers strengthened their grip Friday, the RSI value brushed aside support at 51.36 in addition to the 50.00 centreline (a 50.00 cross indicates a weakening of upside movement).

H4 timeframe:

Friday’s one-way slide watched the currency pair lock horns with a 61.8% Fib retracement at 1.2094, a horizontal value (green) stationed just north of interesting demand from 1.2044-1.2071. Technically speaking, this area boasts a solid floor to be mindful of this week, overrun with Fibonacci studies, including extension levels, expansion levels and projections.

Space south of demand, however, throws light on support coming in at 1.1990.

H1 timeframe:

Aided by a 1.618% Fib expansion at 1.2095 and a 1.272% Fib projection at 1.2098, the 1.21 figure embraced price action amidst US hours on Friday. Of course, we can also see 1.21 entered the frame at the same time the RSI indicator’s value dipped into oversold territory and shook hands with support at 14.74.

Another point worth highlighting is breakout stops plotted beneath the 1.2104 June 4th low (blue box). Tripping these orders as price greets bids around 1.21 has so far facilitated what’s known as a bear trap. This, therefore, could fuel additional buying as breakout sellers panic and liquidate (forming additional buy orders).

Demand at 1.2075-1.2085, nevertheless, is strategically positioned a touch under 1.21. Overhead, resistance is found at 1.2132, aligning to-the-pip with a 38.2% Fib retracement value.

Observed levels:

Long term:

From the monthly chart, the outlook continues to emphasise a bullish bias, taking aim at 2021 tops around 1.2349 and ascending resistance. Before discovering northerly ground, the daily timeframe argues a test of the 200-day simple moving average (1.1987) and neighbouring 50.00% retracement at 1.1986 may be in store.

Short term:

The combination of the 1.21 figure on the H1 and associated Fib studies, together with the possibility of breakout sellers’ orders being liquidated to form buy orders and a 61.8% Fib retracement on the H4 at 1.2093, signals a possible test of H1 resistance at 1.2132 early week (joined with a 38.2% Fib retracement).

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 low) and supply from 0.8303-0.8082. Should a bearish scenario unfold, support is featured at 0.7394, with additional pressure targeting demand at 0.7029-0.6664 (prior supply).

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Technical structure unchanged from previous analysis.

The daily chart’s technical scenery has been a dull affair since April 20th.

Despite a fleeting whipsaw to a low of 0.7645, resistance at 0.7816 and support from 0.7699 continue to outline a defined range (yellow).

Support at 0.7563 is in view as a potential objective in the event sellers take the wheel, deriving additional (dynamic) support from the 200-day simple moving average circling 0.7540. Above 0.7816, supply falls in at 0.8045-0.7985.

With respect to trend, we have been higher since early 2020. However, we must take into account the currency pair has been mostly directionless since the beginning of 2021.

The RSI shows the value engaging with space beneath the 50.00 centreline, unable to penetrate the latter since mid-May. This warns upside momentum could suffer this week and drop in on support from 37.92 and maybe oversold territory.

H4 timeframe:

Leaving Quasimodo resistance at 0.7782 unopposed on Friday, sellers took the reins and extended losses to highlight 0.7632-0.7653 demand this week. Note this was an area that helped facilitate a sizeable rally at the beginning of the month.

H1 timeframe:

Following a test of supply from 0.7783-0.7771 during early Europe Friday (holds H4 Quasimodo resistance within at 0.7782), the early hours of US trading had price test the resolve of 0.77. Helped by a 61.8% Fib retracement (green) nestled just under the round number from 0.7695, a mild recovery occurred. Also reinforcing the 0.77 test is the RSI value dipped a toe in oversold waters and missed support at 19.30 by a whisker before exiting the area into the close.

Resistance at 0.7722 is on the radar, dovetailing closely with a 38.2% Fib retracement at 0.7720, while any sustained movement beneath 0.77 unlocks the door to demand at 0.7634-0.7649 (fixed within the walls of H4 demand at 0.7632-0.7653).

Observed levels:

Long term:

Looking over the monthly and daily charts echoes a bearish vibe. The monthly is contained under major supply and trendline support-turned resistance. The daily timeframe has been carving out a consolidation since mid-April between 0.7816 and 0.7699. Notably, though, June has watched price toy with the lower side of the said range, offering uninspiring bullish intent. With that, daily support at 0.7563 could be targeted.

Short term:

Scope to navigate deeper water on the H4 timeframe until crossing swords with demand at 0.7632-0.7653 signals the 0.77 figure on the H1—despite holding Friday and working with additional 61.8% Fib support from 0.7695—is on the verge of stepping aside and unmasking demand at 0.7634-0.7649 (which as we know is connected with H4 demand at 0.7632-0.7653). However, before any downside attempt takes shape, a 0.7722 resistance test could form—a location sellers may be drawn to early week.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May (+0.2 percent) held the breached descending resistance, echoing potential support for the month of June, currently trading higher by 0.1 percent.

Daily timeframe:

Technical structure largely unchanged from previous analysis.

Alternating between gains and losses, last week wrapped up largely unmoved.

Long-term resistance at 110.94-110.29 (posted under supply at 111.73-111.19) remains centre of attention on the daily timeframe, with downside targeting 108.60ish lows (green oval), followed by supply-turned demand at 107.58-106.85.

Trend studies reveal the pair has been trending higher since the beginning of the year, though discovered a top heading into early April. Subsequent months witnessed a sizeable retracement, followed by attempts to recapture losses.

The RSI continues to oscillate around resistance at 57.00, with the value recently establishing mild bottoms ahead of the 50.00 centreline. Additional structure seen are support from 28.19 and resistance drawn from 83.02.

H4 timeframe:

The emergence of a broad USD bid, along with a risk-on theme, elevated USD/JPY on Friday, consequently maintaining a bullish vibe above demand at 109.02-109.20—an area joining the fight at the beginning of last week.

A key feature to be aware of is not only does the chart demonstrate scope to rally as far north as supply at 110.85-110.46 (houses Fib studies), the noted demand is positioned nearby trendline support, drawn from the low 107.48.

Failure to hold current demand, attention shifts to another layer of proven demand printed at 108.20-108.43.

H1 timeframe:

Arranged by way of the 1.10 figure, resistance at 109.95, a three-drive bearish formation at 109.93 (albeit not perfect), a 100% Fib projection at 109.88, and a 61.8% Fib retracement at 109.89, the 110.00-109.88 area forms relatively dense resistance.

Upstream, 110.18-110.09 supply is in focus (this area is particularly standout due to the momentum derived out of its base which dug below a handful of support points). In fact, this supply is strategically positioned to help facilitate a stop run above 110. Unhinging 110.18-110.09 reveals Quasimodo resistance at 110.41.

109.30 lows, on the other hand, is evident to the downside, closely tailed by familiar demand at 109.07-109.19 (fixed within H4 demand at 109.02-109.20).

On the basis of the RSI indicator, the value pulled away from overbought status Friday and now eyes trendline support, drawn from the low 20.25.

Observed levels:

Long term:

The descending resistance-turned possible support, etched from the high 118.66, belonging to the monthly chart has buyers attempting to take hold. Technically, this places the daily timeframe’s long-term resistance zone at 110.94-110.29 in question and, therefore, may have buyers set up a defence around 108.60 lows if tested.

Short term:

The H4 scale currently trades in unison with the monthly timeframe: scope to approach at least supply at 110.85-110.46.

Lower down, any H1 buying must face a number of notable resistances until Quasimodo resistance at 110.41, which essentially marks the lower boundary of H4 supply.

Therefore, in light of the picture out of both monthly and H4 timeframes, any bearish attempts from the said H1 resistances could be short-lived and promote a bullish scenario to approximately 110.40ish.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum moved in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent).

May, despite diminished volatility during March and April, traded firmly on the front foot, up by 2.8 percent. June, however, is somewhat depressed (down 0.7 percent), albeit recording fresh YTD peaks at 1.4250.

Despite the trendline breach (which could serve as support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Technical structure unchanged from previous analysis.

Sterling against the dollar has emphasised an uneventful picture since May 18th, fluctuating between gains and losses south of Quasimodo resistance at 1.4250.

GBP/USD finished on the ropes for a second straight week amid raised concerns regarding a full reopening, placing support at 1.4003 within reach this week. Demand at 1.3857-1.3940—an important technical area where a decision was made to break above 1.4003 resistance—is also perhaps on the radar.

Trendline support, taken from the low 36.14 on the RSI, recently gave up position, with last week wrapping up within touching distance of the 50.00 centreline.

H4 timeframe:

Since mid-May, the H4 chart has been busy carving out a consolidation between 1.4096 and 1.4219. Interestingly, an additional consolidation pencilled in its presence at the beginning of June between 1.4188 and 1.4083. As you can see, the fact price left the larger upper range at 1.4219 unchallenged informs traders that sellers could be gaining muscle. To confirm this, of course, we would require a breakdown that not only conquers the lower edge of both consolidations (1.4096/1.4083), but also trendline support, drawn from the low 1.3668, consequently unmasking support at 1.4007.

H1 timeframe:

From June onwards, the theme on the H1 chart has been set around the 1.41 and 1.42 figures, along with the 100-period simple moving average, currently circling in between at 1.4146. Also, important areas to recognise are support at 1.4078 and resistance plotted at 1.4246. In fact, 1.4078 served as a substantial floor on Thursday, serving to help more informed traders capitalise on the stop run south of 1.41.

Price action failing to touch gloves with 1.42 since June 7th signals possible moves through 1.41 and support at 1.4078 this week, targeting Quasimodo support from 1.4026.

As you can see, the week ended forming a mild recovery from 1.41, confirmed by the RSI indicator bouncing from oversold space and chalking up what’s known as hidden bullish divergence (essentially signalling price strength despite momentum squeezing lower—these are usually seen as continuation patterns).

Observed levels:

Long term:

The monthly timeframe’s trendline resistance breach in December 2020 underlines a bullish stance. Before buyers change gears, however, touching gloves with support at 1.4003 or demand at 1.3857-1.3940 on the daily timeframe could be in the offing.

Short term:

Shorter term, nonetheless, the H4 timeframe’s ranging action (two clear consolidations exist at 1.4096/1.4219 and 1.4188/1.4083) calls attention to the recent jaded upside. Ultimately, to help validate weakened bulls, price must tunnel below the said range supports and neighbouring trendline support.

Given the H4 timeframe’s picture, 1.41 on the H and support from 1.4078 may deliver little early week and suffer a breach. Should this come to fruition, a 1.4078 break potentially drives moves to H1 Quasimodo support at 1.4026 and the key figure 1.40, which joins closely with daily support from 1.4003.

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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