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Charts: Trading View

US Dollar Index (Daily Timeframe):

In the face of the prior week’s shooting star—a candlestick formation frequently interpreted as a bearish signal—dollar bulls went on the offensive last week and added 0.7 percent.

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According to the US dollar index (ticker: DXY), additional recovery gains shine the technical spotlight on the 93.44 31st March high, established alongside a 100% Fib projection and neighbouring Quasimodo resistance from 93.90. Lower on the curve, the widely watched 200-day simple moving average is on the radar (91.37), grouped with substantial support at 90.64-91.40.

Trend studies reveal the greenback has echoed a recovery phase since the beginning of 2021, following a sizeable decline during 2020. After realising support at 89.34 (a level displaying historical significance), this has motivated a bullish defence, up +3.0 percent year to date.

Although comfortable north of the 200-day simple moving average, which many technicians acknowledge as bullish suggestion, a longer-term trend change is recognised above the 94.74 25th September (2020) high (blue arrow). By the same token, beyond the 89.21 6th January low (red arrow), chart studies suggest an extension to the 2020 downtrend.

The relative strength index (RSI), a popular gauge of momentum, is content above support at 55.67 (a level with clear history dating as far back as April 2020). This demonstrates that momentum remains to the upside, despite exiting overbought territory and moulding bearish divergence heading into July.

  • Sellers making an entrance this week and clearing near-term bids reveals limited support until 90.64-91.40. Ultimately, a daily close below 6th July low at 92.00 could stir a bearish scene. Continued interest higher up, on the other hand, has the 93.44 31st March high in focus, closely followed by Quasimodo resistance at 93.90 and a 100% Fib projection.

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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)

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent.

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.5 percent lower.

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

Daily timeframe:

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests.

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped).

Any upside attempts, a breakout above the current wedge pattern, reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance, extended from the low 29.54. Resistance is close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Aside from June’s downside bias, technical areas to be mindful of this week are Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1896, plotted south of a 38.2% Fib retracement at $1.1917.

H1 timeframe:

In light of Friday’s lacklustre performance, the unit remained toying with $1.18. Thus, for those who read Friday’s technical briefing you may recall the following (italics):

A closer reading of price action on the H1 chart reveals that while short-term flow shakes hands with $1.18, Fibonacci structure resides on both sides of the market—commonly referred to as Fibonacci clusters.

Upstream, a 100% Fib projection at $1.1878, a 1.272% Fib expansion at $1.1880 and a 1.618% Fib extension at $1.1886 is visible, plotted just south of demand-turned supply from $1.1895-1.1911.

Downriver, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen dovetailing with H4 Quasimodo support underlined above at $1.1749.

The relative strength index (RSI) is attempting to climb the 50.00 centreline, which if successful implies momentum could strengthen and take aim at overbought conditions.

Observed levels:

Long term:

From the monthly timeframe, support at 1.1857-1.1352 is in play.

In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern.

Short term:

Short-term flow is centred on the H1 timeframe’s Fibonacci structure this week: between $1.1886 and $1.1878 for resistance and between $1.1745 and $1.1748 for support.

The $1.18 figure is currently offering a floor, though attracts limited convergence with additional technical tools. Traders may, nonetheless, feel the round number is fragile due to the unit trending lower since June.

AUD/USD:

Monthly timeframe:

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

Following June’s 3.0 percent decline, July’s candle knocked on the door of support at $0.7394 last week. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

Month to date, July is down 1.4 percent.

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

Daily timeframe:

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% extension at $0.7424—is in a tight corner right now. However, recognising monthly support inhabits the lower range of the demand at $0.7394, and directly below the area we also have a 61.8% daily Fib retracement at $0.7379, buyers could make a show.

Territory above demand points to the 200-day simple moving average at $0.7581, a dynamic value sheltered below resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence. What this shows traders is from mid-June, the currency pair reflected less downside momentum.

H4 timeframe:

The 100% Fib projection at $0.7427 and a nearby 1.13% BC Fib extension at $0.7423, despite delivering support since 8th July, was moved aside Friday amidst a light USD bid.

Sellers securing position south of the latter shifts focus to Quasimodo support drawn at $0.7364.

H1 timeframe:

For those who read Friday’s technical briefing you may recall the following (italics):

Immediate flow directs attention to the engulf of demand at $0.7416-0.7431. Not only has the move unlocked the $0.74 region as possible support, neighbouring supply from $0.7450-0.7436—the decision point to venture lower—is on the radar.

The report also went on to observe that the big figure $0.74 may also interest traders, having seen the level arranged above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, action which could welcome buyers into the market.

As evident from the chart, supply at $0.7450-0.7436 (currently positioned under the 100-period simple moving average at $0.7453) welcomed sellers on Friday and guided the currency pair under $0.74.

With regards to the relative strength index (RSI), the value is back on the doorstep of oversold after failing to find acceptance above the 50.00 centreline.

Observed levels:

Long term:

Monthly support at $0.7394 making an arrival, a level housed within the lower range of daily supply-turned demand at $0.7453-0.7384, might prompt a bullish scenario.

An AUD/USD bid emerging this week has the 200-day simple moving average ($0.7581) to target, followed by daily resistance at $0.7626.

Short term:

The combination of monthly support at $0.7394, daily supply-turned demand at $0.7453-0.7384, and $0.74 on the H1, may interest buyers in early trade.

Closing above H1 supply at $0.7450-0.7436 and the 100-period simple moving average at $0.7453 is likely to encourage further upside to the $0.75 neighbourhood.

USD/JPY:

Monthly timeframe:

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

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 a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

Month to date, July trades 1.0 percent in the red.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The technical picture from the daily chart shows price languishing below trendline support-turned resistance (taken from the low 102.59), an ascending line mingling with long-term resistance at ¥111.88-111.20.

Brushing aside July 8th low at $109.53 potentially sets the technical stage for additional weakness to ¥107.58-106.85: supply-turned demand.

Trend studies—despite the trendline support breach early July—reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51, and finished the week sub-50.00: the indicator’s centreline. This informs traders that average losses exceed average gains, therefore traders are likely to monitor the indicator closely below 50.00 for further deterioration.

H4 timeframe:

Technical elements on the H4 scale to be aware of this week are supply coming in at ¥110.99-110.80, an area accommodating a 100% Fib projection at ¥110.90 and a 61.8% Fib retracement value from ¥110.85. Harmonic traders will note the 100% Fib projection denotes an AB=CD bearish configuration.

Chart space below seats familiar Fibonacci support between ¥109.48 and ¥109.70 in sight, a zone pinned above demand at ¥109.02-109.20.

H1 timeframe:

Heading into the early hours of London Friday, bullish forces overwhelmed ¥110 offers and addressed a 61.8% Fib retracement value from ¥110.32 before withdrawing to within striking distance of ¥110 into the close. Also technically noteworthy is supply between ¥110.54-110.41 and ¥110.50-110.35, and a 1.618% Fib projection at ¥110.37.

Unwinding below ¥110 this week reasons Quasimodo support at ¥109.61 could enter the fold (enclosed within the parapets of the H4 timeframe’s Fib support mentioned above between ¥109.48 and ¥109.70), assuming lows at ¥109.74 give way.

The relative strength index (RSI) levelled off a touch under overbought Friday as price clipped the 61.8% Fib ¥110.32. Interestingly, the indicator’s value stepped through the 50.00 centreline into the close, signifying further downside momentum. Indicator support set within oversold at 18.76, therefore, is in view.

Observed levels:

Long term:

Monthly action encourages a bullish outlook, following April’s retest of descending resistance-turned support, pulled from the high ¥118.66. This is somewhat clouded by the daily timeframe trekking through trendline support, drawn from ¥102.59.

The above implies a retracement as far south as supply-turned demand from ¥107.58-106.85, prior to monthly bulls taking the reins.

Short term:

¥110 is a key watch early hours this week.

A H1 close below ¥110 hints at a bearish theme to H1 Quasimodo support at ¥109.61. A ¥110 retest in the form of resistance, therefore, may appeal to any bearish interest.

Retesting and defending ¥110, on the other hand, sets up price to knock on the door of H1 supply between ¥110.54-110.41 and ¥110.50-110.35.

GBP/USD:

Monthly timeframe:

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

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 0.5 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

The tail end of the week watched sterling slip versus the buck, fashioning two back-to-back bearish candles. This informs chartists that Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) could be thrown in the mix this week.

Overhead, resistance at $1.4003 remains centre stage—a level displaying commitment since March of this year.

Momentum studies, according to the popular relative strength index (RSI), recently came within a whisker of the 50.00 centreline and concluded the week under 40.00. With that, traders are urged to monitor for a possible oversold signal this week.

H4 timeframe:

Since the beginning of July, buyers and sellers have been carving out a consolidation between the 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3909, and familiar Quasimodo support present at $1.3761.

Areas outside the noted range casts light on supply from $1.3986-1.3958 and a resistance zone at $1.4027-1.3998, while lower on the curve, Quasimodo support can be found at $1.3712, which may be challenged this week if the end-of-week test at $1.3761 stands aside.

H1 timeframe:

Bids thinned at $1.38 during US trading on Friday, following an earlier test at the underside of the 100-period simple moving average at $1.3839.

Subsequent flow witnessed sellers strengthen their grip, boosted on the back of a USD bid and technical breakout selling.

$1.3750 is a level of note, drawing support since early July. Fibonacci traders will also acknowledge the level shares chart space closely with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744.

Downside momentum also pulled the relative strength index (RSI) to within touching distance of oversold territory at the week’s end. Should the value turn from oversold, bullish divergence might develop, a signal showing strengthening momentum.

Observed levels:

Long term:

Should buyers continue to take a back seat on the daily timeframe this week, Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3685) deserves notice.

Yet an upside move would shift attention back to daily resistance at $1.4003.

Short term:

Although the H4 timeframe has price dipping a toe in waters south of Quasimodo support at $1.3761, the $1.3750 support on the H1, joined together with a 1.618% Fib expansion at $1.3748 and a 1.272% Fib projection from $1.3744, could form a floor early week, potentially stirring a pullback to $1.38ish.

A H1 close below $1.3750, nonetheless, brings light to a short-term bearish play, targeting Quasimodo support on the H4 at $1.3712, closely shadowed by the $1.37 figure (H1).

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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