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Charts: Trading View

US Dollar Index (Daily Timeframe):

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Against a basket of foreign currencies, the US dollar index (ticker: DXY) left behind a colourless vibe last week, ranging between 90.44/89.53 session extremes.

Support at 89.34 continues to command technical relevance on the daily chart, extended from as far back as early 2009. Pattern structure, on the other hand, reveals the unit pierced the upper side of a descending wedge (a pattern displaying a decrease in downside momentum within its walls [91.43/90.42]). With the DXY in decline since topping at the 93.43 31st March peak, the recent upside pattern breach is likely viewed as a reversal signal.

While the pattern break shines the technical spotlight on a possible run back to 91.36 resistance, Friday’s shooting star candlestick pattern—a bearish signal—implies upside pressure is perhaps fragile and a dip into 89.34 support could also be on the cards this week.

With respect to trend, as noted in previous writing, a bearish narrative has clouded the greenback since the early months of 2020, in the shape of well-defined lower lows and lower highs. Many analysts likely refer to this downward movement as a primary trend. Interestingly, the 93.43 31st March peak—and subsequent downside—echoes seller strength within the current downtrend, unlocking the possibility of fresh lower lows beyond 89.34 support over the coming weeks (see black arrows).

The RSI indicator, a popular gauge of momentum, reveals the value remains south of resistance at 45.51. This suggests upside momentum lacks impetus, emphasising we may drop in on oversold space, possibly greeting support at 21.36. Should 45.51 move aside, another layer of indicator resistance is visible at 55.67.

  • Chart studies highlight a bearish vibe. Not only will traders see Friday’s bearish candlestick formation, they’ll likely take into account the current downtrend. Consequently, the break above the descending wedge is unlikely to bear much fruit, in which case a bearish move may materialise this week and shake hands with support at 89.34. Beyond here, Quasimodo support rests at 88.43.

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. Month-to-date action for May currently trades higher by 1.5 percent.

April upside—alongside May’s gains—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 trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Quasimodo resistance-turned support at 1.2169 has established a resilient floor, welcoming price action on Friday by way of a dragonfly doji candlestick pattern (bullish signal). Note, a mirror version was seen on the US dollar index in the form of a shooting star candlestick pattern (see above).

Although the RSI displays bearish divergence, EUR/USD trend studies suggest further upside is favourable (trending higher since March 2020) and reinforces Friday’s bullish candle off 1.2169 support. A buy-on-dip scenario, therefore, could unfold, taking aim at Quasimodo resistance from 1.2278 this week.

H4 timeframe:

Friday’s risk events witnessed a higher-than-anticipated PCE price index (core: excluding food and energy) reading, increasing by 0.7 percent, yet failed to ignite much immediate USD upside momentum. The Bureau of Economic Analysis also showed the core PCE price index rose 3.1 percent y/y[1].

Technically, we can see EUR/USD price gathered fresh bullish impetus off a 61.8% Fib level at 1.2133 heading into US hours, stationed just north of another 61.8% Fib level at 1.2125. According to the chart, more topside is in the offing this week, targeting resistance parked at 1.2244.

H1 timeframe:

For those who read Friday’s technical briefing you may recall the research team underlined a pennant pattern (1.2214/1.2175) that established around the 1.22 figure.

As you can see, Friday navigated beneath the pattern’s lower edge and nosedived to within touching distance of Quasimodo support at 1.2132, before pulling back and crossing swords with the 1.22 figure (those short based on the pennant pattern were likely eyeing lower price levels, as the textbook take-profit level is formed by taking the height of the earlier move from 1.2262 and extending this value from the breakout point). Space north of 1.22 has the 100-period simple moving average in range at 1.2212 this week, followed by supply coming in at 1.2240-1.2228.

Interestingly, the RSI value rebounded from trendline resistance-turned support (taken from the high 75.04) at the same time H1 bottomed ahead of the noted Quasimodo support.

Observed levels:

Long term:

The overall trend facing higher, and monthly price exiting demand at 1.1857-1.1352 in April, positions the daily timeframe’s (dragonfly doji candle pattern) test of Quasimodo resistance-turned support at 1.2169 in favourable light this week. Buying from here has resistance to target at 1.2278 (another Quasimodo formation).

Short term:

In conjunction with the bigger picture, H4 displays scope to approach resistance at 1.2244. With H1 testing the resolve of 1.22 offers Friday, the technical outlook suggests a break of this psychological level early week, leaning towards H1 supply drawn from 1.2240-1.2228, sited just south of H4 resistance mentioned above at 1.2244.

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 high) and supply from 0.8303-0.8082. Should a bearish scenario unfold, support at 0.7394 is featured to the downside, with additional downside 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:

Unchanged technical view from previous analysis.

Despite rupturing resistance at 0.7816 early May, the level maintains its position on the daily chart. Interestingly, since April 20th, AUD/USD has offered a non-committal tone, consolidating between the aforementioned resistance and support from 0.7699 (yellow). Of late, however, the currency pair shook hands with the lower wall of the aforementioned range.

Below the consolidation, technicians have support at 0.7563 in sight.

With respect to trend, though, we have been higher since the early months of 2020.

Out of the RSI, the indicator remains flirting with space south of the 50.00 centreline, following a dip from 60.30 peaks in May.

H4 timeframe:

The Australian dollar staged a modest comeback against the US dollar on Friday as the US dollar index trimmed earlier upside from two-week tops. In addition, the risk-on setting weighed on the safe-haven buck and aided the risk-sensitive Aussie dollar.

The technical landscape on the H4 scale saw 0.7696-0.7715 support welcome price action on Friday. Arranged as a support/resistance zone since the end of January, price action traders will likely be watching for this area to hold and ultimately encourage an advance to at least Quasimodo resistance at 0.7782, with a break unmasking daily resistance at 0.7816.

Below 0.7696-0.7715, demand resides at 0.7632-0.7653.

H1 timeframe:

Amidst the opening hours of US trading on Friday, short-term movement whipsawed through 0.77. Sell-stops fuelling moves into bids off neighbouring demand at 0.7671-0.7687 was clearly sufficient enough to elevate the currency pair back above 0.77 and cross paths with resistance at 0.7714—a previous Quasimodo support level.

Overhead resistance to be mindful of this week falls in around the Quasimodo formation at 0.7755, closely shadowed by supply coming in from 0.7783-0.7771 (houses the H4 Quasimodo resistance at 0.7782).

With reference to the H1 chart’s RSI, the value rebounded north of oversold support at 19.30 on Friday and subsequently exited oversold space. The 50.00 centreline could prove to be a roadblock this week (resistance), yet a breach throws light on overbought resistances at 70.61 and 80.85.

Observed levels:

Long term:

The daily timeframe’s consolidation between 0.7816 and 0.7699 remains a key watch this week. Technically, a run off the lower edge of the said range promotes a bullish scenario. Beneath the range, nonetheless, reveals possible downside to daily support at 0.7563.

Short term:

Against the backdrop of higher timeframes, H1 resistance at 0.7714 is another key watch early week. Fuelled by Friday’s 0.77 retest, movement north of 0.7714 opens up a possible test of H1 Quasimodo resistance at 0.7755 (plotted above the 100-period simple moving average at 0.7746), with subsequent buying unlocking supply at 0.7783-0.7771, which, as noted above, contains H4 Quasimodo resistance at 0.7782.

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 marginally 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 is currently holding the breached descending resistance, up by 0.5 percent and echoing potential support.

Daily timeframe:

USD/JPY—in lockstep with the US dollar index—powered higher for a third successive session on Friday. However, unlike prior sessions, a few pips shy of long-term resistance at 110.94-110.29 (posted under supply at 111.73-111.19), we witnessed price fade earlier gains and shape what’s known as a shooting star candlestick pattern (bearish signal).

Should Friday’s action rejuvenate a bearish theme, 108.60ish lows (circle) represent a logical roadblock, followed by supply-turned demand at 107.58-106.85.

Trend studies reveal the pair has been trending higher since the beginning of 2021.

The RSI value has moved above resistance at 57.00, shifting attention to the possibility of further upside momentum into overbought terrain and resistance at 83.02.

H4 timeframe:

Off multi-week tops at 110.20, USD/JPY modestly recoiled on Friday and concluded the session within touching distance of support coming in from 109.71.

Traders are urged to note territory beneath the said support shows scope to drop as far south as demand at 109.02-109.20—a decision point to initially push above 109.71 resistance—which aligns closely with trendline support, drawn from the low 107.47.

Upstream, nevertheless, the technical radar is fixed on supply at 110.85-110.46, secured within daily resistance at 110.94-110.29 and joined by a H4 100% Fib projection at 110.59 as well as a 1.618% Fib expansion at 110.69.

H1 timeframe:

As evident from the H1 scale on Friday, price action whipsawed above the 110 psychological level—movement likely viewed as a bull trap—and concluded the session around local lows at 109.74. Above 110, however, we can see Quasimodo resistance at 110.40.

It is sub 109.74 sellers may find space to work with, directing towards a Quasimodo resistance-turned support at 109.45 and intersecting trendline support, pencilled in from the low 108.56.

Lower on the curve, demand is seen at 109.07-109.20, sharing chart space with a 61.8% Fib level at 109.20 (set within the upper range of H4 demand at 109.02-109.20).

For those who watch the RSI, the value rebounded from the 50.00 centreline in closing trade, helped by trendline support, taken from the low 25.47.

Observed levels:

Long term:

Monthly flow is attempting to forge support off a recently breached descending resistance line, which underscores a potential bullish scenario.

Therefore, daily sellers—based on Friday’s shooting star candlestick formation just south of longer-term daily resistance at 110.94-110.29—face monthly muscle (see above).

Short term:

H4 support at 109.71 is a relatively clean level, having seen the base serve as healthy resistance during April and May. As such, in conjunction with the monthly timeframe’s technical structure, buyers making an entrance off 109.71 this week could be seen.

A H1 close back above the 110 figure would help confirm bullish intent off the aforementioned H4 support and likely welcome additional buyers in the form of breakout orders.

Alternatively, should H4 support at 109.71 give way, technical expectations are for a dip to H1 support at 109.45 and intersecting H1 trendline support.

GBP/USD:

Monthly timeframe:

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

The pendulum swung 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) and refreshed 2021 highs at 1.4241, levels not seen since 2018. May, despite diminished volatility during March and April, trades firmly on the front foot, up by 2.6 percent MTD.

Despite the trendline breach (which could serve as possible 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:

Buyers and sellers have been squaring off (consolidating) a touch south of Quasimodo resistance at 1.4250 since May 18th, following an earlier 1.4003 support retest.

Renewed interest to the upside will see 1.4250 likely attempt to form a ceiling, though a break throws light on the 1.4376 April 2018 high (see monthly analysis). South of support at 1.4003, demand resides at 1.3857-1.3940—an important technical area where a decision was made to break above 1.4003 resistance.

Trend in this market has remained firmly to the upside since March 2020.

The RSI informs traders that upside momentum is levelling off, movement which may have trendline support, taken from the low 36.14, make an entrance.

H4 timeframe:

Similar to the AUD/USD (see daily timeframe), GBP/USD is clearly a patience game right now, fluctuating within the walls of a reasonably defined range at 1.4105-1.4219. Understandably, having noted the overall trend faces a northerly trajectory, the majority of traders are likely anticipating a break to the upside to cross swords with the daily Quasimodo resistance at 1.4250.

Of technical note is also a H4 61.8% Fib level at 1.4092 and a nearby trendline support, taken from the low 1.3668.

H1 timeframe:

In similar fashion to the H4 scale, we can see short-term H1 traders playing the range between 1.42 and 1.41, with Friday fading the upper edge of this range. In between the area, the 100-period simple moving average is seen circling 1.4158ish.

Outside of the aforesaid consolidation, technical elements reveal double-top resistance around 1.4246 and support priced in at 1.4078.

In regards to the RSI, the value retested the underside of resistance at 56.58 on Friday and wrapped up just ahead of the 50.00 centreline. Below the latter, shaking hands with support at 33.00 is possible, stationed ahead of oversold space.

Observed levels:

Long term:

With scope to advance on the monthly scale (to 1.4376), as well as a defined uptrend visible on the daily timeframe since pandemic lows around March 2020, the daily chart’s Quasimodo resistance at 1.4250 is perhaps vulnerable.

Short term:

Both H4 and H1 timeframes exhibit rangebound environments.

Therefore, short-term strategies are likely to favour range-based methods this week.

Breakout traders will also likely be closely monitoring the ranges. A breakout, which given the current uptrend, is likely to be north, with an initial target set around the H1 double-top resistance at 1.4246, followed by the daily timeframe’s Quasimodo resistance at 1.4250.

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.

  1. https://www.bea.gov/news/2021/personal-income-and-outlays-april-2021
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