March 3rd 2020: Dollar Index Finishes Lower for Third Session – Broke 200-Day SMA

March 3rd 2020: Dollar Index Finishes Lower for Third Session – Broke 200-Day SMA, FP Markets

EUR/USD

Monthly timeframe:

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

The month of February witnessed EUR/USD revisit the upper limit of demand at 1.0488/1.0912 and chalk up a reasonably appealing (bullish) hammer candlestick pattern – a noteworthy area of demand given the momentum derived from its base. Additional upside this week is, therefore, achievable, with demand-turned supply at 1.1857/1.1352 and long-term trendline resistance (1.6038) established as upside targets.

To the downside, however, traders looking beyond the current demand zone likely have crosshairs fixed on a reasonably ‘fresh’ demand base at 0.9581/1.0221. Note this zone boasts history dating back as far as 2003.

The primary downtrend in this market has remained lower since 2008, exhibiting clear lower peaks and troughs.

Daily timeframe:

Partially altered outlook from previous analysis –

Demand at 1.0680/1.0781, an area formed in April 2017, elbowed its way into the spotlight in recent trade and remains a dominant fixture on this timeframe.

Supply coming in at 1.1117/1.1078, which intersects with the 200-day SMA, put up a little fight yesterday, potentially exposing a clear pathway north to familiar supply coming in at 1.1281/1.1208. What’s also notable from a technical perspective is the RSI indicator touching the overbought ground and a trendline support-turned-resistance.

H4 timeframe:

Stacked supply at 1.1190/1.1172 and 1.1191/1.1165 are in motion, thanks to recent bidding, which overrun nearby supply at 1.1143/1.1129, now a serving demand zone. Traders may also note the deep 88.6% Fibonacci retracement (square root of 0.7864) resides within the current supplies at 1.1185. The Fibonacci sequence levels of 78.6 and 88.6 indicate deeper retracement and are recognised entry points.

H1 timeframe:

Hyped up March FOMC easing expectations, as well as US manufacturing surveys printing less-than-stellar numbers, weighed on the US dollar index Monday, boosting the euro. After refreshing multi-month highs and snapping above the 1.1172 January 16th high, a reasonably spirited pullback is being seen on the H1, south of the 1.12 handle.

1.1143/1.1129, the H4 supply-turned demand area, is tipped to re-enter the fold today, with a break revealing the 1.11 handle and H1 supply-turned demand at 1.1091/1.1080.

The RSI registered a high at 83.00 yesterday, recently exiting overbought territory and possibly heading towards the mid-way 50.0 value.

Direction:

The monthly price has eyes for higher prices, but in order to reach upside targets, daily price must overcome 1.1281/1.1208. Therefore, some traders likely anticipate a retest to hold off 1.1117/1.1078, a recently violated supply-turned demand.

Lower on the curve, two combined H4 supplies are in motion at 1.1190/1.1172 and 1.1191/1.1165, with the likelihood of a retest forming at 1.1143/1.1129, also positioned on the H1 timeframe.

Given monthly price targeting higher prices, as well as daily flow also showing room to move north, an enthusiastic retest at the H4 supply-turned demand from 1.1143/1.1129 may come about today, with an initial upside target set around 1.1165, the underside of the larger H4 supply.

March 3rd 2020: Dollar Index Finishes Lower for Third Session – Broke 200-Day SMA, FP Markets

 

AUD/USD:

Monthly timeframe:

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

Demand at 0.6358/0.6839 remains in the fight, yet price struggles to chalk up anything meaningful to the upside. An eventual break of the said demand zone has another layer of demand close by at 0.6094/0.5866, while a recovery could lead to trendline support-turned resistance (0.4776) making an appearance, followed by supply at 0.8303/0.8082.

Daily timeframe:

Partially altered outlook from previous analysis –

In light of the recent downside in this market, testing multi-year lows at 0.6433, supply formed at 1.6585/1.6625. Further selling this week could approach demand at 0.6330/0.6245.

The RSI recently re-entered oversold territory, trading at 29.00.

H4 timeframe:

Support on this timeframe falls in at the 161.8% Fibonacci ext. point at 0.6483, which, as you can see, held ground thus far. Recent activity had the unit withdraw back into a descending channel formation (0.6638/0.6585) and test its upper boundary.

Supply at 0.6607/0.6588 made its debut last week, capping recovery gains off lows at 0.6542. Should we break above channel resistance today, traders are likely to see price address the said supply. A break of here has supplied at 0.6655/0.6629 in the firing range, which intersects with trend line resistance, taken from the high 0.7031.

H1 timeframe:

The Australian dollar benefitted on the back of USD weakness Monday, dethroning the 0.65 handle to the upside and reaching highs of 0.6567.

Resistance falls in around the 0.6550 region, bolstered by the 100-period SMA and a 78.6% Fibonacci retracement at 0.6558. Analytics also show what appears to be a rising wedge pattern, which recently had its lower edge penetrated/retested.

Direction:

Monthly demand at 0.6358/0.6839 is rapidly deteriorating, with daily price exhibiting scope to test lower levels this week. Technical research, thus, anticipates additional selling to materialise over the coming weeks.

With H4 price retesting the underside of channel resistance, and holding, along with H1 price rejecting a reasonably attractive point of resistance around 0.6550 and penetrating a rising wedge formation to the downside, 0.65 could re-enter view.

Traders, therefore, may seek bearish scenarios south of 0.6550 today, particularly after retesting the underside of the H1 rising wedge, targeting 0.65, and possibly Friday’s low at 0.6433.

USD/JPY:

Monthly timeframe:

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

Since kicking off 2017, USD/JPY has been busy carving out a descending triangle pattern. The breakout for this configuration is common to the downside, but an upward breakout is considered more reliable and profitable. In recent movement, price elbowed a touch outside the upper boundary of the aforementioned descending triangle to 112.22, and retreated lower, forming a shooting star pattern into the month’s end.

Outside of the current pattern, a supply area is visible at 126.10/122.66, while lower on the curve we have a demand area at 96.41/100.81.

Daily timeframe:

The 200-day SMA, currently circulating around 108.39, is seen capping upside after demand at 107.82/108.04 gave way. While sell stops beneath the current demand were likely triggered, possibly clearing the path to demand set at 106.60/107.09, traders are urged to pencil in the possibility of a rally to channel support-turned-resistance, taken from the low 104.44, before the market turns lower.

The RSI indicator also recently voyaged through the 50.0 value, down from 76.63, and is poised to test oversold levels this week.

H4 timeframe:

Demand at 108.41/108.70 continues to offer the market an area of supply, holding price lower yesterday. This comes after the pair likely run stops south of the 107.65 January 7th low on Friday.

Price holding at the underside of the current supply is certainly a possibility today, with an approach to demand at 106.94/107.30 also possible. Should we cut through current supply, traders can look forward to a potential run towards demand-turned supply at 109.30/109.53.

H1 timeframe:

Short-term flow is in the process of chalking up an AB=CD correction (orange) off multi-month lows at 107.36, though for now price action is held lower by the 108.50 level. Interestingly, the AB=CD formation completes within the confines of a supply zone coming in at 108.88/108.63.

In addition to the above, a 38.2% Fibonacci retracement is seen at 108.64, converging beautifully with the current H1 supply.

Direction:

The lower edge of daily demand at 107.82/108.04 was clipped, possibly triggering sell-stop liquidity. This, along with monthly price showing space to extend losses, could see daily demand at 106.60/107.09 enter the mix this week.

In line with higher-timeframe direction, H1 supply at 108.88/108.63, which is glued to the top edge of the current H4 supply at 108.41/108.70, boasts strength. Downside targets from current price, beyond 108, can be seen around 107.50, closely followed by a small H1 demand at 107.11/107.22.

GBP/USD:

Monthly timeframe:

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

Early February 2018 saw the pair reject 1.4520/1.3893, a 50.0% retracement and a 38.2% Fibonacci retracement combination (red). This, along with trendline resistance (2.1161), remains a well-rounded resistance area to keep an eye on the long term.

In recent months, we’ve seen a recovery form off 1.1904/1.2235, clocking highs of 1.3514 in December 2019 and breaking the 1.3380 March 2019 high. The month of February declined nearly 3.00%.

Daily timeframe:

Partially altered outlook from previous analysis –

Demand formed at 1.2649/1.2799 entered view in recent movement, refreshing YTD lows at 1.2725. Traders will note this area held price higher on two occasions, once in October and again in November (2019), and is potentially confirmed by the RSI heading towards oversold levels.

The 200-day SMA also resides within the current demand zone, circulating around 1.2693.

North of the price we have a local trendline resistance (1.3514), with supply seen at 1.3303/1.3184 in the event we travel further north this week.

H4 timeframe:

Partially altered outlook from previous analysis –

H4 demand-turned supply at 1.2806/1.2833 remains a reasonably dominant fixture on this timeframe, capping upside, while 1.2718/1.2751, an area comprised of 161.8% Fibonacci ext. studies continue to cap downside. This area is also housed within current daily demand.

1.2806/1.2833 may continue to offer the market a platform of resistance this week, having seen its history as an area of support. In the absence of this, follow-through buying to relatively dominant supply at 1.2868/1.2894 is possible.

H1 timeframe:

Sterling kicked off March on a weaker footing across the board amidst Brexit jitters going in to trade talks between the UK and EU. 1.2750 remains a key level on this timeframe, withstanding a number of downside attempts in recent trade. However, a break lower could see 1.27 make an appearance.

1.28 is also seen holding as resistance, though a break of here will see crosshairs fixed on 1.2850. Technically, 1.2850 still offers a particularly attractive area of resistance, bolstered by a trendline support-turned resistance (1.2849), a 61.8% Fibonacci retracement at 1.2861 and a 50.0% retracement at 1.2870.

Direction:

Daily demand at 1.2649/1.2799 could hold price higher this week, reinforced by the 200-day SMA.

While longer-term we’re trading from demand, a successful retest at the underside of 1.2870/1.2850 on the H1 could occur. In light of its confluence, this could draw the candles back towards 1.28.

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 with 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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