Weekly Technical Market Insight: 13th – 17th July 2020

Weekly Technical Market Insight: 13th – 17th July 2020, FP Markets

US Dollar Index:

The June 10 recovery off daily support at 95.84, as you can see, established a reasonably compact bear flag between 95.72/97.45. Last week kicked off slipping below the aforesaid flag’s lower boundary, introducing a sell signal and projecting moves as far south as 92.72 (take-profit target measured by calculating the preceding move and adding the value to the breakout point – purple).

In addition to the above, as featured in recent weekly reports, late May witnessed a push through the lower limit of a large bearish pennant configuration (98.27). Traders familiar with this pattern, therefore, may still acknowledge the possibility of moves forming as low as 93.97: the pennant take-profit target, measured by calculating the distance of the preceding move and adding the value to the breakout point (yellow).

Also referred to as half-mast formations, flags and pennants are considered continuation patterns, estimating the US dollar index, or DXY, may extend downside over the coming weeks.

Weekly Technical Market Insight: 13th – 17th July 2020, 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 May, as you can see, recovered off worst levels out of demand from 1.0488/1.0912 and closed firm. This prompted an extension in June to highs at 1.1422, adding 1.2%, despite running into opposition at the lower ledge of nearby supply from 1.1857/1.1352 (unites with long-term trendline resistance [1.6038]).

July is currently toying with the aforesaid supply, albeit trading higher by 0.6%.

With reference to the primary trend, the pair has exhibited clear lower peaks and troughs since 2008.

Daily timeframe:

Partially altered from previous analysis –

The month of June observed EUR/USD address a potential reversal zone (PRZ), derived from a harmonic bearish bat pattern. The base is comprised of an 88.6% Fib level at 1.1395, a 161.8% BC projection at 1.1410 and a 161.8% Fib ext. level at 1.1462 (red oval). It’s typical, in the case of bearish formations, to see traders sell PRZs and place protective stop-loss orders above the X point (1.1495). Common take-profit targets fall in at the 38.2% and 61.8% Fib levels (of legs A/D) at 1.1106 and 1.0926, respectively.

Although a mild bid has been observed since June 19, harmonic traders ultimately target the aforementioned Fib levels on this timeframe.

H4 timeframe:

EUR/USD chalked up a mild comeback into the close of the week, though wrapped up the session by way of a shooting star candlestick configuration (considered a bearish reversal pattern at peaks).

With reference to probable resistance points this week, traders likely monitor resistance at 1.1348, channel resistance (1.1348) and supply at 1.1415/1.1376. Support, however, can be found at a channel formation (prior resistance – 1.1422), channel support (1.1168) and demand at 1.1189/1.1158 (prior supply).

H1 timeframe:

Early European trading on Friday observed EUR/USD shift to the upside off 1.1255, governed largely on the back of the US dollar index exhibiting overbought conditions. H1 crossed above the 1.13 level and the 100-period simple moving average heading into US trading, yet was unable to sustain upside ahead of supply at 1.1345/1.1325, and settled the week marginally back under 1.13.

Defending 1.13 as resistance could have buyers and sellers eventually butt heads at demand from 1.1239/1.1251, an area where an important decision was made to break 1.1250 to the upside. Beyond 1.1239/1.1251, eyes will be on demand at 1.1181/1.1202 and the 1.12 level.

Structures of Interest:

Long term:

Monthly supply at 1.1857/1.1352 and neighbouring long-term trendline resistance presents a formidable ceiling, one that is unlikely to give way without a struggle. The daily timeframe also reminds traders there’s scope to push for at least 1.1106, the 38.2% Fib level.

Short term:

The shooting star candlestick pattern presented on the H4 timeframe also puts forward a bearish presence today, likely discouraging buyers at 1.13 on the H1.

Consequently, sellers likely have the advantage going into the new week, introducing potential shorting opportunities sub 1.13.

Weekly Technical Market Insight: 13th – 17th July 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

May’s extension, together with June’s follow-through, has supply at 0.7029/0.6664 echoing a vulnerable tone in July, particularly as intersecting long-term trendline resistance (1.0582) demonstrates signs of giving way.

Regarding the market’s primary trend, however, a series of lower lows and lower highs have been present since mid-2011.

Daily timeframe:

Partially altered from previous analysis –

AUD/USD ousted resistance at 0.6931 at the beginning of last week, with the latter now featured as support.

The break to the upside also shifts focus towards two nearby trendline resistances (prior supports – 0.6744/0.6671) this week; a violation here unmasks another resistance at 0.7197.

With respect to support under 0.6931, 0.6755 is on the radar, as well as the 200-day simple moving average, currently circulating the 0.6673 region.

H4 timeframe:

Formed from June 10 to July 1, H4 established a (bullish) pennant pattern between 0.7064/0.6776, considered a continuation pattern among chart pattern enthusiasts. The breakout witnessed at the beginning of July unearthed a buy signal, though heading into mid-month price has entered a ranging phase (blue) between 0.6925/0.6999.

In light of daily price establishing position above 0.6931, breaking above the aforesaid range is a possibility this week, bound for nearby supply at 0.7058/0.7029.

H1 timeframe:

Since late Thursday, the 100-period simple moving average (0.6959) has capped upside.

Overall, though, the H4 range underlined above at 0.6925/0.6999 is contained by supply at 0.7003/0.6987 (and 0.70), and demand from 0.6914/0.6926. As such, these areas are worth keeping a tab on.

Structures of Interest:

Long term:

Monthly price appears to be squeezing sellers out of the market as daily price holds 0.6931 as support.

Short term:

Long-term action indicates H4 players may defend range support at 0.6925 this week, highlighting H1 bullish signals north of 0.6950 or the 100-period simple moving average to H1 supply at 0.7003/0.6987.

Weekly Technical Market Insight: 13th – 17th July 2020, FP Markets

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 carving out a descending triangle pattern between 118.66/104.62.

April and May were pretty uneventful, with June also wrapping up indecisively in the shape of a neutral doji candlestick pattern.

Areas outside of the noted triangle can be seen at supply from 126.10/122.66 and demand coming in at 96.41/100.81.

Daily timeframe:

Partially altered from previous analysis –

Despite failing to connect with the 200-day simple moving average at 108.36, upside momentum came to an abrupt halt at the beginning of July and fashioned a bearish outside day.

Having observed a mild downbeat tone over the course of last week, price, as you can see, eventually made its way back to demand at 105.70/106.66 on Friday. This could entice buyers into the market going forward, though it is worth pointing out a dip lower may target support at 105.01.

H4 timeframe:

Friday’s decline threw light on demand at 106.39/106.64, an area joined closely with channel support (107.36), a 161.8% Fib ext. level at 106.67 and a 78.6% Fib level at 106.51.

The aforesaid demand encouraged a round of buying into the second half of Friday’s session, generating a bullish engulfing candle. Nearby, we have supply registered at 107.03/107.28 (prior demand) and another supply at 107.39/107.20.

H1 timeframe:

Demand at 106.71/106.80 had its lower extreme penetrated early US Friday, reaching lows at 106.64. Enough of a move to overthrow most buyers from the aforesaid area, traders may now look to supply at 107.09/107.00 for shorting opportunities. Note this supply is where an important decision was made to break 107 to the downside. Above here, nonetheless, focus will be on supply at 107.36/107.18 and the 100-period simple moving average.

Structures of Interest:

Long term:

Daily demand at 105.70/106.66 recently re-joined the fight. While this may motivate buyers, it is worth noting the previous reaction out of the zone failed to print anything meaningful, therefore there is a chance sellers may gain additional influence this week.

Short term:

H1 supply at 107.09/107.00 is likely appealing today, as is the H1 supply seen above it at 107.36/107.18. This is fuelled on the view daily sellers may soon gather traction and H1 demand at 106.71/106.80 recently had its lower boundary breached.

Weekly Technical Market Insight: 13th – 17th July 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

Support at 1.1904/1.2235 and long-term trendline resistance (1.7191) offers clear structure on the monthly timeframe, with the latter prompting a notable upper shadow in June.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008, placing 1.1904/1.2235 support in a vulnerable position.

Daily timeframe:

Thursday had GBP/USD stall just ahead of the 200-day simple moving average at 1.2688 and generate a shooting star candlestick pattern, considered a bearish reversal formation at peaks. Interestingly, Friday responded by way of a doji candlestick pattern. In some respects, this could imply the upward move derived out of demand at 1.2192/1.2361 lacks enthusiasm and encourage bearish themes this week.

Despite candle action, prudent traders will still want to note supply at 1.3021/1.2844, in the event price cuts above the 200-day simple moving average.

H4 timeframe:

Partially altered from previous analysis –

South of supply at 1.2720/1.2682, traders observed Friday cross paths with channel support (1.2257) and hold.

The next available demand this week, outside of channel support, rests at 1.2462/1.2506, standing just ahead of support at 1.2453.

H1 timeframe:

It was underlined in Friday’s analysis trendline support (1.2257) would likely be a watched base (represents the same level as H4 channel support).

Heading into early Europe Friday, price tested the aforesaid trendline and rallied higher, turning lower only after finding thin air above 1.2650 resistance. As you can see, the pair settled ahead of 1.26 and the current trendline.

South of 1.26, traders will observe the 100-period simple moving average and 1.2550 support.

Structures of Interest:

Long term:

Candlestick action on the daily timeframe emphasises a potential bearish tone under the 200-day simple moving average at 1.2688.

Short term:

According to the bigger picture, long plays off 1.26 today may deliver little upside. As a result, a H1 close under 1.26 this week may be interpreted as a bearish cue to 1.2550 and maybe, with a little enthusiasm, the 1.25 level.

Weekly Technical Market Insight: 13th – 17th July 2020, FP Markets


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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