Weekly Technical Market Insight: 12th – 16th October 2020

US Dollar Index:

Down 0.8 percent last week, the US dollar (DXY) extended losses south of 94.65 daily resistance (March 9 low), a level benefitting from additional resistance by way of a daily trendline formation (102.99) and hidden RSI bearish divergence. As you can see, going into the close this landed things at daily demand from 92.71/93.14 (a drop-base-rally formation).

Entrenched within a large-scale pullback since March 2008 from 70.70 (primary trend is considered south – check the monthly timeframe), and the daily timeframe’s immediate trend rotating lower since March 2020 suggests bears may be looking to secure lower levels going forward. This – coupled with the RSI squeezing below 50.00 on the daily timeframe – places a question mark on current daily demand, as well as nearby daily support at 92.26.

A bearish setting formed under 92.26 throws light on daily support at 91.00.

With respect to the 200-day simple moving average, circling 96.93, the dynamic value continues to curve lower, two years after mostly drifting higher.

Weekly Technical Market Insight: 12th – 16th October 2020, FP Markets

EUR/USD:

Monthly timeframe:

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

August, as you can see, toppled supply from 1.1857/1.1352 and extended space north of long-term trendline resistance (1.6038), arguing additional upside may eventually be on the horizon, targeting trendline resistance (prior support – 1.1641). Despite this, before seeking higher territory, a dip to the recently penetrated trendline resistance (support) could materialise.

The primary downtrend (since July 2008) remains intact until 1.2555 is engulfed (Feb 1 high [2018]).

Daily timeframe:

After a fleeting advance north of support at 1.1553 and a subsequent period of inactivity around 1.1750, GBP/USD chalked up an animated bullish candle Friday with enough force to test supply at 1.1872/1.1818, a rally-base-drop configuration.

The trend on the daily timeframe has displayed a bullish vibe since March, and the RSI oscillator recently took over trendline resistance to trade at 57.00. Together, these two factors may weaken the appeal of 1.1872/1.1818 supply and shine light on another supply coming in from 1.2012/1.1937 this week.

H4 timeframe:

Fed by a waning US dollar and technical follow-through buying off channel support (1.1684), upside gained momentum on Friday and joined hands with channel resistance (1.1769). The latter closely shares space with supply at 1.1872/1.1838 (fits within daily supply at 1.1872/1.1818), a rally-base-drop formation, which is also joined by a collection of Fib levels.

Additional bullish sentiment this week, on the other hand, may have buyers embrace another supply at 1.1928/1.1902 (prior demand).

H1 timeframe:

Thanks to Friday’s spirited advance, a three-drive bearish pattern is nearing completion around the 127.2% Fib ext. level at 1.1836. Located just under 1.1850 resistance (and the RSI climbing to relatively extreme overbought levels), this combination, along with H4 supply at 1.1872/1.1838 in addition to daily supply from 1.1872/1.1818, offers interesting confluence to work with this week.

Structures of Interest:

Long term:

Buyers and sellers, on the monthly timeframe, are seen squaring off around the upper edge of supply at 1.1857/1.1352. Daily price, however, recently crossed paths with supply at 1.1872/1.1818.

Short term:

The H1 three-drive bearish pattern around the 127.2% Fib ext. level at 1.1836 and neighbouring resistances/supply from the H1, H4 and daily timeframes could prove a tough nut to crack for buyers. Consequently, bearish signals formed around 1.1850/1.1836 this week should not surprise.

Weekly Technical Market Insight: 12th – 16th October 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

The month of September (lower by 2.9 percent) snapped a five-month winning streak and tested the upper border of demand at 0.7029/0.6664 (prior supply). From a structural standpoint, buyers appear to have the upper hand, free to explore as far north as 0.8303/0.8082 in the coming months, a supply zone aligning closely with trendline resistance (prior support – 0.4776).

In terms of trend, though, traders might want to take into account the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Three successive daily bullish candles, with Friday scoring 1 percent, positions a rally-base-drop supply formation at 0.7345/0.7287 in plain sight this week, shaded closely by another area of supply at 0.7453/0.7384.

Other key observations on the daily timeframe are demand at 0.6964/0.7042, and the fact AUD/USD has traded northbound since early 2020. Additionally, RSI momentum also ousted 50.71 resistance last week, en route to perhaps challenge overbought levels.

H4 timeframe:

Supply at 0.7234/0.7286 is an interesting location on the H4 chart this week, positioned within the lower boundary of daily supply at 0.7345/0.7287. We can also see a H4 ABCD bearish pattern present around 0.7296 that unites with trendline resistance (prior support – 0.7076).

Before reaching the aforesaid H4 supply, though, a 0.7208 support retest is in the offing, movement that may appeal to buyers.

H1 timeframe:

Following the formation of a demand area at 0.7183/0.7193, Friday took 0.72 to the upside and also resistance from 0.7227. This throws light on a resistance area from 0.7262/0.7247, which holds 0.7250 resistance within. Beyond here, technicians will likely shift focus to the 0.73 level.

As far as the RSI oscillator goes, we’re currently marching through overbought terrain, encased within a rising channel.

Structures of Interest:

Long term:

Monthly is testing 0.7029/0.6664 as demand, structurally prompting a bullish theme. The daily timeframe, however, is fast approaching supply at 0.7345/0.7287.

Overall, monthly structure should take precedence over the daily timeframe’s movement.

Short term:

While monthly structure reveals buyers are likely to eventually reach higher, the combination of daily supply at 0.7345/0.7287 and H4 Supply at 0.7234/0.7286 may interest sellers this week. Harmonic traders could also make a show in view of the H4 ABCD bearish pattern around 0.7296.

Owing to the above, traders are likely expecting buyers to enter the frame in early trade this week, with the possibility of stumbling around the 0.73 level, which could see market participants adopt an intraday bearish stance.

Weekly Technical Market Insight: 12th – 16th October 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.

September, as you can see, tested the lower boundary of the aforesaid pattern and ended the month modestly off worst levels, with October now emphasising a hesitant phase.

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

Daily timeframe:

Since recovering from monthly support at 104.62 (the lower boundary of the monthly descending triangle), action on the daily timeframe has been testing the mettle of daily supply at 106.33/105.78. Potentially encouraged by the RSI oscillator defending resistance at 57.00, Friday, as you can see, finished at session lows.

Areas of note above the aforesaid supply, however, are nearby trendline resistance (111.71), supply at 107.58/106.85, joined by the 200-day simple moving average at 107.45.

H4 timeframe:

After making a stand around peaks at 106.10 into the second half of the week, USD/JPY retreated Friday and joined hands with a demand area seen at 105.52/105.69.

While the aforesaid demand remains active, downside risks are building given the uninspiring effort out of the zone Friday. Dipping a toe under the demand this week echoes a bearish vibe, with scope to approach demand at 104.92/105.09.

H1 timeframe:

Friday’s sell-off, based on the H1 chart, led the candles through demand at 105.71/105.77, which shortly after welcomed a retest to continue south. Downside momentum also guided the RSI value into oversold waters.

Supports in view today fall in at the 105.50 region, closely fixed by a trendline support (prior resistance – 105.80) and a 61.8% Fib level at 105.38 (green circle). Passing through the aforesaid areas this week could see sellers make their way towards the 105 level.

Structures of Interest:

Long term:

Monthly support at 104.62 (lower base of the monthly descending triangle) remains a key zone on the bigger picture. In order for buyers to make a stand, nevertheless, supply at 106.33/105.78 on the daily timeframe must be addressed.

Short term:

Demand on the H4 timeframe at 105.52/105.69 reveals a fragile state at the moment. Interestingly, this could lead to a whipsaw forming below the area to test H1 support between 105.38/105.50. A reaction from the H1 zone has the backing of monthly support in play at 104.62, though faces opposition in the form of daily sellers out of supply from 106.33/105.78.

Weekly Technical Market Insight: 12th – 16th October 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

Leaving trendline resistance taken from 2.1161 unopposed, the month of September sunk 3.4 percent by way of a bearish outside reversal candle. This advertises a potential trendline support (prior resistance – 1.7191) retest.

In terms of trend, the primary trend has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way – April 2 high 2018.

Daily timeframe:

Demand at 1.2645/1.2773 (and 200-day simple moving average at 1.2710) proved valuable support heading into the close of September.

Friday’s extension to the upside, marking a third successive daily gain for the pair, argues that resistance at 1.3201 is now in the line of fire this week. Furthermore, RSI followers will note the value recently climbed above 55.00 resistance.

H4 timeframe:

Demand at 1.2836/1.2881 (a drop-base-rally formation) received price action on Wednesday, by way of back-to-back hammer candle patterns. Both Thursday and Friday held a bullish tone and strong-armed price action into supply from 1.3055/1.3018. A break of here, nevertheless, shines light on another supply at 1.3116/1.3160 (prior demand).

H1 timeframe:

Friday’s heavy bid, following a retest at the 100-period simple moving average, witnessed a series of H1 bullish candles take on the widely watched 1.30 level, a trendline resistance (1.2687) and another neighbouring resistance at 1.3023. This also propelled the RSI value to overbought levels not seen since late September.

According to the H1 chart, intraday traders are likely anticipating further upside early week, with 1.31 targeted. A 1.30/1.3023 retest could also be something we see unfold.

Structures of Interest:

Long term:

Although monthly price echoes the prospect of downside, the daily candles exhibit room to reach for resistance at 1.3201.

Short term:

With daily price sending across a bullish vibe this week, H4 supply at 1.3055/1.3018 is in a vulnerable location. This, therefore, reinforces a H1 rally, either from current price or following a retest from 1.30/1.3023.

Weekly Technical Market Insight: 12th – 16th October 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. Zero Markets has made every effort to ensure the accuracy of the information as at the date of publication. Zero 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, Zero 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 Zero Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from Zero Markets  website,www.zeromarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. Zero Markets recommends that you seek independent advice. DISCLAIMER: ZERO Financial Pty Ltd (ZERO MARKETS, ABN 72 623 051 641) is an Authorised Representative (no: 001273819) of First Prudential Markets Pty Ltd (ABN 16 112 600 281, AFSL 286354).

Leave a Reply

Your email address will not be published.