Weekly Technical Market Insight: 2nd – 6th November 2020

US Dollar Index:

The US dollar (DXY) outperformed last week, seizing dominant trendline resistance (102.99) and adding more than 1.2 percent. Going forward, resistance at 94.65 and 50% retracement level at 94.77 is on the frontline, which, as you can see, is in the company of an RSI trendline resistance (prior support).

Fracturing the aforesaid resistance this week unmasks another resistance from 95.83, with subsequent upside to cross paths with a bearish harmonic Bat pattern’s potential reversal zone (PRZ) between 97.13/96.27 (yellow area).

In the context of trend, since March 2008, a large-scale pullback has been seen on the monthly timeframe (primary trend is considered south). The daily timeframe’s downtrend (since March 2020), however, is being questioned owing to the recent trendline resistance break.

Weekly Technical Market Insight: 2nd – 6th November 2020, FP Markets

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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)

Following the break of long-term trendline resistance (1.6038) in July, buyers and sellers have since been squaring off around the upper section of supply from 1.1857/1.1352. Technically, although this argues additional upside may be on the horizon, targeting ascending resistance (prior support – 1.1641), September and October fashioning negative months proposes a dip to retest the recently penetrated trendline resistance (support).

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

Daily timeframe:

Partially modified from previous analysis –

The US dollar’s outperformance last week had EUR/USD on the backfoot. Sellers delivered a series of back-to-back red candles out of supply from 1.1872/1.1818.

Addressing lower territory this week throws light on support from 1.1553 and a descending support line from 1.2011.

Traders will also note the RSI oscillator is within a stone’s throw from crossing paths with trendline support (prior resistance).

H4 timeframe:

As touched on in last week’s writing, Thursday nosedived through demand at 1.1682/1.1716 in dominant fashion. Friday, as you can see though, followed up with a 1.1682/1.1716 retest and attracted additional sellers. Going into the new week, an attack on demand at 1.1580/1.1626 seems imminent.

H1 timeframe:

Before transitioning to deeper terrain on Friday, intraday mildly overran the 1.17 level to greet supply at 1.1717/1.1701 (this is an area where a decision was made to break through orders at 1.17 as support).

The sell-off from 1.1717/1.1701 was relatively sharp with enough strength to slice through the 1.1650 support level. Support at 1.1627 is next on tap, along with the 1.16 level.

Although price essentially plotted a fresh lower low on Friday, the RSI oscillator has yet to follow-through and has consequently displayed bullish divergence.

Potential direction:

Long term:

Both monthly and daily timeframes communicate the possibility of a bearish setting this week, with daily support at 1.1553 targeted.

Short term:

The technical situation on the lower timeframes also subscribe to the possibility of additional selling. However, though short-term H1 flow may fall from 1.1650 resistance, intraday support sits at 1.1627, a level that essentially aligns with the upper border of H4 demand at 1.1580/1.1626.

As a result of the above, sellers must confront short-term supports before reaching daily support at 1.1553.

Weekly Technical Market Insight: 2nd – 6th November 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 months of September and October recorded losses, with the latter down by nearly 2 percent. Developing a mild correction, longer-term action is addressing the upper border of demand at 0.7029/0.6664 (prior supply). Structurally speaking, despite recent losses, buyers still have a strong advantage, 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, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partially modified from previous analysis –

Last Wednesday, as you can see, withdrew to demand at 0.6964/0.7042, yet the latter part of the week offered little price movement. Note this demand is also secured a few pips above support at 0.6931.

Clearing supports this week shines light on the 200-day simple moving average at 0.6799 and a neighbouring support level marked at 0.6766.

From the RSI oscillator, we recently twisted lower ahead of 52.00 resistance with the value currently scanning territory below 40.00.

H4 timeframe:

After abandoning 0.7020 (Oct 20 low) and reuniting with demand at 0.6972/0.7004 (located within daily demand at 0.6964/0.7042, which itself is positioned around the upper boundary of monthly demand from 0.7029/0.6664), buyers have attempted to stand their ground.

Resistance stands out at 0.7096, banded together with a 61.8% Fib level at 0.7098 and a 127.2% Fib projection at 0.7092.

Bearish follow-through, on the other hand, could target support from 0.6923.

H1 timeframe:

A brief spell above 0.7050 resistance on Friday tested resistance at 0.7068, a level joined by a 38.2% Fib level at 0.7061 and a 127.2% Fib projection at 0.7070, which clearly appealed to sellers heading into US trading.

H1 is now on the verge of testing the widely watched 0.70 level, arranged just ahead of support at 0.6984. It may also be useful to note the RSI oscillator currently grapples with channel support.

Potential direction:

Long term:

Monthly and daily timeframes offer demand at the moment, albeit buyers have yet to make much of a show.

Short term:

With H4 demand at 0.6972/0.7004 also in the mix, the 0.70 level and H1 support at 0.6984 may be a floor buyers consider early this week.

Weekly Technical Market Insight: 2nd – 6th November 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. July 2020 onwards, as you can see though, has had price toying with the lower boundary of the aforesaid pattern. Notably, both September and October traded south, with the latter finishing lower by 0.7 percent.

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:

Brought forward from previous analysis –

Since August, daily price has also been in the process of shaping a descending triangle pattern between 106.94/104.18. The lower edge of the monthly descending triangle (green – 104.62) also sits just north of the daily pattern’s lower border.

While breaking beneath the daily and monthly timeframe’s descending triangle supports (monthly currently under pressure) shifts focus back to daily demand at 100.68/101.85, we are seeing signs of recovery off the daily pattern’s lower base right now.

H4 timeframe:

The 161.8% Fib projection level at 104.11 (blue) proved effective support once again last week, enduring an onslaught of bearish attacks.

The 38.2% Fib level at 104.68 also proved its worth in the form of a resistance, while moves above this area this week may see supply at 104.92/105.09 (prior demand) resurface along with the lower side of a recently completed wedge pattern (104.34).

H1 timeframe:

Heading into the US session on Friday, following an earlier rally during London off demand at 104.12/104.20, price flipped over 104.50 resistance and the 100-period simple moving average. This threw light on resistance from 104.78 and an ABCD resistance around 104.85, as well as the round number 105 (located within H4 supply at 104.92/105.09).

Potential direction:

Long term:

The longer-term view offers an interesting perspective; monthly and daily price engage with their respective descending triangle supports, therefore an advance this week should not shock.

Short term:

Short-term traders face resistance at the moment, most notably the 38.2% Fib level on the H4 at 104.68 and the H1 resistance from 104.78 (accompanied by ABCD resistance at 104.85). So, although the higher timeframes imply bulls may make an entrance, lower timeframe bearish strategies could also be in store between 105/104.68 (an area held under H4 supply from 104.92/105.09).

Weekly Technical Market Insight: 2nd – 6th November 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 (2.1161) unopposed, the month of September fell 3.4 percent by way of a bearish outside reversal candle and snapped a three-month winning streak. This, despite a lacklustre October, advertises a possible dip to retest trendline support (prior resistance – 1.7191).

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:

Brought forward from previous analysis –

Last week observed price extend south of resistance at 1.3201, enough to shine some light on demand at 1.2645/1.2773 (and the 200-day simple moving average).

Also noteworthy on this timeframe is the RSI oscillator seen testing 47.00 support.

H4 timeframe:

Partially modified from previous analysis –

Resistance at 1.3006, as well as supply from 1.3063/1.3020, remain relevant points on the chart, as does familiar demand at 1.2836/1.2881.

Yet, in case buyers lose control this week, dipping to support at 1.2773 is a possibility.

H1 timeframe:

After topping around 1.3176 on October 21, the pair has been working with a descending channel pattern (1.3019/1.3176), with the 100-period simple moving average trailing alongside the upper line.

Friday, as you can see, retested the 1.29 level in perfect form, gifting intraday buyers entry into the market to target channel resistance. With the latter holding back upside into the close, a return to the 1.29 space could occur, possibly even forcing moves to support at 1.2862.

Potential direction:

Long term:

Daily price reveals room to reach for demand at 1.2645/1.2773, alongside monthly price offering a possible dip to retest trendline support.

Short term:

In keeping with higher timeframe direction, Friday’s reaction from H1 channel resistance may provoke selling in the early stages of trading this week, with 1.29 targeted. As a precaution, however, traders are encouraged to plan for the possibility of a 1.30 test (and nearby 100-period simple moving average) before sellers check in.

Weekly Technical Market Insight: 2nd – 6th November 2020, FP Markets

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