Weekly Technical Market Insight: 7th – 11th December 2020

US Dollar Index:

The US dollar, measured by the US dollar index (DXY), remained depressed last week, down 1.2 percent at the close of trade. Squeezing out a third successive weekly loss, technical elements reveal price action toppled daily support at 90.99 and renewed year-to-date troughs, levels not seen since 2018. Closing Friday by way of a daily doji candle, the index is now on the verge of challenging daily demand at 89.83/90.29.

Technically, a declining dollar is not surprising. From a long-term trend perspective, the market’s primary trend exhibits a bearish disposition on the monthly chart, entrenched within a bulky pullback since May of 2008. Since 2016, however, resistance developed around 103.00, causing the daily timeframe to form a series of lower lows and highs in 2020 – some may consider this the secondary trend. Daily price, despite early November deviating to highs at 94.28, is also seen working with a clear 8-month trendline resistance (102.99).

Additionally, recent USD weakness tugged the daily timeframe’s RSI value into oversold territory, an area not visited since August of this year. Concerning the 200-day simple moving average, circling 95.83, daily action crossed below the dynamic value heading into the close of May, 2020.

Weekly Technical Market Insight: 7th – 11th December 2020, FP Markets

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, and subsequent break of supply from 1.1857/1.1352 in August, a modest correction surfaced. However, with buyers making an entrance in November and December trading higher by 1.7 percent, this argues additional upside may be on the horizon, with ascending resistance (prior support – 1.1641) perhaps targeted.

The primary downtrend, nevertheless, remains unbroken until 1.2555 is engulfed (Feb high [2018]).

Daily timeframe:

Modified from previous analysis –

In tandem with monthly buyers, daily activity squeezed through the upper perimeter of a descending wedge pattern (correction) between 1.2011 and 1.1612 (some may interpret this arrangement as a descending triangle pattern) heading into the final rounds of November with recent trading also overrunning resistance at 1.2095.

Despite shaping two shooting star patterns into the second half of the week, traders will likely be monitoring the descending wedge pattern’s take-profit target at 1.2309 (yellow) this week.

RSI fans will note the value recently crossed paths with overbought space, following November’s rally staged ahead of oversold territory.

H4 timeframe:

With EUR/USD recently journeying to fresh multi-year highs, supply at 1.2200/1.2170 made a show last week, an area extended from April 2018.

As you can see, the aforesaid supply prompted a test of demand at 1.2130/1.2096 (prior supply), which sits on top of the recently consumed daily resistance level at 1.2095.

Below, traders will find additional demand arranged at 1.2040/1.2065.

H1 timeframe:

Following short-lived moves north of 1.2150 resistance, buyers eventually eased, giving way for a test of demand at 1.2103/1.2118 on Friday. The demand, as you can see, is set just ahead of the 1.21 level and also inhabits H4 demand at 1.2130/1.2096.

Another clear feature on the H1 chart is the RSI voyaging under 50.00 on Friday, poised to perhaps welcome oversold conditions.

Observed levels:

Long term:

With monthly price demonstrating scope to scale higher, together with daily action taking the upper perimeter of a descending wedge pattern and also resistance at 1.2095, longer term is likely to take aim at the daily descending wedge pattern’s take-profit target from 1.2309.

Short term:

Testing H1 demand at 1.2103/1.2118 is interesting. Although a spike into 1.21 bids could occur, the fact the H1 zone inhabits H4 demand at 1.2130/1.2096, in addition to the higher timeframe’s bullish vibe, is perhaps enough to spark interest and generate a bullish scene.

Weekly Technical Market Insight: 7th – 11th December 2020, FP Markets

AUD/USD:

Monthly timeframe:

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

Following a mild correction that addressed the upper border of demand at 0.7029/0.6664 (prior supply), buyers have so far responded well. Up by 4.5 percent in November, with December also trading higher by 1.2 percent, buyers appear 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, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Modified from previous analysis –

Three successive bullish candles off demand at 0.7345/0.7287 (prior supply), as you can see, led price into supply at 0.7453/0.7384 last week.

With the trend on the daily timeframe depicting a northerly course since March, this places a question mark on the aforesaid supply. Absorbing the latter helps confirm the current trend and throws light on supply from 0.7587/0.7528.

The RSI indicator continues to hover beneath overbought conditions, following the removal of 52.00 resistance at the beginning of November.

H4 timeframe:

Modified from previous analysis –

Following an early-week retest at the upper boundary of an ascending triangle from 0.7340, buyers took the currency pair to fresh yearly peaks Thursday.

Above, crosshairs are likely directed towards 0.7463, the ascending triangle take-profit target (pink).

H1 timeframe:

0.7450 continues to serve as resistance as we head into the first full week of December, a horizontal level fixed within the upper range of daily supply at 0.7453/0.7384. Demand at 0.7391/0.7401 may be a location of interest, having seen the area sharing its space with a 50.0% level at 0.7394, a 127.2% Fib projection at 0.7399 and the 100-period simple moving average at 0.7396.

RSI analysis uncovers a potential bearish representation, recently dethroning trendline support and retesting the lower side. This threatens momentum could further weaken in early trading this week, perhaps fuelling oversold conditions.

Observed levels:

Long term:

Monthly price trading from demand at 0.7029/0.6664, along with daily price depicting an uptrend and recently rebounding from demand at 0.7345/0.7287, suggests weakness within daily supply at 0.7453/0.7384.

Short term:

The ascending triangle take-profit target on the H4 at 0.7463 is likely an area pattern traders have eyes on this week, though reaching the level entails crossing above 0.7450 resistance on the H1 and also above the upper side of daily supply at 0.7453.

If sellers come into the market, dip-buyers are likely to hone in on H1 demand from 0.7391/0.7401.

Weekly Technical Market Insight: 7th – 11th December 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.

November, as you can see, worked with the lower edge of the aforesaid pattern and finished the month down by 0.3 percent – a third successive monthly loss.

104.62 ceding ground shines light on demand from 96.41/100.81, followed by trendline support (76.15) and the descending triangle’s take-profit level at 91.04 (red).

Daily timeframe:

Technical levels remain unchanged.

Supply from 106.33/105.78 and trendline resistance (111.68) are prominent areas north of price this week.

Light falls on demand at 100.68/101.85 (fixed to the upper base of monthly demand and drawn from September 2016) if sellers make a push.

RSI enthusiasts will note the unit has remained under 57.00 resistance since July.

H4 timeframe:

Support at 103.70 made its presence known again Thursday, arranged just ahead of demand from 103.04/103.58, extended from March 2020. Higher, traders will also note resistance at 104.73.

Having seen both support and resistance welcome at least two consecutive tests, the H4 chart is considered range bound for the time being.

H1 timeframe:

Despite moderate selling interest developing at the lower side of supply from 104.24/104.07 during London’s morning session Friday (black arrow), buyers maintained position. This led price higher into the aforesaid supply, testing the 161.8% Fib projection at 104.20 and 50.0% level at 104.21.

Additional resistance can be seen directly north of current supply by way of a 100-period simple moving average at 104.26.

In terms of the RSI indicator, the value is drifting just beneath overbought levels.

Observed levels:

Long term:

Monthly price appearing to be on the verge of breaching descending triangle support at 104.62 continues to underline a relatively weak market.

Short term:

Considering the monthly timeframe, and lack of support visible on the daily chart, sellers within H1 supply at 104.24/104.07 could still have some fire left in them yet.

A 104.24 break, on the other hand, may fuel intraday buying, with 104.50 H1 resistance and 104.73 H4 resistance in sight.

Weekly Technical Market Insight: 7th – 11th December 2020, FP Markets

GBP/USD:

Monthly timeframe:

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

November trading higher by 2.9 percent and December currently higher by 0.8 percent has stirred trendline resistance (2.1161).

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

Daily timeframe:

Modified from previous analysis –

Since crossing paths with demand at 1.2645/1.2773 and the 200-day simple moving average in late September, GBP/USD has displayed a gradual interest to the upside and generated an AB=CD pullback concluding at 1.3392.

With monthly trendline resistance making an entrance and daily supply also recently joining the fight at 1.3622/1.3467 (with Friday forming a shooting star candlestick pattern), sellers may eventually take the lead.

RSI followers will also see the line has produced a series of higher highs and lows since late September, on course to welcome overbought conditions.

H4 timeframe:

The British pound finished marginally on the backfoot vs. the dollar Friday, following a failed attempt to topple resistance at 1.3483.

Support is seen at 1.3396, a level intraday traders may view as a potential buy zone. Although the level could hold and produce a healthy move, buyers face not only daily supply at 1.3622/1.3467 but also monthly trendline resistance.

Below support, scope to reach support at 1.3310 and demand at 1.3240/1.3273 is seen.

H1 timeframe:

Upside slackened heading into US trading on Friday as price discovered thin air north of the round number 1.35. With that, penetrating Friday’s low at 1.3412 to test 1.34 bids and the 100-period simple moving average could be a scenario seen in early trade this week.

Stationed beneath 1.34, however, is demand at 1.3353/1.3378. Therefore, a whipsaw through 1.34 to test the aforementioned demand could also grace the charts.

RSI followers may also want to acknowledge the value registered moves beyond the 50.00 level on Friday, with the possibility of reaching oversold levels and forming an AB=CD correction.

Observed levels:

Long term:

Monthly price flirting with trendline resistance, as well as daily supply stepping forward yesterday at 1.3622/1.3467 and Friday forming a daily bearish candlestick pattern, communicates a bearish vibe.

Although the immediate trend faces higher on the daily timeframe, the bearish structure and monthly downtrend suggests sellers have the advantage.

Short term:

H4 support at 1.3396 is in a vulnerable position, according to higher timeframes. However, noting that the 1.34 level is nearby on the H1 as well as H1 demand at 1.3353/1.3378, an intraday recovery could still form early week.

A scenario of particular interest is a possible whipsaw forming through 1.34 to tap stops and test the H1 demand. A H1 close back above 1.34 signals short-term buyers could make a show.

Weekly Technical Market Insight: 7th – 11th December 2020, FP Markets

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