Home Technical Analysis Weekly Technical Market Insight: 21st – 24th December 2020

Weekly Technical Market Insight: 21st – 24th December 2020

Weekly Technical Market Insight: 21st – 24th December 2020

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, buyers making an entrance in November and December currently trading higher by 2.8 percent reasons additional upside may be on the horizon, with ascending resistance (prior support – 1.1641) perhaps targeted.

The primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Partly modified from previous analysis

Daily activity, as you can see, squeezed through the upper perimeter of a descending wedge pattern (correction) between 1.2011 and 1.1612 (not the prettiest of structure here with some maybe interpreting this arrangement as a descending triangle pattern) heading into the final rounds of November. December also overrun resistance at 1.2095, shaping a bullish flag pattern (1.2177/1.2078).

As we head into the final weeks of what has been a tumultuous 2020, price action is seen closing in on not only the descending wedge pattern’s take-profit target at 1.2318 (yellow), but also the bullish flag’s take-profit level at 1.2384 (purple).

The trend on this timeframe has decisively pointed north since March (secondary trend). We can also see the RSI recently penetrated overbought space, which is common viewing during an uptrend and may not necessarily indicate a weakening market. 80.62 resistance, however, is a key level to keep an eye on, a barrier in play since the beginning of 2000.

H4 timeframe:

As traders digest fresh year-to-date pinnacles and resistance at 1.2255, Friday begun drafting a bullish flag formation (1.2272/1.2238). A breakout north may witness buyers strive for supply at 1.2351/1.2333 this week, conveniently set a few pips above the daily descending wedge pattern’s take-profit target at 1.2318 (yellow).

Downstream, demand inhabits the 1.2200/1.2170 neighbourhood, with a break unmasking trendline support (1.1602).

H1 timeframe:

Sellers stepped forward Friday, modestly snapping a four-day winning streak and joining hands with demand at 1.2223/1.2236. Clearing local peaks this week potentially paves the way for an approach to 1.23 resistance. Failure to hold 1.2223/1.2236 throws light on 1.22 support and the 100-period simple moving average.

RSI action also journeyed above 50.00 Friday, implying momentum could increase to the upside. Also of note is the RSI has been rangebound since early December between 70.00/40.00, a common formation during uptrends.

Observed levels:

Long term:

As aired in last week’s technical report, the higher timeframes display room to rally on the monthly chart, in addition to the two bullish patterns forming on the daily timeframe. This implies buyers could attempt to refresh year-to-date highs this week.

Short term:

A H4 close forming above the H4 bullish flag (1.2272/1.2238) helps confirm interest to the upside and provides pattern traders a possible entry long. Available resistances this week surface around the 1.23 level on the H1, the daily descending wedge pattern’s take-profit target at 1.2318 and H4 supply at 1.2351/1.2333.

AUD/USD:

Monthly timeframe:

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

On track to close out 2020 in positive territory, December currently trades higher by nearly 4.0 percent following November’s 4.5 percent rebound from demand at 0.7029/0.6664 (prior supply).

Buyers, according to the monthly chart, 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:

Supply at 0.7587/0.7528, as you can see, succumbed to upside pressure last week, movement that directs light towards 0.7674 resistance. Another key observation is Friday finished in the shape of a hammer candle, retesting the upper side of 0.7587/0.7528.

With reference to the secondary trend, AUD/USD has been higher since bottoming in March. This signals immediate strength and represents a possible threat to the longer-term primary downtrend.

The RSI indicator is seen crowding overbought space, visiting resistance around 80.19, a level in play since 2003. Consequently, upside momentum could slow this week.

H4 timeframe:

As indicated on the H4 chart, price retreated south of year-to-date highs at 0.7639, prompting a dip-buying scenario ahead of local support at 0.7577 on Friday.

Since early November, AUD/USD has shaped a series of higher highs and lows.

Refreshing YTD peaks this week unearths supply at 0.7665/0.7644 (extended from June 2018), an area situated below daily resistance at 0.7674.

H1 timeframe:

Heading into the early hours of European trading Friday, price bottomed at 0.7582. Bids were clearly determined in this area, taking on sell-stops derived from lower timeframe breakout traders attempting to short sub-0.76. This resulted in H1 winning back 0.76 and retesting the level as support, albeit sluggishly.

Beyond YTD highs, 0.7650 resistance is seen.

RSI fans will note the line recently broke above 50.00, suggesting momentum may continue to strengthen into the early stages of the week.

Observed levels:

Long term:

Daily supply at 0.7587/0.7528 surrendering position, and now serving as demand, along with monthly price calling for higher ground, announces a potentially bullish climate into the final weeks of December. A concern for buyers, however, is daily RSI resistance at 80.19.

Short term:

Reclaiming 0.76 communicates an intraday bullish tone this week, with buyers likely taking aim at 0.7650, set within the lower side of H4 supply at 0.7665/0.7644.

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.

December, currently down by 1.0 percent, is seen pursuing terrain beneath 104.62.

104.62 ceding ground throws light on support from 101.70, with a break uncovering trendline support (76.15) and the descending triangle’s take-profit level at 91.04 (red).

Daily timeframe:

Partly modified from previous analysis –

Organised by way of three successive bearish candles, support at 103.08 emerged Thursday. Efforts to hold the level were evident Friday, yet the session finished considerably off best levels.

With USD/JPY trending lower since March, and buyers failing to accomplish much off 103.08 Friday, the RSI indicator’s bullish divergence signal is on soft ground. RSI enthusiasts will also note the pair has remained under 57.00 resistance since July (common in a downtrend).

Trendline resistance (111.68) and supply from 106.33/105.78 are prominent areas north of price; light falls on demand at 100.68/101.85 if sellers make a push through 103.08 support this week.

H4 timeframe:

Daily support at 103.08 is a key level on the H4 chart at the moment; below, however, demand resides at 101.98/102.63 (located just ahead of daily demand at 100.68/101.85).

Resistance inhabits the 103.70 range, with tops at 104.15 demanding attention if buyers take the wheel this week.

H1 timeframe:

Discovering resistance off the 100-period simple moving average at 103.57 (confirmed by hidden RSI bearish divergence) witnessed sellers step forward Friday. Ongoing interest to the downside this week brings 103 support back into attention, working together with a 127.2% Fib projection at 103.01 and a 161.8% Fib projection at 102.94.

Observed levels:

Long term:

Monthly price pursuing a bearish theme below descending triangle support at 104.62 places a question mark on daily support at 103.08. A daily close below the aforementioned level unlocks the possibility of monthly support surfacing around 101.70 (located within daily demand at 100.68/101.85).

Short term:

Shorter-term price action suggests 103 support on the H1 is likely to make an entrance this week. Given the level is positioned around daily support at 103.08 and boasts H1 Fib confluence, buyers are unlikely to give up 103 without a fight, regardless of monthly price suggesting lower levels.

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 trading higher by 1.5 percent recently 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:

Supply at 1.3622/1.3467 has represented an area of importance since June 2018 on the daily chart. However, having seen September’s reaction fail to deliver a concrete lower low, together with December’s response unable to capsize support at 1.3176, buyers appear to be gaining the upper hand.

Resistance at 1.3755 stands out above the aforesaid supply this week, with follow-through buying emphasising supply at 1.3996/1.3918.

The RSI reveals the value rebounded strongly from support around 47.00 in recent days, on course to retest overbought space.

H4 timeframe:

Partly modified from previous analysis –

Resistance at 1.3607 made an entrance in the second half of the week, following a run off demand at 1.3435/1.3469. As stated in previous analysis, the reaction from the aforesaid demand is unsurprising, due to it being within this area a decision was made to push above prior year-to-date peaks.

With the week settling just ahead of the aforesaid demand, buyers may attempt to revive a relationship with the zone as we head into holiday-thinned trading. Dipping lower, on the other hand, signals demand at 1.3325/1.3281 (prior supply) could make a show.

H1 timeframe:

It was noted in Friday’s daily briefing that although sterling refreshed year-to-date highs on Thursday, an intraday bearish vibe was emanating from the H1 chart. A double-top pattern around 1.3625 formed, with the neckline (blue arrow) positioned around 1.3560.

As you can see, price cleared bids around 1.3550 support Friday and reached the double-top pattern’s take-profit level (yellow) at around 1.35. Traders will also note, price whipsawed the round number and tested demand at 1.3446/1.3470, and the 100-period simple moving average. Buyers reclaimed 1.35 into the close, moving 1.3550 in view as possible resistance, as well as RSI resistance around 51.00.

Observed levels:

Long term:

Monthly trendline resistance appears to be losing its grip, signalling a test of the 1.4376 April high (2018) could be on the table next year. Adding to the bullish narrative, daily supply at 1.3622/1.3467 also appears to be hanging on by a thread, with daily resistance at 1.3755 targeted.

Short term:

Technically, higher timeframes place H1 buyers above 1.35 in a reasonably healthy position, supported by the near-test of H4 demand at 1.3435/1.3469.

Weekly Technical Market Insight: 21st – 24th December 2020, FP Markets

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