Weekly Technical Market Insight: 1st – 5th February 2021

Note – Charts provided by Trading View

US Dollar Index (daily timeframe):

The US dollar index (DXY)—a measure of the US dollar’s value relative to a basket of foreign currencies— outperformed last week, settling 0.4 percent higher.

The DXY clawed back a significant share of the prior week’s correction, introducing the possibility of wrestling 91.00 resistance this week. Upstream, technical studies cast light on resistance at 92.26, accompanied by a descending wedge (between 94.30 and 92.18) take-profit objective at 92.76 (vertical green boxes).

As outlined in previous research, the greenback has fashioned an unquestionable downtrend since forging a top in the first quarter of 2020 at 102.99. Submerging the 88.25 February 16 low (2018) may help validate the current bearish narrative.

In the context of the RSI indicator, upside momentum subsided since coming into contact with a descending wedge target (black arrows) around 54.20. Although closing the week above the 50.00 centreline, recent efforts throw light on neighbouring trendline support.

Weekly Technical Market Insight: 1st – 5th February 2021, 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 at 1.1857/1.1352 in August, EUR/USD, by way of two back-to-back bullish candles, welcomed 2021 in good health.

This—despite January’s modest 0.7 percent slide—reasons additional upside towards ascending resistance (prior support – 1.1641) may eventually be on the horizon.

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

Daily timeframe:

Since January 18, buyers arranged a moderate defence off 38.2% Fib support at 1.2059, with two successive green closes unfolding in the latter half of last week.

The first full week of February, therefore, could witness EUR/USD test the resolve of the nearby 1.2189 top, with a break perhaps inviting the 2021 top at 1.2349. In case of a dip, demand at 1.1923/1.2001 occupies space south of 1.2059—an area complemented by trendline support (1.0774).

The RSI indicator spent last week navigating the 50.00 centreline, leaving resistance at 60.30 untested.

H4 timeframe:

Largely brought forward from previous analysis –

Holding back sellers since the beginning of December, demand at 1.2040/1.2065 stepped forward last week and prompted a hammer candle (bullish signal at troughs) on Wednesday. As you can see, buyers marginally extended recovery gains into the close of the week.

Resistance at 1.2179 remains in the crosshairs (capping buyers since the middle of January), while a 1.2179 breach shines light on 1.2214 resistance. Interestingly, the aforesaid level is sheltered under supply coming in from 1.2282/1.2245 (Fib fans will also note the 61.8% Fib level inhabits territory at 1.2241).

H1 timeframe:

Pattern traders will note Friday whipsawed north of resistance at 1.2145 and crossed paths with a textbook three-drive bearish pattern at 1.2156 (the 127.2% Fib projection). Common take-profit objectives derived from this pattern are the 38.2% and 61.8% Fib levels (taken from the low 1.2058 and Friday’s high at 1.2156) at 1.2117 and 1.2094, respectively.

Above 1.2156, the organisation of technical framework reveals limited resistance (or supply) until 1.22.

Meanwhile, the RSI indicator is on the verge of testing trendline support after Friday’s top forged just ahead of overbought levels.

Observed levels:

Long term:

Monthly price calling for higher levels, in a market trending north since 2020, implies daily buyers could extend recovery gains this week.

If sellers should make a show, daily demand at 1.1923/1.2001 and trendline support (1.0774) could occupy the headlines.

Short term:

The H1 three-drive pattern at 1.2156 clearly attracted bearish interest Friday, implying short-term sellers may direct their focus towards the 38.2% and 61.8% Fib levels at 1.2117 and 1.2094, respectively, in early trade this week. In fact, the 61.8% Fib level uniting with 1.21 could be a location dip-buyers target, in attempt to trade in line with the higher timeframes.

Weekly Technical Market Insight: 1st – 5th February 2021, FP Markets

AUD/USD:

Monthly timeframe:

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

Following two spirited months of gains off demand at 0.7029/0.6664 (prior supply), early 2021, in spite of January’s moderate correction (0.8 percent), shines light on a possible continuation higher to 0.8303/0.8082—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:

Wednesday’s one-sided decline, followed by continuation selling on Friday, unearths trendline support (0.5506) this week.

Supply at 0.7937/0.7890 may make an arrival in the event the pair presses higher, while a trendline support break leans towards a test of demand at 0.7453/0.7384 (prior supply).

Out of the RSI indicator, the value is seen testing waters beneath the 50.00 centreline, following an earlier trendline support breach.

H4 timeframe:

The break of demand at 0.7600/0.7625 on Thursday likely cornered many buyers in this region. This, alongside the Fib cluster at 0.7696 serving up resistance heading into the closing stages of the week, suggests price is perhaps bound for territory south of demand this week.

Interestingly, below demand we have the daily trendline support close by around the 0.7577 neighbourhood.

H1 timeframe:

0.77 demonstrated effective resistance over the course of last week, aided by RSI resistance at 60.18 and the H4 Fib cluster underlined at 0.7696.

Support at 0.7623, therefore, could greet price in early trading this week, posted nearby the 0.76 level.

Further observation on the RSI indicator shows the value formed a double-top pattern at 60.18 resistance (red arrows), with the neckline modestly breaking on Friday. By itself, this suggests momentum may head for oversold terrain this week.

Observed levels:

Long term:

Monthly could embrace higher levels over the coming weeks, yet before daily buyers join the fight a test of trendline support may unfold.

Short term:

Fragile H4 demand at 0.7600/0.7625 could suffer another blow this week, removing any remaining buyers and causing a bear trap as daily buyers might defend nearby trendline support (red arrows). A similar picture may arise on the H1 this week: a whipsaw through 0.76 bids into daily trendline support (blue arrows).

Overall, therefore, the picture appears to favour buyers this week.

Weekly Technical Market Insight: 1st – 5th February 2021, FP Markets

USD/JPY:

Monthly timeframe:

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

Over the span of four years, USD/JPY carved out a descending triangle pattern between 118.66/104.62.

Although December pursued terrain south of 104.62, January chalked up a comeback and retested the level.

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

Daily timeframe:

Against the backdrop of the monthly chart demonstrating a 104.62 retest (a potential bearish signal), the daily timeframe shows upside gained speed on Friday and stripped trendline resistance (111.71). This fuels a possible continuation to the 200-day simple moving average at 105.64, and supply at 106.33/105.78.

In addition, RSI resistance at 57.00— a level hindering upside since July 2020—also gave in last week.

H4 timeframe:

Last week’s spirited advance channelled price action to within close range of a harmonic Gartley pattern’s potential reversal zone (PRZ) between 105.17 and 105.00.

Support is found at 104.16, with interest also likely directed to trendline support (102.59).

H1 timeframe:

A closer examination of price action on the H1 chart directs focus towards demand at 104.43/104.57, an area holding 104.50 support.

Above, skies are relatively blue until 105 resistance, while ground south of current demand uncovers support at 104.19.

RSI traders may also want to recognise the value is on the brink of testing trendline support, just ahead of the 50.00 centreline.

Observed levels:

Long term:

Monthly price circling the lower side of a descending triangle at 104.62 may pressure daily breakout buyers above trendline resistance.

Should daily flow maintain a bullish trajectory, however, the 200-day simple moving average at 105.64 is seen.

Short term:

Sellers will likely be drawn to the Gartley pattern’s PRZ between 105.17 and 105.00 on the H4 timeframe this week. By extension, this brings light to 105 psychological resistance on the H1. These resistances, of course, benefit from the possibility of monthly sellers making a show from the 104.62 region.

Weekly Technical Market Insight: 1st – 5th February 2021, FP Markets

GBP/USD:

Monthly timeframe:

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

December’s 2.5 percent extension elevated GBP/USD and stirred trendline resistance (2.1161), with January recording fresh multi-month highs and logging a 0.2 percent gain.

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. In effect, the aforesaid high represents the next upside objective on the monthly chart.

Daily timeframe:

Partly modified from previous analysis –

Since January 21, buyers and sellers have been squaring off around the lower side of resistance at 1.3755.

Breaching 1.3755 brings light to supply at 1.3996/1.3918.

The RSI indicator has revealed a rangebound environment since November, limited by support around 47.00 and resistance at the 66.00 region. It is common to see higher oversold support areas form in an uptrend.

H4 timeframe:

Brought forward from previous analysis –

Demand at 1.3618/1.3637 has proven an effective base in the latter part of January, withstanding numerous downside attempts.

Overhead, resistance is seen at 1.3763, with a break unveiling supply at 1.3837/1.3800.

H1 timeframe:

Heading into US hours on Friday, GBP/USD, once again, found resistance off 1.3750, with sellers subsequently scaling through the 100-period simple moving average and 1.37 support.

This has likely shaken out the majority of buyers and placed ascending support, extended from the low 1.3450, into the line of fire this week.

Observed levels:

Long term:

Having monthly price moderately build on gains above trendline resistance delivers a bullish vibe.

The lack of selling pressure witnessed around daily resistance at 1.3755, along with the immediate trend facing higher since 2020, also adds to the bullish narrative.

Short term:

With the higher timeframes in mind, dip-buying strategies may target a number of short-term supports this week, including H1 ascending support, H4 demand at 1.3618/1.3637 and the 1.36 level.

Weekly Technical Market Insight: 1st – 5th February 2021, FP Markets

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