Weekly Technical Market Insight: 8th – 12th February 2021

US Dollar Index (Daily Timeframe):

Measured by the US dollar index, last week witnessed USD bulls strengthen their grip and record a second successive weekly gain, settling 0.5 percent higher.

Friday, however, watched sellers make an entrance from a 127.2% Fib projection at 91.44, extended from the 89.20 low. Candlestick enthusiasts will also note Friday’s reaction fashioned a bearish outside reversal, movement that snapped a five-day winning streak.

Although this could influence sellers this week, possibly targeting the 90.04 trough (January 21), resistance at 92.26 is still likely to call for attention, closely followed 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. Therefore, January’s pullback is likely to be interpreted as a possible shorting opportunity. Submerging the 88.25 February 16 low (2018) may also help validate the current bearish narrative.

In the context of the RSI indicator, upside momentum subsided heading into the latter part of the week around 65.00, south of overbought territory and channel resistance. This also threatens a correction to test trendline support.

Weekly Technical Market Insight: 8th – 12th 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.

While increased upside towards ascending resistance (prior support – 1.1641) may materialise, an 1.1857/1.1352 retest is also on the cards in view of February’s correction.

In terms of trend, the primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Demand at 1.1923/1.2001, together with support at 1.1965 (previous Quasimodo resistance), received price on Friday and pencilled in a bullish outside reversal—similar to the DXY’s bearish outside reversal (note EUR/USD and the US dollar index exhibit an inverse correlation). Upside targets on this scale can be seen around 1.2190 tops.

Technicians are also urged to chalk up support at 1.1887, realised a touch south of the aforesaid demand area.

With reference to the RSI indicator, the value spun higher north of oversold waters heading into the second half of last week. Overhead, aside from the 50.00 centre line, RSI trendline resistance is in view, followed closely by RSI resistance at 60.30.

H4 timeframe:

Friday’s less-than-stellar US non-farm payrolls release (49,000 vs. expected 85,000) directed the US dollar lower across the board and elevated EUR/USD. Leaving demand at 1.1914/1.1932 unchallenged, four back-to-back bullish candles observed the pair confront supply at 1.2040/1.2065 (prior demand).

Also close by is trendline resistance (1.2349) and a 50.0% retracement level at 1.2067. Territory above shines light on Quasimodo resistance priced in at 1.2142.

H1 timeframe:

Friday’s advance, as you can see, reclaimed 1.20+ status in dominant fashion, with subsequent gains toppling the 100-period simple moving average and a Quasimodo resistance at 1.2032.

1.2050 resistance is now active, with a break exposing resistance at 1.2058 and supply coming in from 1.2078/1.2062. The aforesaid areas also share space with the H4 supply mentioned above at 1.2040/1.2065.

RSI fans will see the value recorded overbought conditions on Friday, settling within close proximity of resistance at 81.50.

Observed levels:

Long term:

The upper side of monthly demand at 1.1857, along with daily support at 1.1887, lies in wait in the event buyers fail to respond to Friday’s daily bullish outside reversal out of daily demand at 1.1923/1.2001 (aided by daily support priced at 1.1965).

Short term:

H4 supply at 1.2040/1.2065 and neighbouring trendline resistance might influence short-term flow this week, as might H1 supply at 1.2078/1.2062 and nearby resistances, 1.2058 and 1.2050.

Given the above analysis, buyers interested in the daily timeframe’s bullish outside reversal candle from demand may seek a H4 close above H4 trendline resistance (and H1 supply from 1.2078/1.2062) before pulling the trigger.

Weekly Technical Market Insight: 8th – 12th 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)

January pencilled in a half-hearted shooting star candle formation (often interpreted as a bearish signal at peaks), following two spirited months of gains off demand at 0.7029/0.6664 (prior supply).

February, however, is modestly positive thus far, sparking the possibility of a continuation higher to 0.8303/0.8082—a supply zone aligning closely with trendline resistance (prior support – 0.4776).

In the context of trend, the primary downtrend (since mid-2011) remains south until breaking 0.8135 (January high [2018]).

Daily timeframe:

Partly modified from previous analysis –

Friday, as you can see, wrapped up strongly higher, forming a bullish outside reversal off trendline support (0.5506). Note Friday’s candle engulfed the previous two daily candles.

Continued interest to the upside this week shines the spotlight on 0.7782 tops, along with the 2021 peak at 0.7820. Should buyers throw in the towel, on the other hand, light may shine on demand at 0.7453/0.7384 (prior supply).

After a brief spell beneath the 50.00 centreline, the RSI indicator reclaimed space north of 50.00 Friday, signalling the value could reach for RSI trendline resistance this week and possibly venture into overbought space.

H4 timeframe:

The Quasimodo formation at 0.7583 served well as support last week, rebounding price with enough force to draw the currency pair to within touching distance of a Quasimodo resistance at 0.7698. What’s technically appealing about the latter is its Fibonacci connection. A number of Fibs converge around this level between 0.7703 and 0.7683, offering what’s known as an area of confluence.

To the upside, another layer of Quasimodo resistance is also seen at 0.7747.

H1 timeframe:

AB=CD support emerged at 0.7564 early last week and forged a strong floor. Overthrowing 0.76 and retesting the level sparked further buying and formed an AB=CD resistance at 0.7668 into the closing hours on Friday. Additional resistance can be seen at the 0.77 figure.

Assuming sellers make an entrance around AB=CD resistance this week, harmonic traders are likely to monitor the 38.2% and 61.8% Fib retracement levels, derived from legs A-D (this can be applied once a defined top is in place).

The view from the RSI indicator reveals overbought conditions as we enter the second full week of February, with resistance plotted at 80.85.

Observed levels:

Long term:

Friday’s daily bullish outside reversal from daily trendline support could help reinforce the climb from monthly demand at 0.7029/0.6664 forged late last year.

Short term:

The H4 chart displays weighty resistance between 0.7703 and 0.7683, perhaps causing a problem for buyers early this week. On top of this, H1 is currently shaking hands with AB=CD resistance.

A H1 close above 0.77, nevertheless, is likely to add bullish conviction (in line with the higher timeframe picture), prompting additional bullish flow towards at least H4 Quasimodo resistance from 0.7747.

Weekly Technical Market Insight: 8th – 12th 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)

Since January snapped a four-month bearish phase in the shape of a bullish engulfing candle, buyers remain on form in February north of support at 101.70.

Resistance can be seen in the form of a descending line (not considered a traditional trendline resistance), etched from the high 118.66.

Daily timeframe:

As evident from the daily timeframe, USD/JPY snapped a seven-day winning streak on Friday, gleaning resistance from the lower side of supply at 106.33/105.78 and a 200-day simple moving average at 105.59.

Also technically noteworthy is Friday’s candle shaped a shooting star pattern—a formation generally viewed as a bearish signal, particularly following upside movement.

Technical eyes may also be drawn to the RSI indicator, which recently registered an overbought climate.

H4 timeframe:

In conjunction with the daily timeframe recently crossing swords with supply and the 200-day simple moving average, the H4 chart bumped heads with an alternate AB=CD bearish pattern at the 127.2% Fib extension level from 105.63.

As seen from the H4, we are responding at 105.63. Traditional take-profit objectives from AB=CD formations are the 38.2% and 61.8% Fib retracements at 104.50 and 103.72, respectively, derived from the pattern extremes: A-D legs.

H1 timeframe:

Friday, as you can see, topped within touching distance of Quasimodo resistance at 105.80 and has thrown light on support drawn from 105.14 (and nearby 100-period simple moving average), fixed just north of demand at 104.96/105.06, an area that houses the 105 figure.

Momentum—measured by the RSI oscillator—crossed beneath the 50.00 centreline on Friday, implying the unit could be bound for oversold conditions this week.

Observed levels:

Long term:

January’s bullish engulfing candle has clearly encouraged some buying in the market, though whether buyers book further gains in the face of the daily supply (106.33/105.78) and 200-day simple moving average is difficult to estimate.

Short term:

Buyers also face shorter-term resistance on H1 and H4 timeframes, in particular the H4 alternate AB=CD bearish pattern at 105.63.

In light of the above analysis, technicals suggest sellers have the upper hand in the short term, in which we may see the 105 figure tested on the H1, and with a little oomph, possibly also the 38.2% H4 Fib level at 104.50.

Weekly Technical Market Insight: 8th – 12th 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 refreshing 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:

Largely unchanged from previous analysis due to lacklustre performance –

Despite a strong-willed advance materialising Friday, resistance at 1.3755 remains a ceiling buyers have been unable to penetrate since January 21. Breaching the latter this week, however, 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 (the value stands at 58.00). It is common to see higher oversold support areas form in an uptrend.

H4 timeframe:

The Quasimodo formation at 1.3572 proved effective support in the second half of last week, with Friday touching gloves with peaks at 1.3740.

Overhead, resistance is visible at 1.3763 this week, with a break unveiling supply at 1.3837/1.3800.

H1 timeframe:

For those who read Friday’s technical writing you may recall the following point (italics):

With room seen for H4 to advance to resistance at 1.3763, H1 could try and topple 1.37 resistance and make a run for H1 Quasimodo resistance at 1.3751 (sheltered just under daily resistance at 1.3755). Therefore, a short-term bullish theme may emerge north of 1.37 today.

As evident from the H1 chart, price did indeed dethrone 1.37 and came within touching distance of the Quasimodo resistance registered at 1.3751.

RSI enthusiasts may also note the line hovering within a stone’s throw from overbought territory.

Observed levels:

Long term:

Unchanged from previous analysis –

The monthly timeframe, as noted in previous writing, carries a bullish atmosphere and places a question mark on daily resistance at 1.3755. This helps explain the indecision around the resistance since mid-January.

Short term:

Reasonably weighty resistance could make its way into the spotlight in early trading this week, made up of daily resistance at 1.3755, H4 resistance at 1.3763 and H1 Quasimodo resistance at 1.3751. Breaching the aforesaid resistances swings the technical pendulum towards the 1.38 figure (H1), which happens to also represent the lower edge of H4 supply at 1.3800.

Weekly Technical Market Insight: 8th – 12th February 2021, FP Markets


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