Safe-Haven bid elevates Dollar Index to three-month highs

EUR/USD:

Monthly timeframe:

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

Closing the book on the month of June had EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent. 

A bullish revival shines light on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

Month to date, July trades 0.6 percent lower.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Technical Structure Unchanged from Previous Analysis.

Since mid-June, the daily timeframe has been carving out a falling wedge ($1.1848/$1.1975), a pattern accommodating two tests at either side of the structure. Note some technical analysts prefer wedge formations to display at least three tests. 

Nevertheless, in the event price continues to compress within the falling wedge, Quasimodo support at $1.1688 is likely to make an entrance, arranged south of 31st March low at $1.1704 (a place sell-stops will be tripped). 

Any upside attempts (a breakout above the current wedge pattern) reignites interest at the 200-day simple moving average, circling $1.2002 (sheltered beneath supply at $1.2148-1.2092).

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy gains in 2020.

Out of the relative strength index (RSI), the value occupies trendline support-turned resistance (around 40.00), extended from the low 29.54. Resistance is also close by at 51.36, serving reasonably well since November 2020. A breakout above 51.36 signals momentum is to the upside (average gains surpass average losses) and, therefore, traders could observe a breakout above the noted falling wedge.

H4 timeframe:

Technical Structure Unchanged from Previous Analysis.

Aside from June’s downside bias, technical areas to be mindful of remain at Quasimodo support from $1.1749 and Quasimodo resistance coming in at $1.1880.

Fibonacci studies reveal a 61.8% Fib retracement at $1.1890, plotted south of a 38.2% Fib retracement at $1.1906.

H1 timeframe:

Stationed just south of the 100-period simple moving average ($1.1806), $1.18 has proven robust resistance in recent trading, aided by the US dollar index (ticker: DXY) refreshing multi-month highs as the market remains cautious regarding the spread of the Delta variant. This also weighed on risk-sensitive currencies, such as the Australian dollar and New Zealand dollar. 

As stated in previous writing, noting short-term flow residing south of $1.18, a 1.272% Fib expansion at $1.1745, a 100% Fib projection at $1.1747 and a 1.27% Fib extension at $1.1748 is seen uniting with H4 Quasimodo support underlined above at $1.1749.

Observed levels:

In light of recent price movement, the technical outlook remains unchanged.

From the monthly timeframe, support at 1.1857-1.1352 is in play. In conjunction with the monthly, the daily timeframe is chalking up a falling wedge ($1.1847/$1.1975), which, given June’s decline, highlights a potential reversal pattern. 

Short-term flow is centred on a possible sell-off towards the H1 timeframe’s Fibonacci structure between $1.1745 and $1.1748, joined by H4 Quasimodo support from $1.1749.

AUD/USD:

Monthly timeframe: 

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

Following June’s 3.0 percent decline, July recently elbowed through support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply). 

Month to date, July is down 2.2 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) is in play until breaking $0.8135 (January high 2018). 

Daily timeframe: 

The risk-sensitive Australian dollar staged a modest recovery off multi-month lows against the US dollar on Tuesday, finishing the session largely unmoved. 

Resistance calls for attention at $0.7453-0.7384, whereas any downside interest shifts focus to support at $0.7204. That is assuming Fibonacci bids—the 1.272% Fib projection at $0.7273—is overthrown. 

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.  

According to the relative strength index (RSI), oversold conditions remain. In light of sustained selling since early May, oversold readings are likely to remain, and between 50.00 and 40.00 could stand in as overbought signals. 

H4 timeframe: 

A closer reading from the H4 scale reveals the currency pair shook hands with interesting Fibonacci structure between $0.7293 and $0.7315. Note that within this area, a 100% Fib projection at $0.7313 exists, a level harmonic traders will recognise as an AB=CD bullish formation.

Bulls occupying position out of current Fibonacci support directs focus to resistance at $0.7364, closely shadowed by supply at $0.7390-0.7371.

H1 timeframe: 

Interestingly, the technical landscape on the H1 scale has short-term action easing off $0.73, initially establishing what’s known as a hammer candle pattern—bullish cue. Further buying has Quasimodo resistance at $0.7347 to target, with subsequent bullish intent beyond here perhaps taking aim at $0.74 and the 100-period simple moving average around $0.7395. 

The relative strength index (RSI), finding a floor off support at 27.02, is within striking distance of connecting with the 50.00 centreline. Moves north of the latter signal momentum gaining to the upside: average gains surpassing average losses.

Observed levels:

Knowing monthly price dropped through support at $0.7394, as well as daily flow exhibiting scope to approach at least a 1.272% Fib projection at $0.7273, any upside from $0.73 on the H1 and from Fibonacci structure between $0.7293 and $0.7315 on the H4 may be limited. 

With that being said, this market echoes a sell-on-rally scenario, with sellers possibly targeting H1 Quasimodo resistance at $0.7347 as a base to work with. Alternatively, H4 resistance from $0.7364 (and a possible whipsaw into H4 supply at 0.7390-0.7371) could draw a bearish scenario.

USD/JPY:

Monthly timeframe: 

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

March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66. Although April finished lower by 1.3 percent and snapped a three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent. 

Month to date, however, July trades 1.1 percent in the red and is on track to chalk up a bearish outside reversal.  

Daily timeframe: 

Technical Structure Unchanged from Previous Analysis.

Tuesday observed the US dollar recover ground against the Japanese yen, lifted amid improved risk sentiment and higher US Treasury yields. Despite this, absence of support until supply-turned demand at ¥107.58-106.85—an area sharing chart space with the 200-day simple moving average at 106.92—opens the risk of further selling from a technical standpoint. This follows early July tunnelling through trendline support (taken from the low 102.59). 

Trend studies, despite the trendline support breach early July, reveals the pair has been trending higher since the beginning of the year.

Concerning momentum, the relative strength index (RSI) spun lower from within a whisker of a recently breached ascending channel between 58.82 and 47.51 last week, and finished Tuesday just ahead of 40.00. 

H4 timeframe:

The latest advance—extending recovery gains out of demand coming from ¥109.02-109.20—shines light on trendline resistance, drawn from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09.

H1 timeframe:

Supply at ¥109.83-109.71 was a noted area in Tuesday’s analysis (considered an important zone, having it been within this base a decision was made to channel lower), which, as you can see, entertained a short-term bearish tone heading into London yesterday. Although triggering a 40-pip decline, bulls entered an offensive phase going into US trading and dethroned the aforementioned supply as well as the 100-period simple moving average at ¥109.83.

As of writing, you will note ¥109.83-109.71 is being retested as demand, a touch south of ¥110 and Quasimodo resistance coming in at ¥110.22.

From the relative strength index (RSI), the value is engaging with space above the 50.00 centreline and threatening moves into overbought, possibly targeting resistance at 78.38.

Observed levels:

Between H1 Quasimodo resistance at ¥110.22 and ¥110 (note that inside of this area intersects with H4 Quasimodo resistance at ¥110.09 and H4 trendline resistance) is a zone we may see sellers welcome today if tested. 

This area is in line with daily and monthly timeframes showing space to move lower.

GBP/USD: 

Monthly timeframe: 

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

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, possibly serving as support if retested.

Month to date, July trades 1.5 percent lower.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe: 

Recording a fourth successive daily loss on Tuesday, cable cemented position south of the 200-period simple moving average, circling $1.3695, and challenged Quasimodo support at $1.3609. Technicians may also note the daily scale recently elbowed under a double-top neckline at $1.3670 (double top formed between 24th Feb high at $1.4241 and June 1st high at $1.4250).

Trend on this chart has been somewhat rangebound since late February. Though continuation moves to the downside beyond Quasimodo support at $1.3609 could trigger a bearish vibe.

As for momentum studies, the relative strength index (RSI) is pencilling in bullish divergence, informing traders of strengthening momentum.

H4 timeframe:

Out of the H4 chart, we are seeing the currency pair cross paths with a 100% Fib projection at $1.3640 and a 1.618% Fib extension at $1.3613. Harmonic traders will acknowledge the Fibonacci formation represents an AB=CD bullish configuration. What’s also technically interesting is daily Quasimodo support at $1.3609 connecting with the H4 levels.

H1 timeframe:

The modest $1.36 recovery seen into the close Tuesday, alongside the relative strength index (RSI) exiting oversold territory and breaching 39.68 indicator resistance, throws light on a possible run back to $1.37.

Observed levels:

Daily Quasimodo support at $1.3609, the $1.36 figure on the H1 and Fibonacci structure on the H4 between $1.3613 and $1.3640 may interest buyers in this market, at least until reaching $1.37. Do be aware that the 200-day simple moving average aligns closely with the round number at $1.3695, and therefore could be a location sellers make an entrance to take advantage of possible bearish flow below the daily timeframe’s double-top neckline at $1.3670.