Sterling extends losses following US inflation data, $1.3800 eyed

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 witnessed 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 the spotlight on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

July currently trades 0.5 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:

The US dollar finished higher across the board on Tuesday, aided by stronger-than-anticipated US inflation data. Consequently, EUR/USD slumped and exposed Quasimodo support at $1.1688.

The 200-day simple moving average, circling $1.2001, calls for attention to the upside as (dynamic) resistance, 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.

The relative strength index (RSI)—leaving the 50.00 centreline unopposed—travelled below 40.00 on Tuesday, threatening oversold conditions.

H4 timeframe:

Quasimodo resistance at $1.1880, as underlined in recent analysis, arranged a ceiling on Monday, with Tuesday, following a small (yet clearly effective) shooting star candle, exhibiting a one-sided decline. 

Subsequent to yesterday’s bearish existence, demand at $1.1794-1.1822 put in an appearance and appears poised to step aside. This, along with June’s downside bias, elbows Quasimodo support at $1.1749 on the radar.

H1 timeframe:

Tuesday’s weakness witnessed short-term flow engulf $1.18 and shake hands with support from $1.1784. Technically speaking, this is the last line of support until H4 Quasimodo support mentioned above at $1.1749.

In terms of the relative strength index (RSI), we are treading water within oversold territory and appear to be on the verge of establishing early bullish divergence.

Observed levels:

H4 demand at $1.1794-1.1822 under pressure, together with a lack of support visible on the daily timeframe until $1.1688, could have H1 tunnel through support at $1.1784, targeting at least H4 Quasimodo support at $1.1749.

AUD/USD:

Monthly timeframe: 

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

June’s 3.0 percent decline lands July in reach of support at $0.7394. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply). 

Forging support places trendline resistance (prior support - $0.4776 low) and supply from $0.8303-0.8082 in sight. 

July is currently down 0.7 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: 

Technical Structure Unchanged from Previous Analysis.

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% Fib extension at $0.7424—remains in the picture, despite a lacklustre bullish vibe. What’s interesting is this area houses the monthly support underlined above at $0.7394.

Territory above current demand shines light on the 200-day simple moving average at $0.7576, a dynamic value sheltered south of resistance from $0.7626.

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

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence.

H4 timeframe: 

Technical Structure Unchanged from Previous Analysis.

As evident from the H4 chart, resistance at $0.7508, accompanied by a 50.00% retracement at $0.7505, governs attention to the upside. Lower on the curve, focus is directed towards a 100% Fib projection at $0.7427 and a 1.13% BC Fib extension at $0.7423. 

Should $0.7508 be engulfed, this sets the stage for a run back to Quasimodo resistance at $0.7599 (parked under another Quasimodo resistance from $0.7621). A break of noted Fib levels might not necessarily be considered bearish, having seen daily price flirting with demand at $0.7453-0.7384.

H1 timeframe: 

$0.75 served sellers well in recent trading, delivering resistance to work with as the US dollar received a boost, following better-than-expected inflation. 

Tuesday, as you can see, guided AUD/USD through the 100-period simple moving average around $0.7463 and crossed swords with demand at $0.7416-0.7431. Of technical note, this area is set just north of the $0.74 figure.

As for the relative strength index (RSI), the value is trekking around oversold territory after an earlier dive under the 50.00 centreline. Note support resides at 27.02.

Observed levels:

The big figure $0.74 may interest traders, having seen the level set above monthly support at $0.7394. Traders are urged to pencil in the possibility of a whipsaw through $0.74 to test the monthly barrier, movement which could welcome buyers into the market.

It’s also worth recalling the aforesaid monthly support is set within daily demand from $0.7453-0.7384.  

USD/JPY:

Monthly timeframe: 

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

Following January’s bullish engulfing candle, 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 the three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent. 

July trades 0.5 percent in the red.

Daily timeframe: 

Technical Structure Unchanged from Previous Analysis.

Amidst upbeat US inflation, USD/JPY extended recovery gains Tuesday, pencilling in a third successive bullish session. 

Continued support shows a test of trendline support-turned resistance (taken from the low 102.59) could come about, possibly spearing resistance at ¥111.88-111.20. Territory north has supply at ¥112.68-112.20. 

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

In terms of the relative strength index (RSI), the indicator is on the brink of testing the lower side of a recently breached ascending channel between 58.82 and 47.51. 

H4 timeframe:

Latest movement out of the H4 chart reveals the unit confronted trendline support-turned resistance, taken from the low ¥108.56. This follows last week carving out Fibonacci support between ¥109.48 and ¥109.70. 

In the event of trendline resistance giving way, this sets the stage for an extension towards resistance coming in at ¥111.56.

H1 timeframe:

Following a muscular advance off the 100-period simple moving average at ¥110.19, heading into early US trading, resistance at ¥110.43 was overthrown. With the latter now serving as workable support, limited resistance is in sight until the ¥111 figure and resistance at ¥111.16. 

Traders may have observed trendline support, extended from the low 109.53.

The relative strength index (RSI) continues to test space ahead of overbought, threatening a test of resistance at 78.38. Support also recently emerged around 45.00. 

Observed levels:

Entering long above H1 support at ¥110.43, despite scope to test ¥111, is a tricky venture, with H4 action testing trendline support-turned resistance, taken from the low ¥108.56. However, should H4 price trek north of the trendline formation, this, technically speaking, provides a green flag to ¥111, followed by the lower side of daily resistance at ¥111.88-111.20.

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 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, which could serve as support if retested.

July is currently down 0.1 percent.

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

Daily timeframe: 

Technical Structure Unchanged from Previous Analysis.

Resistance at $1.4003 remains centre stage on this timeframe—a level displaying commitment since March of this year.

Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3672) is also in the spotlight. 

The relative strength index (RSI), following earlier bullish divergence, is now in the vicinity of the 50.00 centreline. Venturing above the latter could help set a bullish tone.  

H4 timeframe:

Made up of a 61.8% Fib retracement at $1.3898 and a 100% Fib projection at $1.3912, resistance emerged from this area since early last week. 

Space to the downside throws light on familiar Quasimodo support from $1.3761, which, as you can see, has served well so far in July, and is located just north of another layer of Quasimodo support at $1.3712. 

H1 timeframe:

Quasimodo resistance at $1.3910, together with a 100% Fib projection at 1.3909, a 1.13% Fib extension at $1.3918, and a $1.39 level, has served this timeframe well. Tuesday nosedived lower from $1.3918/$1.39 and, after brushing aside the 100-period simple moving average at $1.3823, crossed paths with $1.38. 

Sub $1.38 unlocks support around $1.3750.

Out of the relative strength index (RSI), we can see the indicator engaging oversold territory, an area (30.00) that’s delivered support since late June.

Observed levels:

Noting room for manoeuvre on the H4 timeframe to Quasimodo support at $1.3761, this places a question mark on $1.38 support from the H1. Ultimately, this opens up a possible bearish scenario south of $1.38 to $1.3750, plotted just beneath the aforementioned H4 Quasimodo support.