Technical Market Outlook and Review for 19 January

EUR/USD

Europe’s single currency finished Wednesday largely unchanged against its US counterpart. Despite refreshing nine-month tops, the currency pair shook hands with a notable Quasimodo support-turned resistance on the weekly timeframe at $1.0888. This level is also visible on the monthly scale. What’s technically interesting here is that this could be a location that sellers attempt to make a stand from as, according to the weekly timeframe, the recent 13.5% up move (since late September) could simply be viewed as a pullback within a market trending lower since early 2021. Therefore, the currency pair’s movement around $1.0888 is crucial.

In support of the weekly resistance level, prime resistance on the daily timeframe at $1.0954-1.0864 recently made a show. However, on the daily chart, an uptrend is clear through the recent series of higher highs/lows, as well as price crossing above its 200-day simple moving average, currently fluctuating around $1.0308. We can also see that the moving average is starting to level off from its down move: another sign of a potential trend reversal to the upside.

Across the page on the H1 scale, we have been rangebound between $1.0780 and $1.0868 since 12 January.

Therefore, until this range is convincingly breached, short-term traders are likely to continue to fade the limits of this consolidation. Levels of interest outside of the range are a Quasimodo resistance-turned potential support at $1.0764 and the $1.09 handle.

Overall, given the active weekly and daily resistances, and the weekly timeframe’s bearish narrative still in play, a break of the H1 timeframe’s range is likely to be seen to the downside. Such an event materialising might see short-term breakout sellers surface south of the H1 Quasimodo resistance-turned potential support at $1.0764, targeting H1 Quasimodo support from $1.0743 and the $1.07 figure. Alternatively, additional tests of the upper H1 range limit may encourage selling, in view of the bigger picture.

S&P 500

The S&P 500 is an interesting market right now, an index tracking the performance of 500 (a little more than 500) of the largest companies listed in the US.

In the weekly market briefing, the research team noted the following (italics):

Opening from the monthly chart, it is clear to see the index has remained in a dominant uptrend since early 2009. We had two notable corrections in that time, one in early 020 (COVID), dropping 35%, and one currently in play since early 2022 (down 27% from 4,818, as of writing) which was accompanied by negative divergence out of the Relative Strength Index (RSI).

Across the page on the weekly timeframe, price action has respected trendline resistance (drawn from the high mentioned above at 4,818) during the correction mentioned on the monthly chart. However, following the rebound from support at 3,589 and a 50.0% retracement at 3,512 in mid-October, recent price action (lack of bearish interest) appears set to dethrone the noted trendline resistance. Technically, a break would help reaffirm the monthly chart’s uptrend. Adding to this, the RSI, since March 2022, has been forming an ascending triangle between 53.60 and 30.47. While these patterns are frequently seen in uptrends, they can also represent reversal structure in downtrends. Consequently, a breakout north above both the triangle formation, alongside the noted trendline resistance, would likely underpin a longer-term bid in this market.

Against the backdrop of the monthly and weekly timeframes, price action on the daily timeframe forged support off 3,796 in late December and subsequently saw the index engulf resistance from 3,921 (now a marked support level). With daily price exhibiting scope to approach resistance at 4,087, and the daily RSI recently cementing position north of its 50.00 centreline (positive momentum), a retest of 3,921 could unearth a bullish scenario.

Finally, on the H1 chart, a common gap emerged between 3,919 and 3,928, which may serve as possible support. Support north of the gap zone appears vulnerable: it has been tested twice already and a nearby decision point (just under the level) has also been consumed (tested). The gap area is also joined by 38.2% and 61.8% Fibonacci retracement ratios at 3,919 and 3,930, respectively. Additionally, and perhaps most important, the H1 gap converges with the daily support level mentioned above at 3,921, therefore could be area buyers are drawn to.

Monthly, Weekly and Daily Charts:

H1 Chart:

XAU/USD (Gold)

As seen from the weekly timeframe, following the bear trap formed through support at $1,676, spot gold, in $ terms, has powered higher since November last year. While it appears unlikely the double-top pattern formation ($2,070) will reach (or even come close) to its profit objective at around $1,278, it remains a notable pattern structure that has essentially completed.

The weekly timeframe’s current action has price hugging resistance at $1,916, with a break to the upside potentially calling on the double-top pattern’s peaks at around $2,070. Consequently, alongside the Relative Strength Index (RSI) nearing overbought conditions, the noted weekly resistance is a key watch going forward.

The daily timeframe shows price pencilled in a third consecutive losing day on Wednesday, fuelling the possibility that the unit is on its way to dropping in on a decision point at $1,867-1,886. The trend, according to the daily chart, is now technically trending higher. The reversal presented itself in early December last year following the break of the $1,786 previous high in November 2022. Since then, the precious metal also recently welcomed what is known as a Golden Cross, which is the 50-day simple moving average ($1,801) crossing above the 200-day simple moving average ($1,778). This is a pattern trend followers tend to watch and can signal the possibility of a long-term uptrend surfacing. To the upside, resistance is seen in the form of a Quasimodo formation at $1,966, closely accompanied by a 78.6% Fibonacci retracement at $1,973 (not visible on the chart). It is also worth highlighting that the Relative Strength Index (RSI) registered an overbought condition last week, touching levels not seen since March 2022.

Out of the H1 timeframe, gold is poised to complete an AB=CD support area, made up of a 100% projection at $1,893, a 1.13% Fibonacci extension from $1,892 and a 61.8% Fibonacci retracement ratio at $1,890. This, coupled with a longer-term ascending channel resistance-turned support just north of the AB=CD zone, offers support for shorter-term traders to possibly work with.

The technical picture, according to the above analysis, has weekly price testing resistance at $1,916, daily price on the verge of testing a decision point at $1,867-1,886, and H1 price looking towards an AB=CD support zone between $1,890 and $1,893.

Particularly for interested AB=CD buyers, it is important to acknowledge that a whipsaw through the H1 zone could materialise since it is located just above the daily decision point.

BTC/USD

Kicking off from the top, the weekly timeframe shows BTC/USD gained some grip north of support at $11,855 and hammered through the upper limit of a falling wedge pattern (reversal structure), drawn between $25,214 and $17,567. You will note this was accompanied by the Relative Strength Index (RSI) chalking up positive divergence ahead of oversold territory (the indicator also recently crossed above its 50.00 centreline [positive momentum]). Aside from the local tops (which will be more evident on the daily chart), resistance demands attention at $28,844.

Meanwhile on the daily timeframe, price movement continues to consolidate recent gains between support at $20,000 and resistance coming in from $21,924. According to the daily chart, things appear to be improving for the major crypto. The recent outperformance forged a fresh higher high (breaking the $18,385 14 December high), and crossed above both the 50-day and 200-day simple moving averages, currently trading at $17,467 and $19,543, respectively. However, it is important to remember that prior to the above, this market was entrenched in a dominant downtrend since late 2021. This, in addition to the RSI testing highs (89.35) not seen since early 2021, could still see sellers put in an appearance.

Across the page on the H1 timeframe, recent hours witnessed a drop through the lower limit of a short-term rising wedge pattern, drawn between $21,321 and $20,233. Should sellers maintain position under the breached level (current action appears to be retesting the underside of the line), breakout sellers may push for as far south as a decision point from $19,731-19,998.

With the H1 decision point at $19,731-19,998 merging closely with the 20,000 support marked on the daily timeframe, coupled with the weekly timeframe’s (pattern) breakout to the upside, a test of the H1 decision point could be an area buyers welcome.