Upbeat risk sentiment lifts Euro and Pound, EUR/USD fading $1.18

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 0.5 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:

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:

Wednesday observed the dollar index (ticker: DXY) snap a four-day winning streak amidst a recovery in risk appetite. The benchmark 10-year US Treasury yield rose more than 5 percent, testing 1.29%. Additionally, risk sensitive currencies rose and major equity benchmarks voyaged north. 

Technically, H1 finished European trading at the lower side of $1.18, a handful of pips above the 100-period simple moving average around $1.1794. Above the round number, traders will note Fibonacci structure between $1.1817 and $1.1808 (red zone), situated just beneath resistance at $1.1821.

Alongside current price, the relative strength index (RSI) is bound for overbought settings, loitering around 60.00. A test of overbought—in particular resistance at 78.97—considering the downside bias since June, is likely to capture the attention of bears.

Observed levels:

Short term, based on H1 chart studies, a whipsaw through $1.18 into Fibonacci resistance between $1.1817 and $1.1808 is enough to perhaps gather sellers on the back of buy-stops fuelling willing offers.

How much of a bearish presence a $1.18 whipsaw yields is tough to estimate. Although current sentiment favours lower levels, the monthly timeframe trading from support at 1.1857-1.1352, together with the daily timeframe in the process of chalking up a falling wedge reversal pattern ($1.1847/$1.1975), and space for H4 buyers to explore higher, could weigh on any downside attempt from $1.1817-1.1808. 

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 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 1.9 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: 

Ahead of the 1.272% Fib projection at $0.7273 (and neighbouring support from $0.7204), the Australian dollar trimmed a four-day bearish phase against the buck on Wednesday. Underpinned amid improved risk sentiment, AUD/USD is on the doorstep of resistance at $0.7453-0.7384.   

In terms of trend, 2021 is on the back foot.

As for momentum, the relative strength index (RSI) exhibits a narrow consolidation phase between resistance at 41.63 and the oversold threshold 30.00.  

H4 timeframe: 

Fibonacci structure between $0.7293 and $0.7315—within this area, a 100% Fib projection at $0.7313 exists, a level harmonic traders will recognise as an AB=CD bullish formation—entertained buyers on Wednesday and lifted price to within striking distance of resistance at $0.7364, closely shadowed by supply at $0.7390-0.7371 (glued to the lower side of daily resistance at $0.7453-0.7384).

Harmonic AB=CD traders traditionally set take-profit targets at 38.2% and 61.8% Fib retracement levels, derived from legs A-D. As you can see, 38.2% Fib resistance resides at $0.7408.

H1 timeframe: 

A closer analysis of price movement on the H1 chart reveals early European hours $0.73 rejuvenated a strong bid. Upside engulfed Quasimodo resistance at $0.7347, with subsequent buying landing the currency pair at the door of the 100-period simple moving average around $0.7363.

Territory above the SMA brings light to $0.74, a level plotted north of H4 supply at $0.7390-0.7371.

The relative strength index (RSI) finished the session at 65.00. Although somewhat levelling off, the value threatens a test of overbought space and associated resistance at 78.26. 

Observed levels:

The daily chart shows technical space to advance until $0.7453-0.7384. This—coupled with H1 price displaying scope to advance to $0.74 north of the 100-period simple moving average at $0.7363—could prompt a short-term bullish scenario above the SMA, taking out H4 resistance at $0.7364 and drilling into H4 supply at $0.7390-0.7371.

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 0.7 percent in the red and is on track to chalk up a bearish outside reversal.  

Daily timeframe: 

The Japanese yen, a perceived safe-haven currency, fell sharply on Wednesday, reinforced on the back of upbeat risk sentiment. 

Despite a lack of support until supply-turned demand at ¥107.58-106.85, further upside on this chart has resistance at ¥111.88-111.20 to target—intersects with trendline support-turned resistance, 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.

With reference to the relative strength index (RSI), attention is on the lower side of a recently breached ascending channel between 58.82 and 47.51, following the indicator recently pasting a 41.32 low. 

H4 timeframe:

Buyers strengthening grip in recent movement had trendline resistance, drawn from the high ¥111.66 (2021 highs), together with Quasimodo resistance at ¥110.09, abandon position, both of which now stand for support in the event of a retracement. 

Pursuing higher prices on the H4 features supply at ¥110.99-110.80, a base capping upside in early July. 

H1 timeframe:

Supply at ¥110.54-110.41 entered the frame in recent hours, following a run from ¥110 and subsequent break of nearby Quasimodo resistance at ¥110.22 (now serving as support). Of interest, Quasimodo resistance rests above supply at ¥110.65.

As of writing, the relative strength index (RSI) recently engaged with overbought terrain and—leaving resistance at 78.38—exited the area (a bearish signal).

Observed levels:

According to technical studies, buyers appear to have an edge.

As a result, H1 maintaining position off Quasimodo resistance-turned support at ¥110.22 exposes a possible attack on H1 supply at ¥110.54-110.41 and Quasimodo at ¥110.65. This is bolstered by daily and H4 timeframes demonstrating space to advance, targeting H4 supply at ¥110.99-110.80.

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, however, July trades 0.8 percent lower.

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

Daily timeframe: 

Quasimodo support at $1.3609 welcomed a bullish tone on Wednesday, snapping a four-day losing streak amidst a softer dollar across the board. The marginal close back above the 200-period simple moving average, circling $1.3699, also deserves notice. Additional interest to the upside shines light on tops around $1.3909, followed by resistance at $1.4003.

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

H4 timeframe:

Wednesday witnessed a pullback develop off the aforesaid daily Quasimodo support and H4 Fibonacci support between 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, and as such the 38.2% Fib retracement value at $1.3739, derived from legs A-D, is likely targeted as an initial upside objective.

However, before reaching $1.3739, resistance at $1.3712 must be overthrown.

H1 timeframe:

Latest movement out of the H1 chart shows price made its way above $1.37 and tested the mettle of the 100-period simple moving average at $1.3708. As of writing, the currency pair is poised to retest $1.37, which if support comes to pass, a rally to $1.3750 is not out of the question. 

In terms of where we stand on the relative strength index (RSI), the indicator turned ahead of overbought space in recent hours, currently trading at 65.00. Whether this affects $1.37 serving as support remains to be seen. 

Observed levels:

Daily Quasimodo support at $1.3609 underpinning a firm floor yesterday, elevating the currency pair back above the 200-period simple moving average, could help deliver confidence to a $1.37 retest. 

A bullish theme emerging from the aforementioned big figure, nonetheless, faces resistance at $1.3712 on the H4 scale, closely tailed by the 38.2% Fib retracement value at $1.3739.