January 5th 2022: Dollar Holds Positive Tone Ahead of ADP

Charts: Trading View

(Italics: previous analysis due to limited price change)

EUR/USD:

Weekly timeframe:

Since mid-November (2021), buyers and sellers have been squaring off around support at $1.1237-1.1281—made up of a 61.8% Fibonacci retracement at $1.1281 and a 1.618% Fibonacci projection from $1.1237. ‘Harmonic’ traders will acknowledge $1.1237 represents what’s known as an ‘alternate’ AB=CD formation.

Any upside derived from current support will likely be capped by resistance at $1.1473-1.1583; navigating lower, on the other hand, throws light on Quasimodo support as far south as $1.0778. Given the subdued bullish vibe of late, the latter appears the more likely scenario.

Interestingly, the pair took out 2^nd November low (2020) at $1.1603 in late September (2021), suggesting the early stages of a downtrend on the weekly timeframe. This is reinforced by the monthly timeframe’s primary downtrend since mid-2008.

Daily timeframe:

Quasimodo support drawn from mid-June at $1.1213 (positioned beneath the weekly timeframe’s Fibonacci structure) made an entrance on 24^th November (2021) and remains committed, despite a passionless attempt from bulls. A run higher casts light on trendline resistance, extended from the high $1.2254. Establishing a decisive close beneath $1.1213, however, exposes support on the daily timeframe at $1.0991 (not visible on the screen).

The relative strength index (RSI) whipsawed above the 50.00 centreline in recent movement. Note that this level has delivered resistance since mid-October (2021). Overthrowing the latter helps validate interest to the upside from current price support (shown through average gains exceeding average losses), yet defending 50.00 connotes a bearish picture, in line with the immediate downtrend (since May 2021).

H4 timeframe:

Yet again, markets witnessed another solid push to the upside in US Treasury yields on Tuesday. The benchmark 10-year note extended recovery gains and is now comfortable north of the 1.6 percent level. The dollar index (DXY) posted a fresh weekly high, yet the daily candle concluded considerably off session tops.

The European currency, at the time of writing, finished muted against the greenback on Tuesday, following Monday’s 0.8 percent decline in EUR/USD. Technically, we are now exploring space under channel support, taken from the low $1.1235, and resistance from $1.1307. Note both levels welcomed a test in recent trading and held firm.

Downstream, the technical radar points to support at $1.1235, with a breach shining the spotlight on 19^th June low (2020) at $1.1168.

H1 timeframe:

Following a near-test of Quasimodo support at $1.1272 ahead of US hours on Tuesday, EUR/USD bulls assumed command. Subsequent action observed price whipsaw north of $1.13 to test Quasimodo support-turned resistance at $1.1318, which, as you can see, held and guided the currency pair south of $1.13 into the final hours of trade.

Areas of interest above $1.1318 are resistance coming in at $1.1336 and supply from $1.1350-1.1341.17^th December low at $1.1235 is visible beneath $1.1272.

In terms of the relative strength index (RSI), the value rebounded from oversold territory and attempted to find acceptance beyond the 50.00 centreline. Movement above the latter helps confirm upside interest (notifying traders the market shows average gains exceeding average losses: positive momentum).

Observed Technical Levels:

Having seen H4 activity retest the lower side of channel support, taken from the low $1.1235, and resistance from $1.1307, together with H1 price closing back under $1.32, further selling could be in the offing. EUR/USD shorts are likely to take aim at H1 Quasimodo support at $1.1272, followed by H4 support from $1.1235.

AUD/USD:

Weekly timeframe:

Bulls embraced a modest offensive phase deep within prime support at $0.6968-0.7242, with resistance to target at $0.7501. Manoeuvring beneath $0.6968-0.7242 reveals support at $0.6673 and a 50.0% retracement at $0.6756.

Trend on the weekly timeframe has been higher since pandemic lows of $0.5506 (March 2020); however, the monthly timeframe has been entrenched within a large-scale downtrend since mid-2011.

Daily timeframe:

Resistance—made up of a 61.8% Fibonacci retracement at $0.7340, a 100% Fibonacci projection at $0.7315 and an ascending resistance, drawn from the low $0.7106—remains central on the daily scale at the moment. North of the aforesaid resistance, two trendline resistances are seen (taken from highs $0.8007 and $0.7891). Continuation selling shifts attention to support at $0.7021.

The relative strength index (RSI) is seen retesting the 50.00 centreline after a high of approximately 60.00 ahead of the year end. Establishing support from 50.00 is considered a bullish signal.

H4 timeframe:

Latest to come out of the H4 scale reveals the unit shook hands with Quasimodo resistance-turned support at $0.7187 and retested the lower side of channel support, drawn from the low $0.7196.

Quasimodo resistance-turned support at $0.7287 calls for attention to the upside, while territory below $0.7187 throws light on support at $0.7097.

H1 timeframe:

$0.7255-0.7246 supply made an entrance in US trading on Tuesday and has, for the time being, offered an area for sellers to work with (note this zone converges with the H4 channel support highlighted above). Holding the bearish tone places support at $0.7216 in the firing line, closely shadowed by demand at $0.7195-0.7207 and the psychological figure $0.72. Should sellers lose grip, nonetheless, two Quasimodo resistances reside north of $0.7255-0.7246 at $0.7283 and $0.7273.

The relative strength index (RSI) has slowed ahead of overbought terrain, putting forward a mild reversal to sub-60.00. A retest of the 50.00 centreline, therefore, could take shape.

Observed Technical Levels:

From a short-term perspective, the combination of $0.7255-0.7246 supply on the H1 chart and channel resistance from the H4 chart could be enough to draw out a retest of H1 support at $0.7216.

Longer term, technical structure points to resistance on the daily chart between $0.7340 and $0.7315.

USD/JPY:

Weekly timeframe:

Heading into the close of 2021, USD/JPY action voyaged north of resistance from ¥114.38, a level capping upside since early 2017 which now represents support. Latest shows a 1.272% Fibonacci projection from ¥116.09 also entered the frame, with price refreshing multi-year pinnacles.

In terms of trend, the unit has been advancing since the beginning of 2021, welcoming a descending resistance breach, drawn from the high ¥118.61.

Daily timeframe:

Quasimodo resistance at ¥114.97 was overthrown on Tuesday, allowing a test of Quasimodo resistance at ¥116.33.

RSI (relative strength index) analysis shows the value entered overbought space in response to recent bidding. In light of recent strength, traders are urged to pencil in the possibility of false signals emerging from the overbought area. Indicator support remains around 40.00-50.00.

Regarding trend, the unit has been higher since 2021.

H4 timeframe:

Key levels to be mindful of on the H4 scale are the daily timeframe’s Quasimodo resistance at ¥116.33 and support coming in from ¥115.38.

$117.76-117.07 supply is fixed above the daily level (not visible on the screen); therefore, a break of the latter shows room to press higher.

H1 timeframe:

Following a test of the daily timeframe’s Quasimodo resistance at ¥116.33, H1 dipped to retest ¥116 which delivered support in the form of a modest dragonfly doji candlestick pattern. The reaction garnered little response from bulls in US trading on Tuesday, implying weakness and a possible test of the $115.65-115.81 decision point.

The relative strength index (RSI) is on the verge of exiting overbought space after recording a high of 84.76. Withdrawing from overbought is considered a bearish signal, and could lead to a move back to support at 40.00-50.00.

Observed Technical Levels:

Despite the clear uptrend, weekly resistance at ¥116.09 (the 1.272% Fibonacci projection) and daily Quasimodo resistance at ¥116.33 echoes a bearish vibe. As a result, short-term flow could dip sub-¥116 on the H1 chart and cross swords with the H1 decision point at $115.65-115.81.

GBP/USD:

Weekly timeframe:

Resistance at $1.3629-1.3456 made a show in recent weeks, following a mild pullback from December lows of $1.3160.

Sellers responding to current resistance has a double-top pattern’s ($1.4241) profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the breakout point—to target around $1.3093.

While the trend on the weekly timeframe demonstrates an upside bias, the monthly timeframe’s primary setting has been lower since late 2007.

Daily timeframe:

Immediate resistance resides at $1.3602 on the daily scale, accompanied by trendline resistance, taken from the high $1.4250. Technicians will also note the 200-day simple moving average circling above current resistance at $1.3740.

The relative strength index (RSI) remains comfortable above the 50.00 centreline and is within a stone’s throw from overbought levels. Therefore, this market displays positive momentum for the time being.

H4 timeframe:

Demand at $1.3428-1.3444, as you can see, made a show at the beginning of the week, with Tuesday elevating the currency pair to supply at $1.3566-1.3547, an area stationed beneath Quasimodo resistance at $1.3580.

$1.3665-1.3625 supply is seen above current resistances (not visible on the screen), should buyers continue to pursue higher ground.

H1 timeframe:

The decision point at $1.3441-1.3423, together with a 1.618% Fibonacci projection at $1.3437 and the H4 timeframe’s demand at $1.3428-1.3444, recently delivered a floor of support.

Tuesday voyaged through $1.35 and directed attention to the H4 timeframe’s Quasimodo resistance at $1.3580. Given the recent dip in price amid US hours, a $1.35 retest is not out of the question.

RSI (relative strength index) action came within a whisker of overbought surroundings yesterday, though now trades below 60.00.

Observed Technical Levels:                            

The combination of weekly resistance at $1.3629-1.3456, daily resistance at $1.3602 and H4 Quasimodo resistance at $1.3580 shows an area between $1.3629 and $1.3580 sellers will likely be watching.

Alternatively, price may respond to immediate resistance: daily trendline resistance and H4 supply from $1.3566-1.3547.

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