This article was submitted by Aaron Hill from FP Markets.
Subdued trading conditions were evident for the EUR/USD on Wednesday as buyers and sellers squared off around the upper portion of Tuesday’s range.
Through the lens of a technical analyst, charts studies continue to imply sellers will likely remain in the driving seat until around the $1.06ish region. My rationale out of the bigger picture was defined in the recent Weekly Briefing (italics):
The weekly timeframe recently joined hands with Quasimodo support-turned resistance at $1.0888 and chalked up what is referred to as a shooting star. This bearish combination, together with the prospect of investors welcoming a sell-on-rally scenario based on the pullback from the late September lows at $0.9536, proposes a robust technical headwind for buyers to compete with. Adding to the weekly chart’s bearish representation, price action on the daily timeframe voyaged through trendline support, extended from the low $0.9730. Rupturing the aforementioned line, along with the daily chart’s Relative Strength Index (RSI) elbowing through its 50.00 centreline (negative momentum), unmasks daily support coming in at $1.0602. As a note, while the daily timeframe has emphasised an uptrend (series of higher highs/lows since $0.9536), current (daily) price forging a lower high followed by a fresh lower low will undoubtedly question this uptrend and begin the development of an early downtrend.
Consequently, $1.0602 continues to warrant attention on the daily scale, meaning short-term players on the H1 chart may eventually navigate beneath $1.07 to take on Quasimodo support from $1.0667 and H1 support at $1.0635 which would unlock the door to the $1.06 figure: the downside objective on the daily timeframe. This, for that reason, poses two possible scenarios going forward: H1 Quasimodo support-turned resistance at $1.0774 offers a ceiling for sellers to work with to push lower, or failure to reach the aforementioned resistance could spark a breakout scenario beneath $1.07 towards H1 supports mentioned above at $1.0667 and $1.0635.
Major US equity indices were on the ropes during the US morning session, with the S&P 500 trading as low as 1.0%.
The technical picture for the monthly, weekly and daily timeframes, however, remains interesting and largely supportive of further outperformance. The following is a reminder of where I left the bigger picture in recent analysis, albeit slightly modified to reflect current price movement (italics):
The monthly chart has remained in a dominant uptrend since early 2009. We had two notable corrections in that time, one in early 2020 (COVID), dropping 35%, and one in play since early 2022 (27% from 4,818, as of writing) which was accompanied by negative divergence out of the Relative Strength Index (RSI).
The weekly chart connected with Quasimodo resistance at 4,177, closely shadowed by the 4,325 15 August high (2022). Should sellers take hold, a retest of the recently breached trendline resistance (taken from the high at 4,818) could unfold and offer support. However, backing further buying on this timeframe, the Relative Strength Index (RSI) ventured above the upper boundary of an ascending triangle between 53.72 and 30.47. This emphasises positive momentum until reaching the overbought threshold (70.00). While these triangles are generally found in uptrends, they can also forge reversal signals.
Out of the daily timeframe, 4,087 support had its upper space tested this week, a level that delivered strong resistance between September 2022 and January 2023. Given we are still holding ground north of the support, and a Golden Cross presented itself: the 50-day simple moving average (3,964) crossing above the 200-day simple moving average (3,946), price recoiling from its current location and running for the 4,325 15 August high mentioned on the weekly scale could materialise, closely followed by a daily 100% projection (AB=CD harmonic resistance) at 4,378.
H1 support from 4,100 and trendline support, drawn from the low 3,885, have withstood downside efforts. Beyond these levels point to support from 4,050 and a neighbouring trendline support, taken from the low 3,803, while pursuing higher ground focusses on Quasimodo resistance at 4,183, followed by a Quasimodo support-turned potential resistance at 4,219.
Ultimately, this is a market STILL favouring buyers.
Monthly, Weekly and Daily Charts: