This article was submitted by Aaron Hill from FP Markets.
It was a poor start to the week for the common currency, down 0.7% at the close of European trading on Monday. On the back of a buoyant dollar, and a technical bearish landscape, downside risks for the EUR/USD remain elevated.
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, and 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 price forging a lower high followed by a fresh lower low will undoubtedly question this uptrend and begin the development of an early (technical) downtrend.
Against the backdrop of the bigger picture, price movement on the H1 timeframe is drawn to Quasimodo support-turned potential resistance from $1.0743 and the $1.07 figure which is closely shadowed by a Quasimodo resistance-turned potential support at $1.0691.
Ultimately, chart studies indicate this is a sellers’ market with the $1.0743 H1 resistance likely to welcome bears to target the $1.07ish neighbourhood. Failure to pullback and visit $1.0743, nevertheless, breakout selling beyond $1.0691/1.07 could be in the offing, according to the longer-term timeframes honing in on at least $1.06.
US equity benchmarks kicked off the week on the ropes, fuelled by Fed concerns. Technically, though, the recent selling does not change the technical landscape across the monthly, weekly and daily charts.
The following is a reminder of where I left (and are likely to leave for the foreseeable future) the monthly chart in recent writing (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 and, thanks to Friday’s surprise jobs data, fostered a mild end-of-week correction from the technical base, 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, in support of 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 calls for attention, a potential resistance-turned support with the possibility of price recoiling from here and running for the 4,325 15 August high mentioned on the weekly scale. Of note, and I did reference this in previous analysis, the index continues to extend its position north of the 200-day simple moving average at 3,948, which has remained pointing to the downside since levelling off in April of 2022. We also recently witnessed a Golden Cross form: the 50-day simple moving average (3,959) crossing above the 200-day simple moving average, which is considered a bullish trend signal.
Movement on the H1 timeframe is seen getting to know support at 4,100, positioned closely with trendline support, drawn from the low 3,885. These two levels, therefore, are of immediate concern for short-term traders as a break unearths another layer of support from 4,050 and a neighbouring trendline support, taken from the low 3,803.
Given the technical backdrop, the upper of the two H1 trendline supports, if tested, could deliver a floor for dip buyers, an ascending line complemented by daily support priced at 4,087.
Monthly, Weekly and Daily Charts: