Charts: Trading View
US Dollar Index (Daily Timeframe):
USD bids strengthened their grip last week, drawing the US dollar index—a measure of the USD value against six major foreign currencies—higher by 0.9% at the close of Q3.
Albeit refreshing one-year highs at 94.50, the tail end of the week came face to face with resistance around 94.45, shaped by way of a 38.2% Fibonacci retracement and a 1.272% Fibonacci projection. Plotted just south of neighbouring resistance at 94.65, sellers welcomed 94.45 resistance on Friday, dropping 0.2 percent. This landed the index on the doorstep of support from 93.90, a previous Quasimodo resistance barrier which is closely shadowed by a decision point at 92.71-93.53. Technical eyes may also acknowledge trendline support connecting with the decision point, extended from the low 89.84.
The relative strength index (RSI), a reliable gauge of momentum, connected with overbought space last week, clocking a high of 72.06. Indicator support to be mindful of this week rests around the 60.00ish region: the point at which two trendlines converge, followed by the 50.00 centreline.
In terms of trend, the greenback has established a series of higher highs and higher lows since price made contact with support from 89.69 mid-May. Under these circumstances, testing either support at 93.90 or the decision point at 92.71-93.53 is capable of igniting dip-buying attempts.
(Italics: previous analysis)
EUR/USD—down 1.1 percent on the week—shook hands with prime support at $1.1473-1.1583, a long-term base sharing chart space with a 100% Fibonacci projection at $1.1613 and a 1.27% Fibonacci extension at $1.1550. Note the 100% value represents a harmonic AB=CD bullish point, bringing a 1.13% BC Fibonacci extension to the table at $1.1623.
Also technically interesting on the weekly scale is the possibility of long-term sell-stops being tripped south of late September lows at $1.1612 (2020). Sell-stops could fuel larger buyer interest from $1.1473-1.1583.
Trend studies show that with the break of $1.1612 lows, the pair is perhaps in the early phase of a trend change to the downside.
Tracking declines evident in US Treasury yields, the US dollar index navigated deeper waters for a second consecutive session on Friday in what appears to be a spell of profit taking off one-year tops at 94.50. As a result, the euro discovered a modest floor, snapping a five-day losing streak.
This week’s technical observations remain concentrated on Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583) and Quasimodo support-turned resistance at $1.1689.
Momentum, according to the relative strength index (RSI), arrived at oversold terrain last week, with support seen at 21.87. Note that in light of the currency pair grinding lower since June, the RSI may explore oversold levels for a prolonged period.
Quasimodo support at $1.1563 put in an appearance on Thursday and, as you can see, invited buying on Friday to highs of $1.1607. Clearance of Thursday’s peak at $1.1610 seats resistance at $1.1622 in the line of fire, a previous Quasimodo support sharing space with descending resistance, extended from the low $1.1794.
Space north of $1.1622 underlines resistance at $1.1666, while area below $1.1563 guides the technical spotlight towards possible support taken from 9th March high $1.1495 (2020).
With immediate flow facing lower since June, $1.1563 is vulnerable. With this, either a test of $1.1622, or a decisive breakout below $1.1563, might boost further bearish interest.
Heading into the early hours of US trading Friday, candle action absorbed $1.16 offers and bumped heads with neighbouring Quasimodo resistance at $1.1605. Chartists will recognise short-term stops were likely tripped above $1.16, with $1.1605 shorts fading upside momentum, hence a dip to lows of $1.1584.
Air space above $1.1605 is interesting from a technical perspective. Not only is the H4 timeframe’s resistance calling for attention at $1.1622, additional resistance is realised around $1.1632 by way of a 50.00% retracement at $1.1631 and a 38.2% Fibonacci retracement at $1.1634.
Observed Technical Levels:
Although a mild end-of-week recovery developed from prime support at $1.1473-1.1583 on the weekly timeframe, the daily timeframe implies further selling could unfold this week to put Fibonacci support between $1.1420 and $1.1522 to work.
For this reason, expect weekly price to drill further into $1.1473-1.1583 before buyers attempt to show.
In line with the higher timeframes suggesting lower prices this week, resistance between $1.1634 and $1.1622 on the H1 timeframe (red) is an area that may draw in a bearish scenario, feeding off stops taken above last Thursday’s high at $1.1610.