1.12 offering potential resistance?

16 Mar 2020

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

The month of February witnessed EUR/USD revisit the upper limit of demand at 1.0488/1.0912 – a noteworthy area given the momentum derived from its base – and pencil in an appealing (bullish) hammer candlestick pattern.

March, as you can see, manoeuvred the pair into demand-turned supply at 1.1857/1.1352. Leaving long-term trendline resistance (1.6038) unchallenged, price reversed and is now on track to chalk up a shooting star bearish candlestick signal and potentially revisit demand mentioned above at 1.0488/1.0912.

The primary downtrend remains in motion and has remained lower since 2008, exhibiting clear lower peaks and troughs.

Daily timeframe:

Outlook brought forward from previous analysis -

Following a precipitous decline from supply at 1.1540/1.1486, an area located within the confines of the said monthly demand-turned supply at 1.1857/1.1352, the 200-day SMA made an appearance in the later stages of last week, set north of a 61.8% Fib retracement at 1.1051.

Monthly price suggesting lower levels could prompt daily demand at 1.0940/1.1002 to come forward, with a break exposing familiar demand at 1.0680/1.0781, located within the walls of monthly demand underlined above at 1.0488/1.0912.

What’s also notable from a technical perspective is the RSI indicator recently exiting overbought levels, fading peaks at 82.00 (values not seen since March 2008).

H4 timeframe:

Having shown resilience from demand at 1.1038/1.1072 late last week and again Monday (considered significant given it was likely the decision point to break the 1.1095 January 31st high), the candles revisited the underside of a demand-turned supply at 1.1218/1.1245 for a second time Monday and held ground. In light of this, a range between the two said structures is visibly forming.

Should we eventually form another leg down, traders’ crosshairs will likely be fixed on 1.1005/1.0979 as potential demand, whereas a move through the upper edge of the current range has supply at 1.1332/1.1298 to target.

H1 timeframe:

It was quite a day Monday.

In a surprise move Sunday night, the Federal Reserve cut short-term interest rates by 100bps to 0.00%-0.25% via a 9-1 vote, and the Fed launched a USD 700bln QE program. This, however, failed to impress markets as global equities plunged. On the data front, we also had a dreadful NY Empire State Manufacturing Index print. According to the Federal Reserve Bank of New York, business activity declined in New York State, according to firms responding to the March 2020 Empire State Manufacturing Survey. The headline general business conditions index fell thirty-four points to -21.5, its lowest level since 2009.

From a technical standpoint, price rushed through 1.12 in early London Monday, tripping buy-stop liquidity and testing channel resistance (1.1199) that merged beautifully with a trendline resistance (1.1366) and the 100-period SMA. The 1.11 handle also remained supportive yesterday, lifting the H1 candles to within striking distance of 1.12, ahead of the close. Note also the aforementioned trendline resistance (yellow) aligns closely with 1.12.

Structures of Interest:

Monthly price portends lower moves, placing a question mark on the 200-day SMA and 61.8% Fib retracement at 1.1051 on the daily timeframe as potential support, despite yesterday’s recovery. Daily demand at 1.0940/1.1002, therefore, may come forward sometime this week, though also faces opposition from the monthly timeframe.

With monthly technicals portending moves lower, and H4 action showing room to replenish its range to demand at 1.1038/1.1072, intraday sellers may find use in 1.12 today given its close relationship with trendline resistance.