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FX analysis

Short-term FX Technical Strategy (8 Jul 2022)

foreign exchange

EUR/USD – Downtrend remains intact

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Since our last report dated on 5 July 2022, the EUR/USD has broken below the 1.0350 key medium-term pivotal support that invalidated the corrective bounce scenario for an extension of its impulsive down move sequence and hit the 1.0200 support/alternate target scenario (printed an intraday low of 1.014 on 8 July).

The short-term downtrend from 27 June 2022 high remains intact. Watch 1.0270 key short-term pivotal resistance for another leg of potential decline towards 1.0060 support in the first step (lower boundary of the descending channel from 11 February 2022 high & a cluster of Fibonacci extension levels).

On the other hand, an hourly close above 1.0270 invalidates the further drop for a minor corrective bounce towards the next resistance at 1.0350/1.0400.

GBP/USD – Elements have turned bearish

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Short-term downside momentum has resurfaced as indicated by the hourly RSI oscillator that retreated from a key corresponding resistance at the 60% level after a challenge on it.

Flip from a neutral stance to a bearish bias below 1.2200 key short-term pivotal resistance for potential drop towards the 1.1850 support in the first step. However, a clearance with an hourly close above 1.2200 invalidates the bearish scenario for a corrective squeeze up towards the next resistance at 1.2410/2460 (also the 17 June 2022 minor swing high).

USD/JPY – Maintain bullish bias above 134.80 key support

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Since our last report dated on 5 July 2022, USD/JPY has traded sideways above the 134.80 key short-term pivotal support within a bearish reversal “Ascending Wedge” configuration.

No change in our view; potential short-term residual up move for USD/JPY as the steep and swift rally from 5 March 2022 low is coming close to an exhaustion point to inflict a potential pause of the major uptrend phase in place since 5 January 2021 low where a multi-week corrective decline sequence may materialise next.

Continue to watch the 134.80 key short-term pivotal support for a potential push up towards 137.20/50 resistance (upper limit of the “Ascending Wedge” & a cluster of Fibonacci extension levels).

On the other hand, a break with an hourly close below 134.80 kickstarts a multi-week corrective decline scenario for a drop towards the next support at 133.60 in the first step.

AUD/USD – Turn neutral due to broad based USD strength

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No conviction to maintain the bullish bias as per highlighted in our previous report dated on 5 July even though AUD/USD is still trading above earlier highlighted 0.6760 key short-term pivotal support.

Given the broad-based USD strength against the major currencies seen in the last three days, the odds of a short-term corrective bounce scenario for AUD/USD have reduced.

Hence, prefer to turn neutral now between 0.6890 and 0.6760. Only a clearance with an hourly close above 0.6890 revives the corrective bounce towards 0.6990 with a maximum limit at 0.7065. On the flipside, a break with an hourly close below 0.6760 ignites another leg of impulsive down move sequence towards the 0.6670/6640 support (also a cluster of Fibonacci extension levels) in the first step. 

Time stamped: 8 July 2022 at 2.15pm SG

Source: CMC Markets

 

 

 


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