Weekly Technical Market Insight: Week Ending 15th July 2022

AUD/USD:

Long term, the Australian dollar continues to reflect a bearish atmosphere against the US dollar, veering lower since $0.8007 (22^nd Feb high [2021]). As I noted in previous research, the monthly timeframe has portrayed a downtrend since August 2011, indicating the rally from the pandemic low of $0.5506 (March 2020) to a high of $0.8007 (February 2021) on the weekly timeframe is likely viewed as a deep pullback among chartists. Downside from the 2021 February top (an early primary bear trend), therefore, is potentially seen as a move to explore lower over the coming weeks.

Weekly support made its way into the spotlight in recent weeks, between $0.6632 and $0.6764 (composed of a 100% Fibonacci projection, a price support, and a 50% retracement). Whether this is sufficient to tempt a bullish showing is difficult to estimate at this point. Not only because of the clear downtrend, but also due to the US dollar’s relentless advance. Consequently, the aforementioned support is likely to remain on the radar for many technicians.

Also swinging the technical pendulum in favour of sellers in recent weeks, of course, is price action on the daily timeframe voyaging south of Quasimodo support from $0.6901. Overrunning this level—to now serve as potential resistance—sponsors a move to support at $0.6678 (rests within weekly support). Adding to this week’s bearish prospect, the chart’s relative strength index (RSI) continues to discover space under its 50.00 centreline (negative momentum).

Daily resistance from $0.6901 forms the upper limit of H4 supply at $0.6901-0.6862, which happens to intersect with H4 trendline resistance, extended from the high $0.7283. H4 support at $0.6772 has served well in recent trading, withstanding several downside attempts. Ultimately, should the current supply zone give way, H4 prime resistance calls for attention at $0.7062-0.7031, implying a daily resistance breach.

The $0.6784-0.6798 prime support, strategically placed under $0.68 on the H1 timeframe, welcomed a whipsaw beneath the psychological figure on Friday. An 8-pip run beneath $0.68 likely tripped stops and delivered adequate liquidity for informed buyers to fade downside momentum fuelled by the filled sell-stops.

As you can see, H1 price rallied to a session high of $0.6874 and pitched light on Quasimodo resistance at $0.6889, a level bonding closely with a H1 AB=CD bearish pattern (100% Fibonacci projection at $0.6891), the $0.69 base, a 1.618% Fibonacci extension at $0.6904, and a Quasimodo resistance from $0.6889.

Technical Expectation:

Long term, technical studies show sellers have been in control for most of 2021 and 2022. While weekly price is shaking hands with support between $0.6632 and $0.6764, which could inspire buyers this week, should daily price defend its position below Quasimodo support-turned resistance at $0.6901, this bodes well for a dive into weekly support to target daily support at $0.6678.

Taking the above into consideration, this may drive a bearish setting from around H4 supply from $0.6901-0.6862; in particular, the H1 resistance zone between $0.6904 and $0.6889.