Weekly Technical Market Insight: 18th – 22nd October 2021 – FX Empire


(Italics: previous analysis)

Weekly timeframe:

While late September probed the lower wall of supply-turned demand at $1.3629-1.3456, the first half of October has entertained a bullish atmosphere, with last week’s session climbing 1.0 percent.

While we cannot rule out the possibility of further upside, technical elements suggest sellers could eventually strengthen their grip. Not only did price drop beneath $1.3629-1.3456, the unit also closed below a double-top pattern’s ($1.4241) neckline at $1.3669.

The double-top pattern’s profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the breakout point—sits around $1.3093. Conservative pattern sellers are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Daily timeframe:

Ultimately, sterling has been bid on bullish comments regarding interest rates from the Bank of England (BoE). Nevertheless, helping to discourage additional buying in this market is trendline resistance, taken from the high $1.4250, and the 200-day simple moving average at $1.3841. The combination of the two offers powerful confluence.

The relative strength index (RSI) secured position above the 50.00 centreline last week, zeroing in on resistance at 58.70. Removing the latter this week places overbought space in the firing range.

H4 timeframe:

Friday’s 0.5 percent advance pulled GBP/USD to within range of channel resistance, extended from the high $1.3640, and Fibonacci resistance between $1.3807 and $1.3785. What’s also technically interesting is the daily timeframe’s trendline resistance aligns closely with H4 structure.

Any bearish showing this week has support in view at $1.3657 and channel support, taken from the low $1.3415.

H1 timeframe:

US hours Friday connected with resistance at $1.3764 and mildly pared gains. North of noted resistance tips the balance towards $1.38, which joins with a 200% Fibonacci extension and nearby 100% Fibonacci projection at $1.3813.

Assuming sellers maintain position, $1.37 represents potential support, a level blending closely with a 38.2% Fibonacci retracement at $1.3695. And an extension beyond here shines light on support from $1.3657 and neighbouring 61.8% Fibonacci retracement at $1.3647.

Observed Technical Levels:

Long term:

Although we have seen buyers enter the frame this month from supply-turned demand at $1.3629-1.3456 on the weekly scale, traders are urged to monitor the daily timeframe’s trendline resistance this week, taken from the high $1.4250, as well as the 200-day simple moving average at $1.3841. This combination suggests strong confluence, and therefore possible resistance.

Short term:

Fibonacci resistance between $1.3807 and $1.3785 on the H4 timeframe is likely on the watchlists for many price action traders this week. Not only does the area bring channel resistance to the table, the H4 zone dovetails closely with daily trendline resistance, in addition to the H1 timeframe’s resistance formed between $1.3813 and $1.38.

Therefore, in light of the above analysis, a break of H1 resistance at $1.3764 to test $1.38 could come to fruition, where, according to chart studies on the H4 and H1, sellers will be closely watching resistance between $1.3813 and $1.3785.

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