EURO - DOLLAR: Under these resistances, a consolidation is likely

Below 1.15 USD the major trend remains bearish 1.12 USD and then 1.11 USD are in the line of sight. The surpassing of 1.15 USD would cancel this anticipation and favor a recovery toward 1.15 USD.

INDICATOR
Opinion Short Term
Negative
Resistance 1 £1.15
Support 1 £1.12
Opinion Medium Term
Bearish
Resistance 2 £1.15
Support 2 £1.11
STATISTICS
Last Price 1.13 USD
MACD 0
MA 20 1.14
MA 50 1.14
Stochastics 13.51
RSI 37.13

SUMMARY

The MACD is negative and lower than its signal line. This configuration is damaging the cross perspectives. The RSI is not yet indicating an oversold situation, so a continuation of the fall is technically possible. At less than 20, the Stochastics are extermely low. The volumes traded are more than the average volumes over the last 10 days.

MOVEMENTS AND LEVELS

The cross is oriented to the downside. It is under its 50-day moving average located at 1.14. The 20-day moving average (lower than the 50-day moving average) is maintaining the prices under medium-term sell pressure. Our first support is at 1.12 USD and the next is at 1.11 USD; the resistances, located at 1.15 USD and at 1.15 USD must be exceeded for the trend to undergo a reversal.


Moving Averages (MA20 & MA50)

Moving averages are calculated by the addition of the closing price of the N last sessions divided by the number of sessions considered. They can be used to track daily, weekly, or monthly patterns. DayGraph uses 20 and 50 periods. Moving averages provide a good indication of the whole trend affecting an underlying. Reversing situations can be found on the upside and on the downside. Moving averages can constitute supports or resistances by themselves for spot prices.

MACD

The MACD (Moving Average Convergence / Divergence) reflects a difference between moving averages and thus makes reference to the ascendancy or not of the mid-term relatively to the short term. DayGraph uses 26 and 12 periods. Moreover, so as to estimate the variations of the trends, an auxiliary indicator (named signal line) is formed. It is based on an exponential average of the MACD on 9 periods. The advantage of this indicator is triple:

  • absolute position of the MACD
  • relative position to its signal line
  • existence of divergences.

RSI

RSI is the most popular speed indicator because it is one of the most relevant ones in localizing overbought and oversold periods depending on the investment horizon. A bounded indicator, the RSI calculates the relationship between the average of ups and downs for the days of the period under consideration with a mathematical approximation. Day traders use a 5-minute RSI, monthly market investors use a 5 or 9-day RSI, portfolio managers monitor the RSI for 14 days and some investment funds would even go to the RSI 34. The longer the RSI is, the less the overbought and oversold thresholds are distanced (20/80 for a 9-day RSI, 30/70 for an RSI 14). It also gives excellent divergence signals. DayGraph uses a 14-day RSI.

Stochastic

With a design close to that of the RSI, the stochastic indicators use a greater number of variables (highs and lows for the day). The slow %D used smoothes the variations of the base indicator that is too volatile. Paradoxically, the false signals are often more numerous than for the RSI. The main contribution compared to the latter is still notable though: when the stochastics remain stuck in an overbought area (above 75%) for several weeks, it is recommended not to follow the overbought indications of all the other indicators.

Bollinger bands

Bollinger bands are trading bands (upper and lower boundary lines) plotted at 2 standard deviation levels above and below a moving average. DayGraph uses 20 periods. Bollinger bands offer a measure of volatility and relative low and high, the bands widen during volatile markets and narrow when volatility decreases. They can provide strong thresholds: resistance for the upper band and support for the lower band.

Support

Level that has a high probability of halting a fall on the time horizon considered, and consequently, possibly to cause a bounce.

Resistance

Level that has a high probability of halting a rally on the time horizon considered, and consequently, to cause a correction.

This Technical Analysis is issued by Market Dynamics LTD authorised by the Financial Conduct Authority. The views expressed are those of Market Dynamics LTD only and not of Société Générale. Market Dynamics LTD is a French independent research bureau specialising in technical analysis. Market Dynamics LTD analysts are FTA or IFTA qualified. Market Dynamics LTD provides different retail investors, private banking managers, prop traders, and asset managers with commentaries, anticipations, and strategies according to their specific needs. All reasonable care has been taken by Société Générale; authorized by Autorité de Contrôle Prudentiel et de Resolution (the French Prudential Control and Resolution Authority) and subject to limited regulation by the Financial Conduct Authority in the UK; to ensure that all statements of fact and opinion contained in the Materials are fair and accurate in all material respects. Société Générale makes any representation or warranty regarding the accuracy of any information and is not responsible for errors of any kind. Any reproduction, disclosure or dissemination of the Materials is prohibited. The Materials are intended to give general information only and under no circumstances should they, in whole or in part, be considered or construed as an offer to enter into a transaction.

Technical analysis is issued by Market Dynamics Ltd, an independent research company authorised by the Financial Conduct Authority. The views expressed are not those of Societe Generale.