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Euro / US Dollar
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| Joel: Despite attempts to rally in recent day, the market has mostly been well offered since failing to rally to fresh 2009 highs in the previous week beyond 1.5065. We now look for the market to carve a double top with a break back below 1.4625 needed to confirm the bearish formation. The 50-Day SMA by 1.4805 is critical, with a close below this medium-term moving average to likely suggest a material shift in the construct of the market. Only back above 1.5065 ultimately negates and gives reason for pause. POSITION: SHORT @1.4970 FOR AN OPEN OBJECTIVE; REVISED STOP 1.4970. |
| Jamie: The bearish count remains valid as the EURUSD is quietly making lower highs and lower lows. Still, we need a break below 1.4625 in order to eliminate bullish alternate counts. Until then, it is certainly possible that consolidation since 1.5066 is simply a triangle. Potential short term resistance is at 1.4870/85 and structure is bearish below 1.4935. |
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British Pound / US Dollar
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| Joel: Despite the latest surge, the market has been well confined to a prominent range that has defined price action for the past several months. As such, any rallies towards 1.7000 should be used as a formidable opportunity to build on short positions, with only a break and close back above 1.7045 to negate outlook and give reason for pause. Next support comes in by 1.6515, with a break to accelerate declines and reaffirm bearish outlook. |
| Jamie: The GBPUSD has been in a consolidation mode since late May. Price has traded in a wide 1300 pip range since then in what could be corrective (continuation of strength) or distributive (reversal of strength). Structurally, movements since 1.7050 appear corrective (3 waves), which would suggest a triangle, flat, or leading diagonal (all patterns favor lower prices from here). A short term support line has been broken and gives scope to further losses. A break below 1.6250 is expected with 1.6880 remaining intact. Focus then shifts to 1.6130 and 1.6030. 1.6550/80, 1.6600 and 1.6680 are short term resistance levels. |
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Australian Dollar / US Dollar
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| Joel: Remains very well bid on any form of a dip with the underlying structure still grossly constructive. The market has most recently broken to fresh 2009 highs by 0.9405 ahead of the latest minor setbacks. However, given the overbought weekly studies, we are not entirely convinced of the current recovery rally and would not rule out the possibility for a major double top formation with the market seen stalling now above 0.9400 and rolling back over through neckline support at 0.8905. The daily RSI has failed to confirm the latest bout of strength and we look for the latest break back below 0.9210 to help reaffirm our outlook. POSITION: SHORT @0.9280 FOR AN OPEN OBJECTIVE; REVISED STOP 0.9280. |
| Jamie: Having exceeded and reversed from above .9334, the minimum expectations for wave .v of v of C has been met…respect the potential for a double top (which would be confirmed on a drop below .8900), especially when considering divergent momentum readings and patterns of other USD crosses. There are 5 waves down from .9410, confirming that a top is in place. Sell rallies. Resistance is from .9190 to .9275 with .9220/30 possibly possessing the most supply. |
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New Zealand Dollar / US Dollar
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| Joel: The latest rally out from 0.7080 is now classed as corrective rather than a bullish continuation, with weekly studies already rolling over from overbought and warning of a major shift in the structure. While the recent failure to close below the critical 50-Day SMA (0.7310) is concerning, we anticipate that the market will soon manage a close below the medium-term SMA. Look for a lower top to now carve out below 0.7635, ideally by Monday’s 0.7525 high, ahead of a fresh drop to be confirmed on a break back below 0.7080. Initial support comes in by 0.7255. Ultimately, only a close back above 0.7525 gives reason for concern. |
| Jamie: Since the top at .7640, NZDUSD decline are impulsive (5 waves) and rallies are corrective (3 waves). The larger trend has turned down and the objective is below .7080 (and probably much lower). Risk can be moved to .7530. |
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US Dollar / Japanese Yen
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| Joel: Remains locked in an intense downtrend, with the latest setbacks below 89.00 to likely open a direct retest of the recent trend lows by 88.00 over the coming sessions. Below 88.00 will then unlock the critical matched trend lows from late 2008 and early 2009 by 87.15. A lower top is now sought out by 90.60 with only a break back above this level to delay bearish structure. |
Jamie: The bigger picture pattern is constructive. Either a triangle or complex correction is underway since December 2008. The next leg should be up towards 101.50 (maybe even above). One possibility from 88.00 is a leading diagonal as either larger wave A or 1 from 88 to 92.35. A larger B or 2nd wave may be complete as a double zigzag from 92.35. The more time that this correction consumes, the less confidence I have in the count. Bulls need to see an impulsive rally from current levels.
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US Dollar / Canadian Dollar
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| Joel: The recent declines are classed as corrective with our underlying bias still grossly constructive. The market has now triggered a double bottom after basing out by 1.0415 in the previous week, with the break back above 1.0580 on Tuesday confirming and likely to accelerate gains towards the mid-1.0700’s over the coming sessions, above which exposes more medium-term resistance at 1.0870. Only back under 1.0415 negates. |
| Jamie: A double zigzag decline from 1.3068 is considered complete and the pair has carved out a solid 1-2 base (5 up and 3 down) since the October low. A wave ii low is in place at 1.0415, which places the pair in wave iii higher targeting a break of 1.0875 followed by Fibonacci extensions of 1.1090 and 1.1500. Price ideally remains above 1.0610 but a drop under would expose support at 1.0590 and 1.0545. |
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US Dollar / Swiss Franc
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| Joel: We continue to retain a constructive outlook for the pair despite the underlying bearish trend with medium-term studies overextended and warning of a more meaningful corrective rally. While the latest pullback has matched the recent 2009 lows by 1.0030, this does not rule out the potential for a double bottom formation to be confirmed on an eventual break back above 1.0335. Ultimately, only back under 1.0030 would undermine our constructive outlook and put pressure back on downside. |
| Jamie: The USDCHF is in the exact same position as the EURUSD (just as the inverse). The bullish count remains valid against the low (1.0030) (Friday morning spike would be a truncation) but the triangle count is also valid. |
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Euro / Japanese Yen
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Joel: The market is in the process of undergoing some consolidation, with the price confined to the middle of a very well defined multi-week range. We retain no bias at current levels and would recommend watching for a break above 136.00 or back below 131.00 for clearer directional bias. It is worth noting that the price is currently testing the 200-Day SMA. The longer-term SMA has supported since May.
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| Jamie: The EURJPY has traded sideways since April in what could be a triangle. Triangles are typically continuation patterns, which is bullish in this case. However, a complex head and shoulders pattern may also be unfolding. In other words, the consolidation could lead to a larger rounding top and reversal or a continuation of strength from the January low. This analysis is far from eye opening but evidence does not significantly favor one direction over the other at this point (especially with price trading near roughly the center of its multi month range). One interesting observation though – 10 day ATR is the lowest since August 2008, which marked a major top. The point here is that low ATR indicates complacency and fear follows complacency (eventually). A turn towards fear would probably favor a downside break. |
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British Pound / Japanese Yen
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| Joel: The market is in the process of undergoing some consolidation with the price confined to a very well defined multi-day range. We retain no bias at current levels and would recommend watching for a break above 153.20 or back below 145.80 for clearer directional bias. Nevertheless, the underlying structure has been quite bearish and could suggest that a medium-term lower top is in the process of carving out by 153.25 ahead of the next drop through 139.75. However, 145.80 will need to be taken out initially for this scenario to become more of a reality. |
| Jamie: Sticking with the ‘contraction in volatility’ theme, 10 day GBPJPY ATR is at its lowest since July 2008 (and prior to that July 2007). As mentioned before, both times marked periods of complacency and therefore tops in price. Market dynamics are different now as the ‘carry trade’ is not nearly as popular as it was in 2007 and 2008. Still, the Yen is a low yielding funding currency and a turn towards fear would likely facilitate an unwinding of short Yen positions (just not to the degree as in years past). Structurally, a wave iv top may be in place at 163.10. A pop above 153.30 could complete a 3 wave correction from 139.71. That would present a short setup – be on the lookout. |
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Euro / British Pound
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| Joel: Over the past several weeks we had warned that the market would likely drop back to test previous medium-term resistance by 0.8840, and things have now played out this way with the setback extending to 0.8835 ahead of the latest bounce. From here, the risk is for some additional corrective gains back above 0.9100, but ultimately, we look for a resumption of setbacks in favor of an eventual retest by the yearly lows down by 0.8400 over the coming weeks. As such, selling rallies above 0.9100 is now the preferred strategy. |
Jamie: Near term structure remains bearish below .9070 (lower lows and lower highs) but a short term resistance line has been broken and the decline from above .9400 does not look impulsive. It seems probable that price action since the December 2008 high (.9807) is a sideways correction. Movements since then are in 3 waves. A triangle could be underway.
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TRADE LIST *Entry prices for trades that are recommended ‘at market’ are listed as the price at the time of publication
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