Analyst Picks

Walker England , Forex Trading Instructor

My Picks:  EUR/CAD Trend Retracement
Expertise:  Technical
Average Time Frame of Trades:  1 Day - 1 Week

Target 1:1.5110 (February Low)

Target 2: 1.4731 (100% Fib Extension)

Invalidation: Breakout above 1.5890 (61.8% Fib Retracement)

EUR/CAD Daily Chart

EUR/CAD Retraces to Resistance

(Created using Marketscope 2.0 Charts)

The EUR/CAD has retraced to key resistance after declining as much as much as 995 pips from the 2016 high at 1.6105. Current resistance is found at 1.5723 using a 61.8% Fibonacci retracement that measures the distance between the previously mentioned high and standing February low at 1.5110. If today’s daily bar closes below this value, it opens the market to potentially turn back towards values of support. Potential bearish targets for the EUR/CAD include the current low at 1.5110 and a 100% Fibonacci expansion near 1.4731.

In the event that prices fail to turn lower, traders should continue to monitor the 78.6% retracement value at 1.5890. A move above this point suggests that a longer-term bullish move may be developing for the pair. In this scenario, traders may begin looking for the EUR/CAD to challenge and breakout above the current yearly high.

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Kristian Kerr , Sr. Currency Strategist

My Picks:  Short USD/JPY
Expertise:  Technical, Time Cycles
Average Time Frame of Trades:  Few Days - Few Weeks

In retrospect I probably took profit on half my short position in USD/JPY last week too early. However, I am pretty mechanical on the money management side of trading and I view that “lost profit” as the cost of staying unemotional. Technically the break of last month’s low puts the exchange rate in an obvious precarious position (long -term H&S pattern) that raises the risk of a much more aggressive slide. I am glad I still have half on. The next zone of importance on the downside looks to be 114.55/35 as this marks a nice convergence of the bottom of the 1-year standard deviation channel, the 9th square root relationship of the 2015 high and the 127% extension of the late January advance. An oversold bounce from around there would not surprise, while a break below would likely confirm that a more significant decline is indeed underway.

Short USD/JPY from around 121.50. Took profit on ½ of original position near 119.38. Lowered stop on remaining position from cost to 117.60.

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Jeremy Wagner , Head Forex Trading Instructor

My Picks:  Long EUR/USD
Expertise:  Elliott Wave, Technical Analysis
Average Time Frame of Trades:  2 Days – 2 Weeks

The EUR/USD is pressing a resistance level that is critical from an Elliott Wave technical analysis perspective.

We’ve written about several times through December 2015 how the September 3, 2015 low of 1.1087 is critical to the medium term outlook for the pair. A break above 1.1087 essentially eliminates the immediate bearish outlooks and increases the probability of a push to 1.14-1.17.

As a result, we will look to initiate a long position on a break above 1.1090 with an ultimate target near the August 2015 high near 1.17.

Market Interpretation

Market Condition: Breakout

Bias: Long EUR/USD

Entry: 1.1090

Stop Loss: 1.0800 (-290 pips)

First Target: 1.1400 (+310 pips)

Second Target: 1.1720 (+630 pips)

EUR/USD Tests Key Resistance 1.1087

In the article below, a break above 1.1087 eliminates scenario #1 and leaves scenarios #2 & #3 still viable. The preferred count, scenario number 3 is show above and suggests we are in a ‘C’ wave higher that likely retests 1.1720.

FXCM’s Speculative Sentiment Index (SSI) is favoring this move as well as we’ve seen the sentiment reading drop like a rock from -1.4 to -2.2. Price tends to move opposite of SSI so with SSI dropping, look for price to continue higher.

Watch the live SSI feed near this 1.1087 critical level. If SSI continues to drop on a break higher, that increases the probability of scenario #3 in the December 11, 2015 post below.

Suggested Reading: Buy or Sell – EUR/USD Prepares for FOMC Meeting

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Surprised that the EURUSD might increase? Read the Q1 2016 EUR Forecast for a description of why a period of range might soon come to an end. [Free registration required]

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Tyler Yell, CMT , Forex Trading Instructor

My Picks:  Bearish EUR/USD As Market Refuses to Push Through 1.1000 So Far
Expertise:  Elliott Wave, Technical Analysis, Intermarket Analysis
Average Time Frame of Trades:  2 Weeks - 3 Weeks

Interested In our Analyst’s Longer-Term Euro & Dollar Outlook, be sure to sign up for our free guides here.

Point to Establish Short Exposure: Close below 1.0775, Due to Break of Support

Spot: 1.0875

Target 1: 1.0698 Weekly S1 Support

Target 2: 1.0567 Weekly S2 Support

Invalidation Level: Close above 1.0983 (YTD High)

Fundamental & Technical Focus:

The market seems unsure about EUR at best. On the bright side, the Bears appear to have turned their attention to the Japanese Yen after Kuroda introduced a negative interest rates strategy. Other brave (or foolish) traders are calling the bluff of the People’s Bank of China in believing that the Yuan is set for a drastic call, so they’re setting their attention on USDCNH. However, do not forget about the EUR and its downside, especially ahead of Non-Farm Payrolls this Friday.

A weaker Yuan & weaker Yen make the Eurozone less attractive from an exporting point of view because, on a relative basis, the EU’s neighbor’s goods just went on sale. Given the desire that the ECB, led by Mario Draghi to communicate their confidence to the market that they can hit their growth & inflation forecasts, we could see increasing bets on EUR bearishness as we get closer to the early March meeting. The FX market tends to move more drastically on expectations than actual news (see EUR/USD on December 3, 2015, for more details), so a breakdown in EUR/USD could be worth chasing well ahead of the ECB meeting.

Right now, our Trader Sentiment Indicator SSI is providing a neutral bias. This reading on SSI sits between -1.5 & +1.5, which shows us that positioning is not extreme, and the market is rather open to influence from external events. The ratio of long to short positions in the EUR/USD stands at -1.244, as 44% of traders are long. We would want to see a move to and through +1.5 on SSI to have the wind of SSI at our back. However, as managers of risk first, and profits second, be on the watch for a price move above 1.0966, and SSI is moving to -1.5 or deeper. Such a development would put our attention on further gains.

Chart:

EUR/USD: Draghi Likely To React to China & Japan FX Actions

You will notice that the chart above shows a condensing of price action. Markets have often found the greatest periods of volatility following periods of decreasing volatilities. Since mid-December, when the price reached 1.1058, we have seen a concession of lower highs and higher lows. Because trend continuation if favored over trend reversals, even though a reversal has to happen sometimes, a break below ‘.d.' Wave support would likely validate such a trend resumption move.

Lastly, it is worth noting that in the sideways price action that momentum looks to be overheating. In a sideways market, an oversold RSI (5) is often an early warning sign that such moves are unsustainable. Even though EUR is sitting near the highs of the session as this is being written, if price is unable to take out the zone of resistance, and subsequently, price breaks below 1.0807, we can be confident that the trend is likely to resume. Such a development would favor a move toward new lows looks like the favorable and more probable next big move in EUR/USD.

Key Technical Levels:

EUR/USD – Sideways Consolidation May Soon Expire & Downside May Resume

Second Resistance: 1.09834 YTD High

First Resistance: 1.0967/68 100-DMA, Jan. 28

Spot: 1.0888

First support: 1.0810 Jan. 29 Low

Second support: 1.0776 Jan. 21 Low

Trade Setup:

I am looking to sell EUR/USD on a confirmed break of support on the view that the large price consolidation sideways is finished, and the downtrend will continue. Given the recent new highs in US DOLLAR, I will look for momentum to resume lower toward new lows on anticipated Draghi action. A daily close below 1.07764, the January 21 low would help validate the trade setup, and our attention would be turned to the two targets mentioned above. The protective stop will be at 1.0966, right at the recent high with a preference to move the stop to break-even when prices move in the intended direction lower. This target aligns with a favorable risk: reward ratio that our Traits of Successful Traders report found to be one of the best things a trader can do to ensure long-term sustainability in your trading.

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Jamie Saettele, CMT , Sr. Technical Strategist

My Picks:  Long AUD/NZD
Expertise:  Technical
Average Time Frame of Trades:  Swing (several days +)

On January 19th, the following was published at SB Trade Desk. A huge bottoming pattern may be forming but this is a broad range for the time being and resistance could come in near 1.0870/80 (trendline from Sep and November highs and short term upper parallel). Watch for support near 1.0720.

A long was issued at 1.0730. Half of the trade was exited on today's move. The next few days are key in determining whether or not this breakout is 'real' but the next big level on the upside looks like 1.12 or so.

For more trades and analysis, visit SB Trade Desk.

Also check out the DailyFX Trading Guides and forecasts.

created  by Jamie Saettele, CMT

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