Daily Observations: July 3, 2012
Advances by the Australian Dollar and the Euro have remained capped today (again), with significant near-term resistance just overhead as well as the fundamental overhand of the Euro-zone Summit weighing on risk-appetite. I’m expecting some consolidation in the days ahead of the crucial Bank of England and European Central Bank rate decisions, and of course, the always market moving Nonfarm Payrolls report.
- AUDUSD: While our fundamental outlook for the AUDUSD is bearish long-term, we respect the recent rally off of the June 1 low and identify the move as impulsive (we can identify 5 waves up from the June 1 low). With that said, this advance thus appears to be in its final stages, and the confluence of resistance in close proximity to current price should hinder gains. 1.0265/90 (Bollinger Bank, 100-DMA) should attract sellers as should the budding RSI divergence on the 4-hour charts. Price remains supported above 1.0125.
- EURUSD: The EURUSD’s consolidation and failure to set fresh highs in the wake of the Euro-zone Summit play into the budding Symmetrical Triangle on the daily chart. For now, we are looking for a pullback towards 1.2480 before the direction of the triangle is determined. Resistance to the upside comes in at 1.2700/15 (Bollinger Band, 50-DMA), and a break above suggests a test of 1.2745/50 (June high) then 1.2820. Triangle support comes in at 1.2480, and a move lower points to 1.2405/20.
- GBPUSD: The GBPUSD remains constructive in the near-term but advances look to be capped by the confluence of key moving averages around 1.5750. Furthermore, a retest of 1.5775/80 when considered in context of the moving averages in the area should see some sellers return to the market. Advances should be capped by 1.5745/50 (200-DMA) and then 1.5775/85 (June high, 50-DMA). Support comes in at 1.5595/1.5600 then 1.5480/1.5500.
- USDJPY: The USDJPY is working on an Inverted Head & Shoulders pattern off of the June 1 low, with the neckline coming in at 80.60/70. Only a daily close above this level will signal the commencement of this pattern. With the Head at 77.60/70, this suggests a measured move towards 83.60/70 once initiated. Near-term support comes in at 78.85/90 (200-DMA). Price action to remain range bound as long as advances are capped by 80.60/70.
--- Written by Christopher Vecchio, Currency Analyst
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