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Daily Observations: July 5, 2012

Daily Observations: July 5, 2012

Christopher Vecchio, CFA, Senior Strategist

The Euro has taken a beating today and it looks like the Symmetrical Triangle is going to break to the downside. However, with the move below 1.2400 in place, I’ve closed out the remaining portion of my EURUSD short from 1.2730 at 1.2400 for +330-pips. In sum, I took 1/2 profit at 1.2600 from net 1.2655 for +55-pips; 1/4 profit at 1.2550 from net 1.2730 for +180-pips; and 1/4 profit at 1.2400 from net 1.2730 for +330-pips. I will be looking to resell the EURUSD on bounces; and I remain building in a short AUDUSD position.

- AUDUSD: The AUDUSD has put in a lower high thus far today. The two consecutive closes above the 100-DMA give scope for a move higher towards 1.0365/85, but with hourly charts indicating a Rounding Top, a pullback may be warranted first. Near-term support comes in at 1.0250/60 (200-DMA, 100-DMA) and then the weekly low at 1.0210/15. A move below would signal an intraweek reversal and signal further losses.

- EURUSD: The EURUSD’s consolidation and failure to set fresh highs in the wake of the Euro-zone Summit play into the Symmetrical Triangle on the daily chart. For now, we are looking for a pullback towards 1.2440/80 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, 1.2440, and a move lower points to 1.2405/20. A close below 1.2405/20 on the 4-hour chart implies a move towards 1.2285/90 (yearly low).

- GBPUSD: The GBPUSD’s failure to achieve new highs in the post-Euro-zone Summit world draws into question the underlying strength of the Sterling, and the suggestion is that diverging monetary policies between the Bank of England and the Federal Reserve (with the Bank of England increasingly dovish and the Federal Reserve in wait-and-see mode) are hurting the pair. Fresh weekly lows were set today at 1.5566, suggesting further losses ahead. Resistance comes in at 1.5600/05 (20-DMA) then the weekly high at 1.5720/25. Near-term support lies at 1.5480/90 (last week’s low, Bollinger Band).

- 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 78.90/95 (200-DMA). Price action to remain range bound as long as advances are capped by 80.60/70.

Any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, send an e-mail with subject line "Distribution List" to cvecchio@dailyfx.com

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