Daily Observations: July 11, 2012
- AUDJPY: It appears that the pair has completed its Wave 4 rally off of the June 1 low at 74.45/50. The formation is neat considering the Wave 4 termination at 82.35/40 fell short of the Wave 1 termination at 82.48/50; this is imperative for the impulsive decline off the March highs. We now look to sell rallies for a test of the 2011 lows at 72.00/05. Near-term support comes in at 79.40/50 (former swing highs and lows) and then 78.35/50. Advances should be capped by 82.35/40; a break above this level signals a reversal and invalidates our bearish setup.
- AUDUSD: The pair settled back below the crucial 1.0250/60 area (100-DMA, 200-DMA) yesterday but is now trading back above said levels as the US Dollar has weakened. Still, with last week’s range broken to the downside, we necessarily look lower. Near-term resistance comes in at 1.0250/60 and 1.0325/30 (monthly high); a break above 1.0325/30 would signal a reversal and point to more gains towards 1.0365/85. Support now comes in at 1.0120/25 (20-DMA), 1.0080 (former intraday swing highs), and 1.0005/10 (50-DMA).
- EURJPY: A Head and Shoulders pattern appears to be in play on the 4-hour charts, and it looks very clean – perhaps my favorite setup right now. With the Head at 101.60/70 and the Neckline at 98.55/65, the measured move is for a test of 95.60; the yearly low comes in at 95.55/60. This is ideal because it suggests a 300-pips move before finding support at the yearly low – this is very clean. With the EUR oversold across many pairs, it’s likely we see some pullback towards the 98.55/65 Neckline; rallies should be used as selling opportunities.
- EURUSD: The pair has started to rebound as expected as short-term oversold conditions have provided the necessity for some relief. The EURUSD rally should be capped in the near-term, with resistance overhead at 1.2285/90, 1.2360/65, 1.2400, and the crucial 1.2440/80 zone (Symmetrical Triangle support). Support comes in 1.2270/75 and 1.2230/35. at Given the measured move and Fibonacci extensions, we are looking for a move towards 1.1695-1.1875 over the next eight-weeks.
- GBPUSD: Oversold technical conditions are being relieved and the pair has started to trade above some near-term resistance at 1.5540/45, originally noted yesterday. More important resistance comes in at 1.5600/05 (20-DMA) then the monthly high at 1.5720/25. Near-term support comes in at 1.5460 then 1.5420/25 (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 78.85/90 (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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