Daily Observations: August 14, 2012
- Short AUDNZD from 1.3060, Stop at 1.3080, Target 1 at 1.2850
- Long EURCHF from 1.2018, Stop at 1.1990, Target 1 at 1.2500, Target 2 at 1.2750
- Short EURGBP from 0.7942, Stop at 0.7942, Target 1 at 0.7750
- Long USDJPY from 78.72, Stop at 77.60, Target 1 at 79.40, Target 2 at 80.60
- Pending Short AUDUSD 1.0535/45
- Pending Long USDJPY daily close >80.65
- Pending Long EURUSD daily close >1.2400/05
- Pending Short EURUSD daily close <1.2200/20
- AUDNZD: Last Tuesday I wrote: “The pair has moved higher thus far today, after back-to-back Inverted Hammers after a decline, signaling a potential reversal over the coming days; this could negatively impact the short taken.” Indeed, a move higher as transpired before Target 1 was hit; we nonetheless remain short as we view this as merely a pause lower; rallies into 1.3005 should be sold. As per the original trade plan, on a test of 1.2850, I will take 1/2 profit and then resell rallies back into 1.2920/30. With my Stop at breakeven (1.3060), the current position is insulated from losses. Given the divergence between the AUD and the NZD recently, I’m looking to sell further rallies in this pair. Bias: bearish.
- AUDUSD: Last week I wrote “the pair’s exhaustion above 1.0600 (failure to see a daily close above said level) has stoked a pullback, and with a fundamental catalyst (Chinese worries), near-term price action is biased lower.” Prices continue to consolidate, and it very much appears that a Top is being formed on the 4-hour charts. Near-term resistance comes in at 1.0535/45 (former swing highs), 1.0580, 1.0600/15 and 1.0630. Daily support comes in at 1.0480/1.0500 (last week’s low), 1.0435/45, and 1.0380/85. Bias: bearish.
- EURUSD: Yesterday I wrote “more sideways price action in the EURUSD as the 20-DMA provided support today; though the rally off of the July 24 low appears to be corrective in nature, with three waves evident from the bottom (A-B-C correction). This suggests that further downside is likely; in our opinion, this translates to one more new low near the 2010 low of 1.1875 before the start of the next major bull leg. A drop towards 1.1695-1.1875 remains likely by mid-September. Near-term resistance comes in at 1.2310/30, 1.2400/05, and 1.2440/45. Daily support comes in at 1.2200/20 and 1.2155/70. The Inverse Head & Shoulders (Head at 1.2040/45, Neckline at 1.2400/05, Measured Move 1.2750/60) remains a potential outcome.” Bias: neutral.
- GBPUSD: Last week I wrote “the muddle sideways continues, leaving little changed of our outlook for the GBPUSD. Overall, our outlook unchanged from Monday [August 6]. With the ascending trendline off of the July 12 and July 25 lows holding, our bias is neutral. A daily close below 1.5580/85 (50-DMA) would be bearish, whereas a close below 1.5490/1.5520 would be very bearish (as it would represent a break of the channel as well as last week’s lows).” Our view remains. Near-term resistance is 1.5700/05 (August high), 1.5720 (200-DMA), and 1.5755/70 (July high, 100-DMA). Daily support is 1.5620/25 (10-DMA, 20-DMA) 1.5575/80, 1.5490/1.5520, then 1.5450/60 (July 25 low). Bias: neutral.
- USDJPY: A pattern long in the making, the USDJPY Inverse Head & Shoulder formation that has been in wait-and-see mode remains valid so long as the Head at 77.60/70 holds. Indeed, it has, and after the Fed meeting and the July Nonfarm Payrolls two-weeks ago and the disappointing second quarter Japanese GDP this week, the USDJPY is constructive in the neat-term, fundamentally. Accordingly, with the Head at 77.60/70, this suggests a measured move towards 83.60/70 once initiated. Near-term resistance comes in at 79.15/20 (200-DMA). Price action to remain range bound as long as advances are capped by 80.60/70. On the hourly charts, it appears a Rounded Bottom is forming (yesterday was the highest exchange rate since July 20), and we are thus biased higher for now. Bias: bullish.
--- Written by Christopher Vecchio, Currency Analyst
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