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Daily Observations: September 25, 2012

Daily Observations: September 25, 2012

Christopher Vecchio, CFA, Senior Strategist

Current Positions:

- Long AUDUSD from net 1.0454 (1.0525, 1.0455, 1.0421, 1.0435), Stop at daily close <1.0395, Target 1 at 1.0615, Target 2 at 1.0670, Target 3 at 1.0800

- Long EURCHF from 1.2018, Stop at 1.1990, Target 1 at 1.2500, Target 2 at 1.2750

Pending Positions:

- Pending Long USDJPY daily close >80.65

- AUDUSD: The descending trendline off of the August 9 and August 23 highs has kept the pair supported the past four-days, and it remains that the 20-EMA overlapping at 1.0420/25, a base could be building for the next move higher. As long as this level holds today – despite the intraday spike lower – we continue to look higher. Near-term resistance comes in at 1.0425 (20-EMA, mid-August swing lows), 1.0480/85, 1.0550/60, and 1.0615/30 (August high). Interim support comes in at 1.0380/85 (descending trendline off of the August 9 and August 23 highs, 50-EMA), 1.0365 (last week’s low), 1.0335/40 (200-DMA), and 1.0270/80. Bias: bullish above 1.0250/70.

- EURUSD: Nothing has changed: “Price has traded below soft support at the 61.8% Fibo retracement (February 2012 high to the July 2012 low) at 1.2934 today, breaking to fresh lows unseen in the Fed’s QE3 era. The daily RSI has exited overbought territory and is trending lower, though the 4-hour RSI is close to oversold again with some significant diverging (given the relationship between price and RSI the last time the 4-hour RSI was at this level). Interim resistance lies at 1.2930/35, 1.2950/55 (5-EMA), 1.3145, 1.3165/70, and 1.3240. Near-term support comes in at 1.2820/30 (200-DMA, late-April swing high) and 1.2825/30 (20-EMA, 200-DMA). Bias: bullish above 1.2935.

- GBPUSD: Nothing has changed: “The pair has pulled back to the key 5-EMA at 1.6215 (for an indication of short-term strength) and as noted last Thursday, “the gap between the 5-EMA and the 20-DMA has started to turn lower, suggesting a compression of price is occurring. If the 5-EMA holds, we’re looking for further rallies; if not, support is close by.” This has proven to be the case the past few days, though a break of the 5-EMA is threatening today. The key 1.6120/40 level, broken on Friday, remains our guide for bullish/bearish price action. As long as the GBPUSD closes above said level this week, the door is open for a move towards 1.6400 by the end of the month. The former April swing highs at 1.6260 (by close), 1.6300 (by high) are in focus, now that the descending trendline off of the April 2011 and August 2011 highs broke last week. Below 1.6120/40 support comes in at 1.6030/35 (20-DMA), 1.5970 (ascending trendline off of August 2 and August 31 lows, former channel resistance off of June 20 and August 23 highs), and 1.5770/85 (late-August swing lows).” Bias: bullish above 1.6140.

- USDJPY: The USDJPY continues to move lower off of the pullback at trendline resistance last week, spurred on by a general feeling of disappointment on the BoJ’s newest stimulus measures has created the ideal sell-off situation. Now that price is below 77.90, 77.65/70 (June 1 low), 77.45/50, and 77.10/15 (September low) are in focus. A close above 77.90 leaves open the possibility for a rebound to 78.10/20, 78.60 and 79.10/30 (100-DMA, 200-DMA, descending trendline off of the April 20 and June 25 highs). Bias: bearish.

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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