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Daily Observations: September 18, 2012

Daily Observations: September 18, 2012

Christopher Vecchio, CFA, Senior Strategist

Current Positions:

- Long AUDUSD from net 1.0467 (1.0525, 1.0455, 1.0421), Stop at 1.0420, Target 1 at 1.0615, Target 2 at 1.0670

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

- Long USDJPY from 77.92 (added), Stop at 77.60, Target 1 at 79.60, Target 2 at 80.60/65

Pending Positions:

- Pending Long USDJPY daily close >80.65

- AUDUSD: The AUDUSD appears to have failed for its breakout on Friday, with an Inverse Hammer/Shooting Star forming on the daily chart at the descending trendline off of the February 2012 and August 2012 highs coming in at 1.0540/50 today. Near-term resistance comes in at 1.0480/85, 1.0550/60, 1.0600/15 (August high) and 1.0630. Should we see a rally up towards 1.0600 again, another failure would mark a Double Top and signal a push for a test of 1.0250/70 (ascending trendline off of the June 1 and September 6 lows) then 1.0200/05 (100-DMA). Support comes in at 1.0425/45 (swing zone on 4-hour chart back to July 19), 1.0410 (mid-August swing lows), 1.0325 (200-DMA), and 1.0250/70. Bias: bullish above 1.0250/70.

- EURUSD: The EURUSD has pulled back from its 76.4% Fibonacci retracement on the February 2012 high to the July 2012 low at 1.3145, closing below the key ratio for the second consecutive day on Monday. With the daily RSI very overbought, it appears a correction may be underway. Near-term resistance lies at 1.3145, 1.3165/70, 1.3240, 1.3265/85, and 1.3360. It is possible that a long-term bottom is now in at the 1.2040/45 low set in late-July. Interim support comes in at 1.3020/25 (5-EMA), 1.2930/35, and 1.2820/30 (200-DMA, late-April swing high). Bias: bullish above 1.3020/25.

- GBPUSD: Nothing has changed with the pair putting in an Inside Day; though we caution that an Inside Day alongside a significantly overbought daily RSI reading could signal a turning point. “The key 1.6120/40 level cracked with ease on Friday and our bias looks longer for the foreseeable future. The weekly close above said level opens the door for a move towards 1.6400 in the coming days. 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 1.5930/40, near-term support comes in at 1.5860/75 (ascending trendline off of August 2 and August 31 lows), 1.5770/85 (late-August swing lows), and 1.5700.” Bias: bullish above 1.6140.

- USDJPY: The USDJPY has steadied today as it remains supported by a relatively elevated US 10-year Treasury Note (2s10s spread remains wider post-FOMC). The June 1 swing low at 77.65/70 was broken on Thursday leading to a washout in new lows below 77.30, something repeatedly noted over the past weeks as a potential occurrence. A close above 78.60 leaves open the possibility for 79.10/30 (100-DMA, 200-DMA, descending trendline off of the April 20 and June 25 highs). A close below 78.60 has interim support at 78.10/20, 77.90, 77.65/70 (June 1 low), 77.45/50, and 77.10/15 (September low). Bias: bullish above 78.10/20.

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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