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Charts to Start the Week - EUR/AUD, USD/JPY in Focus

Charts to Start the Week - EUR/AUD, USD/JPY in Focus

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- USDJPY honing in on 161.8% extension of triangle breakout.

- EURAUD looks to retest breakout level before move higher.

- See the DailyFX economic calendar for Monday, June 8, 2015.

There are appealing setups in both EUR-crosses and USD-pairs, even if EURUSD is a bit messy right now. EURUSD is currently being tugged back and forth by rising German yields (the unwind of the ECB's QE trade thanks in part to better inflation data) and improved US economic data (namely the May US labor market report).

As the market seeks resolution for direction in EURUSD, which seems destined for heightened volatility in the short-term, attention and capital may be better fixated in other directions and instruments (and, from a personal trading standpoint, I much prefer to trade trending/momentum markets rather than rangebound choppiness anyway). EURAUD, EURJPY, and USDJPY all immediately come to mind, as they fit that basic criteria - markets that are trending/momentum.

USDJPY's ride along its daily 8-EMA continues, and it's possible before we see one last thrust in the pair up towards ¥126.30, the 161.8% extension of the triangle that saw a breakout on May 19. At that point, with the spot price so far extended from its mean reverting levels and a significant fibonacci level having been achieved, the risk-to-reward of being long USDJPY might no longer be appropriate.

The EUR-crosses mentioned above are far more interesting, as they showed a fair deal of resiliency at the end of last week even as EURUSD fell off thanks to Friday's May US Nonfarm Payrolls report. EURJPY may be working on an inverted head & shoulders or cup and handle pattern; in either case, price has been consolidating after breaking through resistance dating back to January. EURAUD is more compelling, having just recently established a base in a falling wedge breakout.

See the above video for technical considerations in EURUSD, EURAUD, EURJPY, USDJPY, AUDUSD, and the USDOLLAR Index.

Read more: EUR/USD at Risk as Significant Short Covering Has Passed

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.