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FX Technical Weekly 07-30

FX Technical Weekly 07-30

2010-07-30 21:05:00
Jamie Saettele, CMT, Sr. Technical Strategist
Share:

EURO / US DOLLAR

Entry

stop

TARGET

FLAT

Levels

R3

1.3265

R2

1.3185

R1

1.3110

S1

1.2975

S2

1.2875

S3

1.2730

Joel: The rally continues with the market accelerating beyond latest barriers by 1.3100 thus far. Daily studies are still residing in overbought territory however, and we would not rule out the likelihood for some form of a material correction over the coming sessions. Look for a break below 1.2975 on Friday to trigger the correction and force a shift in the short-term structure. Next key resistance now comes in by 1.3200.

Jamie: After rallying over 1000 pips from its June low, it may be time for at least a sizeable setback if not a continuation of the larger downtrend. At this point, the rally from the June low is in 3 waves, which is corrective. The spike above 13034 satisfies minimum expectations for the end of wave v of C. Additional strength could test 13185 (a confluence of Fibonacci extensions). The EURUSD is vulnerable. Dropping below the short term channel (wave v of C) would suggest that a top is in place.

JamieTechnicalWeekly_body_100730_105615_CQG_IC_Screen.png, FX Technical Weekly 07-30

BRITISH POUND / US DOLLAR

Entry

stop

t1

t2

FLAT

Levels

R3

1.6070

R2

1.5850

R1

1.5815

S1

1.5550

S2

1.5475

S3

1.5355

Joel: Gains have been quite impressive over the past few sessions with the market taking out key resistance by the 200-Day SMA and closing above the longer-term SMA. This is the first time the market is above the 200-Day since January and could potentially warn of a major shift in the structure. However, daily studies are starting to look rather stretched and Thursday’s close looks very similar to a bearish gravestone doji. A break back below 1.5575 will be required to confirm which should then accelerate declines. Inability to break below 1.5575 will keep pressure on topside.

Jamie: The GBPUSD rally has exceeded the former 4th wave extreme of 15530 and is approaching the October 2009 low of 15705. The pair continues to press against an upward sloping resistance line and short term momentum (see RSI) is divergent. The GBPUSD looks vulnerable but it is difficult to short without a point of reference to place a stop. It is best to wait for a top to form and then short a bounce.

JamieTechnicalWeekly_body_100730_105619_CQG_IC_Screen.png, FX Technical Weekly 07-30

AUSTRALIAN DOLLAR / US DOLLAR

Entry

stop

t1

t2

FLAT

Levels

R2

.9390

R1

.9140

R1

.9070

S1

.8900

S2

.8735

S3

.8630

Joel: The market remains well bid on any form of a pullback with the price rallying back above 0.9000 in recent trade. However, we believe that a short-term top is now in place by 0.9070, with the market more likely to roll back over and accelerate below 0.8900. Only a break back above 0.8900 will negate and give reason for pause.

Jamie:I expect a top to form if one is not already in place. Additional strength could test 9140, which is the 100% extension of the 8062-8864 rally…but respect the possibility that a top is in place at 9075 for the AUDUSD. A short term support line is being put to the test now and a break below would be bearish.

JamieTechnicalWeekly_body_100730_105621_CQG_IC_Screen.png, FX Technical Weekly 07-30

NEW ZEALAND DOLLAR / US DOLLAR

Entry

stop

t1

t2

FLAT

Levels

R3

.7520

R2

.7450

R1

.7400

S1

.7160

S2

.7025

S3

.6970

Joel: Gains have once again stalled out above 0.7300 and the market is in the process of rolling back over. Look for additional declines towards next support by 0.7000 over the coming days, below which exposes 0.6800 further down. Only back above 0.7400 negates outlook and gives reason for pause.

Jamie: The NZDUSD is in a position similar to that of the AUDUSD. The pair met resistance from channel resistance and the 100% extension of the 6557-7164 rally (7400) so the top may be in place. Even in the event of a new high, strength should prove temporary. Short term resistance is at 7300.

JamieTechnicalWeekly_body_100730_105625_CQG_IC_Screen.png, FX Technical Weekly 07-30

US DOLLAR / JAPANESE YEN

Entry

stop

t1

t2

FLAT

Levels

R3

88.10

R2

87.20

R1

86.80

S1

85.90

S2

84.85

S3

84.00

Joel: The latest round of setbacks below 87.00 have been very well supported and daily studies have now turned up from oversold levels with the market looking like it wants to carve out a base. Look for additional gains over the coming sessions back towards 89.15, with a break of this level to likely accelerate gains and force a more material shift in the structure. However, a close back below 86.25 would negate and shift focus back towards the multi-year lows by 84.80.

Jamie: “To review, everything from the 2009 low appears to be corrective. The 3 wave rally from 8480 is surely corrective, so there is the possibility that the USDJPY continues lower from here and takes out 8480 (which would mean that what was thought to be a b wave triangle would actually be a series of 1st and 2nd waves).” Favor the downside to a new low (below 8626) against 8920. Risk can be moved to 8815. 8670 and 8725 are short term resistance levels.

JamieTechnicalWeekly_body_100730_105630_CQG_IC_Screen.png, FX Technical Weekly 07-30

US DOLLAR / CANADIAN DOLLAR

Entry

stop

t1

t2

FLAT

Levels

R3

1.0585

R2

1.0500

R1

1.0390

S1

1.0250

S2

1.0200

S3

1.0130

Joel: The 100-Day SMA has proven to be a formidable support for the pair, with the market failing on multiple attempts over the past several days to close below the longer-term SMA. Look for a medium-term higher low to now be in place by 1.0255, ahead of the next major upside extension beyond 1.0850 over the coming days. Key levels to watch above and below come in by 1.0590 and 1.0300 respectively.

Jamie: The larger C wave rally in the USDCAD should eventually exceed 10866. An inverse head and shoulders pattern may be forming since the October 2009 low (visible on the weekly chart). Near term, favor the upside against 10134 although price ideally remains above 10250.

JamieTechnicalWeekly_body_100730_105632_CQG_IC_Screen.png, FX Technical Weekly 07-30

US DOLLAR / SWISS FRANC

Entry

stop

t1

t2

FLAT

Levels

R3

1.0640

R2

1.0540

R1

1.0470

S1

1.0360

S2

1.0290

S3

1.0220

Joel: Trading with a very heavy tone after fully negating three days of recovery and collapsing to fresh multi-week lows by 1.3375 thus far. At this point, we can not rule out the potential for a fresh drop and bearish continuation into the 1.0100 area, although daily studies are looking stretched and a corrective bounce is not to be ruled out either. Ultimately, the market would need to break back above 1.0680 to really force a shift in the structure.

Jamie: Longer term “it remains possible that the rally from 9916 is the first wave of a longer term bull (diagonal with an extended 5th wave). That would also explain the severity of the decline from 11735. Extended 5th waves are often fully retraced (as has been the case here). Daily RSI was recently at its lowest level since November 2007 (the USDCHF bottomed on November 23rd and was 800 pips higher a month later).” I wrote yesterday that “the rally is just 3 waves, leaving the USDCHF vulnerable.” This latest plunge may lead to a final low.

JamieTechnicalWeekly_body_100730_105635_CQG_IC_Screen.png, FX Technical Weekly 07-30

EURO / JAPANESE YEN

Entry

stop

t1

t2

FLAT

Levels

R3

115.50

R2

114.75

R1

113.80

S1

112.00

S2

110.00

S3

109.10

Joel: The market now appears to be attempting to carve out a short-term base at a minimum since dropping to fresh 2010 lows by 108.10 in recent trade. Tuesday’s strong bullish price action is significant, with the surge taking the price above the multi-day range resistance. From here, there is now the possibility that the market will open a fresh upside extension back towards the 120.00 area over the coming days. In the interim, look for any setbacks to be well supported ahead of 110.00.

Jamie: The long term EURJPY trend is down and the rally from 10730 does count as corrective although there is potential for additional strength towards the 100% extension of 10730-11341, at 11625. The decline from the top (11477) is not yet in 5 waves and 11220 support has held. Despite this, I am cautiously bearish.

JamieTechnicalWeekly_body_100730_105641_CQG_IC_Screen.png, FX Technical Weekly 07-30

BRITISH POUND / JAPANESE YEN

Entry

stop

t1

t2

FLAT

Levels

R3

139.40

R2

137.55

R1

136.40

S1

134.20

S2

133.30

S3

131.45

Joel: Multi-day range resistance has now been broken and this helps to strengthen the case for a medium-term base by 126.75. The bullish price action on Tuesday has also resulted in a close back above the 100-Day SMA with gains now seen accelerating towards 140.00-142.00 over the coming sessions. Look for any setbacks to be well supported ahead of 133.00.

Jamie: 20 day GBPJPY ATR is at its lowest level since January. Since the top above 251 in July 2007, ATR readings this low have coincided with important tops. A low ATR signals low volatility, which signals complacency. The GBPJPY is vulnerable at this level. Favor the downside against 13600 in anticipation of a drop below 12670. I maintain that the GBPJPY is vulnerable over the longer term (next several weeks?) but the break above 13600 exposes channel resistance as well as the 200 day SMA (near 14090).

JamieTechnicalWeekly_body_100730_105644_CQG_IC_Screen.png, FX Technical Weekly 07-30

EURO / BRITISH POUND

Entry

stop

t1

t2

FLAT

Levels

R3

.8530

R2

.8460

R1

.8415

S1

.8270

S2

.8200

S3

.8070

Joel: The market has been locked in a downtrend since 2009 making a series of medium-term lower highs and lower lows. As such, the latest rebound out from the 0.8100 area is classed as corrective and we look for a fresh medium-term lower top to carve out somewhere ahead of 0.8700 ahead of the next major downside extension back towards and eventually below 0.8000.

Jamie: I maintain that the larger EURGBP trend is down towards 7600-7700 (October 2008 low and Fibonacci extension). The drop below the short term support line suggests that the larger downtrend may be ready to resume. 8420 is short term resistance. 8175 may provide short term support.

JamieTechnicalWeekly_body_100730_105646_CQG_IC_Screen.png, FX Technical Weekly 07-30JamieTechnicalWeekly_body_WT730a.png, FX Technical Weekly 07-30JamieTechnicalWeekly_body_WT730b.png, FX Technical Weekly 07-30

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