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FX Technical Weekly

FX Technical Weekly

2011-05-06 23:59:00
Jamie Saettele, CMT, Joel Kruger,
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Trend Table

SRIM,W,D – support/resistance index for month, week, day (a number denotes strength)

Time – Duration of current daily trend

SRIM

SRIW

SRID

Time(Days)

EURUSD

-

(3)

(3)

(1)

GBPUSD

range

(3)

(2)

(2)

AUDUSD

range

(4)

(4)

(1)

NZDUSD

range

(9)

(2)

1

USDJPY

(1)

(4)

(2)

(16)

USDCAD

2

7

3

2

USDCHF

range

0

(1)

2

EURJPY

(2)

(4)

(2)

(2)

GBPJPY

(2)

(6)

(1)

(4)

AUDJPY

(3)

(7)

(3)

(3)

NZDJPY

(3)

(9)

(2)

(4)

EURGBP

-

3

(4)

(1)

EURCHF

(1)

(3)

(3)

(6)

EURCAD

-

(3)

0

(1)

EURAUD

-

7

0

(1)

EURNZD

-

4

0

(1)

GBPCHF

-

(4)

1

(21)

GBPCAD

-

0

1

(1)

GBPAUD

-

4

2

(1)

GBPNZD

range

3

1

(1)

AUDCHF

(4)

(7)

0

(4)

AUDCAD

+

(2)

0

34

AUDNZD

+

1

2

8

NZDCHF

(6)

(8)

0

(7)

NZDCAD

+

(3)

2

32

S&P

range

(3)

(3)

12

GOLD

range

(3)

(3)

1

SILVER

(3)

(9)

(5)

(3)

CRUDE

(6)

(8)

(6)

(3)

30YR

2

8

4

15

COPPER

(2)

(4)

(3)

(10)

CHARTS

-price bar chart

-base currency 10 yr interest rate in green

-counter currency 10 yr interest rate in red

-interest rate differential in black

-indicator that measures change in interest rate differential and change in price over 20 days is in blue (high levels indicate buying opportunities, low levels selling opportunities)-referred to as JSINT

- 14 day RSI

US Dollar (2yr and 10yr yields)

Daily

050611FXTW_body_usd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The last 2 days advance in the US dollar has sent RSI to its highest level since the January top. This is actually concerning because price is well below these levels. RSI getting ahead of price warns of a pullback. The rally near term appears a bit extended as well with potentially 5 waves up from the low. Even if the advance is extending in a larger 3rd wave, a pullback is expected. Initial support comes in at 7444 and a larger pullback could reach 7394. There is channel resistance more or less at the open Monday and the 50 day average at 7537 (3/22 low at 7225 as well). While I am a longer term USD bull, I’d be careful about chasing this strength at the current price – allow the market to digest these gains. From a macro perspective, it is worth noting that the 2-10s difference has turned up (short term rates increasing faster than longer term rates), which is bullish.

JoelAlthough the overall downtrend has been quite intense, the market could be showing signs of basing following the latest impressive rebound. Look for a break back above the 26April high on Friday to officially confirm bullish reversal prospects and accelerate gains. A break above this level will set up a bullish outside week formation. However, inability to establish above the 26Apr high will keep the pressure on the downside and open a retest of the recent trend lows.

Euro / US Dollar

Daily

050611FXTW_body_eurusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThe EURUSD decline the last 2 days was historic. In fact, it has happened only 4 times previously. View the video for more on that matter. Price sliced through a channel that had defined the trend since February but there is potential support from former highs at 14250 and 14280. It is unclear if the plunge from 14588 is small wave 5 or part of an extended 3rd wave. In the former case, the EURUSD would probably get back to 14590 (at least) before a larger decline takes place. In the latter, resistance comes in at 14420/50. JSINT has soared to its highest level since the December low so I’m not advocating bearish positions from the current level. Allow for some digestion of the massive decline from the top.

JoelThe market has finally succumbed to some heavily overbought readings, with the price dropping significantly over the past several hours to trade back below the 20-Day SMA. The daily close below the moving average could be significant and warn of deeper setbacks to come, however, while the market holds above 1.4155, the overall structure remains bullish. Next support comes in by the 1.4450 area in the form of the 61.8% fib retrace off of the 18Apr-4May move, with 1.4325 the next level below guarding against the critical support at 1.4155. Above, look for intraday rallies to be well capped in the 1.4700-1.4750 area by the 10-Day SMA and previous support now turned resistance. It is worth noting, that a break below 1.4490 on Friday would set up the fist bearish outside week since the start of the year.

British Pound / US Dollar

Daily

050611FXTW_body_gbpusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieHaving broken below channel support and the 20 day average, focus for GBPUSD has shifted lower towards 16165. Price has carved out 5 waves from the top now so there is the risk of a corrective rally to 16450-16550. If the shallow rally to 16463 is all the GBPUSD could muster for a small second wave, then Cable might collapse next week.

JoelThe latest pullback has now resulted in a test of some rising trend-line support off of the late March lows, and as such, we will use Thursday’s low by 1.6350 as a gauge for directional bias. Should the market establish on a close basis below 1.6350, then we would expect to see deeper setbacks towards the 1.6000 area further down. However, should we hold above 1.6350 on a close basis, we could see the market attempt to carve a higher low ahead of the next upside extension back towards 1.6750. In the interim, we remain on the sidelines and await a clearer signal.

Australian Dollar / US Dollar

Daily

050611FXTW_body_audusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieAfter reaching support from former resistance at 10580, the AUDUSD rallied violently before reversing at 10800. Additional strength would target 10830, which is defined by the 61.8% retracement of the decline from the top. I favor the downside towards 10420 (former resistance) and 10200/50 (former resistance) as per the recent record in speculative long positions as reported by the CFTC (COT report) and last week’s bearish engulfing pattern.

JoelThe latest sharp setbacks off of the post float record highs just over 1.1000 suggest that some form of a top could now be in place. Both the 10/20-Day SMAs have been easily breached and next key support now comes in by 1.0440. It is worth noting that weekly studies show the formation of a bearish outside week, and this could further suggest that a material top is in place over 1.1000. However, confirmation will only be given on a bearish weekly close and subsequent break back below 1.0440. From here, look for any intraday rallies to be well capped on a close basis below the 10-Day SMA, which currently comes in around 1.0800, with only a daily close back above 1.0800 negating bearish outlook.

New Zealand Dollar / US Dollar

Daily

050611FXTW_body_nzdusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The NZDUSD top is in place as the decline from 8121 is in 5 waves. The corrective advance may be complete so favor the downside from here. Objectives next week are 7690 and 7500. The NZDUSD is the most likely to have formed a significant top as the recent high is divergent with RSI on the daily and weekly. The interest rate differential has also reached a 20 day low, which reinforces the bearish bias.

JoelThe latest break below 0.7820 is significant and suggests that a key top is now in place by 0.8120. From here, look for deeper setbacks towards next key support in the 0.7600’s by the 50/100-Day SMAs. The 10-Day SMA looks like it could be on the verge of a negative cross with the 20-Day SMA to further confirm negative outlook, and as such, any intraday rallies from here should be well capped below 0.8000 on a daily close basis. Back above 0.8000 concerns.

US Dollar / Japanese Yen

Daily

050611FXTW_body_usdjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The USDJPY has bounced from the confluence of the 61.8% retracement of the rally from 7637 and short term channel support. A deeper retracement of the advance cannot be ruled out, especially in light of the pattern in the long bond, which may rally into next week (see link below for specifics). In the event of additional weakness, support comes in at 7825. Trading above the short term channel would suggest that a bottom is in place.

JoelDespite the latest slide, we continue to retain a constructive outlook for the market so long as it holds above the daily Ichimoku cloud on a weekly close basis. Ultimately, only a sustained break back below the cloud would negate constructive outlook. A break and close back above 80.70 on Friday would confirm outlook and accelerate gains, with daily studies turning up from oversold levels.

US Dollar / Canadian Dollar

Daily

050611FXTW_body_usdcad.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieAfter exceeding its 20 day average and breaking above a trendline extended off of the March and April highs, the USDCAD turned back and is testing the trendline as support now. Focus remains on the pivot high at 9720 with a break above signaling an end to lower highs and strongly suggesting that a major low is in place. Today’s inside day presents a bullish continuation opportunity.

JoelThe market has finally managed to mount a nice recovery since basing out by fresh multi-month lows in the 0.9400’s and could be in the process of attempting to establish a more meaningful recovery. From here, look for a daily close back above 0.9700 to confirm outlook and accelerate gains towards 0.9900, while any intraday setbacks are expected to be well supported above 0.9550 on a daily close basis. Back below 0.9950 concerns.

US Dollar / Swiss Franc

Daily

050611FXTW_body_usdchf.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – Expect the USDCHF to work a bit lower to test the lower diagonal line (and perhaps make a throwover) prior to forming a significant low and reversing in impressive fashion (as typically happens following ending diagonals). An impulsive advance from the low would suggest that the bottom is in place. The diagonal line is just below 8700 next week. Caution is warranted however as JSINT is at its lowest level since the November top.

JoelThe latest break to fresh record lows below 0.8600 is certainly concerning and threatens our longer-term recovery outlook. Still, we do not see setbacks extending much further and continue to favor the formation of some form of a material base over the coming weeks for an eventual break back above parity. Look for the market to hold above 0.8500 on a daily close basis, while only a break and weekly close below 0.8500 ultimately delays outlook. Thursday’s strong bullish reversal day is encouraging for recovery outlook, though the market will need to continue to extend gains for confidence to build.

Euro / Japanese Yen

Daily

050611FXTW_body_eurjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURJPY is likely to work lower towards a cluster of support near 11500 which is defined by the 100% extension of the drop from 12332 at 11498 and the 50% retracement of the entire rally from 10701 at 11517. A test of these levels next week would present a buying opportunity.

JoelThe latest sharp pullbacks into the 116.00’s have been intense, although the market is expected to find some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out somewhere above 115.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35.

Euro / British Pound

Daily

050611FXTW_body_eurgbp.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The Euro absolutely plunged to end the week…against everything. With respect to the EURGBP, the uptrend and 9160 objective remain intact. In fact, a detailed look at this week’s decline reveals a sharp 3 wave drop. The 2 declining legs would be equal at 8719, a level that is reinforced by a former pivot low. Look for a low near there early next week.

JoelThe latest break back above key medium-term resistance by 0.8940 may have proven to be a false break with the market quickly retreating to weekly opening levels and setting up for a potentially very bearish weekly close. From here, look for a break back below 0.8800 to further confirm false break suspicions and expose an even deeper setback and bearish resumption. However, inability to establish below 0.8800 would negate and keep the pressure on the topside, exposing 0.9040 plus.

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forex Stream. A graduate of Bucknell University, he holds the Chartered Market Technician (CMT) designation from the Market Technician Association. He is the author of Sentiment in the Forex Market. Send requests to receive his reports via email to jsaettele@dailyfx.com.

If you wish to receive Joel’s reports in a more timely fashion, emailinstructor@dailyfx.com and you will be added to the distribution list.

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

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