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FX Technical Weekly

FX Technical Weekly

2011-05-13 23:59:00
Jamie Saettele, CMT, Joel Kruger,
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Trend Table

SRIM,W,D – support/resistance index for month, week, day (higher number denotes strength-max is 9)

Time – Duration of current daily trend (negative indicates downtrend)

SRIM

SRIW

SRID

Time(Days)

USDX

3

2

3

6

EURUSD

(3)

(1)

(3)

(6)

GBPUSD

(1)

(1)

(1)

(4)

AUDUSD

-

0

(3)

(1)

NZDUSD

range

0

(2)

(1)

USDJPY

-

0

(1)

(21)

USDCAD

3

0

3

3

USDCHF

range

3

2

1

EURJPY

(3)

0

(3)

(7)

GBPJPY

(3)

0

1

(9)

CADJPY

(3)

0

(1)

(12)

AUDJPY

(3)

0

(3)

(3)

NZDJPY

(3)

0

(2)

(9)

EURGBP

(3)

0

(1)

(6)

EURCHF

(3)

0

2

(11)

EURCAD

(2)

(3)

(1)

(6)

EURAUD

(3)

0

1

(6)

EURNZD

(2)

0

(3)

(6)

GBPCHF

-

0

0

(26)

GBPCAD

range

0

1

(4)

GBPAUD

range

(1)

3

(6)

GBPNZD

-

(2)

(1)

(6)

AUDCHF

-

1

(1)

5

AUDCAD

range

(1)

(4)

39

AUDNZD

range

(1)

(3)

(2)

NZDCHF

-

0

2

4

NZDCAD

+

0

1

37

S&P

range

0

(5)

(1)

GOLD

range

0

(3)

6

SILVER

(4)

0

(2)

(8)

CRUDE

(9)

0

(4)

(8)

30YR

3

0

(3)

20

COPPER

(5)

0

(2)

(15)

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 (blue bar indicates strong bull move and warns of a top when no longer blue – red bar indicates strong bear move and warns of a bottom when no longer red)-referred to as JSINT

US Dollar (2yr and 10yr yields)

Daily

051311FXTW_body_usd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The USD index broke above parallel channel resistance on Wednesday and today traded above the 4/18 high. An objective going forward is the 100% extension at 7686 – a level reinforced by the 2/2 low at 7688. There is also a line that extends off of the June 2010 and January 2011 highs at 7730 on Monday (the line decreases about 5 points per day). Short term support comes in at 7516 (former resistance). JSINT is turning over from an elevated level, which is bullish. I favor the upside until 7700.

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 18April high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 18Apr high will keep the pressure on the downside and open a retest of the recent trend lows. A bullish outside week formation does help to strengthen case for bulls.

Euro / US Dollar

Daily

051311FXTW_body_eurusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURUSD has mustered little more than a corrective bounce from 14150, a level defined by the 38.2% retracement of the rally from the January low and 4/18 low. There are several levels to watch next week, including 14000 and 13861-13900. The most important level is 13736, which is where there would be 2 equal legs down from above 14900. A drop to this level could constitute wave B within an A-B-C advance from 12874. 14254 is resistance. I favor the downside until at least 13736.

JoelSetbacks have stalled for now after just taking out some critical support by the 1.4155 lows from 18Apr. At this point, it is difficult to determine whether the market will look to consolidate the latest intense declines and possibly bounce a bit back towards the 1.4500 area, or will continue to decline and accelerate below 1.4155 to officially signal a shift in the medium-term structure in favor of the USD. Either way, the strategy from here should be to look to sell, with any rallies now seen well capped in the 1.4500 area, as the break below 1.4155 is significant, ending a sequence of consecutive higher lows in 2011. In the interim, we remain sidelined and await a clearer signal.

British Pound / US Dollar

Daily

051311FXTW_body_gbpusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – Cable has dropped below the support line that extends off of the December 2010 and March 2011 lows and tested the 4/18 low at 16165. Focus is on the 100% extension of the decline from 16476 at 16041. A line that extends off of the May 2010 and December 2010 lows is at 16065 today and increases about 7 pips per day. In summary, the 16040/70 area is support. A bounce would encounter resistance at 16234 and 16270. I favor the downside until at least 16050.

JoelThe market is staring to give way with the price now dropping back below the 50-Day SMA to warn of additional declines over the coming sessions. Look for deeper setbacks towards the 1.6000 area, with any rallies now expected to be well capped ahead of 1.6500. Ultimately, only back above 1.6520 gives reason for concern.

Australian Dollar / US Dollar

Daily

051311FXTW_body_audusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThere is no change to the AUDUSD pattern from the Daily Technicals this morning. “The rally from 10536 is viewed as a B wave within a larger correction. As such, expectations are for price to roll over in wave C.” Wave C in the AUDUSD is underway. An objective is the 100% extension of the decline from 11011 at 10413. This level intersects with parallel channel support on Monday. Weakness below that level would expose the January top at 10255.

JoelAs per our commentary earlier this week, the market looks to have put in a lower top by 1.0890, below the 1.1012 post float record highs, with confirmation to be given on a break back below the previous weekly low at 1.0535. Look for a fresh downside extension on the break exposing deeper setbacks to previous resistance now turned support by 1.0250. In the interim, any intraday rallies should be well capped below 1.0750 on a daily close basis.

New Zealand Dollar / US Dollar

Daily

051311FXTW_body_nzdusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie –The New Zealand Dollar significantly overbought in my opinion. Shrinking yield differentials and waning momentum at the recent top suggest that the NZDUSD could fall sharply over the next several weeks. Near term expectations are for a sharp drop in either a 3rd or C wave towards the 100% extension at 7666 (also 100 day SMA) and 2/18 high) and the 7500 area – which is defined by the 61.8% retracement of the rally from 7114, 161.8% extension of the decline from the top and 200 day MA.

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 is showing 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

051311FXTW_body_usdjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The USDJPY has traded above its short term channel and focus is now on the May 2 high at 8168. Trading through there would suggest that the low for the month is in place at 7956 (as per the tendency for the high OR low for the entire month to register during the first 5 days of the month). I remain skeptical of the bull side given the potential (as suggested by other markets…USD, bonds, stocks) for risk aversion to extend for at least several days. As such, a test of the recent low in the USDJPY (and all Yen crosses) cannot be ruled out (and is in fact favored).

JoelAfter undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support by the bottom of the daily Ichimoku cloud and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported in the 80.00’s with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming days.

US Dollar / Canadian Dollar

Daily

051311FXTW_body_usdcad.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The USDCAD inverse head and shoulders pattern was confirmed today as price broke above 9720. Focus is now on the 100% objective at 9780 – which intersects short term channel resistance on Monday. Additional strength would target 9850 and then the 161.8% extension at 9950 (March high is at 9975). It is worth noting that the move above the April high of 9721 is the first time price that has exceeded the prior month’s high since May 2010. I favor strength until at least 9780.

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 base. From here, look for a daily close back above 0.9700 to confirm outlook and accelerate gains towards 1.0000, while any intraday setbacks are expected to be well supported above 0.9550 on a daily close basis. The market is also showing the potential for a formation of an inverse h&s pattern, with a break back above the neckline at 0.9720 to confirm.

US Dollar / Swiss Franc

Daily

051311FXTW_body_usdchf.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – Look higher towards the 161.8% extension at 9106. This level intersects with parallel channel resistance on Monday. There may interim resistance at 8975 and 9015. The former is the line that extends off of the February and April highs. The latter is the 4/20 high (pivot high in April). Any weakness should find support at 8885 and 8825. I favor the upside until at least 9100.

JoelStarting to show signs of basing off of the recently established record lows by 0.8550, with the market putting in a solid bullish close on the weekly and now breaking back above the previous weekly high to end a sequence of consecutive weekly lower tops. Next key resistance comes in by 0.9000 and a break above will further confirm recovery structure and open the door for a move back towards a medium-term lower top at 0.9340. Look for any intraday setbacks to be well supported above 0.8700 on a daily close basis. Ultimately, only a daily close back below 0.8700 delays and gives reason for concern.

Euro / Japanese Yen

Daily

051311FXTW_body_eurjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The 30yr bond (which correlates closely with the Yen – both appreciate during periods of risk aversion) appears poised to test above 126 before rolling over. As such, a test of the 61.8% retracement at 11325 may be in the cards for the EURJPY. This level is reinforced by the 200 day average and 3/24 low. Price is nearing the 11325 measured level and 200 day average so I’m the lookout for formation of a low early next week. A panic drop could extend as far as the 161.8% extension at 11075. Bottom line, I expect that there will be an opportunity to buy on Monday or Tuesday at lower levels (and it should feel scary at the time).

JoelThe latest sharp pullbacks into the 114.00’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 above the 100-day SMA ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. A daily close below the 100-day SMA concerns.

Euro / British Pound

Daily

051311FXTW_body_eurgbp.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURGBP has tumbled to parallel channel support and price must turn up from here if the larger trend remains up. The 9158 objective intersects short term channel resistance on June 6th and longer term channel resistance on June 17th. A daily close below 8672 would suggest that an important top is in place at 9042 (that does not mean that there will not be corrective rallies however). Rallying above 8817 would be viewed as constructive.

JoelThe latest break back above key medium-term resistance by 0.8940 may have proven to be a false break with the market sharply reversing back into the 0.8600’s thus far. From here, look for a break back below 0.8670 to expose an even deeper setback and bearish resumption towards 0.8500. Any rallies should now be well capped ahead of 0.8900.

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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