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FX Technical Weekly

FX Technical Weekly

2011-05-27 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)

SRIM

SRIW

SRID

USDX

3

1

(3)

EURUSD

(3)

(1)

3

GBPUSD

(1)

3

5

AUDUSD

(2)

(2)

2

NZDUSD

+

3

3

USDJPY

-

(1)

(4)

USDCAD

5

2

2

USDCHF

-

(3)

(6)

EURJPY

(3)

0

(1)

GBPJPY

(1)

1

1

AUDJPY

(1)

2

1

NZDJPY

+

2

3

CADJPY

(3)

(1)

(3)

EURGBP

(4)

(3)

(2)

EURCHF

(6)

(5)

(5)

EURCAD

0

2

4

EURAUD

(3)

2

1

EURNZD

(6)

(5)

(3)

GBPCHF

(1)

(1)

(5)

GBPCAD

2

3

4

GBPAUD

0

3

2

GBPNZD

(2)

(2)

(3)

AUDCHF

(6)

(7)

(4)

AUDCAD

0

0

3

AUDNZD

(3)

(8)

(3)

NZDCHF

0

2

0

NZDCAD

5

5

4

S&P

(2)

(2)

2

GOLD

0

3

0

SILVER

(3)

6

2

CRUDE

(9)

0

1

30YR

6

2

2

COPPER

(1)

0

4

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

052711FXTW_body_usd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The drop below 7496 may complete a flat correction. Allowing for bounces, look lower towards Fibonacci measurements at 7469 (wave a x 161.8%), 7435 (50% retracement), and 7396 (61.8% retracement). Near term resistance is at 7533. I expect a low to form in early June near one of thementioned measured levels.

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 1April high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 1Apr high will keep the pressure on the downside and open a retest of the recent trend lows. A more constructive weekly chart does help to reaffirm recovery outlook, but setbacks will need to hold above 74.00 for recovery outlook to remain intact.

Euro / US Dollar

Daily

052711FXTW_body_eurusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – Exceeding 14345 could complete a flat from the 5/15 low. It is also possible that the decline from 14940 is a completed correction (3 waves). Both of these counts point higher to at least 14450 – which is the 161.8% extension of wave a and the 50% retracement of the decline from 14940. Exceeding 14450 gives scope to a test of 14490-14520 (pivots in April). 14180 is short term support.

JoelIn the process of a corrective bounce following a 10 big figure drop in May with the market rallying from below 1.4000 and I search of a fresh lower top ahead of the next major downside extension below 1.3970. From here, look for any rallies to be well capped in the 1.4300-1.4400 area, with only a break back above 1.4500 negating negative outlook and giving reason for concern.

British Pound / US Dollar

Daily

052711FXTW_body_gbpusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The GBPUSD has bounced from the support line that extends off of the May 2010 and December 2010 lows. It is possible that the rally to 16746 completed a 3 wave rally from the May 2010 low and that weakness from there is wave 1 of the next bear wave. I like shorting a rally into 16400/80 (50%-61.8% retracement) in early June (look for a high in early June).

JoelThe 100-Day SMA has proven to be formidable support for the pair, with the price rallying substantially out from the 1.6060 lows to trade back towards 1.6500. However, we would expect rallies to now be well capped below 1.6550 on a daily close basis, with gains even potentially holding below 1.6480 on a close basis which represents the 61.8% fib retrace off of the 1.6740-1.6060 move. Look for a lower top in the 1.6500 area ahead of the next major downside extension below 1.6000 over the coming days. Ultimately, only a daily close back above 1.6550 would negate outlook.

Australian Dollar / US Dollar

Daily

052711FXTW_body_audusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThe slow grinding decline in the AUDUSD is viewed as wave A (leading diagonal or wedge to classical technicians). Expect strength into the 61.8% retracement (10793) over the next week or so before a sharper C wave decline tests former resistance near 10200/50. 10610 is short term support.

JoelContinues to show signs of topping after posting fresh post float record highs just over 1.1000 several days back. The latest corrective rally therefore is expected to be well capped ahead of 1.0800 where the next lower top is sought out ahead of a fresh downside extension below 1.0440 and into the 1.0200’s. Ultimately, only a daily close back above 1.0800 negates and gives reason for concern.

New Zealand Dollar / US Dollar

Daily

052711FXTW_body_nzdusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThe NZDUSD has exceeded the 8120 high and focus is on the 2008 high at 8215. Watch the parallel channel for resistance in the coming weeks. Measured levels are derived by adding the width of consolidation to the breakout price. This technique yields objectives of 8487 (breakout from 8120) and 8836 (breakout from 7975). Near term support is 8060 (I’m a buyer on weakness).

JoelRemains very well bid with the market breaking to fresh yearly and multi-year highs above 0.8120 to challenge the near 30-year highs over 0.8200. Daily studies are starting to look stretched, but a break back below 0.7960 will be required at a minimum to relieve immediate topside pressures. A daily close above 0.8200 however, will open the door for yet another major upside extension towards next key psychological barriers by 0.8500 further up.

US Dollar / Japanese Yen

Daily

052711FXTW_body_usdjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – As the USDJPY is wont to do, it lulled traders to sleep and then moved violently (in this case lower). There may be some support from the 61.8% retracement of the rally from 7956 at 8060 but the rally from 7956 is not clearly impulsive therefore a test of 7956 cannot be ruled out. Clarity is lacking. There are better opportunities elsewhere.

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 weeks.

US Dollar / Canadian Dollar

Daily

052711FXTW_body_usdcad.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieAfter breaking higher on the 23rd, the USDCAD has traded sideways for several days. It’s impossible to know whether or not this is consolidation before additional strength or distribution prior to weakness. As long as price is above 9641, look higher towards the 161.8% extension of the advance from 9444 at 9946. This level, along with the 3/15 high at 9974, is resistance. Near term support is at 9750.

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. The latest break and close back above 0.9700 triggers an inverse H&S pattern that now projects additional gains towards parity over the coming days. Look for setbacks to now be well supported above 0.9600 on a daily close basis.

US Dollar / Swiss Franc

Daily

052711FXTW_body_usdchf.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The USDCHF has broken down to a fresh record low and focus is on Fibonacci extensions at 8458 and 8157. Also keep an eye on the support lines that extend off of lows from recent months (that line is at 8355 on Tuesday). Keep in mind that the CHF is still a low yielding currency and that US yields appear to be forming a low. As such, I am on the lookout for opportunities to sell the JPY and CHF in early June (buy USDCHF and USDJPY).

JoelThe latest minor recovery has proved to be just that, with the market finding a fresh lower top ahead of 0.9000 in favor of this latest sharp drop to yet another record low in the 0.8500 area. Daily studies are however still looking quite stretched to us, and we continue to like the idea of taking shots at buying on dips in anticipation of a major base. Look for current declines to hold around the 0.8500 area and a break back above 0.8740 to encourage basing prospects and open the door for the potential formation of a major interday double bottom (neckline by 0.8950) projecting gains back towards 0.9500. A daily close below 0.8400 would negate.

Euro / Japanese Yen

Daily

052711FXTW_body_eurjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURJPY decline from 12332 is in 3 waves (to this point) and the reversal near parallel channel support increases confidence in a bullish bias. The 11340 low has held for 9 days now which is constructive so I’m looking higher towards former support at 11850 and 11920.

JoelThe latest sharp pullbacks into the 113.00’s have been intense, although the market has now found some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out above 113.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. Only a daily close below 113.00 concerns.

Euro / British Pound

Daily

052711FXTW_body_eurgbp.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The extent of the EURGBP decline from 9042 suggests that an important top is in place and that rallies should be sold. Currently bouncing from the 61.8% extension of the initial decline from 9042, expect resistance at 8740. Rallies should now be sold against 8850. The 100% extension of the 9042-8677 decline at 8475 is a bearish objective.

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 ahead of the latest minor bounce. From here, look for a lower top below 0.8900 and break back below 0.8600 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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