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FX Technical Weekly

FX Technical Weekly

2011-07-08 21:48:00
Jamie Saettele, CMT, Joel Kruger,
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Trend Table

Trend Strength (M,W,D)

DisparityM

DisparityW

DisparityD

USDX

(1)

0

0

EURUSD

1

0

0

GBPUSD

0

(1)

(1)

AUDUSD

1

0

1

NZDUSD

2

2

1

USDJPY

(1)

0

1

USDCAD

(1)

0

(1)

USDCHF

(3)

0

1

EURJPY

0

0

0

GBPJPY

0

0

0

AUDJPY

1

0

1

NZDJPY

1

1

1

CADJPY

0

0

1

EURGBP

1

1

0

EURCHF

(2)

(1)

0

EURCAD

0

(1)

(3)

EURAUD

0

(1)

(2)

EURNZD

0

(2)

(3)

GBPCHF

(3)

(2)

0

GBPCAD

(2)

(1)

(2)

GBPAUD

(2)

(2)

(2)

GBPNZD

(2)

(3)

(2)

AUDCHF

(2)

0

1

AUDCAD

1

0

0

AUDNZD

0

(1)

(1)

NZDCHF

(1)

1

1

NZDCAD

1

1

0

S&P

1

1

1

GOLD

2

0

0

SILVER

0

0

0

CRUDE

0

0

1

30YR

0

0

0

COPPER

0

1

2

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

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) & 2yr +10yr US yields

Daily

FXTechWeekly070811_body_usd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The near term analysis for the USDOLLAR is the exact opposite of the EURUSD. A triangle appears to be unfolding. The implications are bearish several weeks out but a tighter range is likely to take hold near term. Near term resistance is 74.87 and 75.05 and 75.50 (closer to the triangle line). Additional weakness should find support at 74.00.

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 24May high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 24May 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, and we look for a higher low over 9400 ahead of the next major upside extension beyond 9765.

Euro / US Dollar

Daily

FXTechWeekly070811_body_eurusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURUSD has met triangle resistance and expectations are for price to work a bit lower to complete the triangle in wave E before a breakout later this summer. Upside cannot be ruled out over the next day or so but 14600/20 should cap any strength if the triangle is still forming. Expect a tighter range over the next few weeks. JSINT is at an extremely low level, which increases the probability of a setback near term.

JoelOverall, medium-term price action remains quite choppy and we continue to like the idea of selling into rallies in anticipation of a more sizeable pullback below 1.4000. From here, look for the formation of a fresh lower top by 1.4580 ahead of the next downside extension to be confirmed on a break back below 1.3970 over the coming days. In the interim, look for intraday rallies to be well offered ahead of 1.4500. Back under 1.4220 accelerates declines.

British Pound / US Dollar

Daily

FXTechWeekly070811_body_gbpusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The GBPUSD has broken below its trendline from the 2010 low and confirmed a head and shoulders top. Using the traditional head and shoulders measuring technique yields an objective near 15250 (distance between head and neckline subtracted from point of neckline break), which is near the late 2010 low of 15350. Recent consolidation may lead to a break higher that tests 16200 before Cable rolls over.

JoelAlthough the short-term structure remains bearish, setbacks seem to be well supported in the 1.5900’s for now. However, we classify the latest price action as some bearish consolidation ahead of the next major downside extension with the market now looking to establish back below the 200-Day SMA and extend declines below next key support at 1.5750 further down. In the interim, look for any rallies to be well capped ahead below 1.6100 on a daily close basis.

Australian Dollar / US Dollar

Daily

FXTechWeekly070811_body_audusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie“The AUDUSD may be headed for fresh highs above 11000 in the coming month(s) (in a 5th wave).” Price continues to advance at a relentless pace and 10775 is on the verge of giving way. A pop through there should result in a pullback, which ideally proves corrective. Support would then be 10600/50. A long AUDUSD position at slightly lower levels is one of the better opportunities in my opinion.

JoelContinues to show signs of topping after posting fresh post float record highs just over 1.1000 several weeks back. The latest corrective rally therefore is expected to be well below 1.0800 on a daily close basis, where the next lower top is sought out ahead of a fresh downside extension below 1.0390 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

FXTechWeekly070811_body_nzdusd.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieFocus remains on the resistance line that extends off of the May and June highs. This line is above 8400. It is possible that this leg will complete a diagonal from the March low. 8235 and 8180 serve as near term support. IF the rally from the March low is a diagonal, then the top must occur before 8517 in order to ensure that wave 3 is not the shortest wave.

JoelAny sign of an intermediate top in this market is looking less pronounced with the price rallying back to fresh post float record highs beyond 0.8300. However, we still consider the overall price action to be quite stretched and would therefore be looking for yet another topside failure above 0.8300 ahead of an eventual bearish decline and shift in the overall construct of the market. Ultimately, only a consecutive 2-Day close above 0.8350 would compromise bias and give reason for concern, while back below 0.8200 confirms bias and should accelerate declines.

US Dollar / Japanese Yen

Daily

FXTechWeekly070811_body_usdjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – There are signs that a major USDJPY shift is in the works. Price bounced from its 61.8% retracement of the rally from the March low twice in the last 2 months and has also broken above the trendline that extends off of the April and May highs. A 3rd wave advance may be underway – if so, then this rally should accelerate in the coming weeks. The above chart plots the weekly spot price with the 2 yr interest rate differential. The differential has turned higher from a level that has previously held, which increases confidence in the bullish bias.

JoelThe market looks to have finally found some support in the 80.00 area and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported around 80.00 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 and the latest break and close back above 81.00 helps to confirm. Look for a test of next key short-term resistance by 82.20 over the coming sessions.

US Dollar / Canadian Dollar

Daily

FXTechWeekly070811_body_usdcad.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThere is a bullish USDCAD count in which the rally from the low is a leading diagonal and the sharp decline is wave 2. 9600, which intersects with a line parallel to the potential neckline, has been reached and should provoke a reaction. 9575 is also former resistance and now potential support. Near term resistance is former support at 9670 and 9700. I have my doubts about the larger bullish count but it is worth considering given the potential for additional weakness in crude.

JoelDespite the latest sharp pullback off of the 200-Day SMA in the 0.9900 area, we continue to retain a constructive outlook for this market and contend that a meaningful base has been carved out by the May lows in the 0.9400’s. As such, any additional declines from current levels should be limited, with the market expected to find some formidable support at current levels. Ultimately only a close back below 0.9500 would threaten outlook. Back above 0.9700 on the other hand will confirm outlook and likely accelerate gains.

US Dollar / Swiss Franc

Daily

FXTechWeekly070811_body_usdchf.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – Recent evidence is overwhelmingly in favor of a major USDCHF reversal. Evidence includes the recent COT data diverging from the record CHF high, major divergence with RSI close to 50 on the daily (more powerful than if at a lower level), increasing interest rate differential in favor the USD, and now impulsive rally from the low. Near term weakness should prove corrective. Support is 8425 and 8390.

JoelDespite the intense downtrend resulting in recently established fresh record lows below 0.8300, short/medium/longer-term technical studies are looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. The latest break back above the 20-Day SMA is encouraging while a push beyond 0.8550 will ultimately be required to officially relieve immediate downside pressures and accelerate gains. In the interim, look for intraday setbacks to be well supported ahead of 0.8350.

Euro / Japanese Yen

Daily

FXTechWeekly070811_body_eurjpy.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

JamieThe 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. Ultimately, only a sustained break below 113.00 concerns.

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. Ultimately, only a sustained break below 113.00 concerns.

Euro / British Pound

Daily

FXTechWeekly070811_body_eurgbp.png, FX Technical Weekly

Prepared by Jamie Saettele, CMT

Jamie – The EURGBP has traded through 9042, which should lead to a test of 9150/60 (former high and 100% extension of the rally from 8066). Keep an eye on channel resistance as well, which is above 9200. Former resistance at 8950/75 is now support. The next top (near 9200?) will compose a large B wave from the 2010 low and lead to a collapse.

JoelThe surge above 0.9000 has been impressive, although, with the market once again stalling out above the psychological barrier, we could very well be seeing the formation of yet another medium-term top. Look for a daily close back below 0.8900 to confirm topping bias and accelerate declines, while back above 0.9050 negates and exposes additional upside.

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.

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