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EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

2013-03-08 21:37:00
Jamie Saettele, CMT, Sr. Technical Strategist
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One gets the sense based solely on news outlets that the EURUSD collapsed this week. In truth, price is little changed on the week; last Friday’s (March 1st) close was 1.3017. The current level to 1.2875 remains of interest as a bottoming area.

EURUSD

Weekly

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_eurusd.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREX Observation: One gets the sense based solely on news outlets that the EURUSD collapsed this week. In truth, price is little changed on the week; last Friday’s (March 1st) close was 1.3017. Levels to keep an eye on for support are channel support from the 2012 low, which is just under the low at about 1.2936 on Monday. 1.2875 is lining up to be even bigger than previously thought. The level is defined by the 50% retracement of the rally from the 2012 low, late November low and December low. The former resistance line turned support crosses 1.2875 on 3/25 and 3/26. The extent of weakness from the February high and structure (impulsive case can be made) make it likely that a significant (possibly for rest of the year) top is in place for the EURUSD but the current environment, which is dominated by salacious news headlines, is conducive to formation of a low for a rally back towards 1.3300-1.3400.

FOREX Trading Implication: While still looking for a low, it’s difficult to be long without a level to be long against. Last week’s note that “when such an advertised level (January low) gives way, I’m wary of chasing the break” remains valid. I’m looking for a low between here and 1.2875. Near term, an expanding triangle low (credit to Kristian Kerr for pointing it out) is a possibility (see below).

EURUSD

60 Minute

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_eurusd_1.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

GBPUSD

Weekly

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_gbpusd.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREX Observation: The idea that price is bottoming for a move back to 1.5320-1.5400 remains favored. Price has reached supports from several technical measures; a July 2010 pivot low and channel support. The 61.8% of the rally from the 2009 low to 2009 high (1.3500-1.7042) is at 1.4853.

FOREX Trading Implication: I’m looking for a low but evidence of a near term low is needed in order to trade safely from the long side. It is interesting to note that the NFP reaction stopped at downward sloping trendline support (see next chart). Divergence between the GBPAUD and GBPNZD suggests turn potential.

GBPUSD

240 Minute

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_gbpusd_1.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

EURJPY

Daily

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_eurjpy.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREX Observation: The USDJPY remains the story of the year, month, week, and day… every day, which is closing at the former support lines highlighted in yesterday’s report (see second chart). I’d like to concentrate on the EURJPY for now however. Today’s NFP print triggered the common ‘news spike and reversal’. The level that produced the high is the 78.6% retracement of the decline from 127.70 and 2/18 and 2/20 highs. There are several things that may be going on pattern wise since the February high, including a triangle or flat. In both cases, a test of the high (127.70) isn’t out of the question but the response at the well-defined technical level today is consistent with at least several days of downside. 121.50/122.00 is estimated near term support.

FOREX Trading Implication: Would like to see Friday’s high hold Monday before committing to the downside near term. Higher volatility environments warrant consideration of an automated strategy as well.

SPX 500

Weekly

EURUSD_Trade_at_13000_Still_Constructive_SP_500_Warning_Flags_body_spx.png, EUR/USD Trade at 1.3000 Still Constructive; S&P 500 Warning Flags

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREX Observation: I haven’t written about the S&P in some time but the position of the index now warrants comment. Much hullabaloo is being made of the new high in the Dow but the S&P is 20 points from its 2007 (and record) high. What’s more, this last leg of the S&P rally isn’t being confirmed by RSI which is below 70. The Elliott channel intersects the 161.8% extension of wave 1 on Tuesday at 1564, just below the record high.

FOREX Trading Implication: The Elliott channel is worth watching for a potential reversal opportunity. Weakness below 1525 would suggest that a drop back to at least 1485 is underway.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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

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