Weekly Technical Update: Greenback Sideways to Start New Year

The first week of the year saw the greenback giving back its gains back, more so to commodity currencies such as the Loonie, Aussie, and Kiwi. Against the Euro and Sterling, it was pretty much sideways. Surging oil prices can be attributed to the strength in the commodity currencies, even more so than the greenback. The Japanese was quite neutral this week, and ended near the levels it started against the EUR and GBP. Let's take a look at how some of these pairs faired and what we may be able to expect for the upcoming weeks.

EUR/USD: Still in Consolidation

Weekly: The first week of 2010 is similar to the last 2 weeks of the 2009 for the EUR/USD pair which has shown narrow ranges in the weekly time-frame, following 3 strongly bearish weeks.
The 1.3800 area is a viable target if the market continues to decline as it is the 50% retracement. Further decline to 1.3500 is a more aggressive target to the 61.8% retracement.
Daily: The daily time-frame shows that the last 3 weeks has been a flag formation, which has so far been kept below 1.4500.
The closest significant retracement area is 38.2% or at 1.4560. If the market is able to continue the decline from here, the swing projection can be more aggressive.
However, further retracement is also possible. The 1.4675 and 1.4775 area.

GBP/USD: Scenarios Long-term and Short-Term Outlooks

Weekly: The post last week was for the long-term. Above is the weekly chart with several possible scenarios.
The first is that the market continues to range, bouncing up from the 1.5700 support area to test the 1.68-1.70. area as resistance. The resistance may hold if the economic “recovery” is in the manner that is expected, which is a slow drag.
A second is that the pair will break above 1.70. This has a swing projection to 1.9500 for 2011.
Greenback strength may continue. If the market breaks below 1.5700 in January, we may test the 1.4800 area in 2-3 months.

Daily and 4H: shorter time-frame also shows different possible scenarios. The dark declining lines in the daily chart projects a swing to 1.57 and this is the bottom of the support zone.
Another scenario is the rally from the 1.5900 area towards 1.63, which completes an abcd retracement pattern. From there, we may then still have a decline to test of the 1.5700 area or maybe slightly above this lower bound of long-term support.
If the market rallies above 1.6300 however, the market might head towards the 1.68-1.70 area, which is the resistance from the upper half fthe long-term range (seen in Weekly)

USD/JPY: Stalling at Resistance

Daily and 4H: The USD/JPY came to the 93.00 level as we have anticipated. Here the market is also showing signs of reversal as anticipated, though this may be a minor one.
so, far we saw that although the market could not sustain a break above 93.00, it continues to make higher highs and lows, so there still has not been a significant retracement.
Price action from Jan 3-8 completed a bearish butterfly at 93.70 area and the pair has show reversal price action since then.
This may be a minor retracement, which should end at 91.80 or the 78.6% retracement of last 2 near-term upswings. From here, if the stochastic is also oversold and crossing back up, a bullish price action may indicate further rally towards the 95.00 leve which is the 78.6% retracement. (The 93.00 area was the 61.8% level).

USD/CAD: Testing Support

Daily and 4H: The USD/CAD is basically testing and important support area. at the 1.02-1.03 area. The daily time-frame shows that the swing projections for different degrees of decline targets this range.
From here, if the market bottoms and has bullish signals (stochastic crossover, reversal candlestick action etc.), A rally to 1.0950-1.1000 area is the long/intermediate-term target, and is a swing projection.
4H: Looking at the 4H time-frame, we see that in the short-term, we are seeing some bottoming action at 1.03. We may be developing a double bottom, but that can only be established if the market can rally above 1.0360 (short-term powerline).
In this time-frame, the first target is 1.0460 (61.8% retracement and short-term trendline. Then, there is a target at 1.57-1.60. It is the long intermediate term target range in 4H time-frame, but is short intermediate-term target in Daily time-frame.
A more aggressive target is the 1.0750 in the short-term.

EUR/GBP Swing Projection

Daily and 4H: Daily shows possible sustainable break of intermediate term downsloping trendline. The stochastic is bullish, though the momentum is not strong.
The 4H time-frame shows the swing projection in more detail. You can see that the target at 0.9080-0.91 would be a completion of a bearish butterfly. If so, the fact that stochastics stayed above oversold levels shows bullish strength (or bearish weakness).
Otherwise the market stays in range in short-term between 0.8850 and 0.9050.

GBP/JPY: Long-Intermediate Term Still Bullish, Short-term Bearish

Daily and 4H: The GBP/JPY pair continued its rally this week, after a throwback tested the 146.00 area and established it as support. The stochastic is crossing back over upside in the bullish zone so momentum is still bullish.
Looking at the 4H time-frame, we see that this week's price action completed a bearish gartley in the short-term.
With bearish reversal candlestick combo, and a bearish divergence with stochastics, there should be a bearish outlook for the start of next week. Depending on the first 2 sessions manner of decline (if there is a decline), the market may be supported by an upsloping trendline at around the 147.00-147.50 area. If it is strong, it may continue to test the 1.46 area.
A bounce from there may develop into a head and shounder if the rally can rally above 150.50. The 153.00 area however is intermediate resistance. So until this is broken, the price action should be stalked in the 4H and 1H time-frames.

Capital Market Services, L.L.C.
www.cmsfx.com

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All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.