Weekly Technical Update:
Week of the Yen
While the Greenback was the strong performer of last week, the Japanese yen took that title for this week. Although we did see a general gain in the USD, it was no match for the JPY which was boosted from this week's risk aversion.
EUR/USD to Retest 1.3450
Update: The EUR/USD rallied above 1.36 following this morning's outlook for a decline towards 1.3450. However, this push should not be considered an indication of bullish reversal, but rather within the context of the general decline. Unless, the market can create a low above 1.3650, continue the bearish outlook.
4H: The near-term EUR/USD rally was held near 61.8% retracement (1.36).
The stochastic is starting to crossover in the bearish zone, indicative of a market maintaining the bearish mode (SMA50<SMA200).
The 1.3450 level was held twice in the current decline and looks to provide support again. Our decline this week would end up developing a declining triangle.
Note the 3-wave structure (a-b-c-) of the waves within the triangle. These indicates that the market does not have a impulse direction yet.
Wait for a breakout below 1.3450 for a bearish continuation case, or a break above the declining trendline to start preparing for the bullish case.
Weekly: Looking at the weekly, we see that the market is currently at a cluster of fibonacci levels (100% projection, 61.8% and 78.6% retracement.)
You can also see that if the market continues to decline, the next cluster's center of gravity is near the 1.31 area. This can be your intermediate target if the market breaks below 1.3450 AND establishes a top below that.
GBP/USD: Continuing Bearish Push
Daily: The bearish outlook for GBP/USD is materializing since last week's post. The target is 1.50, but now let's refine it a little. The 1.49 area is a full projection of the previous swing from 1.65.
This is also 61.8% retracement of the 2009 rally.
Weekly: The weekly shows that the 61.8% retracement is coincident with a 150% expansion of the previous downswing from 1.69. Look for some bottoming action here next week.
Note that if the market continues to decline, the next target is 1.44, which is about 200% expansion of previous swing from 1.69 and also 78.6% retracement of the 2009 rally.
USD/JPY Eyeing 87.00
Daily: The USD/JPY continues to decline towards 87.00. Although the decline appears to be stalled at the moment, the stochastic shows that the momentum is strong, and along with price action, which broke a rising support, shows that further decline is likely.
Bearish mode is maintained as SMA50<SMA200
Continuation with a 100% swing projection points to 87.00 area, which would also complete a Bullish Gartley and is near 150% extended retracement of the upswing, and above the 78.6% retracement of a larger degree upswing. (The use of extreme low suggests 78.6% retracement of swing should be slightly above the marked 86.70 (ie. 87.00).
Weekly: Looking at the weekly, we see that the stochastic reflects a new bullish mode, but is in a short-term retracement.
A bearish signal could develop if the market starts to accelerate further downwards and creates a “m” pattern, and would therefore reflect a failed bullish push.
Otherwise, look for bottoming action near or above the 87.00 area.
USD/CAD: Rally Pauses at 78.6% Retracement Level
Daily: The daily shows this week's rally as anticipated last week. The market indeed held above 1.0350 and rallied, but was paused at the 78.6% retracement level.
The stochastic shows some promise as it crossed over to the upside this week.
The 100% swing projection goes to the 1.09 area. However, if this is a new bullish mode, the swing can continue to the 1.1150 area. This is the next strong cluster of fibonacci levels.
Weekly: The stochastic in weekly is still bearish, BUT is showing some advancing bullish momentum in the market.
You can also see congestion since end of 2009. But since we are coming off a decline, the bullish outlook in the Daily time-frame needs confirmation.
A break above 1.08, and establishing a low above that would be very promising for the bullish outlook towards 1.115 and possible another leg up after a correction there.
EUR/GBP Rally Brings Pair to Crossroads
Daily: The EUR/GBP followed our outlook from last week's update. However, it is stronger than expected, and no topping action occurred at the 0.89 area. Instead the market had no trouble penetrating this 61.8% retracement level, and continued to 78.6% retracement level (0.8970).
This is also a 150% expanded projection of the previous swing. The light gray fibonacci levels are for the decline that started at 0.9420 area (see in weekly).
Weekly: The weekly chart shows that a rising support held and the current week's price action suggests another bullish week to follow possibly to the 0.91 area.
The stochastic is crossing over.Further confirmation can come next week if there is a correction decline and a bottom is established above 0.8850.
This short-term bullish outlook can turn into intermediate term if 0.91 breaks.
Capital Market Services, L.L.C.
www.cmsfx.com
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. CMS will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.
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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.
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