FOREX TRADING

This was basically a week of continuing consolidation, except for the USD/CAD which is looking seriously at the parity scenario. The coming weeks may be crucial as the markets test important powerlines. We have short-term consolidations/corrections in pairs such as EUR/USD, GBP/USD, EUR/GBP, and GBP/JPY. But we are also testing long-intermediate-term consolidation in USD/JPY, EUR/GBP, and AUD/USD as well.

EUR/USD Test of Rounded Bottom

Daily: The EUR/USD pair continues to be supported above the 1.3450 support. This week, the market closed above 1.35 and appears to be creating a rounded bottom.

Today’s rally so far heightens that probability but is still premature to call it a reversal signal. The market needs to break above the declining trendline preferably followed by a pullback. This would confirm a reversal and a target could be the 1.42 area, which is the support from a consolidation zone.

4H: The 4H time-frame shows the market in a current swing breaking out from a triangle pattern. A swing projection is to the 1.3820 area, and the market is nearing.

The completion of the rounded bottom is tested here. If the market can eventually break above 1.3820 during this current bullish cycle, the market may go to 1.42.

However the momentum is overbought so there might be a slightly correction in the near-term. Then if the market breaks above, get ready for a pullback to confirm.

GBP/USD: Still at the Station

Daily and 4H: Not much has developed for the GBP/USD since last week. The pair remains in consolidation like a train staying in the station.

This week the market was supported above 1.4850 and another leg up was started.

By Friday, this attempt has not shown much strength yet, as it still remains below the 1.52 top from the previous leg up.

The market can break the 1.52 and still see resistance near the 1.53/1.5350 area.

Looking at the daily, we see that this area is also coincident with a declining trendline.

If the pair can break above that, and confirm with a throwback, the market can continue to rally to test the important powerline at 1.56/1.57.

Otherwise, the market rejects the bullish attempt, and continues to consolidate. A break below 1.48 would suggest a move to 1.45/1.44.

USD/JPY To Test Resistance

Weekly and Daily: The USD/JPY was stronger this week and continues a rally that would soon test a long-term declining trendline at 91.50.

Basically, a break above that, with further confirmation from a break above the previous 92.30 top, can suggest bullish outlook.

Otherwise, continue to be bearish since the established trend has been bearish the last couple of years.

The stochastic in the weekly is bullish at the moment, but is bearish in combination. The two higher tops are not confirmed with price action, showing that a stronger reversal attempt was not reflected by price action; this is bearish.

The 87.00 projection needs to be re-assessed. Perhaps instead of declining channel, the market will enter a sideways channel for a while before a bullish mode is taken.

USD/CAD Eyes Parity

4H: The USD/CAD attemped to rally but was quickly subdued in the last session. Looking at the 4H time-frame, we see that the signal was spotted prematurely, and the same candle that would have broken above the declining resistance, actually closed back within the channel.

The market instead continued to however above 1.02 until the European session got underway.

We see in the 4H time-frame a near-term projection to 1.01. This is a conservative patterns breakout projection, but considering the overall bearish mode, let’s see what other targets are viable.

Daily and Weekly: The daily chart shows the continuation of a swing past 100% projection of the previous. If this is a butterfly, it is extending the second retracement leg.

Fibonacci projection shows that just above the parity level, there is a confluence of the 161.8% projection of the previous leg, and 138.2% extended retracement of the previous 1.02-to-1.0750 rally.

The weekly shows that the 78.6% retracement level is just below the parity level. If the market breaks below 0.99, it may continue declining until it tests the major low at 0.91. It is still a bit premature, but a confirmation would be a failed bullish attempt after a rebound from the parity level.

EUR/GBP Congestion Pattern

Daily and Weekly: This week, the EUR/GBP attempted a rally, but remains in the consolidation context.

This consolidation comes after a strong push from the 0.87 area. This push is now testing a declining resistance. We can see this resistance as part of a large triangle in the weekly chart.

If the market breaks above this 0.9150 resistance, a move towards 0.96 is possible as a swing projection, first seeing resistance from the previous top at 0.94.

On the otherhand, a decline would be a C-wave within this larger correction pattern.

The daily shows that a decline may be imminent, but may need confirmation from a break below 0.90. This would completed a double top.

The next test is the 0.8850 powerline, which was the resistance of the previous consolidation area. If that breaks, the market may come down to the 0.87 area to test the rising support of the triangle pattern.

Consider that the EUR/GBP has been bullish before this triangle, so if there is bottoming at 0.87, it is very likely a bullish attempt from there will break above the triangle.

But also be ready for the opposite scenario, as a break below 0.87 would spell a decline to 0.84 area, a swing projection.

AUD/USD:Almost 0.92, Resistance Holding for Now

Daily and 4H: The AUD/USD rally was projected to 0.92. The market missed it barely, touching 0.9190. The 4H time-frame shows this is the first non-higher top in the recent channel rally, and the stochastic is showing some signs of exhaustion.

BUT before we jump on the reversal, there are a few tests for the bearish attempt. Current, the near-term signal is a break below 0.92, then a break below 0.9060.

A decline would still see support near the 0.90 area, which is probably coicident with the rising trendline in the 4H.

At the moment monitor the topping action and see what kind of bearish attempt follows. It would not surprise me to see a break above 0.92 next week, unless the bearish attempt is sustained. Look for bottoming action for a decline at 0.9060. If a bullish attempt follows that, a break above 0.92 is likely.

GBP/JPY: Couter-trend Rally Continues

4H and Daily: The GBP/JPY is in a second leg up in its recent correction rally.

Immediately we can see a swing projection to the 139/139.50 area. This is coincident with the SMA200 in the 4H chart, and tests resistance levels both flat and declining.

It would also be a completed bearish Gartley at the 61.8% retracement level, seen in the daily chart.

Weekly: The weekly chart shows how bearish the GBP/JPY since 2008. A swing projection continues to 130.50 or 78.6% retracement. If the current rally is indeed a correction. Get ready for an intermediate bearish outlook in the coming weeks toward 130.50.

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.