FOREX TRADING

Weekly Technical Update: Greenback Strength Re-emerging

Last week, it the USD crosses such as the EUR/USD and GBP/USD were showing signs of reversal after greenback dominance for end of 2009 and most of 2010 so far. However, by week’s end, the greenback prevailed, and we may have to start thinking of USD-bullish outlooks in the coming weeks. There was some risk appetite to start the week, but that evaporated by the end, dragged by Greece’s uncertain plan of action for its sovereign debt. Let’s take a look and see what we can expect in the coming weeks.

EUR/USD Signals Continuation Decline

Daily and 4H: The EUR/USD has failed to finish development of a rounded bottom as price action was rejected from going above 1.3850. As that important powerline held, the market declined.

The daily stochastic shows a crossover(reversal signal), and the 4H time-frame shows crossover in the oversold zone (bearish continuation).

There is support at 1.3450. A pullback therefore could be expected to spring from this previous low, but a bearish attempt after a weak rally has a good chance to breaking.

Then the intermediate outlook is bearish towards the 1.30/1.31 level.

If no break below 1.3450 occurs, continue to stalk the pair as it is bound to exit its consolidation zone between 1.3450 and 1.3850.

GBP/USD Signals Bearish Continuation

Daily and 4H: The Sterling is also showing weakness against the greenback after a couple weeks of sideways, slightly upwards correction. The market was not able to break and stay above the 1.5350 area, and a very sharp decline is developing.

Looking at the 4H time-frame, the decline has broken important support levels and is now testing the 78.6% retracement level.

The strength of the current decline is suggestive of further bearish continuation.

Looking at the daily, the next support is at 1.44/1.45, where important fibonacci levels coincide.

USD/JPY Indecision Near Resistance

Daily and 4H: This week, there was a reluctance of the market to follow the existing downtrend and head towards 87.00. But there is also a lack of bullish commitment which is needed to break above the declining trendline seen in the Daily.

The 4H time-frame shows a sideways range roughly between 90.0 and 89.80/91.0. A close below 90.0 in the 4H time-frame should have bearish implications, especially if confirmed with a break below the 89.50 powerline.

A close above 91.0 is a bullish indication, but needs further rally to confirm. The market is very undecided about this pair, so ability to break the 89.50 or 91.0 levels will be indicative of new direction. A bearish implication will have higher probability of follow through than a bullish indication, as the long-term trend has been bearish.

USD/CAD In Retracement Rally

Daily and 4H: This morning, better than expected Canadian fundamentals gave the CAD a boost, and the USD/CAD pair dropped from 1.0190 to 1.0070 in the 3 hours around the release of retail sales and inflation data for Canada. A break below the 1.0070 would have been a strong indication of an attempt to the 1.0 parity level.

There was definitely a volatile reaction, but there was an equally strong rejection from the market, keeping the pair above the 1.0070 area.

This suggests there is some bullish forces that will try totest the 1.02 area. If the market breaks the current 4H 50SMA and the 1.02 area, a target would be the 1.0370 area, which is 50% retracement of the latest downswing, and just above the 38.2% retracement of 2 previous downswings.

This 1.0370 area will hold as resistance if the market is to maintain the intermediate bearish outlook towards 1.0.

There may be some reversal signals, but the market continues to be in a bearish mode with the SMA50 diverging further from SMA200 in both daily and 4H time-frame. Therefore, continue to treat any the current rally as a pullback and look for its completion at 1.0370 if not 1.0200.

EUR/GBP Stalking Possible Pullback

Daily and 4H: The EUR/GBP pair broke its intermediate term uptrend earlier this week. and has continued to decline until hittin the 0.8915 area Friday.

Remeber the EUR/GBP is in a congestion pattern. Therefore, although the current rally could be the start of the 3rd impulse wave of a rally, it could very well be just a pullback.

This is where the 4H time-frame might offer more detail. The current rally should top off around 0.9050 if the long-term congestion mode is maintained. Then a decline towards 0.8850 is suggested.

Otherwise, if the market continues to rally, and breaks above 0.9150, we have a major bullish signal.

Weekly: The weekly shows a swing projection towards 0.96.

AUD/USD:0.92 Awaits Another Test

Daily and 4H: The AUD/USD has reached the swing projection of 0.9200, rallying to 0.9250 before topping and declining. The declining trendline has held to end this week.

Price action is bearish in the short-term, and there might be a test of the 0.9075 (38.2% retracement.

A break below that, and coincidentally the rising support would suggest a decline towards the 0.86 low (but note that the market has not cracked the rising 200SMA yet in the daily).

The nearest anticipation would be for bottoming action near 0.9070, then another attempt to crack the high at 0.9250. A break above 0.9250 will be a long-term continuation signal.

GBP/JPY: Couter-trend Rally Tops, Bearish Continuation?

4H and Daily: The GBP/JPY has completed the second leg projection in a retracement rally. The market rallied almos tto the projection of 139.50, rejected after reaching 139.40.

The daily time-frame shows stochastic crossover, and price action reversal signal. The 4H time-frame shows an attemp top break the rising trendline. If this succeeds, and a pullback follows to confirm a breakout, a swing projection seen in the daily, targets the 128.20 area.

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.