FOREX TRADING

Last week, there was a slide in commodity related currencies, and risk correlated pairs. The Japanese yen and US Dollar were beneficiaries of this environment. This week, we saw this dynamic reverse a bit. Still, this may still be just consolidation setting up for continuation. On the other hand, it is always prudent to entertain the reversal scenario as well. Let’s juggle with these two scenarios entering into the next week.

EUR/USD Supported at 1.2150

Daily and 4H: The 1.2440 (61.8% retracement) level was tested, and resistance held up. The 1.2150 area is the current support, and was also respected.

If the market breaks below 1.2150, a swing towards 1.17 is suggested.

A break above 1.2440 suggests a continuing consolidation that may retest this week’s high at 1.26.

USD/JPY Pushing Towards Support Zone

Daily and 4H: The USD/JPY is in sideways consolidation seen in the Daily between 88 and 95. The pair is trading near the middle of this range at the moment. In another perspective, it was testing 78.6% retracement at 89.60, and also a rising support from the low in Dec 09 (not shown).

Therefore the intermediate term outlook is still sideways and slightly bearish, but the short-term is bullish.

The 1H chart confirms this short-term bullish outlook as the market broke above a sidways channel. The minimum projection for a channel breakout is to the 92 level.

This is just above the 91.80 level which is 61.8% retracement and also a previous support.

If the current “throwback” is supported this short-term bullish projection is valid and very probable.

GBP/USD Stalking Consolidation

Daily and 4H: The GBP/USD is in a very similar technical situation as the USD/JPY, and GBP/JPY in that it was consolidating in a sideways channel since last week, and has broken above the resistance, but may still be in correction mode.

The daily shows the correction should see resistance if goes to 1.48 area, which is between the 38.2% and 50% retracement.

In the 4H time-frame, this is just above the 61.8% retracement area.

The current breakout is being tested by today’s throwback. If the market keeps the pair supported, another rally should break the current minor high near 1.46, possibly towards 1.48.

USD/CAD May be Topping

Daily and 4H: The USD/CAD may have found a top near 1.07. The daily shows a very strong rejection from above that level and a very bearish candlestick on Thursday.

The market is indecisive today as it decides whether to sling shot form the SMA 200, or to retest the lower powerlines near 1.02 and 1.00/0.99.

The 4H time-frame shows the market testing 1.0450 area. The 1.0400 area is 61.8% retracement.

The RSI broke below 40. However the market is very choppy recently, and signals are not lined up for neither bullish or bearish bias. I am going to have some bearish bias for the USD/CAD to continue lower, but a break below 1.04 is needed.

Then the 1.03 area may be an area where the outlook is again tested.

As you can see, outlooks are very limited in consolidation, so make sure to go down to lower time-frames, possibly down to 15-min to stalk these moves more closely.

EUR/GBP Support at 0.8430 Holds

Daily and 4H: The daily shows a possible negative reversal, which we spotted last week. However, the RSI was not able to break back below 40, which is a concern for this bearish outlook.

Besides we already see that the previous low at 0.8430 held as support and a reversal candlestick combination has formed to end the week, suggesting further sideways correction if not a reversal.

The 0.8650 is resistance if the current rally continues, although we saw the last attempt climb all the way to 0.88 and 0.8750, but was rejected sharply.

A break below 0.8430 suggests a swing projection to 0.8350.

AUD/USD Found a Bottom for Now at 0.8050

Daily and 4H: The daily shows a possible pullback that failed to penetrated the previous support zone near 0.8580.

A decline from here can go towards 0.78, if confirmed by a break below 0.8050.

The 4H time-frame shows the reversal candlestick combination as the market neared the the 0.8580. The RSI broke above 60, so there is a higher chance the current decline is NOT the swing that will go to 0.78. Instead it is possibly part of further complication in the current correction.

If the market is support above 0.8350, then there should be another attempt to test the highlighted zone.

Otherwise it is trapped roughly between 0.8580 and 0.8050.

GBP/JPY: Still Resolving Correction

4H and 1H: The GBP/JPY continues to consolidate as seen in the 4H time-frame. The RSI broke above 60. But the latest 4H candle is extremely strong. Being Friday ahead of a Memorial day weekend, I suspect this to be some “position squaring”.

If the market is to continue this correction, which I have as wave C, we can see a 5-wave count in the 1H time-frame. If wave 5 = wave 1, the projection is to 133.90.

The 131.00/130.50 area provides support. There are the SMAs in the 1H chart. This is also coincident with a rising channel support.

Continue to stalk this pair, and expect some further correction. While 133.90 is a wave 1 equality projection, the market can rally up to test the 134.50 area.