FOREX TRADING

After the market put on some risk last week, it spent this week fiddling. USD and JPY crosses as well as commodity related and growth related currencies were all tested this week. The Euro led this week in gains against the greenback. The Japanese yen held its ground after 2 weeks of decline. Timing is becoming ripe for a continuation of risk aversion. The question is whether this week’s actions indicate reversal, or if there is yet another risk supported attempt.

EUR/USD Correction Rally At Resistance Zone

Daily and 4H: This week, the market did not respect continued putting back on risk, pushing the Euro higher against the dollar and other currencies. As I mentioned earlier this week, the rally could reach 1.24, and it has.

The daily chart shows a significant negative reversal, unless the market finds more momentum to push through 1.26. The swing projection targets the 1.17 area.

The 4H chart shows that the rally is still intact, with a rising support.

The RSI is bullish but is flattening. Price action on Friday provided a strong bearish candle, but again, this is not much of a clue. Breaking below the rising trendline should be a major clue to bearish continuation.

USD/JPY Slides as Suggested by Negative Reversal

Weekly and Daily: I have had the projection seen in the daily chart on the USD/JPY for a couple of weeks now, since the market rallied to test the 50-period moving average to start June, but failed to break it.

A negative reversal also formed, and this week the decline continued. This is a second leg.

Choppiness of this pair suggests caution of this projection. A near-term projection is shown in the daily chart going to 90. This would complete a gartley retracement, suggesting continuation of the bullish attempt that started at 89 in mid-May.

There should be some support here for a rally. It is difficult at this point to assess whether a rally from there should be temporary or a significant rally towards 95.

My opinion is the latter because of the choppiness of the market. However this opinion would go against the bearish mode in the higher weekly time-frame.

GBP/USD Stalking Consolidation

4H and Daily: The GBP is also gaining against the USD in what appears to be a second leg to a correction rally. The full equality projection at 1.49 has not been reached, but is very close at 1.4880.

The market is testing a confluence of 50% and 78.6% retracement, 50-simple moving average in the daily chart, and the 1.48 powerline.

A decline from here has a swing projection of 1.4060, perhaps 1.41.

The 4H chart shows the market in a diagonal triangle, indicative of terminal waves. This is suggesting that next week, we may see a reversal, which means a bearish continuation.

USD/CAD Choppy and Bearish

Daily and 4H: Last week, I mentioned that the USD/CAD was choppy and bearish. This week’s price action was exactly that. In the daily, we saw a strong bearish day, but when we look at the detail in the 4H chart, we see a decline in a channel.

The 4H chart also shows bullish divergence. Accompanied with negative reversal, this is suggesting some further bearish attempts.

In other words, looking back at the daily, the current low may not last. A bullish projection from the current low is to 1.0925. A rally from lower, near 1.0150, would aim near 1.0860.

The bearish outlook would say that the counter-trend support has been broken in the daily chart, and suggests a re-test of the previous low near parity. This however happened after a rally broke a previous high at 1.08 area. This showing a bullish attempt suggest we may have found a bottom for ranging action if not reversal. Therefore, the counter-trend breakout outlook may not be appropriate.

EUR/GBP in Diagonal Triangle

4H: As mentioned last week, the EUR/GBP was due for a correction. This week, the market indeed developed twists and turns, but overall in a diagonal triangle.

If this week’s price action is a wave (c), it may near its target. 0.8396 makes it 150% of (a), and 0.8412 makes it 161.8% expansion of (a).

Also note 38.2% retracement at 0.8427.

The RSI is showing bearish divergence, and no positive reversal. Look for the market next week to cap off the current rally and continue a wave 3 decline.

AUD/USD: Finishing up Wave (c)

Daily and 4H: The previous post was right, the bearish divergence was followed by a very weak decline and the last 4H candle signals another bullish attempt. This sets up a positive reversal, and points to just below 0.6750. This is now the target for this correction wave (c) to be complete.

In the daily, this is going to test the 50-period simple average. This will be the first time testing it since crossing below it in early May. The pair is already in a resistance zone starting from 0.86.

If topping indeed occurs, a low time-frame target could be 0.85, and the 4H time-frame target would be 0.8070, the previous low.

GBP/JPY: Continues to Twist and Turn

4H: Continuing the “twist and turn” theme from last week, the GBP/JPY pair continued to be choppy. It has been in a general uptrend in June, but that is coming after strong declines that came in May.

This week kept the same volatility but was sideways. A positive RSI reversal suggests there may be another push.

However, this short-term outlook is a prelude to the intermediate term bearish mode. Look for some more near-term bearish attempt, but the short-term bullish attempt to continue. In the intermediate term (2-3 weeks), it may reverse.

If the market breaks the rising trendline, it may not take 2-3 weeks, and a reversal/bearish continuation may be starting. So far this week, price action is not telling us much, except that risk appetite is being tested.