FOREX TRADING

This week, the greenback started with a bang. However after the FOMC announcement, which puts a lid on interest hike prospects, dimmed the USD gains. By Friday, the USD has lost most of the gains from earlier in the week. The yen held its gains better. Commodity currencies such as CAD and AUD also started the week strong, but reversed these gains into losses by Friday. Let’s take a look.

EUR/USD Unconfirmed Bearish Engulfing

Daily and 1H: The daily chart shows this week’s move dominated by the first day, which created an engulfing pattern. However, the rest of the week has laboriously pared some of the initial loses in the EUR/USD.

The projection to 1.17 is still valid, with two negative reversals with the RSI in the Daily chart suggesting this target. (This is when the RSI makes a higher high from bottoming, but price action does not).

Basically there was no bearish confirmation after the signal offered at the start of the week

Looking at the 1H chart, we see the latest twist and turns develop a downswing and then a gartley retracement pattern yesterday. This suggests a swing towards 1.2150 sometime in the beginning of the next week.

We can see in the daily, that the 1.2150 area is an importan powerline, and may be tested as support when the decline reaches it.

USD/JPY Continues Slide Towards 88.30

Daily: Since last Friday, the USD/JPY pair dcelined as expected, but not after starting the week with a bullish engulfing pattern. This false signal was followed by 4 days of strong decline. We see that the pair is nearing a support zone, with an ultimate target to 88.30 suggested by the negative reversal.

The 4H chart shows oversold conditions. The price action however is very bearish, and we may break below the current low.

The 1H chart shows a negativer reversal as the market attempts to bottom. This suggests we may continue lower even in the near-term toward 89, the beginning of the support zone.

GBP/USD Refuses to Top off

Daily: The above chart with the projections is a premature one, but is suggested by negative reversals. The 1.42 and 1.37 are projection targets. However we see that the momentum is still bullish, and if the RSI breaks above 60, these bearish projections must be reconsidered.

4Hand 1H: The intraday charts show some early signs of possible topping. The 4H chart does not show it, but the 1H chart shows a possible double top.

As I am writing about this, the market has already pulled back almost 100% to the previous top.

This may be a development of a double top in the 4H chart.

In anycase, it is going to be important to see the topping action develop some kind of candlestick reversal in the daily. So far every attempt has failed this past week.

Look to see if the market can top off near 1.5030 to start next week.

Early signals should not be processed until we have some confirmation. Today for example, we saw a possible double top, and if we did not wait for confirmation in a weak pullback, the strong pullback would have caused pain.

A bearish outlook next week should not aim below 1.4850. A break below this is the first true signal of topping.

USD/CAD Choppy and Bearish

Daily and 4H: The USD/CAD pair rallied this week. In the daily, we see that this rally came after testing 1.02 level.

The RSI also suggests that the market may be turning bullish, if it can cross above 60 without breaking below 40.

The 4H chart shows the pair reach a declining channel resistance, where the market is developing a possible double top.

It is probably best to see if a subsequent rally is weak. If weak, it is a pullback and is a bearish confirmation. In the near-term a downswing aims at 1.0250.

Otherwise, it will threaten to break above channel resistance and the high of the consolidation near 1.0470.

EUR/GBP in Diagonal Triangle

Weekly: The weekly suggests we should be in a C wave, and possible the wave 3 of a C wave. We see this week’s action spell bearish continuation. The 0.80 may offer psychological support, but the 0.7740 level is the 61.8% retracement and is a valid projection. We may find support a little higher in the central area of the consolidation seen in second half of 2009.

The RSI also suggests we are in some kind of wave 3. Perhaps a closer look offers better clues to the structure.

Daily and 4H: The daily chart shows the pair testing the previous low. The wave count also suggests we may be in a wave 3 of a wave 3 kind of scenario. Please forgive and overlook any unconventional labeling. I am only labeling for purpose of identifying structure.

The 4H chart shows our scenario from last Friday develop almost exactly as expected. The market is now testing the 0.82/0.8250 low. Some short-term bullish attempt can be expected, but the bias is that it may break and continue.

The ability of the RSI to reach oversold levels confirms the bearish outlook. I might look for another upswing towards 0.83, before considering the bearish scenario.

AUD/USD Has (c) Finished?

4H and 1H: I have been stalking the AUD/USD rally, as a (c) wave. After this wave ends, I am looking for a bearish continuation, seen more clearly in the daily, which is not shown here.

The 4H chart RSI is at 40. A break below makes it more likely that (c) wave is done with. However, if the market rallies, we may not be done, and a swing towards 0.8880/0.89 is possible.

There is a channel seen in the 1H chart. The market is rallying towards the channel resistnace at the moment. This is also now testing 61.8% retracement of the previous downswing.

If the RSI in the 1H chart also stays below 60, and the market tops off before breaking out of the channel, look for bearish action next week.

The 0.8550 level is the first target. It is the resistance during the previous consolidation period that was in second half of May, a the start of June.

GBP/JPY: Continues to Twist and Turn

4H: GBP/JPY contineus to twist and turn but is in sideways action this week. Pretty much continuing its mode frmo last week.

Therefore, not much to add. When market breaks below 133.30, or breaks above 136, something more significant will probably develop.

I have bearish bias on this pair as that is the mode when seen in the daily and weekly charts.