This week, the greenback is seen fighting back, although its gains have been slight. It has been most apparent with the EUR/USD. Against the USD/JPY, it is simply holding the Japanese yen from further gains. It also gained insignificantly against the Sterling. Against the AUD and CAD however, the USD actually continued to lose. These mixed results suggest that even though the USD is fighting back, it may still be weak, with the Euro even weaker. Let’s take a look at this week’s action, and see what we can anticipate.

EUR/USD Eyes 1.27, 1.25, 1.2150 (Link)

4H: The EUR/USD has established a top at 1.30 this week after breaking below the double top pattern. Thursday, we saw the EUR/USD surge but this was still a pullback. The targets established in an earlier update are still valid. We know the first near-term target is 1.27, and the market action has set up for a swing towards this level. You can see this projection on the chart above.

I forgot to put the 60 and 40 in the RSI, but you can see the RSI held below 60, a good sign for the bearish outlook.

Daily: The EUR/USD in the daily time-frame has finished 2 bullish swings, and was rejected that 1.30, 61.8% retracement level. I have mentioned the first target is at 1.25. If the market supports the pair here, we may have 5th wave swing towards and possibly above the 1.30 level. However, if 1.25 breaks, this count is invalid.

This is also 50% retracement and the 50-period moving average, so there should at least be temporary support. Then reaction after that should give us the clue to intermediate outlook. A break below looks at 1.2150 in the short-intermediate term.

USD/JPY: In a Flat (Link)

4H and Daily: As anticipated in the latest USD/JPY update, the breakout yesterday was just expanding the consolidation action from a rising triangle to a flat, or sideways channel.

The 4H chart shows some of the internals of the consolidation, and so far there has been non-impulse waves within the flat. To me, this suggests the market may spend some more time within this pattern. Also, this pattern may still expand further. Impulse waves would have suggested the market wants a quick correction.

That means, so far we have a, b patterns complete, and c is developing. If the resistance holds, it will be complete there. To me, there may be another decline followed by a rally to complete the consolidation pattern.

Looking at the daily, we remember that the market is bearish, and from last week’s update, bullish outlooks are limited, but bearish outlooks are also limited since we are in a significant support zone. So intermediate outlook is uncertain to me.

In the short term, it appears daily price action has been somewhat bullish this week, although within a sideways context. .

Momentum is definitely a clear clue, as the RSI is showing bullish divergence.

So if the market brings the pair higher, fibonacci studies may help anticipate where it might turn back down lower.

88.50 is 61.8% retracement of the latest downswing in the 4H chart, and is the near-term resistance for this pattern to expand a bit higher.

However if the pattern takes on a zig zag instead of a flat, it can expand even further towards 61.8% retracement in the daily, 90.35 area.

GBP/USD Testing 1.55

Weekly and Daily: The greenback is fighting back, but not so successfully against the Sterling. Earlier this week, as the GBP/USD started to decline, I mentioned the rising support seen in the daily chart. This was going to test the USD strength, and apparently, it was not strong enough to bring the pair below.

The RSI in the daily forms a positive reversal, suggesting a rally towards 1.5610. Basically, the momentum shows that we may have at least another move as capitulation.

The weekly shows that the pair is attempting to break away from a declining trendline. It has already broken an accelerated trendline, which I did not draw here.

It appears that there will be a lot of resistance here above 1.56, so the greenback may have more help at this level to fight back.

Then I want to see what kind of decline occurs from there, if one develops, because there is still a chance for a bearish outlook to materialize. If we are in ranging mode, there still may be some bearish outlook in the short-term after a near-term rally into 1.56.

USD/CAD in a Congestion Pattern

Daily and 1H: The USD/CAD is in a congestion pattern. This triangle is within the context of sideways action between 1.0 and 1.08. There is also a common support at 1.02.

The market has been in congestion with apex near 1.0450, which is apparently the equilibrium price level for the market in the recent weeks.

My count has already wave e complete, suggesting a decline here should break below the triangle.

The length between c and d projected to e targets 1.02. Then, if a pullback from there confirms weak bullish attempt, a subsequent bearish attempt may bring the pair closer to the parity level.

The 1H chart shows that in the near-term, the market is testing the 1.0360 low. If this breaks, the market is likely to continue lower to 1.02, assuming the triangle pattern in complete.

A break above the declining resistance however throws caution at this bearish short-term outlook.

EUR/GBP Euro Trying to Turn the Corner

Daily and 4H: The EUR/GBP paused its recent rally this week, topping off at the 0.8530 area. The anticipated action from this week’s earlier EUR/GBP update is materializing. The anticipated target for this decline was the 50% retracement, 0.8330 area, and the market is just above this level, testing the 200SMA in the 4H chart.

At the end of this decline, the market may have completed an AB=CD retracement pattern, suggesting that if this was simply a correction, bulls are looking to rally soon.

One thing that cautions against the bullish outlook is the strength of the decline. In the daily perspective, the decline this week has been accompanied with higher volatility, which gives it more strenght. If a rally from the 0.83 area fails to break above the SMA50, which at the moment resides near 0.84, then we may have some further bias to the downside.

In any case, the decline should see support at 0.8250, 0.82. If this breaks, the 0.81/0.8060 low is the next immediate support.

AUD/USD To Finish 2-Swing Correction Rally

Daily: Last week, I mentioned that the AUD/USD looked bearish in the short-term, if the market breaks below the 0.8700 area. This week, the market started with a gap below, but eventually filled the gap, and continued higher.

The rally was strong enough to break through the important resistance at 0.8880 and 61.8% retracement. It is now testing the 200SMA. All this was anticipated as resistance, but price action is strong.

The RSI is also breaking above 60. The current rally is projected to at least 0.91. Therefore, there is still strong resistance in the 0.90-0.91 zone.

I would like to see what kind of reaction occurs here.

I no longer have a bearish bias on this pair. The AUD/USD is strong and appears to be starting an impulse wave. If that is the case, the 0.8880 area should now be support.

Therefore, I will be looking for a throwback to test this area to see if indeed the AUD/USD has turned bullish.

GBP/JPY Remains in Sideways Action

Daily and 1H: If you have been following my updates on the GBP/JPY, you would realize how uncertain I have been about this pair and its twist and turns during the current congestion pattern seen in the daily chart.

In the daily chart, I have shown the congestion pattern in an abcde pattern in two different ways. Trying to anticipate a completion of a pattern is always difficult, but once the market breaks out, there is a strong indication the market will go that direction.

If the breakout is upwards, a swing projection where A = C, will target 1.40.

I have a count in the 1H chart, but this is no where resolved. It appears that this week cmopleted an impulse wave down, and a full correction.

Basically, if the market is held from going above today’s levels, at this 78.6% retracement level, we may have just completed a wave 1 and 2 of a fresh bearish impulse wave.

This is one scenario. Perhaps, it is still better to wait until the breakout from this congestion pattern.