FOREX TRADING

The EURUSD continue to make upside pressure yesterday, topped at 1.2763 but still unable to move consistently above 1.2730, traded lower around 1.2700 at the time I wrote this comment. We are still in upside correction phase as long as price move inside the minor bullish channel but the major scenario remains bearish. The bias is neutral in nearest term. Another upside movement above 1.2730 could trigger another upside pressure testing 1.2770 – 1.2825. On the downside, a movement below 1.2650 and violation to the downside of the minor bullish channel could potentially end the upside correction testing 1.2587 – 1.2523 and keep the bearish scenario remains strong.

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The EURUSD made another upside attempt yesterday, topped at 1.2726 but further upside pressure was still limited and traded lower around 1.2670 at the time I wrote this comment. The bias is neutral in nearest term and still within a bearish context but price is bouncing to the upside from 1.2587, moving in a minor bullish channel. We need a violation to the downside of the minor bullish channel to continue the bearish scenario. Break above 1.2730 could trigger further upside pressure testing 1.2770 – 1.2825 region before testing 1.2930 which could be a serious threat to the bearish scenario. Immediate support at 1.2620. Break below that area could trigger further downside pressure re-testing 1.2587 – 1.2523 and keep the bearish scenario intact.

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EUR/USD closed lower on Wednesday as it extends the decline off this month’s high. The mid-range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signalling that additional weakness is possible near-term. If it extends this month’s decline, the reaction low crossing is the next downside target. Closes above the 20-day moving average crossing would temper the bearish outlook.

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The EURUSD has been moving in volatile but indecisive market for the last 48 hours. After the confirmation of “head and shoulders” bearish reversal scenario, now price is moving in a new bearish channel as you can see on my h4 chart below. This bearish outlook can only be cancelled by a movement above the right shoulder of the H&S formation which is around 1.2930 and violation to the bearish channel. Immediate resistance at 1.2730 followed by 1.2770. We will have some high impact data from the Euro zone and US today. The Euro usually move higher after data release lately but the bullish moves were short lived. Tricky market, but I am still on the bearish side.

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EUR/USD closed lower on Tuesday as it extends the decline off this month’s high. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are oversold but remain neutral to bearish signalling that additional weakness is possible near-term. If it extends this month’s decline, the reaction low crossing is the next downside target. Closes above the 20-day moving average crossing would temper the bearish outlook.

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Everyone who travels a lot surely need to always update the flight information, hotel booking, and everything. We know that traveling is not only about leaving on a jet plane but you need to prepare everything before you get on the plane. The situation is getting more stressful if there’s sudden flight delay while we need to catch up something right after it. It feels like our head wants to explode when facing this kind of rush hour.

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The EURUSD continued its bearish pressure yesterday and seems convincingly move below 1.2700 area. This fact could trigger further bearish pressure testing 1.2523 – 1.2470 region as the ‘head and shoulders’ bearish reversal scenario is now confirmed. Another upside pullback above 1.2700 will lead us to neutral zone as direction is unclear but I think overall the pressure is more to the downside and I prefer short on rallies at this phase.

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EUR/USD closed lower on Monday as it extends the decline off this month’s high. The mid-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are oversold but are bearish signalling that additional weakness is possible near-term. If it extends this month’s decline, the reaction low crossing is the next downside target. Closes above the 20-day moving average crossing would temper the bearish outlook.

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EUR/USD closed lower on Friday and has renewed the decline off this month’s high. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are oversold, diverging but are turning bearish signalling that additional weakness is possible near-term. If it extends this month’s decline, the reaction low crossing is the next downside target. Closes above the 20-day moving average crossin would temper the bearish outlook.

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The EURUSD continued its bearish pressure on Friday, slipped below the major bullish channel and 1.2700 key support area, bottomed at 1.2664 but rebounded to the upside and traded above 1.2700 earlier today in Asian session. The bias is bearish in nearest term but we need a consistent move below 1.2700 to continue the bearish pressure testing 1.2610 before testing 1.2500 – 1.2470. Fundamental focus will be on some Euro zone flash manufacturing and services PMI numbers today. If we have good numbers, potential resistance to be tested is at 1.2780 and 1.2930 area.

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The markets continued to consolidate for most of the week. The USD consolidated for the week, but ended the week on a high note The AUD/USD is at a critical support level, and the USD/CAD broke a declining resistance. Against the currencies of another low interest rate country, Japan, the USD however remains pressured.

EUR/USD – Assessing Wave Count

4H: EUR/USD was in consolidation, possible a wave 4 in the wave a until the market rejected a rally above 1.29. The decline is likely wave 5 of a so a b wave can be expected to follow. That is my preferred count, which would be followed by a wave c. The RSI during this time should mainly stay below 60.

Day: There is still a bullish count that puts the current decline as wave 4, which should not come down below 1.25.

However, if this count is incorrect, and we already have a completed wave I, and we are already in wave II, this decline can extend to 1.22.

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The Week Ahead

Highlights

• USD recovery, risk sell-off likely to continue
• Weber comments soften the euro
• Australian election this weekend
• JPY strength may demand government action
• Key data and events to watch next week

USD recovery, risk sell-off likely to continue

After consolidating for much of this past week, the USD surged again to finish the week at new recent highs. The gains came in the wake of a disappointing US weekly jobless claims report and a shocking drop in the July Philadelphia Fed Index of local manufacturers, which fell to -7.7 from +5.1 in contrast to forecasts of gain to +7.0. USD strength in the face of weaker US data again illustrates the role of the USD as a safe haven currency. As the US outlook continues to deteriorate it spells bad things for the global growth outlook, undermining confidence and raising risk aversion. On Friday, Bundesbank Pres. Weber added another reminder of the dimming global outlook and latent Eurozone financial sector stress (see more below), sending the EUR sharply lower, but ultimately the USD higher across the board.

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U.S. Review

A Clear Step Backward

• Fears about a second-half slowdown kicked into higher gear following the release of the higher-than-expected weekly first-time unemployment figures.
• Industrial production rose 1.0 percent in July, but more recent data from the factory sector point to a substantial slowdown during the second half of the year.
• A pickup in apartment building helped pull housing starts slightly higher in June, but the previous month’s data was revised lower and permits fell 3. 1 percent.

The Economy’s Engine Is Sputtering a Bit

Thursday morning’s surprising 12,000-person rise in weekly first-time unemployment claims was a red letter moment for the economy. Jobless claims have risen for three weeks in a row and totaled a half million during the most recent week. The current level of jobless claims is more typically associated with the heart of a recession rather than one year into a recovery. While there are some statistical quirks in the data, there is no denying that unemployment claims are unusually high and at troublesome levels. Jobless claims only exceeded the current level during one week of each of the past two recessions. The four-week moving average has risen less dramatically and now totals 482,500, a level that is inconsistent with nonfarm employment growth.

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Market Outlook

Tactical view:

• EUR/GBP: return to June low?

Comments by ECB council member and 2011 candidate president Weber on the possible extension of unlimited liquidity until year-end have not gone unnoticed, casting a shadow of the ST outlook for the EUR. In a market short of liquidity and marked by a retreat of risk, Weber’s comments may hasten the decline in EUR/USD from the August highs. With risk beating a retreat, the success of Japanese officials to temper the decline in USD/JPY can be questioned and indicates that the cross may be settling in a range around 85.0. The perceptible weakening of the US economy in Q2 is showing signs of spilling over in Q3 and means the USD is set to remain a safe haven magnet along with the CHF. Unrevised UK Q2 GDP data next week may add fuel for a return in EUR/GBP to the June lows. (more…)

The Week in Review

The fulcrum of the American trading week and the view of the US economy shifted down, and the dollar future rose with the weekly jobless claims on Thursday. Behind the employment concerns lies the health and postponed recovery of the housing market. Without jobs the housing sector cannot recover and begin to add to GDP.

New jobless claims for the week of August 14th increased 12,000 to 500,000. It is the largest weekly total since November 13th last year and it is the first 500,000 print this year. Economists had predicted a drop of 6,000 to 478,000. The prior week was revised up 4,000 to 488,000 from 484,000.

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