Greenback Firms As Japanese Yen Weakens

This week, the greenback strengthened broadly. There was general risk aversion in the markets. The Japanese yen, which usually gains during risk averse periods broke that correlation this weak and its own deflationary concerns pared its recent gains.

EUR/USD Targets 1.3050

Daily and 4H: The EUR/USD declined as anticipated in last week’s post. The market declined consistently this week until Friday. The intermediate target remains at 1.30/1.31 or 1.3050.

In the short-term, there is a correction, signaled by the current price action and the bullish divergence.

Since the EUR/USD has a strong trending component, I would expect a short correction towards 1.3450/1.3470 (38.2% retracement).

Look for topping action coming out of next week’s early action, then we may have another swing down towards 1.3050.

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The USD continued to strengthen this week, especially against the EUR, which has been declining broadly as well. There was still an air of risk aversion so the JPY started the week strong but did not have a significant push. The GBP/JPY for example showed ranging action, and the USD/JPY is already showing a possible reversal rally although there may be some short-term resistance. Let’s take a look at the week’s action, and outlook for the weeks ahead.

EUR/USD: Elliott Wave Count – Big Picture

Daily and 4H: The GBP is showing less weakness than the EUR, but by the Friday session continues to decline. The 4H time-frame shows a break from this week’s consolidation/ranging action. Unlike the EUR/USD is approaching a major support that was established through a long-term range between 1.57 to 1.70.

The short-term swing projection is the 1.59 level.

It will be important to monitor price action in this major support zone between 1.57 and 1.59. A break below spells further decline to the 1.53 area (50% retracement and swing projection).

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The dollar index swing up and down around the breakeven line throughout the overnight session. The trading volumes were strong during the European hours, but the market moved chaotically in very close ranges. This is in reaction to the fundamental part of the market being very mixed mixed: on one side, U.S. yields are rising, which is dollar bearish, but on the other, the U.S. economy appears to be emerging faster than the Euro-area from recession, which is dollar bullish. Looking ahead, the dollar bulls and bears will continue to fight during the first part of the U.S. session, with the U.S. and Canadian trade balance numbers at 08:30 EST probably setting the direction of trading.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 78.45 Looking for: A Short, wave IV) reversal

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