FOREX TRADING

Last week, the market remained in consolidation, but sentiments were building. As the EU kicked around the can a little longer regarding the Greece debt situation, the equities market grew more and more impatient, with their trigger fingers hovering above the liquidate button. The risk averse moves started show on Wednesday, 5/5. But it was on Thursday that the US equities market got a panic slide, but a close that pared most of this move. By Friday, the markets is either settling and getting a grip, or it is only a dead cat bounce. This week, I will be incorporating lower time-frames to get closer details of this week’s market moves. Some will also have longer time-frames to see the bigger picture.

Tracking EUR/USD and USD/JPY

Monthly: The monthly chart shows a possible decline all the way to 114 area. Currently there is support at 1.24 area, then 1.19 area before 114 can be reached. These are rough estimates and we may need to adjust with new data from intra-day charts as the market approaches these levels.

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This market was in a broad based consolidation. Even cross pairs created from the weakest paired with the stronger currencies such as EUR/CAD is finding bottoms. In these periods, it is important to follow the structure of the consolidation. It is also important to be patient in dealing with consolidations because most likely we premature see them complete. Let’s see if we can anticipate next week’s developments.

EUR/USD’s Pullback Tests Broken Support as Resistance

Last week, I noted a target of 1.3050, which the market missed. 1.31 held, and the market is in another correction rally. The rally hit 1.3340, and is declining, and watching this decline might give you a heads up whether or not the correction is complete.

1H: The market continued the correction rally as anticipated in yesterday’s video update where wave c was possibly developing. The market rose slightly past the swing projection suggested by a near-term positive reversal.

Now we have this rally test an important powerline at the 78.6% retracement or 1.3350 level. This is also where the previous consolidation support was broken.

If the market tops off here, we have another negative RSI reversal. Note that the momentum has shown sequentially stronger retracements, but price action has not been able to make higher pivots.

Look for a top near 1.3350. If a strong bearish candle follows, a swing towards 1.3050 is likely.

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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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