FOREX TRADING

The USD continues to lose, and this is reflected by the surge of gold (XAU/USD) to new highs. However, there is some fight back in the end of the week that can be stalked as a correction. Next week, we will see if the market wants to confirm USD weakness. The Japanese yen also slide due to the intervention, but this is widely believed to be an insignificant move against the powerful yen.

Gold (XAU/USD) Making New Highs

4H and Day: Gold is making new highs this week, adding pressure to, or correlated to the pressure on the USD. Basically, strength in gold and weakness in USD goes hand in hand as gold is priced in USD.

There is a bearish divergence in the 4H chart, but one that may also be developing a positive reversal suggesting further rally.

In any case, the a support resides near 1265/1263 area.

The daily chart shows 2 possible targets after the bullish breakout from the previous historic high near 1265.

150/161.8% expansion of the June upswing to the current swing targets the 1300/1320 area.

Also, a channel breakout projection (width of the channel projected in the direction of the breakout), targets 13.60/70 area.

Look for the USD to continue losing and gold to continue rallying, although there may be some correction to start next week.

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The USD was in consolidation/ correction mode this week ahead of the NFP. This is in a sense the market’s way of paring some overextended USD gains, but also offers a chance for the market to continue with greenback strength. There was some dollar strength immediately after the release, but when the ISM manufacturing data came out worse than expected, the market went back to dollar weakness. It appears that the USD may be turning the corner and will correct further next week.

EUR/USD – 1.29/1.2950 is Wave C Projection

4H and Day: The EUR/USD pair is in a bullish mode at least in the short-term and continues to do so after the NFP.

Even the alternate count was looking at 1.29/1.2950 as the target.

However this is an area of strong resistance. If the market breaks above 1.2950, it is very likely that it has turned bullish.

Otherwise, the market may may ranging. It is not longer bearish, as reflected by the strong momentum in the RSI reading rising above 70.

The decline from 1.2900/1.2950 should not break below 1.2770, which is the end of wave I, or A. If it breaks below, then we may have the ABC count scenario, instead of the I, II, III count scenario, and the market would be bearish.

The daily chart shows the market in a bullish mode after the RSI broke above 70 in August, but has yet successfully broken below 40. A break above 60 confirms bullish continuation in the intermediate term.

Note that the market broke above a longer intermediate trendline, and then broke below a shorter-intermediate trendline.

Dynamics might lead to a ranging market, which is why I anticipate resistance near the 1.29/1.2950 area, and decline to 1.28.

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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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After 2 major event risks, last Friday’s NFP and This Tuesday’s FOMC announcement, the USD is looking poised to making a recovery from its recent weakness. Global risk aversion may be the factor behind USD strength this week, as it is a safety currency. However, the dollar is not in the clear yet. It is going to be dealing with some technical levels in many crosses. Let’s see evaluate the scenarios

EUR/USD Testing Support at 1.2750; Monitoring 1.2450

Daily: The EUR/USD may be in wave 4 of a bullish impulse wave. It is testing the 1.2750 level which may provide support. It if it breaks below this level, it may come down to the 50%, or 61.8% retracement level.

The key thing to monitor is whether the market will break below 1.2450.

Another thing to monitor is the RSI. It should not go below 40 for the bullish scenario to continue for EUR/USD.

With that said, The USD may enjoy some further strength in the coming week, but its strength will be tested against the Euro’s that was shown in June and July.

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NFP Puts USD Recovery on Hold

This week, The USD had some early signs of recovery. It was mainly stabilizing after being pressured the previous weak. There were some strong USD gains on Wednesday, but this did not follow through on Thursday, and by Friday’s NFP, the market turned back USD-weakness. The Japanese yen continues to gain in this risk averse environment, after being pressured earlier in the week.

EUR/USD Surges After NFP

Daily: The EUR/USD broke above this week’s consolidation range today, driven by the worse-than-expected NFP.

The EUR/USD is at an area of significant resistance. The 1.3250 to 1.3300 area is resistance, but if broken, should again see resistance at 1.35 or the 200SMA.

The RSI in the 1H chart shows bullish continuation momentum.

The RSI in the daily shows overbought RSI readings, but also a signal of intermediate bullish momentum.

I am very uncertain of the EUR/USD at the moment. Today’s moves proved that signs of greenback recovery earlier this week, were head fakes.

The question remains for me: how much weaker can the USD get in the short-intermediate term. Before considering the dollar recovery, I maintain that we should look for the USD to gain across the board, especially against the JPY, and CHF, which has not happened yet. (more…)

This week, The US dollar continued to loss ground to the euro, and pound, as well as to the JPY, which competes with the USD for risk-aversion-based flow. The commodity currencies such as AUD and CAD also gained on the greenback. Even gold, which has been declining is gaining again. It appears the dollar is sliding across the board. Let’s review the technical developments for this week.

EUR/USD Nears Last Resistance Zone for Bearish Outlook

Daily: The EUR/USD rallied further this week and is going to enter an upper zone of resistance.

If the market continues further but can find a top in the zone that starts at 1.3120 to 1.3250, it can still decline towards and even past the 1.1880 area.

However, a breaks suggests continual rally towards 1.35 area.

There is a bearish divergence developing. The slowdown in momentum can also be seen by looking for strong bullish candles. The strongest has waned each week.

To confirm topping, I would like to see a strong day decline that can match and preferably be wider than the ATR.

Another thing to monitor is the USD/JPY and USD/CHF. At the moment, the USD is very weak against these. If it is rallying, the chances for EUR/USD to find a top improves.

Will increase monitoring of this pair next week.

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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. (more…)

This week, the greenback continued to weaken after fighting back a bit last to end last week and the start of this week. However, we saw it slide across the board. Even more pressured were the CAD and AUD. Perhaps global growth concerns are stabilizing the EUR and GBP which has been almost singled out in April and May. The Japanese yen on the other hand is benefiting from this risk aversion.

EUR/USD Approaches Heavy Resistance Above 1.31

Daily: Yesterday’s EUR/USD and GBP/USD update noted that the EUR/USD was targeting 1.30/1.31 area. The 1.30 area has already been reached. The pair now enters an important resistance zone.

For this to be a wave 4 to be followed by a bearish wave 5, it can not cross above the 1.3250 level. I am anticipating some topping action coming out of next week’s open.

If the RSI rallies above 75 though, the momentum is too bullish to consider the bearish scenario.

I don’t have an opinion other than watching for reactions coming out of this resistance zone.

Weekly: Thee weekly chart offers a different look and fibonacci study from a larger swing. We see that the 1.31/1.32 area is 38.2% retracement here, and 78.6% retracement of the swing measured in the daily chart.

Also, the RSI is still below 60, and below 50 as well. The weekly shows strong momentum, but overall bearish mode. Therefore, until the momentum can be shown to have decelerated and turning, I have no opinion on this until probably after next week.

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The USD was pressured to start the week, and continued further. However, it started to fight back against the JPY, and by Friday, it fought back across the board. The EUR/USD for example was projected to 1.2750 to start the week, and topped at 1.2720. Other USD-crosses look to be topping as well, and a pullback that is starting in the US session and may extend to the start of the next week, may provide clues to whether the market’s have actually topped.

EUR/USD Showing First Signs of Reversal

1H: The EUR/USD was in a diagonal triangle according to the 7.8.2010 update. The market did not reach 1.2740, but was held at 1.2720. Then there was a sharp slide in the European session until the start of the US session, when the decline paused.

I would like to see a rally attempt fail and that would help confirm the bearish outlook.

Weekly and Daily: The weekly chart shows that the market is testing a channel resistance, which is holding as of now. If the daily closes near 1.26, it can create an engulfing pattern in the daily, indicative of a reversal.

The weekly also shows one possible count. We may be in a C wave. If C = A, then the projection is 1.15. The count may be that we are finishing up 4 and heading into 5 of C.

The daily chart shows a trendline. If this is broken, there is more likelihood that 1.15 is the projection. (more…)

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.

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After the market put on some risk last week, it spent this week fiddling. USD and JPY crosses as well as commodity related and growth related currencies were all tested this week. The Euro led this week in gains against the greenback. The Japanese yen held its ground after 2 weeks of decline. Timing is becoming ripe for a continuation of risk aversion. The question is whether this week’s actions indicate reversal, or if there is yet another risk supported attempt.

EUR/USD Correction Rally At Resistance Zone

Daily and 4H: This week, the market did not respect continued putting back on risk, pushing the Euro higher against the dollar and other currencies. As I mentioned earlier this week, the rally could reach 1.24, and it has.

The daily chart shows a significant negative reversal, unless the market finds more momentum to push through 1.26. The swing projection targets the 1.17 area.

The 4H chart shows that the rally is still intact, with a rising support.

The RSI is bullish but is flattening. Price action on Friday provided a strong bearish candle, but again, this is not much of a clue. Breaking below the rising trendline should be a major clue to bearish continuation.

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The risk sentiments in the global markets stabilized this week after sliding last week. We saw the Japanese Yen and the Greenback lose some of its flight to safety appeal. Friday saw some of this fizzle but both currencies were still pressured within this week’s context. The GBP however was hit on Friday, as it posted poor manufacturing data. Let’s take a look at what we can expect next week.

EUR/USD Still Pointing South to 1.17

Daily and 4H: The continued slid last Friday below the 1.2150 support. This week, the EUR/USD pair crawled back up to retest the 1.2150 level.

The 4H time-frame shows new negative reversals forming, suggesting this market is still very bearish and that the 1.17 projection is still valid.

The daily chart shows we may be in a third wave, so a sharp decline may be coming next week.

However, I am not so convinced the internals of this week’s rally correction is over. So monitor the rising support in the 4H and 1H charts. If that breaks, then it is more likely the market is ready to head lower to 1.17.

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Last week, there was a slide in commodity related currencies, and risk correlated pairs. The Japanese yen and US Dollar were beneficiaries of this environment. This week, we saw this dynamic reverse a bit. Still, this may still be just consolidation setting up for continuation. On the other hand, it is always prudent to entertain the reversal scenario as well. Let’s juggle with these two scenarios entering into the next week.

EUR/USD Supported at 1.2150

Daily and 4H: The 1.2440 (61.8% retracement) level was tested, and resistance held up. The 1.2150 area is the current support, and was also respected.

If the market breaks below 1.2150, a swing towards 1.17 is suggested.

A break above 1.2440 suggests a continuing consolidation that may retest this week’s high at 1.26.

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Weekly Technical Update: Rotation Out of Risk and Commodity

Last week, I mentioned we should be getting ready for a rotation out of risk into commodity. This week, we saw commodity and commodity related currencies fall sharply. The Yen was a strong performer this week in the risk adverse environment. The Euro however, after exhausting declines, have finally bottomed for now near 1.22, and may be in an intermediate correction. By rotating out of equities and commodities, investors may be at the moment rotating into bonds, and treasuries.

EUR/USD Finds Short-term Bottom

Daily and Weekly: From the daily time-frame, we can see a bigger possible rally. I know just yesterday, I wrote “Bottom-pickers Go Away!” Well, signs are now finally showing a possible bottom. But I would still carry the same precaution and limit my expectation of a rally attempt.

The daily shows the 1.31 area at the 61.8% retracement, also coincident with where the SMA 50 should be, as well as a previous minor support turned into resistance. This is the furthest I would expect the rally to reach before another attempt at breaking the 1.24 support zone.

This means the market may have a tough time getting past here. But even before 1.31, 1.2750 is an important area to break above. Not shown here, but it is 61.8% retracement of the down swing from the start of May. The market may actually turn back down at the 1.2750 level.

A possible wave count is given, but is not resolved. From this scenario, the correction can actually reach 1.35. However, I am skeptical of that since so much resistance is at 1.31. (more…)

This week was an important one to assess how the market is reacting to last week’s shaker. The fundamental front is dominated by EU woes but the market is also starting to realize greater structural implications globally. The discussion now is whether this current crisis will derail the recovery in Europe and the US.

Intermarket Analysis

The US is plagued by realization of structural faults too as the market now all knows that the major US banks did not have one losing day trading in the Q1 2010. This eerily reminds me of Madoff’s equity curve, which was incredibly and improbably consistent. That type of consistency should call for attention, yet the banks slipped under the radar until Goldman Sachs was brought under criminal investigation.

The worrying sign here is that there appears to be no real improvement. The structure of our finance system has clearly remained unchanged, and possibly even encouraged by bailouts. The market’s confidence in the Euro and Pound has been dropping, which has made the Greenback pretty. However, I suspect that we are going to continue a commodities rotation, evident by the persistent surge in oil and gold. If structural changes are to come, the market may even accelerate this rotation process.

EUR/USD

4H: Looking at a short-term time-frame, we see that the Euro continues to be pressured. The market formed a negative RSI reversal this week suggesting a swing projection to 1.23, 1.2350. The RSI is in the oversold territory but reflects healthy bearish momentum.

Monthly: The monthly is just a reminder of the bearish scenario. With a break below 1.2350, 1.23, we may see a drop to 1.15, 1.14.

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