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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The Euro continues to be pressured, but the greenback is giving back some of its recent strength as well. On the other hand the Japanese currency stalled its slide, though there has not been any significant show of strength. These developments may thus be corrective so let’s continue to stalk them for a return of dollar strength, and/or Japanese yen weakness. Meanwhile, commodity currencies such as the AUD and the CAD continue to firm up along with gold and oil.

EUR/USD: 1.3050 Target Shelved as Market Consolidates

Daily and 4H: The EUR/USD has been projected to slide to the1.3050 area. The week began in the direction of this outlook, but failed to break below the previous low at 1.3280.

A rally is materializing as we can see in the 4H time-frame. The daily time-frame shows a reversal combination to end the week as well.

This all suggests some furthering of the near-term bullish attempt.

Remember however that the market is in an established bearish mode, so stalk this current rally as a correction.

The 4H chart shows a swing projection can bring the pair to 1.36. The RSI in this scenario would reflect sideways instead of bearish overall momentum.

The daily RSI still shows bearish momentum and may still do so after a rally to 1.36. (The range has been staying below 60).

So stalk the current rally towards 1.36 and see if topping action and a bearish attempt can follow. If so, look for the market to essentially range between 1.36 and 1.33 with a bearish bias.

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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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Two weeks ago, the Greenback was the top performer, followed by the Japanese yen. Then, the Japanese yen we the highlight of last week. This week, the rotation comes to the commodity currencies such as the Loonie and the Aussie. Let’s take a look.

EUR/USD Awaiting Breakout from Consolidation

I was correct to update last week that the bullish attempt on Friday was not to be considered a bullish signal. Instead the market did indeed retest the 1.3450 area, but bounced off of it this week.

Weekly and Daily: The EUR/USD is still in congestion. Looking at the daily, we see that it has been consolidating with a slight downward tilt since the start of February. The 1.3450 area provided support, while each rally attempt falls shorter and shorter (congestion).

Looking at the weekly, we see that the last 4 weeks have been without direction. However, we can see in price and momentum, that the market is very bearish and without any bullish signs, looks to continue to 1.30 area. (78.6% retracement).

On the other hand, the current support is strong and has held up. So wait for a break below 1.3450 to confirm outlook to 1.30 area.

For a bullish outlook, which should only be for short-term and monitored carefully, a confirmation requires a break above 1.38 and estbalishing support above this area as well. Then, the target maybe the 1.43 area.

4H: Looking at the 4H time-frame for clues, you can see that the momentum has channeled up, and is currently testing support. the market is also testing tghe 61.8% retracement area of the previous upswing.

If the market stays above 1.35, there may be another bullish swing projection on the upside. This may bring the market near 1.38 area. Remember, this is still in the context of congestion, which is in a larger context of decline.

If the market gets to that point (1.38/1.3850), monitor for topping action, but also beware of a possible break above.

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The USD and the JPY were the strong performers this week. The Greenback is breaking out of its recent consolidation mode. Risk aversion kept the Japanese Yen strong as the preferred safe haven currency. Commodity currencies are subdued, coming off December strength as gold made record highs. The risk aversion also pressured pairs such as the Loonie(CAD) and Aussie(AUD).

EUR/USD: Continuation After Consolidation

Daily and 4H: The EUR/USD is showing bearish strength. It looks like the 1.40 area is after all providing some short-term support as anticipated.

In the daily, you can see a swing projection to the 1.37/38 area. This is the short/intermediate term projection.

In the near/short-term. The market is rallying. This is an expected correction rally, so the strength should be inferior to that of the declining candlesticks.

Then there might be topping action around 1.4250 early next week. A hold there as resistnace would further confirm the bearish outlook to 1.37.

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The first week of the year saw the greenback giving back its gains back, more so to commodity currencies such as the Loonie, Aussie, and Kiwi. Against the Euro and Sterling, it was pretty much sideways. Surging oil prices can be attributed to the strength in the commodity currencies, even more so than the greenback. The Japanese was quite neutral this week, and ended near the levels it started against the EUR and GBP. Let’s take a look at how some of these pairs faired and what we may be able to expect for the upcoming weeks.

EUR/USD: Still in Consolidation

• Weekly: The first week of 2010 is similar to the last 2 weeks of the 2009 for the EUR/USD pair which has shown narrow ranges in the weekly time-frame, following 3 strongly bearish weeks.
• The 1.3800 area is a viable target if the market continues to decline as it is the 50% retracement. Further decline to 1.3500 is a more aggressive target to the 61.8% retracement.
• Daily: The daily time-frame shows that the last 3 weeks has been a flag formation, which has so far been kept below 1.4500.
• The closest significant retracement area is 38.2% or at 1.4560. If the market is able to continue the decline from here, the swing projection can be more aggressive.
• However, further retracement is also possible. The 1.4675 and 1.4775 area.

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