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EURUSD
EURUSD plodded gradually higher at the start of the week, and yesterday managed to overcome 1.4000 resistance setting off a few weak stops;butthe pair only got as far as the 1.4030 supply level before selling interest kicked back in and the pair resumed its ungraceful slump back below the 1.3900 handle.
Heavy trading in Asia means we’re almost back to last Friday’s 1.3850 lows, and prior rebound level, but if ever there was a trading mantra to live by it’s that the trend is your friend; and with this bear market vividly in play we would steer well clear of the temptation to take another long punt ahead of Trichet and co later today.
Instead we remain poised to sell more EURUSD on any bounces back toward 1.4000, and on a confirmed break of this 1.3850 support would look for a quick visit to 1.3750-60 coincing with the next major support and lower bound of the downtrend channel.
EURUSD plodded gradually higher at the start of the week, and yesterday managed to overcome 1.4000 resistance setting off a few weak stops;butthe pair only got as far as the 1.4030 supply level before selling interest kicked back in and the pair resumed its ungraceful slump back below the 1.3900 handle.
Heavy trading in Asia means we’re almost back to last Friday’s 1.3850 lows, and prior rebound level, but if ever there was a trading mantra to live by it’s that the trend is your friend; and with this bear market vividly in play we would steer well clear of the temptation to take another long punt ahead of Trichet and co later today.
Instead we remain poised to sell more EURUSD on any bounces back toward 1.4000, and on a confirmed break of this 1.3850 support would look for a quick visit to 1.3750-60 coincing with the next major support and lower bound of the downtrend channel.
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USDJPY
After a false break lower through the 1-week uptrend yesterday, USDJPY quickly took out stops through 90.35 (38.2% fibonacci retracement of the rally from 84.83 to 93.77) to touch 90.09. However, despite the short term technical picture favouring a resumption of the downtrend (as highlighted in yesterday’s report), the pair met strong buying interesting ahead of 90.00, eliciting a nice bounce back within the uptrend channel, attracting investors wrong-footed by the break to scramble back into their USDJPY longs.
The momentum into the afternoon finally punched through the 91.00 resistance that had represented a major cap over the past week, and currently the pair is sitting just below the upper bound of this 4-week downtrend coming in around 91.15. From here we really need to see a confirmed break (i.e. daily close) above this 4 week downtrend to open up a challenge on the more significant 2.5 year downtrend coming in around 92.00, a development that would firmly shift the bias in favour of a major trend reversal.
After a false break lower through the 1-week uptrend yesterday, USDJPY quickly took out stops through 90.35 (38.2% fibonacci retracement of the rally from 84.83 to 93.77) to touch 90.09. However, despite the short term technical picture favouring a resumption of the downtrend (as highlighted in yesterday’s report), the pair met strong buying interesting ahead of 90.00, eliciting a nice bounce back within the uptrend channel, attracting investors wrong-footed by the break to scramble back into their USDJPY longs.
The momentum into the afternoon finally punched through the 91.00 resistance that had represented a major cap over the past week, and currently the pair is sitting just below the upper bound of this 4-week downtrend coming in around 91.15. From here we really need to see a confirmed break (i.e. daily close) above this 4 week downtrend to open up a challenge on the more significant 2.5 year downtrend coming in around 92.00, a development that would firmly shift the bias in favour of a major trend reversal.
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USDCHF
As we discussed yesterday, the dip lower through the 3 week uptrend line left USDCHF vulnerable to correction lower, and after a quick retest of the back side of the trendline in early Europen trading, the pair dropped rapidly from 1.0570 levels down to 1.0500 support, but much like USDJPY, the pair found bids around the lows and by this morning has staged a strong recovery back above 1.0600.
Obviously with the gravity of upcoming risk events (non-farm payrolls tomorrow), it’s a precarious job to be making a call on the long term direction on the pair from here, but in the short term the technicals strongly favour a correction lower. We are currently trading around the major 1.0610 resistance level, with the major 14-month downtrend resistance now coming in at 1.0630, just ahead of the 1.0643 post-intervention highs.
That’s in addition to the 14-day RSI already toeing the line of overbought territory at 69 and our stochastic oscillator crossover around the 90 level suggesting a correction from overbought levels is imminent. As such, this one’s sell in our view, but keeping risk light and positions nimble will be key in case the US data makes for a USD surge into the end of the week.
As we discussed yesterday, the dip lower through the 3 week uptrend line left USDCHF vulnerable to correction lower, and after a quick retest of the back side of the trendline in early Europen trading, the pair dropped rapidly from 1.0570 levels down to 1.0500 support, but much like USDJPY, the pair found bids around the lows and by this morning has staged a strong recovery back above 1.0600.
Obviously with the gravity of upcoming risk events (non-farm payrolls tomorrow), it’s a precarious job to be making a call on the long term direction on the pair from here, but in the short term the technicals strongly favour a correction lower. We are currently trading around the major 1.0610 resistance level, with the major 14-month downtrend resistance now coming in at 1.0630, just ahead of the 1.0643 post-intervention highs.
That’s in addition to the 14-day RSI already toeing the line of overbought territory at 69 and our stochastic oscillator crossover around the 90 level suggesting a correction from overbought levels is imminent. As such, this one’s sell in our view, but keeping risk light and positions nimble will be key in case the US data makes for a USD surge into the end of the week.
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GBPUSD
Yesterday GBPUSD gave us the tantalizing rally we had been expecting all week, and those alert enough to take advantage of the bounce to 1.6069 were rapidly rewarded with a GBP collapse all the way back down below 1.5900. Easier than taking candy from a baby.
With the outcome of the BoE meeting today by no means clear cut, we prefer to take at least half our profits off the table at this point; this morning’s continuation of the sell-off (to 1.5866 lows so far) is within 15 pips of the Monday lows, and there is likely to be considerable support further down at 1.5833 coinciding with the major 30 Dec low and lower bound of the 2 week downtrend channel.
Any rallies are likely to be capped once more by 1.6080, with the 50-day moving average resistance now coming in at 1.6125 which should attract further selling interest. If the BoE surprises the market with an extension to QE and 1.5833 support breaks down, thereafter look for the pair to target 1.5707 (13 Oct 09 low).
Yesterday GBPUSD gave us the tantalizing rally we had been expecting all week, and those alert enough to take advantage of the bounce to 1.6069 were rapidly rewarded with a GBP collapse all the way back down below 1.5900. Easier than taking candy from a baby.
With the outcome of the BoE meeting today by no means clear cut, we prefer to take at least half our profits off the table at this point; this morning’s continuation of the sell-off (to 1.5866 lows so far) is within 15 pips of the Monday lows, and there is likely to be considerable support further down at 1.5833 coinciding with the major 30 Dec low and lower bound of the 2 week downtrend channel.
Any rallies are likely to be capped once more by 1.6080, with the 50-day moving average resistance now coming in at 1.6125 which should attract further selling interest. If the BoE surprises the market with an extension to QE and 1.5833 support breaks down, thereafter look for the pair to target 1.5707 (13 Oct 09 low).
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EURCAD
Today’s featured pair which is worth bringing onto the radar is EURCAD; as it is currently poised on the lower bound of its major 14 month downtrend channel around 1.4720, and looking at the daily chart, this level also coincides nicely with a major support that has held since 6th October 2008. Today marks the pair’s 10th straight down day, and for our money, this looks like a decent punt for a correction higher.
Obviously the ECB meeting later today isn’t expected to set in motion any structural shift to EUR strength in the coming months, but with the 50 day moving average still at the lofty 1.5050 levels, there’s clearly ample room for a quick 150 pip trip higher without having to conflict with any fundamental assessment.
Today’s featured pair which is worth bringing onto the radar is EURCAD; as it is currently poised on the lower bound of its major 14 month downtrend channel around 1.4720, and looking at the daily chart, this level also coincides nicely with a major support that has held since 6th October 2008. Today marks the pair’s 10th straight down day, and for our money, this looks like a decent punt for a correction higher.
Obviously the ECB meeting later today isn’t expected to set in motion any structural shift to EUR strength in the coming months, but with the 50 day moving average still at the lofty 1.5050 levels, there’s clearly ample room for a quick 150 pip trip higher without having to conflict with any fundamental assessment.
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