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USDCHF
The 3-week downtrend channel has been violated a number of times in the past 24 hours, but as of yet the bulls have failed to capitalize on the upside break and the pair is continuing to stutter around the trendline resistance.
We are still short at 1.0530 from yesterday’s trade recommendation (taking the view that a lack of directional impetus from either the bulls or the bears made it a prime range-trading environment) and are looking at a first target of 1.0450 (Monday’s low), with 1.0400 (double bottom seen last week) as a possible extended target.
Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
The 3-week downtrend channel has been violated a number of times in the past 24 hours, but as of yet the bulls have failed to capitalize on the upside break and the pair is continuing to stutter around the trendline resistance.
We are still short at 1.0530 from yesterday’s trade recommendation (taking the view that a lack of directional impetus from either the bulls or the bears made it a prime range-trading environment) and are looking at a first target of 1.0450 (Monday’s low), with 1.0400 (double bottom seen last week) as a possible extended target.
Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
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GBPUSD
After a choppy and indecisive few days trading, we feel GBPUSD is gathering momentum for a move lower –a view based on yesterday’s break below the significant 6-week uptrend and reinforced by a bearish engulfing candlestick on the daily chart over the last 2 days of this week.
We now look to sell around 1.5200 levels –the back side of the 6-week downtrend seen at 1.5210 –and await a return to 1.5125 (yesterday’s low). Further downside is highly possible but likely to become laboured below 1.5125 as trendline support is currently seen around 1.5110 and a significant former pivot level remains at 1.5080. Should we managed to conquer those supports, there is a much clearer path towards the next downside targets of 1.4992 (100-day moving average), then the 12 Jul low 1.4949.
The risk-reward profile does look a little edgy should we break back above the uptrend at 1.5210, with next resistance not seen until 1.5350 (19 Jul high), 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high).
After a choppy and indecisive few days trading, we feel GBPUSD is gathering momentum for a move lower –a view based on yesterday’s break below the significant 6-week uptrend and reinforced by a bearish engulfing candlestick on the daily chart over the last 2 days of this week.
We now look to sell around 1.5200 levels –the back side of the 6-week downtrend seen at 1.5210 –and await a return to 1.5125 (yesterday’s low). Further downside is highly possible but likely to become laboured below 1.5125 as trendline support is currently seen around 1.5110 and a significant former pivot level remains at 1.5080. Should we managed to conquer those supports, there is a much clearer path towards the next downside targets of 1.4992 (100-day moving average), then the 12 Jul low 1.4949.
The risk-reward profile does look a little edgy should we break back above the uptrend at 1.5210, with next resistance not seen until 1.5350 (19 Jul high), 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high).
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USDJPY
Yesterday we outlined the two possible scenarios in play for USDJPY –the first being a potentially bullish symmetrical triangle pattern with a target at 88.15, and the second one a larger bearish flag pattern which had not yet been activated. That latter pattern now looks to have become activated by the sell-off through trendline support at 87.00-05, and with that we now feel that the smaller symmetrical triangle pattern is as good as dead in the water.
The classically defined target on the downside for this new flag pattern is 84.30 with supports ahead of there eyed at 86.27 (16 Jul low) and Nov 2009 lows of 84.83; but as we have mentioned a couple of times recently, down at those levels we would be playing Russian roulette with possible BoJ intervention so anything below 85.50 seems an ambitious enough take profit level for our fear/greed ratio.
Any rallies from here are likely to meet fresh sellers around 87.15-20 (back side of the flag) where those who missed the break-out first time around will want to jump in, then further resistance seen at 87.57 (this week’s high from 20 Jul), 88.00 (former pivot), 89.15 (12 Jul high) and 89.50 (28-29 Jun high).
Yesterday we outlined the two possible scenarios in play for USDJPY –the first being a potentially bullish symmetrical triangle pattern with a target at 88.15, and the second one a larger bearish flag pattern which had not yet been activated. That latter pattern now looks to have become activated by the sell-off through trendline support at 87.00-05, and with that we now feel that the smaller symmetrical triangle pattern is as good as dead in the water.
The classically defined target on the downside for this new flag pattern is 84.30 with supports ahead of there eyed at 86.27 (16 Jul low) and Nov 2009 lows of 84.83; but as we have mentioned a couple of times recently, down at those levels we would be playing Russian roulette with possible BoJ intervention so anything below 85.50 seems an ambitious enough take profit level for our fear/greed ratio.
Any rallies from here are likely to meet fresh sellers around 87.15-20 (back side of the flag) where those who missed the break-out first time around will want to jump in, then further resistance seen at 87.57 (this week’s high from 20 Jul), 88.00 (former pivot), 89.15 (12 Jul high) and 89.50 (28-29 Jun high).
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EURUSD
As the credibility of the European bank stress tests is put up to increasing scrutiny, the bears continue to pile the pressure on EURUSD; and in the last 24 hours we have seen the 3-week uptrend channel break down, leading to a low of 1.2733.
From here the risk-reward profile strongly favours short positions, so we would look to use the back side of that 3-week uptrend as a good entry level for shorts; that trendline resistance is seen at 1.2790 currently, so we’d be happy getting in around there and setting a stop just above 1.2830 (yesterday’s US session high). First destination on the downside will be the 14 Jul low 1.2683, although it’s worth noting that today that level coincides with a very short-term downtrend support so the pair will likely bounce off there on the first attempt. Ultimately we see this bearish trend eventually taking another look at 1.2522 (13 Jul low) and 1.2483 (2 & 6 Jul lows), and very possibly a further extension back towards 1.2000.
Should the bears relent enough for the pair to break back within the uptrend channel at 1.2790, expect further selling interest to lie around 1.2840 (support-turned-resistance from earlier this week), the 100-day moving average 1.2887, and 1.2925.
As the credibility of the European bank stress tests is put up to increasing scrutiny, the bears continue to pile the pressure on EURUSD; and in the last 24 hours we have seen the 3-week uptrend channel break down, leading to a low of 1.2733.
From here the risk-reward profile strongly favours short positions, so we would look to use the back side of that 3-week uptrend as a good entry level for shorts; that trendline resistance is seen at 1.2790 currently, so we’d be happy getting in around there and setting a stop just above 1.2830 (yesterday’s US session high). First destination on the downside will be the 14 Jul low 1.2683, although it’s worth noting that today that level coincides with a very short-term downtrend support so the pair will likely bounce off there on the first attempt. Ultimately we see this bearish trend eventually taking another look at 1.2522 (13 Jul low) and 1.2483 (2 & 6 Jul lows), and very possibly a further extension back towards 1.2000.
Should the bears relent enough for the pair to break back within the uptrend channel at 1.2790, expect further selling interest to lie around 1.2840 (support-turned-resistance from earlier this week), the 100-day moving average 1.2887, and 1.2925.
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USDCHF
The 3-week downtrend channel continues to direct price action in the short term, but trendline resistance has already been under threat this morning around 1.0515. Given that the bears looked unable to muster a decent assault on 1.0400 at the end of last week, they are likely to capitulate soon enough in defending this trendline too.
Having said that, it doesn’t look like the bulls are all that feisty for a move higher either, so perhaps we will be confined to ranges for the time being. If that’s the case, we think that current levels (1.0530) actually look pretty attractive for short entry given the previous price action around 1.0550-60. We’d be satisfied using 1.0580 as our stop, and set a first target on the downside of 1.0450 (Monday’s low), with 1.0400 (double bottom seen last week) as a possible extended target.
Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
The 3-week downtrend channel continues to direct price action in the short term, but trendline resistance has already been under threat this morning around 1.0515. Given that the bears looked unable to muster a decent assault on 1.0400 at the end of last week, they are likely to capitulate soon enough in defending this trendline too.
Having said that, it doesn’t look like the bulls are all that feisty for a move higher either, so perhaps we will be confined to ranges for the time being. If that’s the case, we think that current levels (1.0530) actually look pretty attractive for short entry given the previous price action around 1.0550-60. We’d be satisfied using 1.0580 as our stop, and set a first target on the downside of 1.0450 (Monday’s low), with 1.0400 (double bottom seen last week) as a possible extended target.
Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
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GBPUSD
The fickle short-term trends in GBPUSD are making trading conditions difficult, and indeed the 1-week downtrend channel we highlighted yesterday morning has already broken its originally defined ceiling –a development made all the more frustrating by the fact it came very shortly after the pair had broken through 1.5230 support (which would have suggested in our minds that the next significant leg of this move would be to the downside).
Given this whipsaw action, we prefer to steer clear of fresh trade entry for the time being, and should the bulls clear the next significant resistance at 1.5350 (19 Jul high), we could be induced to consider longs once more. Above there the likely targets are 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high).
Should the pair opt to go lower instead, yesterday’s low was 1.5154, and next supports are seen at 1.5080 former neckline, 100-day moving average 1.4992, then the 12 Jul low 1.4949.
The fickle short-term trends in GBPUSD are making trading conditions difficult, and indeed the 1-week downtrend channel we highlighted yesterday morning has already broken its originally defined ceiling –a development made all the more frustrating by the fact it came very shortly after the pair had broken through 1.5230 support (which would have suggested in our minds that the next significant leg of this move would be to the downside).
Given this whipsaw action, we prefer to steer clear of fresh trade entry for the time being, and should the bulls clear the next significant resistance at 1.5350 (19 Jul high), we could be induced to consider longs once more. Above there the likely targets are 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high).
Should the pair opt to go lower instead, yesterday’s low was 1.5154, and next supports are seen at 1.5080 former neckline, 100-day moving average 1.4992, then the 12 Jul low 1.4949.
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A very interesting picture for USDJPY at the moment with the possibility of both a bullish triangle pattern and a bearish flag pattern currently on the table. Yesterday we highlighted an ascending triangle pattern on the hourly chart with a target at 88.15 which looks to have been activated by the move up through 87.22; but having assessed the subsequent price action, it looks more accurately like this was in fact a symmetrical triangle. The consequences of this shift in definition is a mere 5 pips (the target now 88.20), so our view of the topside prospects remain unaltered;resistance is seen around 88.00 (i.e. might use discretion on taking profit a little earlier than the pattern’s defined target), and further supply remains at 89.15 (12 Jul high) and 89.50 (28-29 Jun high).
What is intriguing however about the current picture is that there is also the possibility of a bearish flag coming into play in the coming sessions, and which currently suggests a break below 86.95 (lower edge of the flag) would be a good trigger for short entry –implying a target of 84.20 below. This bearish scenario does tie in nicely with the recent break of 86.97 (1 Jul low) which opened up the possibility of another plunge towards Nov 2009 lows of 84.83; but once again we should remain cautious that such a bearish target would almost certainly catch the attention of the BoJ in which case intervention may be a very real and ruthless threat.
A very interesting picture for USDJPY at the moment with the possibility of both a bullish triangle pattern and a bearish flag pattern currently on the table. Yesterday we highlighted an ascending triangle pattern on the hourly chart with a target at 88.15 which looks to have been activated by the move up through 87.22; but having assessed the subsequent price action, it looks more accurately like this was in fact a symmetrical triangle. The consequences of this shift in definition is a mere 5 pips (the target now 88.20), so our view of the topside prospects remain unaltered;resistance is seen around 88.00 (i.e. might use discretion on taking profit a little earlier than the pattern’s defined target), and further supply remains at 89.15 (12 Jul high) and 89.50 (28-29 Jun high).
What is intriguing however about the current picture is that there is also the possibility of a bearish flag coming into play in the coming sessions, and which currently suggests a break below 86.95 (lower edge of the flag) would be a good trigger for short entry –implying a target of 84.20 below. This bearish scenario does tie in nicely with the recent break of 86.97 (1 Jul low) which opened up the possibility of another plunge towards Nov 2009 lows of 84.83; but once again we should remain cautious that such a bearish target would almost certainly catch the attention of the BoJ in which case intervention may be a very real and ruthless threat.
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Just as we suspected in yesterday’s report, the brief visit above 1.3000 (1.3028 the high) soon attracted the attention of bears who re-emerged in numbers and drove the pair all the way back down to lows of 1.2839.
We feel that at these lofty levels, a short bias seems the most attractive in terms of risk-reward (recall that the rally to 1.3028 represented a 9.5% appreciation in the space of just 6 weeks), and significant resistance level appear to cap the upside to 1.3095-1.3125. That zone of anticipated selling interest includes the triple whammy of 10 May high (1.3095), the 4-week uptrend channel resistance at 1.3115, and also the 38.2% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876 which comes in at 1.3125.
The tricky part here is selecting favourable entry levels and a small enough position size to tolerate a wide stop; 1.2950 would be the ideal area for us to re-load longs, with the view that the pair should at the very least re-visit the lower edge of this 4-week uptrend channel in the coming days (currently seen at 1.2745). We still expect some buyers to lie around 1.2780 (a former pivot) and 1.2683 (last Wednesday’s low).
Just as we suspected in yesterday’s report, the brief visit above 1.3000 (1.3028 the high) soon attracted the attention of bears who re-emerged in numbers and drove the pair all the way back down to lows of 1.2839.
We feel that at these lofty levels, a short bias seems the most attractive in terms of risk-reward (recall that the rally to 1.3028 represented a 9.5% appreciation in the space of just 6 weeks), and significant resistance level appear to cap the upside to 1.3095-1.3125. That zone of anticipated selling interest includes the triple whammy of 10 May high (1.3095), the 4-week uptrend channel resistance at 1.3115, and also the 38.2% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876 which comes in at 1.3125.
The tricky part here is selecting favourable entry levels and a small enough position size to tolerate a wide stop; 1.2950 would be the ideal area for us to re-load shorts, with the view that the pair should at the very least re-visit the lower edge of this 4-week uptrend channel in the coming days (currently seen at 1.2745). We still expect some buyers to lie around 1.2780 (a former pivot) and 1.2683 (last Wednesday’s low).
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