•Euro looking to carve out lower top by falling trend-line and fib retrace
•Dollar/Yen outlook shifts as market contemplates retest of key trend lows
•Cable rallies above 1.6500 but gains not sustainable
•Dollar/Swiss still carving out inverse head & shoulders base
•Dollar/Cad upside projected back towards 1.1800 over coming weeks
•Australian Dollar well capped on rallies above 0.8100
•New Zealand Dollar bearish bias intact despite recent gains
EUR/USD – We remain very bearish on the pair and view the latest rally as merely corrective in nature, with the market attempting to seek out a fresh lower top below 1.4175 ahead of the next drop back through 1.3750 and towards our measured move head & shoulders objective by 1.3250 over the coming weeks. There is a solid confluence in the 1.4010-1.4040 area, with falling trend-line support off of the 2009 highs, the 61.8% fib retrace off of the 1.4175-1.3750 move and the 50% fib retrace off of the 1.4340-1.3750 move all converging in this area. As such, we view any rallies above 1.4000 as formidable sell opportunities and should be used to build on any existing short positions. Ultimately only back above 1.4175 gives reason for concern. Strategy: SIDELINED FOR NOW; LOOK TO SELL
USD/JPY – Price action in the pair has been extremely choppy with the latest sharp pullback forcing a shift in our bias and suggesting that deeper setbacks are now on the horizon. Look for a break below 95.55 over the coming sessions to open a more significant drop towards the 93.55-85 area which has offered itself as a solid support zone in 2009. Below 93.55 should force yet another wave of selling to ultimately challenge the multi-year and 2009 lows by 87.15. Back above Friday’s 97.20 highs will be required to delay bearish outlook. Strategy: SIDELINED FOR NOW; AWAIT CLEARER SIGNAL
GBP/USD – The double top scenario that we had anticipated in the previous week has failed to play out as of yet with the latest bout of consolidation threatening the bearish formation. Nevertheless, the market has recently failed by falling trend-line resistance off of the 2009 highs and we look for a lower top to carve out below 1.6620 ahead of a fresh drop over the coming sessions back below 1.6185. A break below 1.6185 will be required to accelerate declines and increase the probability for a retest of 1.5800 and deeper drop towards the 1.5000 area over the medium-term. A close above 1.6665 negates. Strategy: SIDELINED FOR NOW; LOOK TO SELL
USD/CHF – It is too difficult to recommend any formal positions at current levels but we are still hanging on to the idea of the formation of a major inverse head & shoulders pattern, to be confirmed on a break back above 1.1000. A fresh higher low is now sought out above 1.0650 in anticipation of the move back through neckline resistance at 1.1000 over the coming days. Ultimately, only back below 1.0650 would give reason for concern. Strategy: SIDELINED FOR NOW; LOOK TO BUY
USD/CAD – The very non-classic formation of an inverse head & shoulders basing pattern talked about in the previous “Weekly Classical” has now triggered and we are projecting fresh upside over the coming weeks back towards the 1.1800 area, by the previous trend highs from mid-May. Any setbacks are now seen well supported on dips ahead of 1.1000, with only a break back below this psychological barrier giving reason for concern. Strategy: SIDELINED FOR NOW; LOOK TO BUY
AUD/USD – Dips have been very well supported in the 0.7800’s and the market has chosen to enter a period of consolidation after posting fresh 2009 highs by 0.8265 in early June. We had been looking for a double top scenario in the previous week, but this has failed to play out with the consolidation nearly negating the pattern formation. We still however retain a bearish bias and look for a lower top to carve out below 0.8240 ahead of the next major drop below 0.7825-50. Only back above 0.8265 negates outlook. Strategy: SIDELINED FOR NOW; LOOK TO SELL
NZD/USD – The market has been in the process of consolidating the latest setbacks off of the 2009 highs by 0.6600 set in early June. We had established a short position in the previous week and after booking profits on half at 0.6300, we were taken out at cost on the remaining half of the position. While we still retain a bearish bias, we will stand aside at current levels and await a clearer signal. Any rallies should be well capped ahead of 0.6500 to keep the toppish structure intact, with a break back above the psychological barrier and 78.6% fib retrace off of the 0.6600-0.6155 move to likely negate and open the door for a retest of 0.6600 and fresh upside towards 0.7000. Back under 0.6355 should accelerate declines. Strategy: SIDELINED FOR NOW; LOOK TO SELL
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com. If you wish to receive Joel’s reports in a more timely fashion, e-mail [email protected] and you will be added to the “distribution” list.
Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)
“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)
“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)