Weakness Stays with Greenback; Yen Might Start Sliding as Well

This week, The US dollar continued to lose 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 has slid across the board. The Japanese yen may also start getting pressured, but only early signals are given to this outlook. Let’s review the technical developments for this week.

EUR/USD Nears Last Resistance Zone for Bearish Outlook (Link)

USD/JPY Remains Bearish with Negative Reversal Signal

• Daily: The USD/JPY fell below its previous support near 86.40, and tested the 86.00 level.
• This came after a rally materializing after a bullish divergence. Because the rally did not reach the previous high near 89.00, the market is showing us a negative reversal. This is a signal when the price high is lower, but the RSI high is higher.
• The projection for this is shown in the chart to about 85.20.
• This is the support zone for the USD/JPY going back to Dec 2009. The timing of the USD/JPY hitting this support, and the EUR/USD hitting an important resistance zone, might give the USD some strength in the next couple of weeks.

GBP/USD Testing Important Resistance Zone

• Daily: The GBP/USD continues to be strong this week. There was a positive reversal spotted last week, and the market continues higher after reaching the projection.
• The RSI did not develope a bearish divergence, a sign of continuing strength.
• I did mention earlier this week that the market should be nearing resistance. The 200-period moving average (in gray), is being tested, and the market continues. It is not testing an important powerline/zone that starts at about 1.57 to 1.5870(61.8% retracement).
• My take is that the market is now ranging, but is overextended to the upside. However, if the market accelerates next week, and the RSI shoots into the overbought zone. I would reconsider.
• If the market finds topping action next week, I will become more confident of this scenario.
• Next couple of weeks appear to be very crucial as the market spends time considering direction from significant powerlines, pivots, resistance, support, whatever technicians call them.

USD/CAD Breaks Below Congestion Pattern

• Daily and 1H: There isn’t much to update on the USD/CAD, except that it indeed broke below the congestion pattern. The target remains the 1.02/1.0180 area, and possibly retest of the parity level.
• The RSI shows ranging momentum, so I would start looking for bottom action soon. The weakness in the USD appears to be bringing it to major supports across the board. Will this help the greenback bounce back?
• If so, I would anticipate sharp reversals, such as a strong rally for USD/CAD from 1.018 next week, back towards 1.04, where the moving averages reside.

EUR/GBP Euro Showing Weakness

• Daily and 4H: The EUR/GBP was seen last week to decline and be supported at 0.8250. This week, the market did indeed continue the decline, but is only showing more confirmation for this outlook today.
• Looking the 4H chart, we see that the latest candle is threatening to break below the 0.8320 area. It broke it, but has not confirmed yet, and the break has not been convincing.
• This does also breaks the SMA 200 in the 4H chart.
• I am interested in seeing the reaction near 0.8250, the 61.8% retracement level. If there is a rally that breaks above the 0.84 area, I am convinced of a continuation rally.
• However, I will be looking for topping action as early as 0.8320.
• Then, the next target for decline is the previous low near 0.81/0.8060.

AUD/USD Struggling to Reach 0.91

• Daily: Last week, I anticipated further rally in the AUD/USD towards the resistance zone around the 78.6% retracement area.
• This week, the market gave us a strong bearish signal, but has not followed through. Instead, the week ended rallying, and testing this week’s high just below 0.91.
• This may complete a 2-swing correction suggesting a bearish attempt following the completion.
• There is possibility of topping action, and a decline towards 0.8550 in the short-intermediate term.

GBP/JPY Breaking Above Congestion Pattern

• Daily: The GBP/JPY did finally break above the congestion pattern we have been stalking the past several weeks now. The break is strong and has impulse type internals. The last few days saw the GBP/JPY slide but this offers a throwback.
• If the market can rally to start next week, it can go towards 140.00, with 138.65 as first resistance.
• The RSI did break above 60 temporarily, but the momentum is not convincing of a bullish rally.
• There is only a slight bias to the upside due to the strength of the rally and the weakness of the subsequent decline. Also, Elliott Wave Principles suggest internals point to bullish scenarios as well in the short-term.
• Perhaps, the Japanese yen will also take a hit. The rally in EUR/JPY and GBP/JPY is more probable if the USD/JPY can find a bottom and rally.

Fan Yang
Currency Analyst
Commodity Trading Advisor
fyang@fxtimes.com

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

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.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

GBP/USD Hits Positive Reversal Target

• Daily: In last Friday’s Weekly Technical Update, it was noted that the GBP/USD developed a positive reversal (when the RSI low is lower or equal, but the price low is higher). The swing projection to 1.5610 was projected. The market reached 1.5637 already.
• I mentioned that this pair now enters a zone of resistance above 1.56. You can see in the daily that this is the zone between 50 and 61.8% retracement.

• 1H: The GBP/USD in the 1H chart also shows a rally following a positive reversal. The projection to 1.5625 was reached. This came after a bearish divergence was formed.
• This suggests that the momentum has slowed, but the bearish attempts are in the near-term, and not strong enough to reverse the trend.
• Now we are pushing into resistance again. Some traders find this to be a scalping opportunity, but for the intermediate term, the rally is still intact, and there are no signs of reversal.
• However, being that the market is testing resistance, the resistance zone above 1.56 should be monitored for topping action.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

Today, the Japanese yen fell across the board throughout the Asian and European session, and has so far held those gains in the US session. The GBP/JPY is breaking out of congestion as well as the EUR/JPY. There is a pullback in the USD/CAD, and there is a rally in the USD/CHF to establish a bottom. I will also follow up with developments in the EUR/GBP and XAU/USD Gold.

USD/CHF Establishing a Bottom

• 4H: Following up with yesterday’s update, “Assessing Possible Bottom“, indeed a rally emerged from the 50 period moving average in the 4H chart. The rally is strong, so the projected path of the rally from yesterday’s post should be revised.
• We could extend the current rally to 1.0630 and complete a 100% swing projection.
• If the rally continues, there is more resistance at 1.068/70 area. Then there is more resistance that could exist as the SMA 200 and 161.8% expansion.
• So basically, the pair is establishing a bottom but after such a strong decline in previous weeks, the market has a lot of resistance just above. The logical thing to expect is some declines from there as the market may still be bearish or at least ranging. However, if these levels break easily, that should be a very strong signal that the market is both cover shorts and putting on longs.
• One more note is that the RSI is rising above 60, a violation of bearish momentum. It is at least suggesting ranging action if not bullish.

• Daily: The daily chart shows the market coming out of a bottom after a bullish divergence. We see that unless the market breaks above 1.07, there is a negative reversal (RSI high getting higher while price high staying lower or equal). A break above eyes 1.09, 38.2% retracement of the entire downswing.
• The resistance may also be a factor of 50 period moving average  in the daily.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

GBP/JPY: An Impulse is Born Out of Congestion

• Daily: Yesterday’s interpretation of a positive reversal anticipated a rally after a correction. The market indeed continued to rally, and an impulse wave is born. I will look at the internals in the chart below, but first from the chart above, I want to note that the market broke above congestion resistance, but there is still resistance at 136.40 (50% retracement).
• A throwback may be a good test of whether the current bullish attempt is sustainable.
• The blue indicator on the bottom is the Choppiness index (14). When the index is high, or rising, the choppier and stronger the retracement. When this happens, to me the market is entering or is in a ranging mode. When the choppiness index declines and is low, it means the market has entered a trending mode. The trending mode is usually shorter in time than ranging mode, and so you see that the oscillations should be dominated by rises (I have not tested this empirically, feel free to check out the choppiness index in VT Trader).
• The main point is that the index is starting to turn down, meaning the market is starting to come out of the ranging mode it has been in since June.

• 4H: The rally is convincing the 4H time-frame, as we can clearly see an impulse wave developing. If so, we are in the terminal wave 5, and a correction should follow.
• Since the 136.40 level offers resistance, the market may pause there.
• Assuming that, a correction throwback ideally stops above 133.60, but can still extend to 133.00 and be considered wave II.
• Looking back at the daily, if the market does continue rallying, a target for the swing is the 140 area.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

EUR/USD Might be Developing the Last Wave of a Zig Zag

• Daily: The 1.30 resistance has cracked. The outlook may be changed since the market first tested the 1.30 level. However the bearish scenario still exists ahead of the short-term bullish outlook. An important resistance exists at 1.3250. The market may be respect this if this rally as a wave 4. If that is the case, we are in the last wave of a zigzag correction to be followed by wave 5, down towards 1.1880.
• However, if the market climbs above 1.3250, it is likely wave 5 was already complete, and we are in a major correction, and we may only be in the first leg of that correction. There may still be a decline to follow, but that should not reach 1.1880, and should be treated as a correction since the mode has switched to bullish.
• The weekly chart shows this entire decline in 2010 and where a stronger correction can extend to.

• Weekly: The weekly chart shows that the market has been rising sharply, and consistently over the past 8 weeks. The bullish scenario might extend further to 1.35/36 area, the previous consolidation zone. This will also test the 50 moving average in the red, and the 50% -61.8% retracement zone.
• The RSI should be at 60. I would say this is the test of long-term bullish strength. For now, intermediate term strength appears to be holding, and the long-term look is ranging for now.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

The first global session of this week started with some risk appetite. The US Dollar pretty much started to decline as soon as the week started as global equities rallied and thus it was not demanded as a safety currency. Japanese yen gained initially, but is struggling to keep those gains in the late European and early US session. I will briefly take a look at charts of EUR/USD, GBP/USD, USD/CAD, AUD/USD, GBP/JPY, EUR/JPY, and USD/JPY.

USD/CHF: Assessing Possible Bottom

• Weekly and Daily: Trying to find a bottom after a sharp decline is a dangerous endeavor. Traders liken it to “catching a falling knife”. Some say you will have “smelly hands” for trying to catch the bottom. Also, the weekly chart shows no real signs of reversal yet.
• With that  being said, let’s go ahead to see if we find any clues for a bottom in lower time-frames. Before that, I should note the RSI in the weekly is still above 40, after it was in very overbought levels. This did happen when the SMA50 was below SMA200, so really the situation is wide ranging action.
• The daily shows possible double bottom action if the market can rally and close above 1.0560. As always though, a throwback to confirm is necessary especially for a bullish outlook after a strong decline.
• The target for a rally if the 1.0560 is broken is 1.09. This is the 38.2% retracement of the decline from the 1.17 top, seen in the Daily chart.

• 4H: The 4H chart shows a consolidation that may have completed a and b, but c may not be complete. Sure there is resistance at 1.0560, but the wave form of c is incomplete and should see another rally in my opinion.
• In any case, I won’t try to force a count but let the market resolve the current consolidation.
• This basically helps me prepare for a breakout up top if there is one. Even a break of 1.0560 is not a bullish signal just yet until we see “c” complete and a subsequent decline to prove to be a throwback. Then, we can say we have established a bottom.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

USD/CAD Eyes 1.02 if Support Breaks

• Daily and 1H: In an update last week on the USD/CAD, I mentioned that the currency pair was ready to break below the congestion pattern, after completing 5 waves.
• We can still have waves 6 and 7 if the support holds. However, if the support fails, the near-term target is just below 1.02, then the parity level.
• The support in the 1H chart has already broken, and the RSI is attempting to break below 40. There is also a moving average crossover.
• These may already be signs that the market is heading towards the near-term target below 1.02.

Fan Yang
Currency Analyst
Commodity Trading Advisor

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.