Greenback Strengthens Further; Yen Slows

The USD continued to strengthen this week, especially against the EUR, which has been declining broadly as well. There was still an air of risk aversion so the JPY started the week strong but did not have a significant push. The GBP/JPY for example showed ranging action, and the USD/JPY is already showing a possible reversal rally although there may be some short-term resistance. Let’s take a look at the week’s action, and outlook for the weeks ahead.

EUR/USD: Elliott Wave Count – Big Picture

GBP/USD: Eyes Range Support at 1.57

• Daily and 4H: The GBP is showing less weakness than the EUR, but by the Friday session continues to decline. The 4H time-frame shows a break from this week’s consolidation/ranging action. Unlike the EUR/USD is approaching a major support that was established through a long-term range between 1.57 to 1.70.
• The short-term swing projection is the 1.59 level.
• It will be important to monitor price action in this major support zone between 1.57 and 1.59. A break below spells further decline to the 1.53 area (50% retracement and swing projection).

USD/JPY: Bearish Gartley

USD/CAD: 1.11/1.10 Projection

• Daily: The USD/CAD continues to climb in this recent environment of risk aversion and news of China’s tightening of regulations which subdued any strength in commodities and thus commodity currencies such as the CAD, AUD, and NZD.
• The daily time-frame shows the market struggling to reach the previous top at 1.075. The 1.07 is holding as resistance so far in three attemps this week.
• The market may be starting a bullish run in the USD/CAD, but a significant correction would help with timing and could further confirm the bullish mode.
• Weekly: The weekly time-frame shows that the 1.10-1.11 area is an important resistance. So if the markey breaks the 1.075 area, this may be the next resistance.
• This is also an important area as it may coincide with the 200 and 50 MAs in the Weekly time-frame. We will see then if the current rally is a major correction, or whether a long-term rally is starting to take off.

EUR/GBP Bullish Gartley

• Weekly and Daily: The weekly shows a completion of a bullish Gartley at the 0.86 area (78.6% retracement), which is above the swing projection to 0.8550. Last week, I mentioned a possible correction.
• In the daily time-frame you can see there was a very short attempt to the 0.88 before the decline continued. Price action on Thursday and Friday shows possible reversal setting up.
• If the market does bottom here at 0.86 and start next week with a bullish move, further rally could provide a pullback to test the 0.8850 area. If market then tops off here, the bearish scenario is valid and the 0.84 level is the next short intermediate term support.

GBP/JPY: Adjusting Outlook

• Daily and 4H: The yen was very strong last week against the GBP, invalidating the then-bullish outlook towards 153 area (channel resistance in Daily). This week, the yen continues to be strong, but was not able to bring the GBP/JPY down to the 139.50 area (channel support in Daily).
• Instead the market is struggling to break below the 78.6% retracement near 143.80.
• Although the market is not displaying any bullish signals, it completed a bullish Gartley and combined with the bottoming price action is the first sign of possible reversal.
• The 4H time-frame shows the bottoming action that ranged between 147.30 and 144.50 area, altough clear-out action established a lower support at the 143.70 level.
• A break below continues bearish case towards 139.50. A break above 147.35 suggests a swing projection (in Daily) to the 152.50/153 area.

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. CMS 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. Foreign currency trading is not conducted on an exchange. CMS is acting as a counterparty to its clients’ transactions and as a result, CMS’ interests may be in conflict with its clients. Since CMS acts as the buyer or seller in the transaction one should carefully evaluate any trade recommendation provided by CMS or any of its solicitors. Foreign currency trading involves a substantial risk of loss and may not be suitable for all investors. All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.