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Choppy Week Hints Short-term Dollar Strength
The Dubai debt scare has subsided. This week’s NFP was the mover on Friday as it came in surprisingly favorable. TNon-farm payrolls dropped by a seasonally adjusted 11K in November, the fewest since December 2007. “The figure was much better than expected, and for the months of September and October the number of job losses was revised lower by a total of 159K. – Nick Nasad“. Also for a transcript of this week’s Live Coverage on the job data among other releases, check out:
Live Coverage: Fundamental and Technical Recap and Outlook & November Nonfarm Payroll Report.
The week ended with dollar strength. for some pairs, action during and after the report release is a breakout, for others the reaction is a test of important levels. Let’s take a look at this week’s price action and the outlook for the upcoming weeks.
EUR/USD: Daily Technical Update 12.04.09 EUR/USD Assessing Non-Farm Payroll Data Reaction
GBP/USD: Daily Technical Update 12.04.09 GBP/USD Stalking Short-term Throwback
USD/JPY Clear-out Confirmed
- Daily and 4H: We anticipated a short-term rally after the market made a 14-year low for the USD/JPY. Instead of reaching the 15-year low, the pair surged back up above 88.00. this confirms our clear-out and turns this into a strength-formation.
- We broke short-term resistance and is breaking intermediate resistance. If the 88.00 area can be re-established as support, we may have a short-medium-term rally towards the 94.00 next couple of weeks. If the declining trendline (near 94.00) is broken, then we can consider a true reversal of USD/JPY.
USD/CHF Friday Surge Puts Pair Near Resistance.
- Daily and 4H: The USD/CHF confirmed that last week’s action was simply a clear-out of the parity level. (Refer to Weekly Technical Update 11/27/2009). This week’s price action re-tested the 1.000 level, broke it, but rallied from the 0.9970 (78.6% retracement) level. Today’s NFP data accelerated a rally from this support.
- In the daily, we see an intermediate trendline broken, so in we are short-term bullish and intermediate term neutral.
- At the moment, the 1.0200 resistance is holding. The 1.0300 level may provide some resistance if that is broken.
- With overbought conditions, we may get a correction decline from 1.0300. This decline should be stalked to see if a strong rally can follow. We’ll get clues on whether the market leans bullish in the intermediate term, or if it is more likely to be neutral, or ranging.
- The 1.0500 area is a major resistance, and the market still remains in long-term bearish mode, so bullish consideration should be short to medium-term.
- Daily and 4H: The EUR/GBP was in ranging action this week, and in fact formed a Head and Shoulder to end the Friday session. Looking at the Daily time-frame, the combination of stochastic readings and candlestick patterns suggest at least short-term bearish interest.
- In the 4H time-frame we see a completed Head and Shoulders suggesting a decline. Meanwhile, the decline that already has materialized completed a bullish Gartley with support at the 0.9000 level.
- There may be some short-term bearish moves next week, but these declines should be stalked. Look for more support at the 0.8930 area, which is 78.6% of the full upswing (not shown here), and a 127.00% expanded retracement (shown in screenshot). Look for bottoming action here.
- Daily and 4H: The scenario labeled “1″ in last week’s post materialized this week. (Refer to WeeklyTechnical Update 11.27.2009).
- We were anticipating the other 2 scenarios since they were going to lead to short-term bearish consideration. In our current case, the market is looking to test the previous resistance. The 153.30 level is intermediate resistance. The 150.30 level is the 78.6% and 127.0% retracement resistance (the yellow box in the screenshots). Look for topping action in these areas, as they would signal a short-term bearish action.
- From this decline, look for bottoming action at the previous short-term powerline at around 146.50. If market can rally from here, a bullish outlook is signaled in the intermediate-term. Otherwise it is still ranging.
- The bullish outlook is within the longer-term ranging outlook with resistance at 163.00.
AUD/USD Still in Consolidation
- Daily: After the break of a long-term trendline, the AUD/USD pair has remained in sideways action. This week saw a rally and then a decline back to the 0.9100 level it started the week with.
- Basically, we are seeing 3-legged downswing, and a test of 0.8900 is likely. If the market pushes the pair below, we can start to consider the bearish scenario. Otherwise, the 0.8900 area is support.
- If we see bottoming action at 0.8900, then we are still in intermediate ranging mode. A break above downsloping trendline would be a signal of a return to bullish mode. Ultimate confirmation of return to bullish mode is a break of 0.9400, but upside may be limited as it nears important long-term resistance around the 0.9700 area.
Fan Yang
Currency Analyst
Commodity Trading Advisor
fyang@cmsfx.com
