The Euro and the Yen Share Bottom Rung

This week, the Euro and the Japanese yen stood out as losers. The Euro remains pressured in the cloud of uncertainty that surrounds the Greek debt situation. The market was also returning to Japanese weakness. April until this week has seen mainly yen-strength, but perhaps this corrective period is over. Finally, commodity pairs could not get that extra push beyond its recent limits. Let’s take a look at how we can prepare for the upcoming weeks, given this week’s action.

EUR/USD Sliding Towards 1.3050 (Link)
Update: The pullback mentioned in the post is not complete. There is a more significant rally. The “pop-up” may provide us with “negative RSI reversals” to start next week.

GBP/USD Correction Complete

• 4H and Daily: We ended last week anticipating a break below 1.53 for a bearish signal for a decline towards 1.49/50. This week started with a gap below 1.53, followed by a pullback that took up the entire week. The Friday session showed that the 78.6% retracement at 1.5450 was held up.
• I mentioned earlier this week that a rally to 78.6% was not preferred in the bearish outlook. The only thing relieving this concern a bit is the relative aggressive bearish price action to the relatively laborious rally that led to a rejection at 1.5450.
• The main thing in the 4H time-frame is that the RSI remained below 60. The short-term target can be the bottom near 1.49.
• The daily time-frame shows the intermediate bearish target at 1.45.

USD/JPY: Bullish Continuation (Link)

USD/CAD Parity Still Holding as Support

• Daily and 4H: Last week ended with a pop up to 1.0215. That was on the back of the Goldman Sach lawsuit induced risk aversion. The market started this week paring that reaction as the Bank of Canada gave hawkish implications to its policy intentions.
• This decline broke below the previous low or 0.9960 and reached 0.9930, but found support and rebounded to the 1.0050 level by Friday’s US session.
• 2 things about momentum. The inability of the RSI in the daily to break below 40 concerns me a bit as it is against the bearish outlook suggested by the negative RSI reversal. As long as the RSI in the 4H chart remains below 60, this current rally can be scratched off as a pullback, and another bearish attempt should follow.
• Many traders and analysts are finding bottoms here at parity. While it is a psychological support, this bottoming may be temporary. The market is bearish in the intermediate and long-term, so it is probably best to fade bullish actions until they prove to be able to create higher highs and lows in the daily chart.
• Look for the rally to top off around 1.0070, but no higher than 1.0100. A break above suggests an extended consolidation. Another holding below 1.01 does not necessarily invalidate that neither, but gives the bearish attempt a better chance. On the bearish outlook, I would not be too optimistic neither until there could be a daily close well below 1.00 such as 0.99.

EUR/GBP Hits 0.8650 Target

• Daily and 4H: If you have been following my posts on the EUR/GBP, you would know the 0.8650 was a bearish projection. (Refer to Tuesday’s video update. The market broke below the 0.8650 projection nearly hitting 0.86, but is now rallying. A rally appears to  be inevitable if today’s close is above 0.87.
• Next week, we will see if this rally is simply a correction before further decline, or if it will be a reversal rally back to resistance area near 0.9150.
• Given the current environment, I believe it is more likely the EUR/GBP continues its bearish scenario. However, we are just done with a 5-wave decline, which means a significant corrective bullish mode should follow in the short-term. This correction rally is what we should be stalking for next week.

AUD/USD: Stalking Corrective Wave

• Daily and 4H: The AUD/USD is extending its correction. This may be the corrective wave after a 5-wave rally the topped off at 0.94.
• It could be more significant than the previous 2 corrections and could reach the 0.9025 area.
• The RSI in the 4H chart would dip below 40.
• The RSI in the daily, should test 40, or maybe even supported at the previous lows near 46.
• Essentially, anticipate the bullish break above 0.94 scenario first. If the daily RSI breaks below 40, then consider the bearish reversal scenario.

GBP/JPY:  Stalking Impulse Wave Rally

• Daily and 4H: If you look at last week’s update on the GBP/JPY, you would see that the bullish outlook has been developing as anticipated. The market came down to test 139.30, and rebounded.
• There is not too much to update except that the rally is materiazing and the target near 147.0 is viable. However, look for some near-term resistance as the rally approaches 145.0

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

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