A Week of Consolidation

This market was in a broad based consolidation. Even cross pairs created from the weakest paired with the stronger currencies such as EUR/CAD is finding bottoms. In these periods, it is important to follow the structure of the consolidation. It is also important to be patient in dealing with consolidations because most likely we premature see them complete. Let’s see if we can anticipate next week’s developments.

EUR/USD’s Pullback Tests Broken Support as Resistance (Link)
Last week, I noted a target of 1.3050, which the market missed. 1.31 held, and the market is in another correction rally. The rally hit 1.3340, and is declining, and watching this decline might give you a heads up whether or not the correction is complete.

GBP/USD Terminal Wave Projection

• Daily and 4H: Not too much has changed since last week. The market continued to consolidate although it is showing that it may have topped off near 1.5510.
• The daily chart shows my favorable wave count, where we may have completed c. But I am always cautious when I think a retracement is complete.
• For example, it was easy to say that wave “a” was very unlikely the end of the completion although it satisfied a corrective 3-wave  count. However, we know wave (4) should be different from wave (4), not always, but it can be expected.
• Wave (4) turned out to be more complex, and I am not sure if it is actually finished.
• The 4H time-frame shows that the bears are taking over, as the RSI is now in a bearish range (below 60).
• A break below 1.5150 would create a double top, and suggest a decline towards 1.49 area. If 1.49 breaks, than the next level of resistance is 1.44 area right above the 78.6% retracement level which is about 1.4330. The swing projection is to 1.45. This is a loose are of targets, but being conservative, we should only expect a decline to 1.45 if 1.49 breaks.

USD/JPY: Positive RSI Reversal in Daily Projects to 96.40

• Daily and 4H: The USD/JPY has completed a correction last week for a continuation rally. This week, the market started with a throwback from 94.40 to test the 93.00 level. The market held. and because price bottom was above the previous bottom while RSI low is a new one, there was a postive RSI divergence suggesting a rally towards 94.50, which was reached Friday.
• Friday’s news offered some risk aversion and the market is not ready to continue until next week.
• The current decline has 2 strong 4-H candles, but still remain above the support of the triangle between 28th and 30th. This offers a chance to test the commitment of bulls.
• If the market continues next week and breaks the current high at 94.56. 96.40 is further confirmed.

USD/CAD Stays Choppy at Parity

• Daily and 4H: Last week, I mentioned that bullish attempts at the USD/CAD should probably be faded, but bullish outlooks are limited until a daily close below 1.00 appears.
• The daily chart shows momentum about to test the bearish range resistance of 60.
• Going back, it was tested July and November 09, and broken February this year. This will coincide with price action testing the 1.02 area as resistance and the SMA 50 in the daily chart.
• The 4H chart shows bullish momentum, although we know this is within the context of a consolidation pattern at a critical level.
• Next week, if the market breaks above 1.02, anticipate a rally towards 1.04. This would satisfy a pattern breakout projection, but beware that it could STILL be part of a more complex correction.

EUR/GBP Consolidating at Support

• Daily and 4H: The market consolidated this entire week after it dropped to 0.8650 last week.
• Looking at the daily, we see that the market creating sideways action as it tests this 0.8650 area as support. The RSI in the daily is turning up and has broken a declining trendline. The RSI in the 4H time-frame has remained in the bearish range
• I think we could be done with an impulse wave down, and there should be a correction. The question is whether this correction is limited in the range we see now. Continuing consolidation is likely to cause a rally.
• If the market breaks above the 87.50 area, it may go to an important powerline at 88.50. This is a level that for me, gives a sense of balance to the entire triangle going back to November 2008.

AUD/USD: Positive Revsersal

• Daily and 4H: A positive RSI reversal is seen in the daily, with a suggested swing projection to 0.9540.
• In the 4-H time-frame, we see a possibly completed W-X-Y correction as the market broke above the declining trendline and the previous high at 0.93. Now there is a throwback. The market declined in mid-US session. The 0.925 area is an area of fibonacci cluster so it is supporting the current decline The 0.920 area is the next cluster. If the market breaks below 0.92, I would reconsider the bullish scenario seen in the daily chart.
• Otherwise, a rally targets 0.9540 level.

GBP/JPY:  Stalking Impulse Wave Rally

• Daily and 4H: The market has been pushing up the GBP/JPY, but is struggling to break above the 145.0/146.0 area.
• Two projections in the daily both go to 147.00 area, which is near the 50% retracement area.
• The 4H time-frame offers a possible bullish gartley formation scenario.That means another swing down to 144.10 area before reversing this short-term correction back to an intermediate term rally.
• Watch for the RSI to stay above 40 in the 4H time-frame or barely break the 40 level before rolling up. Other wise the market either wants to stay swinging around 143.00.
• A break on below 140 suggests a test of 133 area.
• The favorable scenario is a rally swing to 147.00 come next week after a completed bullish gartley at 141.00 (78.6% retracement) level.

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

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