A Week of Consolidation

Last week, the market remained in consolidation, but sentiments were building. As the EU kicked around the can a little longer regarding the Greece debt situation, the equities market grew more and more impatient, with their trigger fingers hovering above the liquidate button. The risk averse moves started show on Wednesday, 5/5. But it was on Thursday that the US equities market got a panic slide, but a close that pared most of this move. By Friday, the markets is either settling and getting a grip, or it is only a dead cat bounce. This week, I will be incorporating lower time-frames to get closer details of this week’s market moves. Some will also have longer time-frames to see the bigger picture.

EUR/USD and USD/JPY updates (Link)
Addition (Monthly chart)

• Monthly: The monthly chart shows a possible decline all the way to 114 area. Currently there is support at 1.24 area, then 1.19 area before 114 can be reached. These are rough estimates and we may need to adjust with new data from intra-day charts as the market approaches these levels.

USD/JPY Remains in Consolidation, Shelving Bullish Outlook

• Weekly and Daily: The short-term tracking of USD/JPY is provided through the link in the EUR/USD update.
• The weekly time-frame shows that market has failed to turn bullish in the intermediate and long term. Instead, the RSI remained below 60, and the market continues to consolidate.
• We are in the middle of the consolidation zone, roughly between 88 and 95. The broken double top in the daily suggests the pair should attempt to consolidate closer to lower half of the zone, but the strong rejection brings in the question of whether there are silent bulls waiting for the dust to settle when.

GBP/USD Terminal Wave Projection

• Daily and 4H: The GBP/USD has reached our target at 1.45 as anticipated in the previous week’s update.
• I believe the 1.45 area should hold, but a break below that suggests retest of 2009 low near1.35. The “m” pattern seen in the weekly does suggest this scenario, but the rejection at 1.45 seen in the daily suggest the market has expanded its bearish energy so far and consolidation is due.
• Perhaps the pair will return to consolidation zone between 1.48 and 1.55. However I would suspect that a rally attempt would see resistance as early as 1.52.

USD/CAD May Continue Rally

• 4H and 1H: Last week’s update showed the USD/CAD in a consolidation range roughly between 1.0 and 1.02. This week, the market blasted through resistance at 1.02, and found resistance near 1.0750. There was a strong rejection, but we may still continue this rally after the correction.
• The 4H and 1H time-frame show positive RSI reversal with a swing projection towards the previous high at 1.0750. Notice I did not use the entire swing, because I believe there were energy in that rally that won’t be in the next.
• Of course, after the next rally attempt another one to follow can bring the pair further, but as far as a near-term projection of the next attempt, if bullish, may retest the 1.0750 and possibly 1.08.
• 1.08 is an intermediate term resistance.
• This bullish outlook should be reconsidered if the market can break below 1.02. At the moment, if the market breaks above the declining channel resistance the bullish attempt should be confirmed.

EUR/GBP Shows Wild Volatility; 0.860 Tested as Resistance

• Weekly and Daily: The weekly shows that this week’s EUR/GBP slide may be temporary as we ended up with a spinning top (unless something weird happens in the closing hours).
• The weekly also shows that a decline could reach 0.82, though the 0.8450 is the current minor support. Minor in the sense that it was just discovered, but not minor in the sense that there was a major rejection here.
• Basically, we need to look at lower time-frame for clues.
• The daily shows that the current rally went all the way to 0.88 but is struggling to close above 0.86.
• If the market closes below 0.8650, it shows that this previous support area is turning into resistance. Then if next week starts with a decline, we may be heading towards 0.8450, then possibly 0.82.

AUD/USD Remains in Consolidation

• 1H and 15-min: The bigger picture shows the pair in long-term consolidation, but we can also see the AUD/USD in near-term consolidation.
• The 1H time-frame shows a negative RSI reversal suggesting a decline towards 0.8650.
• The RSI is staying below 50, and we can’t even see 60 in the current frame because its the market has been so bearish in the short-term.
• As you can see below in the daily and weekly charts, the 0.8650 is the support for this intermediate-term consolidation. It was referred to as long-term when the discussion came from the 1H and 15-min chart. Look for bottoming there and a rally to retest 0.94 area in the coming weeks.
• however, if the momentum from the current decline continues, and the RSI would then show a break below 40, we can see a decline towards the 0.80 area.

GBP/JPY:  Support Brings GBP/JPY back in Consolidation

• 1H and 15-min: The theme of a sharp risk averse move than a sharp recovery and now uncertainty is broad, but individual pairs carry specific stories. The 1H and 15-min time-frame will look similar to some other pairs.
• The 1H time-frame shows a bullish projection in the near-term to 141 or maybe 140.80 (our previous support). The 15-min shows RSI remaining below 60, and if a larger correction rally is to follow, it will break above 60.
• However the higher time-frame shows the current move in perspective to its bigger picture.
• The 132 low is holding so far. But if it breaks next week, the pair is looking at 120. Fundamentally this is likely to be fueled if there’s more debilitating news in the Eurozone.
• However in the current rally attempt from the 132 low can go to 141.
• the inability to close below 132 suggests strength may be forming.

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

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