USDJPY and EURUSD Technical Analysis

Talking Points:

• EUR/USD Technical Strategy: Flat
• Candlestick Pattern Hints Euro Down Move May Be Brewing Ahead
• Risk/Reward Considerations Argue Against Taking Short Position

The Euro put in a bearish Dark Cloud Cover candlestick pattern, hinting a larger downward reversal against US Dollar may be ahead. Prices launched aggressively higher in the aftermath of last week’s FOMC monetary policy announcement – rising the most in three weeks – but have since erased nearly all of the advance after finding resistance above the 1.14 figure.

Near-term support is now at 1.1220, the 38.2% Fibonacci expansion, with a break below that on a daily closing basis opens the door for a challenge the 50% level at 1.1146. Alternatively, a move back above the 23.6% Fib at 1.1311 clears the way for a test of the 14.6% expansion at 1.1368.

Risk/reward considerations argue against taking a trade at current levels. At 99 pips, the available trading range is smaller than 20-day ATR, which suggests prices are wedged too closely between near-term support and resistance to make for a workable setup. We will remain on the sidelines for now.

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Talking Points:

• EUR/USD Technical Strategy: Flat
• Euro Still Stuck in Quiet Consolidation Within Triangle Chart Formation
• Short Position Favored in Line with Long-Term Bias But Setup Still Absent

The Euro remains locked between the narrowing boundaries of a Triangle chart pattern as prices await a clear-cut directional spark. Prices lost momentum after hitting a seven-month high against the US Dollar in late August and have been unable to find lasting follow-through since.

Triangle top resistance is now at 1.1269. A daily closeabove this barrier clears the way for a challenge of the September 18 high at 1.1459. Alternatively, a dropbelow Triangle floor support – now at 1.1117– opens the door for a test of rising trend line set support set from mid-March, currently at 1.1018.

Needless to say, near-term positioning remains inconclusive. The multi-year trend continues to favor the downside however. With that in mind, we will continue to wait for a selling opportunity in line with the long-term trajectory, waiting on the sidelines in the interim.

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• EURUSD parallel to 1997
• USDJPY and MAJOR reversals in years that end in 5
• Silver ‘macro’ trendline supports argument for commodities

EUR/USD
Weekly

-Recent comments remain valid. That is, “Support is estimated in the mid-1.0800s. Resistance is estimated in the mid-1.1400s (May and June high are 1.1435/65). A break on either side would indicate potential for a larger move.” The high this week was a bit above the cited resistance but it did hold.
-Big picture, EUR/USD has worked higher from long term support but failed again at the 55 week average this week. This is the same average that the rally failed at in August…and November 1997. The November 1997 parallel is interesting because that point marked the short covering rally from extreme weakness into the August 1997 low. In 2015, the same average (55 week) has repelled ‘short covering rallies’ following extreme weakness into the March 2015 low. Understand that every major turning point begins as a ‘short covering rally’. The question then is, ‘when does the short covering rally become a rally with legs?’ Well, if current behavior continues to follow that of 1997, then additional range trading is in store (that probably means back to the 1.0800s then higher again). Traction above 1.15 would suggest something bullish is underway.

GBP/USD
Weekly

-It’s all about the line that extends off of the 2009 and 2011 highs. The long term picture in GBP/USD is bearish due to the behavior at this line and its associated parallels. The rate is at resistance now from the line that extends off of the 2014 and 2015 highs. A push above probably delays anything significantly bearish until near 1.60.

AUD/USD
Weekly

-“COT observations and a tweezer bottom candlestick pattern in AUD/USD on the weekly chart indicate reversal risk towards .7440.”
-.7440 could influence for a pullback but ‘decent’ resistance may not reside until .7532-.7625, the zone defined by the February and March lows.

NZD/USD
Weekly

-NZD/USD triggered a short term double bottom and blew through the target. Given the long term picture, dips should be bought. There probably isn’t solid resistance (as in a place that could cap the bird for at least several weeks or more) until near .70. .70 represents channel resistance and the 200 day average.

USD/JPY
Weekly

-“June’s trade produced a monthly key reversal in USD/JPY.” This key reversal didn’t form just anywhere…it formed at the line that connects the 1995 and 2005 lows. That line was support in 2007 and resistance before the 2008 collapse. The time element is interesting of course too (MAJOR turn every 10 years in USDJPY). Bottom line, the key reversal may have signaled a multi-year top in USD/JPY.

USD/CAD
Weekly

-USD/CAD has plummeted from several pips shy of the long term Fibonacci retracement at 1.3462 (61.8% retracement of 2002-2007 decline). The current juncture, defined by the March high at 1.2834 and a slope level near 1.2720, could influence for a bounce but the larger trend has changed (it’s down).


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Talking Points:

• EUR/USD Technical Strategy: Flat
• Euro Declines After Forming Bearish Candlestick Pattern, Targets Support Below 1.13
• Passing on Short Position Until Risk/Reward Parameters Evolve to Favorable Setting

The Euro moved downward against the US Dollar as expected after prices put in a bearish Dark Cloud Cover candlestick pattern. Sellers now aim to challenge support below the 1.13 figure, with a breach putting the fate of the upswing from mid-March in play.

A daily close below 1.1254, the intersection of the 38.2% Fibonacci expansion and a rising trend line set from early August, opens the door for a test of the 50% level at 1.1180. Alternatively, a reversal above the 23.6% Fib at 1.1346 clears the way for a challenge of the 14.6% expansion at 1.1402.

While it is tempting to take up a short position in line with the long-term trend and broad-based fundamental considerations, we will tactically stand aside. The available trading range is narrower than 20-day ATR, tilting risk/reward parameters against triggering a trade. With that in mind, we remain flat until something more compelling presents itself.




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The EUR/USD pair fell apart during the course of the session on Thursday, as the European Central Bank suggests that more stimulus was coming. Because of this, we are testing the 1.11 level, which of course should be supportive as well. However, the market fell and closed towards the bottom of the range, so it does suggest that more than likely we will continue to go lower. The uptrend line just below been broken would be negative and should continue to bring sellers into this market. Rallies at this point in time would have to be looked at with suspicion.

The USD/JPY pair broke higher during the course of the session on Thursday as we cleared the 120 handle. This was probably a bit of a “knock on effect” as the US dollar strengthened due to the ECB speaking of potential liquidity measures. Because of this, the US dollar of course strengthened everywhere. This is a market that has been consolidating for some time, so the fact that we broke above 120 should not have been a huge surprise. However, we think that the 121 level offers quite a bit of resistance. At this point, we are not willing to get involved.

Talking Points

• USD/JPY fails again near 121.50
• Double top trigger near 120.00

USD/JPY: 1998 High Still an Influence?

The BOJ decision came and went last night with the Bank leaving monetary policy unchanged by an 8 to 1 vote (just as in recent meetings). The price action in USD/JPY in response was actually quite interesting as the exchange rate fell initially then rallied sharply to come within a pip of two-month highs before turning down aggressively. It could all just be month-end shenanigans, but classical technical analysis would suggest the rate is vulnerable here following that second failure in a week around 121.50 as it sets ups a fairly clear double top near the top end of the range.

The near-term cyclical view is predictably a bit of a mess given how choppy things have been these past couple months. However, last week’s high close in USD/JPY did occur exactly 17.2 years (Armstrong Pi cycle) from the high in 1998 so the exchange rate should probably be monitored closely here to see if this latest decline actually morphs into something. Traction under 120.00 would trigger the aforementioned double-top and set the stage for a move towards the bottom end of the range, but it is going to take traction sub-118.00 to get excited about anything of substance developing on the downside.

A daily close over 121.40 would invalidate the potential negative cyclical influence from 1998, but only a move through the 61.8% retracement of the June to August decline at 121.75 would turn the technical picture positive.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

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EUR/USD
Weekly

-For months, FX Technical weekly has been steadfast in that “support is estimated in the mid-1.0800s. Resistance is estimated in the mid-1.1400s (May and June high are 1.1435/65). A break on either side would indicate potential for a larger move.” EUR/USD traded 1.1494 (a bit above the cited level) 2 weeks ago and down to 1.0897 this week. This is support near term. Failure to hold here would make a breakdown a reality. It’s decision time.

GBP/USD
Weekly

-The long term tradable slope in GBP/USD is best described by the line that extends off of the 2009 and 2011 highs and its associated parallels. Right now (10/30) is trading ‘no man’s land’ (not at support and we’re not at resistance) but resistance is 1.5800-1.6000…if it gets there.

AUD/USD
Weekly

-The AUD/USD rally failed 3 weeks ago (we were looking towards .7530-.7625) but bears aren’t in the clear here either. This week’s low registered at a long term median line (albeit downward sloping). Countertrend advances have materialized off of this line time and time again so respect potential for something other than another breakdown.

NZD/USD
Weekly

-NZD/USD continues to act well. After breaking through the August high 2 weeks ago, the rate has put in 2 weeks of consolidation and maintained the breakout level. FXTW maintains that “there probably isn’t solid resistance until near .70. .70 represents channel resistance and the 200 day average.”

USD/JPY
Weekly

-USD/JPY continues to fail in the vicinity of the December 2014 and March 2015 highs. In fact, price action since December 2014 could be forming a giant head and shoulders top. Even if that is the case, sideways action could stretch into February (time of consolidation from Dec 2014 to May = time of consolidation from August 2015 to February 2016).
-Previous comments are still valid; “June’s trade produced a monthly key reversal in USD/JPY. This key reversal didn’t form just anywhere…it formed at the line that connects the 1995 and 2005 lows. That line was support in 2007 and resistance before the 2008 collapse. The time element is interesting of course too (MAJOR turn every 10 years in USDJPY). Bottom line, the key reversal may have signaled a multi-year top in USD/JPY.”

USD/CAD
Weekly

-FXTW wrote previously that “USD/CAD has plummeted from several pips shy of the long term Fibonacci retracement at 1.3462 (61.8% retracement of 2002-2007 decline). The current juncture, defined by the March high at 1.2834 and a slope level near 1.2720, could influence for a bounce but the larger trend has changed (it’s down).” This week’s bearish key reversal could signal the beginning of the next leg lower although price does need to crack the October low in order to instill confidence in the idea.


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Talking Points:

• EUR/USD Technical Strategy: Flat
• Euro Resumes Down Move, Issues Lowest Close in Three Months vs. US Dollar
• Opting to Wait for Improved Risk/Reward Parameters to Re-Enter Short Position

The Euro is back on the defensive against the US Dollar, with prices dropping for a third consecutive day to issue the weakest close in three months. Renewed selling pressure points to continuation of the down move initiated following the formation of a bearish Dark Cloud Cover candlestick pattern, as expected.

Near-term support is in the 1.0818-44 area, marked by a horizontal level established in late May and the 38.2% Fibonacci expansion. A break below that on a daily closing basis sees the next downside barrier at 1.0774, the 50% level. Alternatively, a turn back above the 23.6% Fib at 1.0932 – now acting as resistance – opens the door for a test of the 14.6% expansion at 1.0985.

We are keen to re-enter short after the second half of our short position from 1.1057 was stopped out at breakeven. Risk/reward considerations argue against taking a trade at current levels however as prices sit within a hair of immediate support. We will stand aside for now, waiting for a more compelling setup.

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• EUR/USD summer lows resist but indecision at 30 year trendline (arithmetic)
• USD/JPY median line does it again
• AUD/USD – embrace the slop

EUR/USD
Weekly

-EURUSD broke the summer lows (1.0807/47) last week so downside potential may be realized towards parity (parallel with line from 1995-2008 highs). In fact, those summer lows provided resistance this week. Former support providing resistance is bearish but be aware of the 30 year trendline that EURUSD is sitting on. In other words, be quick to abandon a bearish bias and even turn bullish on a move through resistance (summer lows) lest you be run over by a rally similar in scope to the ones that have materialized from this line in the past. I’ve been tracking SSI down here too. Typically, SSI will register a reading near 2 (or -2 for a bull move) early in a trending move. Despite one of the strongest 20 day declines in recent years (20 day RoC was lower at the Jan and March lows), SSI hasn’t even spent much time above 1.5. The implication is that retail is hesitant to buy weakness. This isn’t necessarily bullish, but it’s not bearish either. It makes sense that these comments convey indecision; this week formed a doji after all!

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