USDJPY and EURUSD Technical Analysis

Talking Points:

• EUR/USD Technical Strategy: Flat
• Euro Stalling Above 1.06 Figure vs. US Dollar, RSI Divergence Hints at Rebound Ahead
• Waiting for Corrective Recovery to Enter Short Trade in Line with Long-Term Down Trend

The Euro continues to stall above the 1.06 figure against the US Dollar as markets struggle for directional conviction in thinning pre-holiday trade. Positive RSI divergence still points to ebbing downside momentum and hints that a recovery may be brewing ahead.

Near-term support is at 1.0556, the 23.6% Fibonacci expansion. A break below that on a daily closing basis clears a path to test the 1.0428-61 area, marked by the March 13 low and the 38.2% level. Alternatively, a reversal above the 14.6% Fib retracement at 1.0702 opens the door for a challenge of the 1.0785-1.0818 zone (23.6% retracement, May 27 low).

more...

EUR/USD
Monthly

-While under the summer lows (1.0807/47), EUR/USD downside potential may be realized towards parity (parallel with line from 1995-2008 highs). In fact, those summer lows provided resistance earlier in November. 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 extremely bearish either.
-November ends on Monday and it’ll be interesting to see if the month closes under the 30 year trendline (arithmetic). The line is at about 1.0730. A move above there would indicate a hold of the long term support line and present a high reward/risk opportunity on the upside.

GBP/USD
Weekly

-No change to the most recent GBPUSD comments. “In line with the broader trend, 9 months of sideways trade in GBP/USD has resolved to the downside. Focus is on the lower parallel supports that cross lows over the last several years. In other words, focus is on a new low (below the April low). A break of the downward sloping lower parallels could set off a crash towards the 2009 low.”

AUD/USD
Weekly

-Recent AUD/USD comments were that “the dominant downtrend is very much intact but there have been prolonged periods of trading around this median line that gave way to decent counter trend moves (rallies). In other words, everything since the September low may very well be corrective but AUD/USD could trade in a more or less nonsensical range for a while longer before the downtrend attempts to reassert.” It’s also worth noting that AUD/USD is at a 14 month trendline. A break above could trigger a run towards longer term slope resistance (and the 55 week average) in the mid .7600s.

NZD/USD
Weekly

-NZD/USD is wedged between a long term resistance line (was support in January) and an even longer term support line. If this long term support gives way, then focus would shift to .5673 (combination of the next parallel and the 1999 high). However, recent developments give scope to a broad bottoming process. The Daily Techs asked “is this a trend change or just a bounce within the downtrend?That question might be answered with how the rate trades around .6455-.6500. The burden of proof is on bulls to step up in order to suggest that the last few months compose a bottoming process rather than just a bear market advance.” NZDUSD has responded positively to the mentioned support zone. As such, look higher while above .6428.

USD/JPY
Weekly

-FXTW wrote several updates ago that “immediate focus is on the long term upward sloping median line. This line has been support and resistance in the past. The late 2014 (BoJ on Halloween) advance commenced upon a break above this line as well. Point is, the line is a useful reference point…so pay attention!” This long term median line is now acting as resistance but the near term picture is positive whilst above 121.60 (breakout level). Weakness below there would once again bring a yearlong topping process into focus.
-The below chart displays a monthly USD/JPY log chart. The 4+ year bull has stalled at the line that connects the 1990 and 1998 highs. 12 month rate of change also exhibits divergence. Basically, technical observations on the monthly chart warn of a top.

USD/CAD
Weekly

-There is no change to recent comments. “Recent USD/CAD action diminishes confidence in (but doesn’t destroy) the topping ‘idea’. New highs could carry to the next parallel near 1.38 (all-time high is 1.618…). Below 1.3175 would delay anything bullish until support near 1.2900 (slope line that crosses the February high, March high, and October low).”


more...

Talking Points:
-USD/JPY Technical Strategy: USDJPY Continues to Hold Key Support at 122, Favoring Upside
-21 & 34-DMA support at 121.80 & 122.70 Underpins Price
-Environment for sideways price action before next push higher is aligning

USD/JPY continues to be encouraging albeit without excitement above 122 support. The reason that USD/JPY isn’t excited is because volatility is lacking on USDJPY and other markets. The volatility index or VIX remains near the post-August 24th lows and is off nearly 62%. When volatility and implied volatility is low, USDJPY typically moves higher or is at least supported, and that’s environment we’re in now. However, if volatlity is going to rise in such a manner as to shake USD-JPY out of the tree, this week is the week to do so given the event risk coming.As Christopher Vecchio recently pointed out, EUR/USD Prepares for its Most Important Week in Months (If Not Years!), and the events that will likely move EUR/USD could also move other G4 currencies like USD/JPY. On a larger time frame, the USDJPY positive monthly close confirms the prior basing candle and signals higher towards the August high before news of the Yuan Devaluation near 125.85.

USDJPY volatility has been very low in terms of ATR with a recent weekly average of around 150 pips. However, we continue to lean on the support of 122, which encompasses the December ’14 high, March high and the initial rebound higher after the August 24th sell-off as support. The 34-day moving average is a bit below the 122 level at 121.80, which aligns with the October high of 121.60. Shorter-term support can be found at 122.70, the 21-DMA. As long as these forms of support continue to hold up the price on a closing basis, we’ll continue to look for traction towards the August & June highs of 125.25/125.85 respectively even if the march higher is slow.

While some banks have left investors wanting in terms of additional quantitative easing, it still appears that there is more room on the road ahead of monetary divergence between the US & Japanese economy. If these two powerhouses have yet to reach an extreme monetary policy divergence, which you could make that argument that we just might be entering a new phase of divergence, we could likely see a continued push to the upside beyond the June highs. The safer approach given the lack of volatility now, and the implied volatility in the upcoming days may be a breakout above the fairly thick congestion area of resistance ranging from 123.35 to 123.71.


more...

USD/JPY
Weekly

-The below chart displays a yearly (each bar is 1 year) USD/JPY log chart. Remember, huge reversals have materialized in years that end in 5. A top formed following the last 3 year rally (1994-1996). 12 month rate of change exhibits divergence and the top in June was at the line that connects the 1990 and 1998 highs. Finally, a yearly doji may form for 2015 (a lot to be decided next week). Shorter term, this week’s drop under 121.60 (bullish breakout level in November) is bearish.

USD/JPY
Monthly

more...

Talking Points:

• EUR/USD Technical Strategy: Flat
• Euro Drops to Two-Week Low vs. US Dollar Amid Fed Rate Hike Aftermath
• Risk/Reward, Tactical Considerations Argue Against Taking Short Position

• The Euro is facing swelling selling pressure against the US Dollar in the aftermath of the FOMC monetary policy announcement, with prices dropping to a two-week low. The pair topped below the 1.11 figure having rebounded following the ECB rate decision.
• Near-term support is in the 1.0777-1.0818 area, marked by the 23.6% Fibonacci expansion and the May 27 low. A daily close below this barrier paves the way for a test of the 38.2% level at 1.0602. Alternatively, a move back above support-turned-resistance at 1.0938 opens the door for a challenge of the December 15 high at 1.1060.

H4 price is located above SMA with period 100 (100 SMA) and above SMA with the period 200 (200 SMA) for the ranging within the following key reversal support/resistance levels:

• 1.1059 resistance level located far above 100 SMA/200 SMA in the bullish area of the chart, and
• 1.0520 support level located below 100 SMA/200 SMA in the bearish area of the chart.

RSI indicator is estimating the bearish reversal to be started in the near future with the secondary ranging market condition. Descending triangle pattern was formed by the price with 1.0831 support level to be crossed for good possible breakout.

• If the price will break 1.1059 resistance level so the bullish trend will be continuing without ranging.
• If price will break 1.0831 support so the reversal of the price movement from the primary bullish to the primary bearish market condition will be started.
• If price will break 1.0520 support so we may see good bearish breakdown.
• If not so the price will be ranging within the levels.

Resistance	Support
1.1059	1.0831
N/A	1.0520

• Recommendation to go short: watch close H4 price to break 1.0831 support level for possible sell trade
• Recommendation to go long: watch close H4 price to break 1.1059 resistance level for possible buy trade
• Trading Summary: ranging

SUMMARY : ranging on bearish reversal

TREND : waiting for direction


more...

If we get a supportive candle at the 1.08 level, I would be willing to start buying the Euro again. On the other hand, if we break down below the bottom of the 1.08 level, I feel that the market can be sold.

The H4 chart below shows how during last Monday’s New York session, the price fell to touch this level, quickly respecting it with a wick followed by a bullish engulfing candle which immediately broke to the upside. The price rose steadily before topping very close to a key resistance level, giving a maximum reward so far of about 260 pips for a risk of about 60 pips.

D1 price is located below 200 day SMA (200 SMA) and 100 day SMA (100 SMA) for the primary bearish market condition with the ranging near the border between the primary bearish and the primary bullish trend on the chart.

• The price is ranging between ranging between Fibo resistance level at 1.1059 and Fibo support level at 1.0520.
• The bullish reversal resistance level is 1.1059 Fibo resistance located above 200 SMA on the border between the bearish/bullish area of the daily chart.
• The bearish reversal support level is 1.0520 Fibo support located far below 100 SMA/200 SMA in the primary bearish area.
• Intermediate support level for the price to be broken on the way to the key bearish reversal support level is 50.0% Fibo support level at 1.0791.
• “The Euro may be establishing a top against the US Dollar as prices carve out what may turn out to be a bearish Head and Shoulders chart formation. The single currency found resistance below the 1.11 figure having launched a recovery following the ECB rate decision, as expected.”
• “A break below support in the 1.0777-1.0818 area to below will lead with the 38.2% level at 1.0602 as the next target. Alternatively, a reversal above a horizontal pivot at 1.0938 may be targeting with the December 15 high at 1.1060.”

If the price will break 50.0% Fibo support level at 1.0791 so the primary bearish trend will be continuing with Fibo support level at 1.0520 as the next bearish target.
If the price will break Fibo resistance level at 1.1059 from below to above on close daily bar so the reversal of the price movement from the primary bearish to the primary bullish market condition will be started.
If not so the price will be ranging within the levels.


more...

• "Near-term support is in the 1.0777-1.0818 area, marked by the May 27 low and the 23.6% Fibonacci expansion, with a break below that on a daily closing basis opening the door for a test of the 38.2% level at 1.0602. Alternatively, a push above the December 15 high at 1.1060 paves the way for a challenge of falling trend line resistance at 1.1201."
• "The Head and Shoulders setup requires a breach of neckline support at 1.0777 to become actionable, which has yet to materialize. Furthermore, the threat of risk aversion ahead represents a possibly potent catalyst for Euro gains amid the unwinding of carry trade positions. With that in mind, we will remain on the sidelines for the time being."

more...

• "The Euro may be carving out a top below the 1.11 figure against the US Dollar having rebounded as expectedafter last month’s ECB policy meeting. Prices appear to be carving out a bearish Head and Shoulders chart formation, although confirmation of the setup is still pending for now."
• "A daily close below the 1.0777-1.0818 area marked by the May 27 low and the 23.6% Fibonacci expansion clears the way for a challengeof the 38.2% level at 1.0602. Alternatively, a rebound that takes the pair above the December 15 high at 1.1060 opens the door for a test of falling trend line resistance at 1.1175."
• "The Head and Shoulders setup is not actionable for now absent a break of neckline support at 1.0777. More broadly, prices are too close to support to justify entering short from a risk/reward perspective. With that in mind, we will remain on the sidelines and wait for a better-defined opportunity to present itself."

more...