Technical Analysis

• EURUSD 1.3017 could produce an important low if reached
• USDJPY breaks out
• AUD relative strength

EUR/USD
Weekly



-“Long term, a failed breakout and top would keep with the pattern of 3 year cycle tops. 1.3750 is an important reference point (year open).”
-The break of 1.3476 completed a topping process with targets of 1.3294 (origin of diagonal), 1.3209 (2 equal legs), and 1.3012 (head and shoulders target). 1.3476-1.3512 is now resistance and 1.3017 (50% retracement intersects with reaction area) is a target.

GBP/USD
Weekly



-“Of note is a weekly outside reversal and weekly RSI rolling over from above 70 this week. Prior instances of RSI rolling over (2004, 2006, and 2007) from above 70 indicated tops of at least several months.”
-GBPUSD has traded back to the year open (1.6565). 1.6565 to the March low (1.6464) forms a support zone for a bounce. If this zone gives way then then major support comes in from the 3 peaks in 2012 and this year’s low at 1.6250-1.6340. Expect resistance on any rebound, whether in the coming weeks or months, at 1.6820/90.

AUD/USD
Weekly



-“The combination of the .9400 figure and weekly RSI failing near 60 indicates a lot of overhead to punch through. Since the 2011 top, each RSI failure near 60 has led to a top or topping process (range for several weeks then a breakdown...that may be the case now).”
-The failure of AUDUSD to break down in the face of a broad USD advance underscores bullish potential. Any reversal towards USD weakness could facilitate the next leg in the bull trend that began at the January low. .9200 needs to hold in order to look higher.

NZD/USD
Monthly



-“Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st. The rate reversed this week from pips below the record high and above the mentioned line.”
-Above .8534 is needed in order to suggest that at least a minor low is in place. Look lower as long as price is below that level. Exceeding .8534 would shift focus to .8600/50. I’ve highlighted monthly key reversals (filtered with a range condition). Focus on .8250/75 as support.

USD/JPY
Weekly



-“The miserable trading conditions in USDJPY are probably explained by its long term Elliott wave position. That is, the rate has been mired in a corrective 4th wave all year. The good news is that wave 4 probably ends soon. Keep focused on the Elliott channel. The line crosses from about 100 to 100.75 for the remainder of August.” Forget the Elliott channel for now and treat wave 4 as complete as long as price is above 102.50 (103.00/30 is support). That means new highs in wave 5 (then risk of a major decline but don’t forget that ‘5ths’ can extend). 104.75 is a near term target.

USD/CAD
Weekly



-“USDCAD has fallen apart which ironically means it is probably going to find some sort of low soon. The rate is nearing important price levels. The 2011 high at 1.0657 and current year open at 1.0634 are possible supports. The line that extends off of the 2012 and September 2013 lows is at about 1.0607 next week. This level is in line with the July 2013 high at 1.0608.” USDCAD ended up finding low at 1.0620.
-The USDCAD advance from the July low is impulsive and may find resistance near 1.1025/50 (61.8% and June high) before correcting lower.

USD/CHF
Weekly



-USDCHF is trading pips shy of its YTD high but has pushed above the trendline that extends off of the 2010 and 2013 highs (there is a trendline that extends off of the 1985 and 2001 highs near .9400). The nearly 30 year trendline splits the 50% and 61.8% retracements of the decline from the 2012 high (.9335 and .9485). The rate could press higher into month end towards this zone before reversing.



More...

Talking Points:

• US Dollar Sets New Six-Month High as Rally Regains Momentum
• S&P 500 Continues to March Upward, Aiming to Surpass 2000.00
• Gold Stalls Above Channel Support, Crude Oil Trying to Bottom

US DOLLAR TECHNICAL ANALYSIS – Prices continue to push upward as expectedafter putting in a Bullish Engulfing candle pattern, rising to set another six-month high. A daily close above the 50% Fibonacci expansion at 10652 exposes the 61.8% level at 10677. Alternatively, a move below the 38.2% Fib at 10627 opens the door for a challenge of the 23.6% expansion at 10595.



S&P 500 TECHNICAL ANALYSIS – Prices are aiming to extend upward after clearing resistance in the 1985.30-91.40 area marked by the 50% Fibonacci expansion and the July 24 high, with the bulls targeting the intersection of a formerly broken channel floor and the 61.8% level at 2006.80. A further push beyond that aims for the outer boundary of the index’s long-term uptrend at 2023.50. Alternatively, a turn back below 1985.30 targets the 38.2% Fib at 1963.70.



GOLD TECHNICAL ANALYSIS – Prices are testing support at 1272.98, the 76.4% Fibonacci expansion. A break below this barrier on a daily closing basis exposes a falling channel floor at 1267.98, followed by the 100% level at 1257.63. Alternatively, a reversal above the 61.8% Fib at 1282.47 targets the 50% expansion at 1290.15.



CRUDE OIL TECHNICAL ANALYSIS – Prices is attempting to inch higher as expected after showing positive RSI divergence on a test of support at 101.61, the 61.8% Fibonacci expansion.A daily close above 102.94, the intersection of the 50% level and a falling trend line set from mid-June, targets the 38.2% Fib at 104.28. Alternatively, a break below 101.61 exposes the 76.4% expansion at 99.96.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com


More...

Talking Points

• Next week very important for the euro
• USD/CAD nearing key downside pivot
• USD/JPY advance begins to stall

Foreign Exchange Price & Time at a Glance:
Price & Time Analysis: USD/JPY

• USD/JPY touched its highest level since late January earlier this week before stalling
• Our near-term trend bias is lower in USD/JPY while above 102.75
• The 1st square root relationship of the year’s high at 104.40 is the next near-term upside pivot
• A turn window is eyed next week
• A close under 102.75 would turn us negative on the exchange rate

USD/JPY Strategy: Like the long side while over 102.75.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	102.75	103.75	103.85	104.10	104.40

Price & Time Analysis: USD/CAD

• USD/CAD traded at its highest level since early May on Tuesday before encountering resistance at the 2x1 Gann angle line of the year’s high near 1.1000
• Our near-term trend bias is higher in the exchange rate while above 1.0855
• A close over 1.1000 is needed to re-instill positive momentum and signal a new leg higher is underway
• A minor cycle turn window is seen early next week
• A move under 1.0855 will turn us negative on Funds

USD/CAD Strategy: Square.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/CAD	1.0855	1.0880	1.0905	1.0950	1.1000

Focus Chart of the Day: EUR/USD



EUR/USD fell to its lowest level in almost a year on Wednesday before finding support near the 38% retracement (polarity) of the 2011 to 2012 decline in the 1.3150 area. My cycle work suggests that next week should prove important for the exchange rate from a timing perspective. Originally I had anticipated that this key period around the start of September would end up being some sort of secondary high in the single currency, but the August correction never materialized. With sentiment now at dangerous extremes (EUR DSI at just 6% bulls) and seasonal analysis showing that September is one of the stronger periods of the year for the euro, factors seem to be aligning for some sort of decent low next week. With the highly anticipated ECB meeting coming right around the idealized turn date I am expecting that the actions taken by Draghi & Co. will probably be interpreted as a disappointment by the market as a whole. Key reaction levels over the next few days are seen at 1.3125, 1.3085 and 1.3055.


More...

Talking Points:

• US Dollar Signals Near-Term Top Forming Below Six-Month High
• S&P 500 Chart Positioning Hints a Downturn May Be in the Cards
• Gold Moves to One-Week High, Crude Oil Struggling to Advance

US DOLLAR TECHNICAL ANALYSIS – Prices may be carving out a near-term top after forming a bearish Evening Star candlestick pattern. A daily close below the 14.6% Fibonacci retracementat 10618 exposes the 23.6% level at 10591. Alternatively, a reversal above the 14.6% Fib expansion at 10657 opens the door for a challenge of the 23.6% threshold at 10683.



S&P 500 TECHNICAL ANALYSIS – Prices put in a bearish Hanging Man candlestick below resistance at 2006.80, the 61.8% Fibonacci expansion, hinting a downswing may be ahead. Near-term support is in the 1985.30-91.40 area, marked by the July 24 high and the 50% level, with a break below that on a daily closing basis exposing the 38.2% Fib at 1963.70. Alternatively, a move above resistance aims for channel floor support-turned-resistance at 2013.00, followed by the top of the index’s long-term uptrend at 2027.50.



GOLD TECHNICAL ANALYSIS – Prices broke above resistance at 1282.47, the 61.8% Fibonacci expansion, exposing the 50% level at 1290.15. A further push beyond that aims for the 38.2% Fib at 1297.82. Alternatively, a turn back below 1282.47 opens the door for a challenge of the 76.4% expansion at 1272.98.



CRUDE OIL TECHNICAL ANALYSIS – Prices are attempting to inch higher as expected after showing positive RSI divergence.A daily close above the 14.6% Fibonacci retracement at 103.19 initially exposes the 23.6% level at 104.50. Near-term support is at 101.05, the August 19 swing low.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com


More...

• EURUSD crashes through objectives; LT trendline in play
• USDJPY registers 6 year high
• AUDUSD tests Fibonacci resistance

EUR/USD
Monthly



-“Long term, a failed breakout and top would keep with the pattern of 3 year cycle tops. The break of 1.3476 completed a topping process with targets of 1.3294 (origin of diagonal), 1.3209 (2 equal legs), and 1.3012 (head and shoulders target).”
-EURUSD crashed through all the objectives. I was surprised that 1.3020 (50% from 2012) didn’t influence but an even bigger zone rests slightly below the current level. The zone in question is defined by long term trendline support along with the 2011 and 2013 lows (circled) at 1.2873 and 1.2744. These levels straddle the 61.8% retracement of the advance from the 2012 low at 1.2787. The much anticipated squeeze may be in order from this zone.

GBP/USD
Weekly



-“Of note is a weekly outside reversal and weekly RSI rolling over from above 70 this week. Prior instances of RSI rolling over (2004, 2006, and 2007) from above 70 indicated tops of at least several months. Major support comes in from the 3 peaks in 2012 and this year’s low at 1.6250-1.6340.”
-It’s only taken 2 months for GBPUSD to drop into its major support zone. Near term momentum (daily RSI) is at a level that has only been reached several times in recent history, 2012 (one day) and 2008 (throughout August and September and once in October). Readings this low were more common (but not common) during the heady trend following days of the 70s and 80s. A period of consolidation is favored.

AUD/USD
Weekly



-“The combination of the .9400 figure and weekly RSI failing near 60 indicates a lot of overhead to punch through. Since the 2011 top, each RSI failure near 60 has led to a top or topping process (range for several weeks then a breakdown...that may be the case now).”
-The failure of AUDUSD to break down in the face of a broad USD advance underscores bullish potential. Any reversal towards USD weakness could facilitate the next leg in the bull trend that began at the January low. .9200 needs to hold in order to look higher.

NZD/USD
Monthly



-“Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st. The rate reversed this week from pips below the record high and above the mentioned line.”
-“Above .8534 is needed in order to suggest that at least a minor low is in place. Look lower as long as price is below that level. Exceeding .8534 would shift focus to .8600/50. I’ve highlighted monthly key reversals (filtered with a range condition). Focus on .8250/75 as support.” The late week response at the cited zone along with waning momentum on several time frames warn of a turn higher.

USD/JPY
Weekly



-“Treat wave 4 as complete as long as price is above 102.50 (103.00/30 is support). That means new highs in wave 5 (then risk of a major decline but don’t forget that ‘5ths’ can extend). 104.75 is a near term target.”
-104.75 was reached and USDJPY continued on to its best level in almost exactly 6 years on Friday. Several key reversals this week indicate strong resistance and a likely pause in the bull move. In other words, expect USDJPY to consolidate before its next rally attempt. 104.25 is support.

USD/CAD
Weekly



-“USDCAD has fallen apart which ironically means it is probably going to find some sort of low soon. The rate is nearing important price levels. The 2011 high at 1.0657 and current year open at 1.0634 are possible supports. The line that extends off of the 2012 and September 2013 lows is at about 1.0607 next week. This level is in line with the July 2013 high at 1.0608.” USDCAD ended up finding low at 1.0620.
-The USDCAD dip from 1.0997 found support at the 50% retracement of the 1.0620-1.0997 advance (the 61.8% is at 1.0764). The hold is a positive sign and I lean towards the upside although a break above 1.0997 is needed in order to resolve a period of consolidation (5 weeks so far).

USD/CHF
Weekly



-“There is a trendline that extends off of the 1985 and 2001 highs near .9400). The nearly 30 year trendline splits the 50% and 61.8% retracements of the decline from the 2012 high (.9335 and .9485). The rate could press higher into month end towards this zone before reversing.” On Friday, USDCHF traded into the 50% retracement at .9334. Consolidation may take hold but momentum considerations suggest that any weakness will prove temporary.



More...

Talking Points

• USD/JPY touches key Fib extension
• Gold nears major downside pivot
• Euro cracks key support

USD/JPY

• USD/JPY traded it its highes level in almost 6 years today before stalling near the 127% extension of the 1Q14 range
• Our near-term trend bias remains higher in the rate while above 104.70
• A close over 106.45 is need to set off the next leg higher in the advance
• An important turn window is eyed mid-month
• A close below 104.70 would turn us negative on USD/JPY

Like the long side while above 104.70.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	104.70	105.80	106.15	106.45	106.75

GOLD

• XAU/USD has come under further pressure to trade at its lowest level since early June
• Our near-term trend bias is lower while below 1296
• The 1240 level remains a major downside pivot with weakness below needed to confirm the start of a more important decline
• A cycle turn window is eyed next week
• A move over 1296 would turn us positive on the metal

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1224	1240	1256	1280	1296

EUR/USD


If you have worked in the financial markets long enough you will know that they have a funny way of sometimes making you look foolish. Last week’s acceleration lower in EUR/USD through key support at 1.3025 felt like one of those times.

Accelerations in trend around key time periods are not unheard of, in fact, I would estimate they occur about 20% of the time. With respect to the euro I believed it was a much lower probability scenario given the sentiment profile heading into last week as the Daily Sentiment Index (poll of small futures traders) fell to just 6% euro bulls. I still think the sentiment situation remains a major overhang for EUR/USD going forward and at some point we will get a decent “shake of the tree”. The real question is when? With the acceleration through the last window cycle analysis favors weakness into the next important turn window around the end of the month. EUR/JPY might actually be the canary in the coalmine, however, as the middle of the month looks potentially important from a cycle perspective.

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

More...

Talking Points

• USD/JPY probes key trendline
• USD/CAD turning lower from key turn window?
• Unusual cyclical convergence near month-end in EUR/USD

USD/JPY

• USD/JPY touched an almost 6-year high earlier in the week before stalling near trendline resistance in the 107.40 area
• Our near-term trend bias remains lower in the rate while above 105.30
• Resistance between 107.40 and 108.30 looks formidable and a move through this zone is needed to set off the next impulsive leg higher
• An important turn window is eyed later in the month
• A close below under 105.30 would turn us negative on USD/JPY

USD/JPY Strategy: Like holding reduced long positions above 105.30.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	105.30	106.20	107.30	107.40	108.30

USD/CAD

• USD/CAD traded to its highest level since late March at the start of the week before stalling near 1.1100
• Our near-term trend bias is higher in Funds while above 1.0890
• A move back through 1.1030 is needed to re-instill positive momentum to the rate
• An important cycle turn window is seen this week
• A close under 1.0890 will turn us negative on USD/CAD

USD/CAD Strategy: Like holding reduced long positions while above 1.0890.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/CAD	1.0890	1.0920	1.0970	1.1030	1.1065

EUR/USD



I believe the latter part of this month will prove important for the euro from a timing perspective. Various long-term cyclical relationships should influence around this time with the most important of the lot having ties to the key low in 2010 and the “all-time” low in 2000. The 2010 low occurred on June 7th. During the last week of September that will measure 1,570 calendar days or ½ Pi. I have seen many markets undergo important reversals around this interval through the years and this relationship alone probably warrants some serious attention. However, what makes the last week of the month so potentially interesting to me is that it will also measure 5,083 calendar days (Pi x Phi) from the 2000 all-time low which was recorded on October 27th of that year. Such a long-term cyclical convergence is rare and likely pretty important – at least the way I look at things. Given the lopsided negative sentiment towards the euro of late (DSI fell to just 5% bulls earlier this month) and extreme positioning (IMM small specs recently hit a record amount of shorts) I have to favor some sort of low coming out of it, but two weeks is an eternity in the foreign exchange market and anything can happen before then. I will revisit as the window draws near, but barring a sharp spike over the next few days I like the idea of an important low around month end.


More...

Talking Points:

• US Dollar Enters Consolidation Mode After Hitting 14-Month High
• S&P 500 Trying to Regain Upside Momentum Above September Top
• Crude Oil Rebound Cues Remain, Gold Probing Lower Once Again

US DOLLAR TECHNICAL ANALYSIS – Prices corrected modestly lower after hitting the highest level in 14 months against its top counterparts.A daily close below the 14.6% Fibonacci retracementat 10874 exposes the 23.6% level at 10836. Alternatively, a turn above the 23.6% Fib expansion at 10919 clears the way for a test of the 38.2% threshold at 10976.



S&P 500 TECHNICAL ANALYSIS – Prices are testing resistance in the 2012.60-18.90 area marked by the September 3 high and the 38.2% Fibonacci expansion. A break above this barrier on a daily closing basis exposes the 50% level at 2032.80. Alternatively, a reversal below the 23.6% Fib retracement at 1984.60 targets the 38.2% threshold at 1967.30.



GOLD TECHNICAL ANALYSIS – Prices broke downward, with sellers now aiming to challenge the 23.6% Fibonacci expansion at 1213.75. A break below this barrier on a daily closing basis exposes the 38.2% level at 1196.30. Alternatively, a reversal above the 14.6% Fib at 1224.50 targets the September 16 high at 1241.95



CRUDE OIL TECHNICAL ANALYSIS – Prices are edging higher as expected after putting in a bullish Piercing Line candlestick pattern above support at 96.73, the mid-April 2013 low. Near-term resistance is at 99.47, the 14.6% Fibonacci retracement, with a break above that on a daily closing basis exposing the 23.6% level at 101.18.



--- Written by Ilya Spivak, Currency Strategist for DailyFX.com


More...

• EURUSD 13 year trendline just below 1.2800 (USDCHF at 30 year trendline!)
• USDJPY nears 13 year trendline
• NZDUSD at midpoint of 2011-2014 range

EUR/USD
Weekly



-“Long term, a failed breakout and top would keep with the pattern of 3 year cycle tops. The break of 1.3476 completed a topping process with targets of 1.3294 (origin of diagonal), 1.3209 (2 equal legs), and 1.3012 (head and shoulders target).”
-EURUSD crashed through all the objectives. I was surprised that 1.3020 (50% from 2012) didn’t influence but an even bigger zone rests slightly below the current level. The zone in question is defined by long term trendline support along with the 2011 and 2013 lows (circled) at 1.2873 and 1.2744. These levels straddle the 61.8% retracement of the advance from the 2012 low at 1.2787. The trendline that extends from the 2001 and 2013 lows (pink line) is at 1.2771 next week. Bottom line; EURUSD has entered huge support and I expect a bounce (corrective recovery).

GBP/USD
Weekly



-“Of note is a weekly outside reversal and weekly RSI rolling over from above 70 this week. Prior instances of RSI rolling over (2004, 2006, and 2007) from above 70 indicated tops of at least several months. Major support comes in from the 3 peaks in 2012 and this year’s low at 1.6250-1.6340.”
-“Near term momentum (daily RSI) is at a level that has only been reached several times in recent history, 2012 (one day) and 2008 (throughout August and September and once in October).” Old triangle resistance came in as support this week (as it did in December 2013 and February this year and the rally ended up failing near the 8/15 low. A few more weeks of sideways action would do well to reset the market for another decline.

AUD/USD
Weekly



-“The combination of the .9400 figure and weekly RSI failing near 60 indicates a lot of overhead to punch through. Since the 2011 top, each RSI failure near 60 has led to a top or topping process (range for several weeks then a breakdown...that may be the case now).”
-AUDUSD broke down from a head and shoulders top on 9/9. The target was reached 4 days after the pattern completed. Weakness has extended below the line that extends off of the 2008 and 2014 lows, warning of something much more significant on the downside.

NZD/USD
Weekly



-“Don’t forget about the line that extends off of the 1996 and 2007 highs. That line crosses through the 2008, 2011, and highs as well. In 2011 (record free float high), the rate surged through the line in late July before topping on August 1st. The rate reversed this week from pips below the record high and above the mentioned line.”
-“Above .8534 is needed in order to suggest that at least a minor low is in place. Look lower as long as price is below that level.” NZDUSD has entered a support area defined by a trendline, a number of former inflection points (including the 2007 high at .8108) and the midpoint of the 2011-2014 range (.8102). The level could offer several weeks of relief.

USD/JPY
Weekly



-“Treat wave 4 as complete as long as price is above 102.50 (103.00/30 is support). That means new highs in wave 5 (then risk of a major decline but don’t forget that ‘5ths’ can extend). 104.75 is a near term target.”
-“Focus is now on expansion targets at 108.33 and 110.12 as long as price is above 103.50.” The first target has already been reached. The latter level isn’t far from the August 2008 high at 110.65. There is also a trendline that extends from the 2001 and 2007 highs at the current level. 106.80-107.40 is support. At this point, USDJPY would have to break 105 to do real damage to the trend.

USD/CAD
Weekly



-“USDCAD has fallen apart which ironically means it is probably going to find some sort of low soon. The rate is nearing important price levels. The 2011 high at 1.0657 and current year open at 1.0634 are possible supports. The line that extends off of the 2012 and September 2013 lows is at about 1.0607 next week. This level is in line with the July 2013 high at 1.0608.” USDCAD ended up finding low at 1.0620.
-The USDCAD dip from 1.0997 found support at the 50% retracement of the 1.0620-1.0997 advance (the 61.8% is at 1.0764). The hold is a positive sign and I lean towards the upside.

USD/CHF
Weekly



-“There is a trendline that extends off of the 1985 and 2001 highs near .9400. The nearly 30 year trendline splits the 50% and 61.8% retracements of the decline from the 2012 high (.9335 and .9485).” USDCHF is trading at the 30 year trendline now. Like EURUSD, the rate is at a level where one would expect at least a period of consolidation to take hold.



More...

Talking Points

• EUR/USD turnover failing to confirm recent drop
• Gold nearing key support zone
• USD/JPY touches important long-term trendline

USD/JPY

• USD/JPY reached new multi-year extremes late last week before stalling near a key long-term trendline connecting the 2002 & 2007 peaks around 109.50
• Our near-term trend bias remains higher in USD/JPY while above 107.40
• A close over 109.50 is needed to set up a new leg higher in the rate
• An important turn window is eyed next week
• A close under 107.40 would turn us negative on the rate

USD/JPY Strategy: Like holding reduced long positions above 107.40.

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
USD/JPY	107.40	108.30	109.00	109.50	109.75

GOLD

• XAU/USD has come under steady pressure to trade at its lowest level since the start of the year
• Our near-term trend bias remains lower while below 1240
• Key downside pivots look to be 1203 and 1193
• A cycle turn window of some importance is eyed over the next day or so
• A close over 1240 would turn us positive on the metal

XAU/USD Strategy: Square

Instrument	Support 2	Support 1	Spot	Resistance 1	Resistance 2
XAU/USD	1193	1203	1215	1228	1240

EUR/USD



I think the latter part of this week/first half of next week has the potential to be quite significant for EUR/USD from a timing perspective. My reasons for this thinking are highlighted HERE. In addition to these timing elements I am also starting to see telltale warning signs of a reversal vis-à-vis volume and sentiment metrics. On the volume side the picture has begun to clearly shift over the past few sessions as turnover has dropped to below average levels as spot made new lows for the year. This is in sharp contrast to the action observed in July and August when EUR/USD broke to new trend lows on consistent levels of above average volume. This weak volume breakdown suggests the trend is nearing a potential exhaustion point. This interpretation is further supported by On-Balance-Volume (OBV) figures which have been diverging with the move lower in spot since about the start of the month. Perhaps the most significant development over the past few days is in sentiment which has seen pessimism towards the euro fall to its lowest level in years as the Daily Sentiment Index (DSI) touched just 3% EUR bulls this past Friday. Such extreme one way conviction in the direction of the market has been a reliable contrarian indicator in the past ahead of important inflection points in the exchange rate. It looking like it will be again.


More...