Forex Strategies

EUR/USD 1H chart 6/18/2013 6:55AM EDT



Triangle: In the previous update, I noted the market shifting EUR/USD from a rising channel to a triangle, which was symmetrical (higher lows, lower highs). There was a break above this triangle late US session, but price held under the 1.3389 high. Support however continues to be higher, turning the symmetrical triangle into an ascending one, which has more bullish bias.

Breakout: The market is cracking the resistance around 1.3390 but clearing above 1.34 would probably be needed to open up the 1.35 handle, which is about 78.6% retracement of the 2013 downswing.

FOMC: The key event risk the market will be monitoring for USD-crosses is the FOMC policy decision due for Wednesday. The key word is tapering – whether the Fed is ready to wind down its $85 bln/month asset purchase aka. quantitative easing. The US should gain on tapering talk, and should loss if there is no indication of its timing. There will be a press conference after the decision statement, where Bernanke will answer questions, and try his best to keep market volatility down by being vague about tapering. We’ll see how the market interprets his communication.
Scenarios: The 1.35 level is achievable if tapering if the market believes tapering is still far from sight. A break below 1.3275 would form a top, and would likely be accompanied with more information on a tapering timeline.


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Market players are not taking well the strong increase in UK inflation, that rose beyond expected to an annual rate of 2.7%. The GBP/USD eases after the news, approaching 1.5610/20 area, strong static support according to the 4 hours chart, as per several intraday highs and lows around it. Technical readings in the mentioned time frame entered negative territory, while price moves away from its 20 SMA, capping now the upside around 1.5700.Further losses below the mentioned support should signal a downward continuation, with 1.5550 then at sight. Immediate resistance comes now around 1.5660, ahead of mentioned 1.5700 level.



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EURUSD: With EUR seen trading slightly above the 1.3400 level, a convincing break and hold above that level is expected. A follow through higher above here will turn focus to the 1.3450 level with a breach setting the stage for more gains towards the 1.3500 level. Its daily RSI is bullish and pointing higher supporting this view.

On the downside, support lies at the 1.3318/30 levels and then the 1.3242 level, a reversal of roles as support is likely to occur here and turn it higher. However, if broken, further decline could follow towards the 1.3200 level. Further down, support comes in at the 1.3100 level and possibly lower towards the 1.3000 level. All in all, EUR continues to retain its medium term upside bias.



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USD/JPY 4H chart 8:25AM EDT 6/19/2013



Consolidation: The USD/JPY is finding itself in a consolidation range between 95.80 and 93.75. The RSI in the 4H chart is around 50, reflecting a neutral momentum, but with bearish bias since it has just tagged 30 and below twice.

FOMC: If the Bernanke and the FOMC provides new clues for tapering, the market is likely to react with USD-strength. In this scenario, the USD/JPY might break above 95.80. Then if it pushes through any resistance at the 96.00 handle, the range breakout projection is 97.85.

However, if there is not new tapering clue, USD/JPY could just continue what it has been doing in late May through June so far. If 93.75 breaks, the breakout target is 205 pips lower, or 91.70. But, there will be support factors at the 93.00 handle, 92.96 – 38.2% retracement, and a support pivot at 92.55.

The FOMC gives a statement at 2:00PM EST, and follows with a press conference with Bernanke at 2:30PM EST. Watch the press conference here live


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SP500 daily chart 6/19/2013 8:05AM EDT



Bullish maintenance: The S&P500 has retreated from a record high at 1687.4 to find support at a previous resistance near 1598.5. So far in June, it has traded sideways, holding the RSI above 40, and therefore still maintaining overall bullish momentum in the daily chart. The moving averages are still for most part in bullish alignment. Price has held above a key rising trendline that goes back to November 2012. Price also just pushed above a pivot at 1649.6, making is a market in consolidation, but with bullish bias towards the previous high of 1687.4.

FOMC: If the market feels the FOMC is not ready to taper, risk will probably be positive and the S&P500 will probably extend towards 1687.4. Otherwise, it could be held under 1650, and if so, it would be focused on the 1600 handle and 1598.5 pivot as well as the rising trendline.

The FOMC will give its statement at 2:00PM EST, and follow with a press conference with Bernanke at 2:30EST.


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EUR/GBP daily chart 9:17AM ET 6/20/2013



Triangle: Just a quick note: EUR/GBP respected its triangle resistance with a strong bearish daily candle so far during the 6/20 session. This puts the pressure back to the triangle support. Below that we have the lows around 0.84 in sight. A break below 0.8395 and the 200-day SMA, and a rising trendline that goes back to July 2012, will be needed to open up further bearish outlook. The first target could be the 50% retracement at 0.8282.

Failure to push below 0.84, and a return above 0.86 might open up the upside. Past a pivot at 0.8636, the EUR/GBP would revive bullish outlook at least toward the 0.8790-0.8814 highs.


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EUR/USD 4H chart 6/20/2013 8:15AM EDT



FOMC reaction: After consolidating around 1.34 EUR/USD fell sharply following the FOMC policy statement and press conference. It quickly fell below this 1.33 and this week’s low. As we get into the 6/20 US session, the reaction has extended further, breaking below 1.32 to test the 38.2% retracement (of the May-June rally) at 1.3178, and last week’s low at 1.3176. The 4H RSI reading is below 30, which shows bearish momentum, but perhaps a near-term oversold condition.

Next support: A break below 1.3175 should first open up the 50% retracement at 1.3105 and 61.8% retracement at 1.3032.

Pullback: If there is no break below 1.3175, or even if there is and there is a quick pullback, the first upside level to monitor is probably 1.3230 which has been resistance and support a week ago. A break above 1.33 might neutralize the bearish outlook.

EUR/USD 1H chart 6/20/2013 8:20AM EDT




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Chart in Focus: Daily Spot Gold

The Spot Gold market sold-off in an aggressive manner today as the downtrend continued and price easily broke through support near $1,320.00. The market has been weakening for some time recently and we've been discussing the possibility for a large sell-off like this in our members' community and in recent commentaries following the fakey signal that formed back on June 7th. From here, traders can watch for price action sell signals from resistance to rejoin the downtrend on any retraces back to resistance.

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SP500 daily chart 6/21/2013 9:55AM EDT



FOMC: The S&P500 slid sharply after the FOMC event risk. Equity markets have been rallying on the back of easy monetary policy. Scaling back of asset purchases will take this away like taking away drugs from an addict. There will be some time of coming down. The S&P500 is coming down from a historical high near 1687.
Rising trendline, breakout target: As we wrap up the week, the SP500 has fallen below a support/resistance pivot around 1598.5, and is now is trading at a rising trendline that goes back to Nov. 2012. Below this trendline, the next support/resistance pivot area is in 1530-1540.

RSI: If the daily RSI reading falls below 40, it will be a sign that the bullish momentum is dead. A reading below 30 would reflect a market starting to show bearish momentum.
Pullback: If there is a pullback either without break of the trendline or even after a break, watch the support/resistance pivot around 1636. If that holds as resistance, the bearish outlook should remain. A break above would neutralize the bearish outlook and put pressure back toward the 1687 high.


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Kuroda: BoJ gov. Haruhiko Kuroda expressed optimism that the Japanese economy will stabilize overtime, and attributes part of that to the easy monetary policy as well as to the softening of Japanese yen in the past year, which helped exports. Let’s take a look at USD/JPY, EUR/JPY and GBP/JPY as they consolidate just below some key resistance factors.

USD/JPY 4H chart 6/21/2013 9:25AM EDT



The 4H USD/JPY chart shows a market that has stalled after rallying sharply on the back of the FOMC policy statement and subsequent press conference.The pair remains at the crossroad while it trades between 98 and 96. A break above the trendline, with a hold above 98.00 should open up the 100 handle, near the 61.8% retracement of the May-June decline.

Below 95.80, the market could be turning the focus back to the 93.77 low as well as some support factors below the 93.00 handle.

EUR/JPY 4H chart 6/21/2013 9:30AM EDT



The 4H EUR/JPY chart shows a market also up against a falling resistance and failing twice to break through so far this week. Just like in USD/JPY, Kuroda did not help the pair push through. A break above the 130 handle could open up the next resistance pivot area, 131-131.30. Above that, we have the highs at 132.76 and near 133.50 in sight.

A break below 128 neutralizes the week long rally, and if a pullback holds under 128, the market is likely to put pressure toward the lows around 125.

GBP/JPY 4H chart 6/21/2013 9:40AM EDT



The 4H GBP/JPY chart shows a similar post FOMC rally and then resistance just under 152. This was a previous support/resistance pivot as well. The second failure to push through is forming a double top. Outside of some local pivots such as 152 and 149.50, we should monitor a falling trendline from May vs. a rising trendline that goes back to November 2012. At this point, a break above 153 should clear the falling trendline, and the 200-4H SMA, which should first open up a support/resistance pivot area around 154.80.
A break below 148.00 could be a break below the rising trendline, which is a bearish signal that first opens up the lows just above 147.00. Then below the 147.00 handle, the bearish short-term trend since May continues with the 200-day SMA at 143.20 as a possible first key target/support.


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