Forex Strategies

Surprisingly, it didn’t took long for the USD/JPY to recover ground: the pair has been steadily rising for the past two weeks, after bottoming this June at 93.78. The level stands still as a key long term support, as 93.70 stands for the 38.2% retracement of the monthly rise from October 2012 to May 2013. And while the strong recovery tends to confirm another run above 100.00, latest price behavior suggest that buyers are not yet that confident, as we have seen earlier this year.As for the daily chart, price stands above 99.00, nearing a key resistance level: the 61.8% retracement of a shorter Fibonacci, from May high to June low at 99.90. And while technical indicators are standing above their midlines first time since early month, they lack any kind of momentum that would suggest further gains. At this point, a break above 100.00 will be an invitation to buy, eyeing for the upcoming weeks this year high around 103.60. A break above this last should see the pair extending towards 105.00, next logical target.

Some consolidation or even retracements down to 96.80 won’t be enough to harm the upward bias, yet if this last gives up, 100.00 will become just a memory, with the 93.70 again exposed.




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At this point, we are all wondering if the EUR/USD will or will not be able to finally break below the 1.3000 level. Despite some short term spikes below the strong psychological support, a huge battle is going on in between bulls and bears, and the pair holds barely above, as the first half of the year comes to an end. Indeed that’s a worrisome scenario for buyers, as we have not seen this Friday the usual profit taking and position adjustment, meaning that despite the level holds, bears are for now winning.As for the technical stance, the daily chart shows a strong bearish momentum coming from technical readings, with price capped by the 61.8% retracement of its latest bullish run around 1.3050. Exposed to the downside on a break the weekly low of 1.2983, the pair has a 100 pips clean path towards 1.2880 next strong midterm support. Once below this last, next target comes at 1.2975, May 20th low converging with a daily ascendant trend line coming from September last year.

A change in direction will be dependent on upcoming fundamental data from both economies, the ECB monthly meeting and US employment figures. Draghi needs to provide and outstandingly positive outlook and US data miss expectations, to revert the downward momentum in the pair. Something in the middle won’t be enough and just produce short term noise. Key resistances for this week come at 1.3050, and 1.3105, being this last, the 50% retracement of the above mentioned rally. Only above this last the pair will be poised to revert the downward tone.




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Chart in Focus: Daily AUDUSDThe AUDUSD downtrend continued moving lower on Friday after the market broke down from an inside pin bar setup as well as a fakey setup that we had been discussed in Thursday's commentary. We can see in the chart below that the market was obviously in a sustained downtrend and then it retraced back up to resistance near 0.9325.
Once there, the market stalled for a couple of days, forming a fakey sell signal and inside pin bar sell signal in the process. Today, the downtrend resumed as those sell signals saw price break lower. We could see more downside movement in this market in the coming days given the very weak technical picture. Traders can continue to watch for price action sell signals on any retraces back to resistance next week.




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USDJPY: 99.12
Short-Term Trend: sideways
Outlook:

As expected USD continued its recovery rally from the 93.79 low. Now, I expect further rally twd 100.00/101.00 area, and possibly even to 102.45 level before the next leg down takes place. So, going short on further recovery remains my favored strategy. A subsequent move below 96.69 will indicate that the next leg lower is likely under way for weakness twd 93.12 level first.
On the upside, only sustained trading abv 102.45 negates, risks re-test on the May's top...
Strategy: Shorts favored at 100.60. Stop=102.60. Target=93.10.


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GBP/NZD 1H Chart: Channel Up

Comment: Despite the fact that the pattern is only 33 bars long, both trend-lines forming it proved to be reliable in defining fluctuations of GBP/NZD. Just now the pair has encountered an up-trend support at 1.9544, meaning that it is expected to recover up to 1.9761, where the upper boundary of the pattern should be hit along with the daily R1 and 200 -period SMA.

On the other hand, while the technical indicators are showing mixed signals, the traders’ sentiment is strongly bearish—74% of open positions are currently short.



EUR/PLN 1H Chart: Triangle

Comment: Since Jun 21 EUR/PLN has been consistently respecting the converging trend-lines, forming the triangle on a 1H chart. Considering that this pattern implies continuation of a major move, we expect an eventual break-out to the upside; however, for now the resistance at 4.3565 holds and in a very short term is unlikely to give in. Still, daily indicators are bullish, suggesting that the dips should not be deep, being limited by the nearest supports at 4.3270 and 4.3165, and will be followed by a robust rally beyond 4.3565.



USD/CHF 1H Chart: Channel Up

Comment: For some time now pair has been trading in a 0.940-0.950 cent range and is likely to continue doing so in the short term. It should hit pattern’s support and, as indicated by the medium term technicals, bounce from it.

In the long term, however, pair seems to be likely to return trading sideways. Range trading, both in the short and the long term, seems very likely due to the dynamics in the market sentiment. Both distributions, of the currently open positions and pending orders, are close to 50/50 ratio. It does not give any advantage nor to the market bulls nor to the bears.



USD/CAD 4H Chart: Channel Up

Comment: Despite the recent rebound from the pattern’s resistance pair is facing significant upside pressure in the short and medium terms. It is so indicated by the short and medium term technical indicators. In addition to this current market sentiment is strongly bullish—73% of all open positions are long on the pair. Pending orders do not suggest any comfort for the bears either.

However, recent high at 1.0556 is the highest level sin October, 2011, which should cause some turbulence in the market and might give bears a change to ignite a sell off.




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EUR/USD 1H chart 7/1/2013 9:10AM ET



Consolidation: Last week, the EUR/USD market put in a support in the 1.2983-1.30 area and respected it 3 times. Coming off the last bounce, it starts the wee with a rally to 1.3055-1.3060 which is a support/resistance pivot area. Last week’s overall range was roughly between 1.2985 and 1.31. The 1.3055-60 area is the central pivot as well as actual support/resistance. If the US session continues to respect this area as resistance, then the EUR/USD has strong bearish bias within consolidation, with pressure on the 1.2983 low.

RSI and MAs: The RSI is stuck between 40 adn 60 as the market consolidates. The prevailing momentum is bearish since the reading tagged 30. The moving averages are congested, but the 200-hour SMA remains above price action and is down-sloping, more evidence that the market has bearish pressure.

Targets: Below 1.2980, the EUR/USD immediately tests a rising trendline that connects May’s lows. There is also a support pivot at 1.2955. If these factors do not turn the EUR/USD around, a breakout projection is about 120 pips lower, or around 1.2765. Note that the May low is around 1.2795, and the 2013-low is around 1.2744.

A break above 1.3060 puts the focus on the 1.31 resistance area. A break above that establishes a short-term bottom with upside toward 1.3150, 1.32 and the 1.3240-1.3255 resistance levels. The breakout projection would be to 1.3220 (120 pips higher), but note that this is a breakout against the prevailing trend and in general should be treated with more caution and reservation than a break into the trend.

EUR/USD Daily chart 7/1/2013 9:18M ET





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SUPPORT: 1610 1602 1595 1583 1579 1573 1568/66 1556/55 1551 1548/47 1544/42

RESISTANCE: 1614 1616/17 1620 1627 1635/36 1640 1644 1648 1652 1658 1661

So we hit target of 1620...buyers had had enough and let the sellers take us lower...Now our first short term Fib is at 1611 and cash went to lows of 1612 and our short term stochastics have turned bearish...so we need to keep our eyes on this 1611 and the daily pivot of 1606....
The sellers will go for it if the buyers do not defend this...and the could possibly reach 1601 which is our 2nd short term Fib.....If the buyers are tired after yesterdays action and just think...oh well...let it go...then the sellers have every right to march through this support and head for S1 at 1593 which is also today's 50% short term Fib level...Now all this depends on the mood of the market...bearish or bullish..conflicting technical indicators.... conflicting technical indicators....

1614 breaking could well muster the buyers....they will rally together....and hopefully have enough momentum behind them to assault the 1620 resistance once more....They would then be a happy little band and hopefully take their profits...You may see more aggressive buyers if 1620 breaks...that would rouse them into thinking they can go higher....therefore beware sellers....These buyers may have you on the rope again.


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Little progress was able to make GBP/USD, with the pair caped below 1.5240 over Asian hours and struggling to hold above 1.5200 at the time being. The 4 hours chart shows 20 SMA acting as dynamic resistance now around mentioned daily high and with a strong bearish slope, while technical indicators hold in negative territory. While investors move into cautious mode ahead of heavy data ahead on the week, the pair maintains the bearish bias: immediate support comes at 1.5164, past week low and 78.6% retracement of its latest bullish run. A price acceleration below this last should see a continuation towards the 1.5110/20 area in the short term, thus exposing 1.50 figure for the upcoming sessions.

Above 1.5240, next resistance comes at 1.5280, and only steady gains above this last may favor some short term rallies, eyeing then 1.5330 price zone.




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Chart in Focus: Daily EURUSD

The EURUSD rotated lower today and triggered a fakey sell signal entry from the fakey setup that we first discussed in our commentary from last Friday. In the chart below, we can see that the market retraced to just over the 50% level of the pin bar / false-break bar from last Friday, this provided for a tight stop loss and solid risk reward potential. A 1:2 risk reward was already possible depending on stop loss placement and entry level, there's potential for this market to continue moving lower if it can break down past 1.2960 support.



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EUR/GBP 4H chart 9:05AM ET 7/2/2013



Range: The 4H EUR/GBP chart shows a market that has gotten stuck in a range roughly between 0.8470 and 0.86. The moving averages are relatively flat, reflecting a market with sideways momentum the last 2-3 months. In the previous week, EUR/GBP bounced off the common lows and attacked the common highs of the range. This week so far, the EUR/GBP has been taking stabs at the resistance with no avail as a bearish divergence develops in the 4H chart with the RSI. On the other hand, bears have not been able to take control.

Reversion target: If you got a short position around 0.8590 with a stop above 0.86 like 0.8616, that’s 26 pips. A conservative target from 0.8590 would be 0.8540, for 50 pips. This is almost a 2:1 reward to risk, with potential of more if the EUR/GBP does more than just “revert to the mean”.

Breakout: A break above 0.86 can open up another 130 pips above, based on the width of the range. The first challenge though, will be the 0.8636 pivot. But above that, we have 0.8730, as well as the 2013-highs in the 0.8790-0.8815 area in sight.
EUR/GBP Daily* chart 9:12AM ET 7/2/2013




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