Friday January 15, 2010 - 20:34:24 GMT
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Weekly Technical Update 1.15.2010 Broad Based Consolidation
Greenback, Risk Aversion Continues Sideways Action
The second week of the New Year did not offer much in terms of
breakouts from the recent consolidation ranges. Fundamentals reflect a
slow recovery and risk appetite also remained subdued this week after
some initial rally. Letâ€™s take a look at some major currency pairs.
EUR/USD: 1.15.2010 Stalking Consolidation â€“ After
breaking above 1.45, the market returned on Friday to below where it
started the week, testing 78.6% retracement in the consolidation mode.
GBP/USD: Stalking Reversal Signal
- Daily and 4H: The GBP/USD has rallied just as
anticipated from last week. Now we are at the 1.6300 area coincident to
many forms of resistance. Price action on Fridayâ€™s daily bar is an
engulfing pattern, suggesting possible reversal.
- The 4H time-frame suggests this reversal is happening in the
smaller scale. It broke the upsloping trendline, but still needs to
break below the 1.6200 powerline. The stochastic is showing a surge of
- This may be the start of a swing towards 1.5700 (shown in the daily time-frame).
- Topping action may take a little longer, but for the short-term, it
looks like a decline at least to the 1.0650 area is viable if it can
break below the 1.6190-1.6230 area.
USD/JPY: Stalking Complex Correction
- Daily and 4H: Last weekâ€™s post mentioned the
USD/JPY stalling at resistance after a completion of a bearish
butterfly pattern. This now, the USD/JPY declined to the 90.50 area in
a expanding pattern.
- The stochastic suggests oversold conditions in the daily, and a
possible bullish stochastic forming in the 4H time-frame. A break of
the downsloping trendline near 91.30 spells a rally to test the 93.00
- However, another scnenarios is possible. As the decline was heavy,
we may have a further swing towards the 88.75-89.80 or 78.6%-61.8%
zone. Here, if the market can bottom and show bullish signal, and still
suggests a test and possible break above the 93.00 resistance area.
USD/CAD: Stalking Setup Near Support
- Daily and 4H: The USD/CAD pair broke below a
short-term support and now is testing an intermediate-term one at
slightly above 1.02. The swing projection in both Daily, and 4H
time-frame scales are to this lower bound of the support zone.
- The market has reversed at 1.0220. If may go to 1.0350 before
resistance, OR the downsloping trendline might hold for another bearish
attempt to crack 1.02.
- The pair remains bearish near support, which means a break below
1.02 suggests parit 1.00, and a break above downsloping trendline with
confirmation may be a signal for a rally in the short-term to 1.05
area. A break above that eyes 1.10.
- For now, the USD/CAD is just a keep-an-eye-on type of pair.
EUR/GBP Invalidating Bullish Outlook?
- Daily and 4H: Last weekâ€™s outlook for a bullish
reversal was premature. After the break of downsloping trednline in the
Daily, the market has been undecided whether it should followup
through. Instead, the week progressed with a decline from 0.90 to
0.8850, breaking 0.8850 intermediate support. It is likely to close
- This bearish signal is invalidating the bullish outlook for
terminal wave â€śVâ€ť. It appears wave â€śIVâ€ť is not done yet. for the count
to remain valid, the decline should not go lower than the 0.87 area,
which is the end of wave â€śIâ€ť.
- The 4H time-frame is showing some continuation signals in the
stochastic. The price action shows a break of 0.8850, and a near-term
retest of it as resistance, which looks to be holding at the moment.
GBP/JPY: Monitoring Choppy Uptrend
- Daily and 4H: The GBP/JPY remained bullish as
anticipated in last weekâ€™s post. In the 4H chart, you can see that it
has been retracing 78.6% of upswings approx. 350 pips each. The market
is now again testing the 78.6% retracement of the most recent upswing.
- The stochastic this time is not oversold. The declining stochastic
in the daily also reflects a struggle to reach the 153.00 resistance.
This weekâ€™s action did not invalidate the outlook, but surely weakens
its possibility. The pairs choppy action reflects this weekâ€™s subdued
Commodity Trading Advisor
Information and opinions contained in this report are for
educational purposes only and do not constitute an investment advice.
While the information contained herein was obtained from sources
believed to be reliable, author does not guarantee its accuracy or
completeness. CMS will not accept liability for any loss of profit or
damage which may arise directly, indirectly or consequently from use of
or reliance on the trading set-ups or any accompanying chart analyses.
Foreign currency trading is not conducted on an exchange. CMS is
acting as a counterparty to its clientsâ€™ transactions and as a result,
CMSâ€™ interests may be in conflict with its clients. Since CMS acts as
the buyer or seller in the transaction one should carefully evaluate
any trade recommendation provided by CMS or any of its solicitors.
Foreign currency trading involves a substantial risk of loss and may
not be suitable for all investors.
All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.
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