Tuesday August 17, 2004 - 13:15:56 GMT
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DailyFX Technical Report 08-17-04
DailyFX Technical Report 08-17-04
Francois Nembrini, Systems Trading Department Manager
- The EUR/USD picture remains very much mixed, however, some clear bearish formations have come to fruition following the American session. Just as heightened geo-political event risk would imply, the second shoulder (consolidated range) of a H&S formation spanning early June to present appears to be hammering itself out between two key fibs of the broader scope (23.6 and 38.2 of 1.1760-1.2465) as well as near term (50% retracement of 1.2360-1.1970) and the regression trend (4/23) centerline. The 200-day SMA (1.2225) has created a magnetic like attraction to the pair for five sessions now but a momentary break away seems likely for this session’s close. The ascending regression trend lower band is closing in rapidly on present pricing, and has begun to decouple from the 100-day SMA (1.2115). We feel the region is sure to create a thorn in the side of sellers until event risk subsides. On the bid side, 1.2300 should continue to provide solid resistance with a break clearing the way to spike highs made during the first shoulder range (1.2355).
- It appears that the USD/JPY has finally decoupled from the confluence of the last Fibonacci fanline made from 115.00-107.05 and the 50% retracement of the same high and low near the end of this week’s session approximately. Solid resistance has been created by various attempts to trade above the 61.8% retracement (111.90) – and at this moment in Asia and London trading the level has served to cap the rally out of the apex of the flagging pattern we had noted for some time now. If the consensus continues to favor longs we could see a test of spike highs made late July (112.75). In the event of a pullback we see the of the flag (descending line connecting lower highs from previous test of 112.75 - presently 111.10) hypotenuse as a likely support. The upper band of the trend channel comes into play at 113.00.
- A clear Head (1.8750) and Shoulders (1.8400/1.8100) has been drafted on the GBP/USD daily chart with the recent full retracement of mid-events hysteria. The supportive confluence of the 100-day SMA and EMA (1.8185/1.8200) has propped up the drop seen in London trading and has aided in more clearly defining the second shoulder. The rapidly ascending 200-day SMA (1.8075) has recently crossed the 38.2% retracement of 1.8916-1.7533 (1.8060) and could encourage bulls to lift the pair back to the top of the shoulder range following a test and rejection or intraday reversal/oversold indication. A breakdown of the omnipotent MA would be monumental and would speed the waning convergence of the 100 (1.8175) and 200-day SMA.
- As the most recent of the Majors (except the Yen), joining the EUR/USD, to make a 100 and 200-day SMA crossover, the longer-term outlook is decidedly bullish. However, we do anticipate a period of consolidation for USD/CHF, as USD bulls and Swiss Franc bears are likely to remain reserved until the closing ceremonies in Athens and the last day of the RNC near the onset of September. If consolidation does take place we will have set up for a bullish move from the inverted Head (1.2230) and Shoulders 1.2400/1.2720) and if it fails a universally bullish double bottom. The convergence of the standard set moving averages 100 and 200 SMA/EMA (1.2675) and self-affinity seen in the 52 and 26-week SMA remains most notable aspects for long term macros players to keep a close eye for value zones (i.e. bottom of shoulder range or potential double bottom (1.2200) at July’s lows in the event of a break down of the shoulder range).
Comment from 07/23
Our S and R zones did not play out. If we do not consider the pivotal price action on 200.50/201.00, our analysis was pretty unhelpful.
Today, GBP/JPY turned back to bullish. Bulls will step in at 199.50/200 in order to exploit a decent Fibo confluence (38.2% Fibo from
the Mar – Jun bull wave & 50% Fibo from the Jan – Jul bear wave). A breakout below would open 198.00 and the 100 SMA. Below,
bulls will keep in mind 194.50/195.00 thanks to the Low BB and 200 SMA. Bears do not have many entries but 205.00/50 will provide
a good possibility for reversal players thanks to the High BB and 61.8% Fibo from the 98 – 00 bear wave. Higher, 206.50/207 might
profit taking simply because it is the Feb swing High
The cross stayed in a tight range for the past couple of weeks. The outlook is clearly bullish thanks to a bullish triangle but as long
as the market stays below 205, it is tough to get really excited about the upside. In fact, aggressive bears will probably try another
reversal at 204.50/205. The level has been tested many times which makes the play risky but the High BB and former swing high
should provide some type of R. A sustained breakout above would directly expose 207 (bulls will buy on dips). Below, bulls will watch
201.20/70 thanks a solid Fibo cluster (61.8% Fibo from the Jun – Jul bear wave & 23.6% Fibo from the Apr – Jun bull wave & 23.6%
Fibo from the Oct – Mar bull wave). A breakout below the zone would put the market back to neutral and the 197.50 level would be
the next serious S thanks to another Fibo cluster (23.6% Fibo from the Jun – Jul bear wave & 50% Fibo from the Apr – Jun bull wave
& 38.2% Fibo from the Oct – Mar bull wave.
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