Weekly Technical Update
Rotation Out of Risk and Commodity


Last week, I mentioned we should be getting ready for a rotation out of risk into commodity. This week, we saw commodity and commodity related currencies fall sharply. The Yen was a strong performer this week in the risk adverse environment. The Euro however, after exhausting declines, have finally bottomed for now near 1.22, and may be in an intermediate correction. By rotating out of equities and commodities, investors may be at the moment rotating into bonds, and treasuries.



EUR/USD Finds Short-term Bottom (Link)



USD/JPY Pushing Towards Support Zone




Daily and 4H: The daily chart shows the USD/JPY in a range between 95 and 88.
The 4H chart shows the market in a channel, which could be a double bottom. A break above should go immediately to 91.80/92.00 area. A break above that suggests a move towards 93.60 area.
The bearish scenario is a break of 89 leading to 88. If 88 breaks, it can retest the lower bound of the support near 86.
In either case, there is not too much room to maneuver and may be choppy. Adjustments to targets will have to be made constantly.





GBP/USD Stayed Under the Radar



Weekly and 4H: The GBP/USD remained in consolidation throughout the week after last week;s sharp slide. The weekly shows that if the low at 1.4250 area breaks, the pair can continue lower towards 1.38.
The 4H time-frame shows the sideways action between 1.45 and 1.4250 all week. A break above 1.45 may see a rally towards 1.48/1.4750 (61.8% retracement). This would be pattern breakout projection.
Howeer, if this is a c wave of a zigzag, it should really top off earlier perhaps near the 1.4650 area (50% retraceent).

USD/CAD



Daily and 4H: The USD/CAD filled last week’s gap as anticipated, and surged to 1.0750, eating up the tail of a candlestick 2 weeks ago.
As can be seen in the Daily time-frame, this 1.0750 area is a common resistance area, and Friday’s price action shows the market respecting it.
The 4H time-frame shows supports for a correction decline. The market can go to 61.8% retracement level at 1.0350. If that breaks, the 1.250 area is the last retracement support, before the 0.99/1.0 level.
A break below 1.0250 may see parity tested. Be aware of the RSI in the 4H as it may be developing positive reversals next week to suggests more attempts to break 1.0750. For example, this would occur if the current downswing cannot make below 1.0450 before turning back up.

EUR/GBP Testing Important Resistance



Daily: The EUR/GBP is testing/breaking the 0.8650 area. This ia powerline and the market is testing not just this resistance but the declining trendline and SMA 50.
After some basing action, the market looks like it is rallying. However, this rally is so far unimpressive and may be developing a negative reversal.
If RSI crosses below its SMA 50, and the market action tops off before going above 0.8800, a slide towards 0.8350 is possible.




AUD/USD Does Not See Bottom Yet (Link)
GBP/JPY: Waiting for Count to Resolve in Correction (Link)



Fan Yang
Currency Analyst
Commodity Trading Advisor
fyang@fxtimes.com

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