Weekly Technical Update

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. Let’s take a look at some major currency pairs.

EUR/USD: 1.15.2010 Stalking Consolidation– 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 Friday’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 bearish momentum.
* 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 week’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 resistance area.
* 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 week’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 around 0.8830.
* This bearish signal is invalidating the bullish outlook for terminal wave “V”. It appears wave “IV” 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 “I”.
* 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
GBP/JPY

* Daily and 4H: The GBP/JPY remained bullish as anticipated in last week’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 week’s action did not invalidate the outlook, but surely weakens its possibility. The pairs choppy action reflects this week’s subdued risk sentiment.


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

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