EUR/USD – The rally to 1.2976 gave way to a 3 wave correction that has found support at the 50% fibo of 1.2795-1.2976 at 1.2885. A continued bounce from fibo support targets yesterday’s high at 1.2976. However, that high formed a double top with the 5/15 high, massive negative divergence with oscillators on the daily, and yesterday’s candle resulted in a bearish reverse hammer at the upper Bollinger band. This evidence points to a continued correction of the 1.1825-1.2971 rally, possibly to the 5/4 low of 1.2570 or the 38.2% fibo of 1.1825-1.2971 at 1.2533.
USD/JPY – Range conditions prevail in USD/JPY as the pair traded between the 10 and 20 day SMA’s yesterday. As such, hourly oscillators are the weapon of choice. Hourly RSI is now sloping down from close to overbought territory and thus offers a cautious short term bearish bias. However, a break above this evening’s 112.50 high exposes the 6/2 high at 112.93. The inability of the pair to break below the 38.2% fibo of 108.96-112.86 at 111.45 gives suggests that the larger corrective move from 1.0896 has more upside potential. Resistance stems from the 6/1 high of 113.37 and the 50% fibo of 118.87-108.96 at 113.93.
GBP/USD – The rally to 1.8879 yesterday was resisted by daily highs from 5/30, 5/31, and 6/2. These daily highs form a double top on the hourly chart at 1.8868/79, which is initial resistance. The double top favors additional weakness towards support at the 61.8% fibo of 1.8565-1.8858 at 1.8677. A supporting trendline from the 5/26 low of 1.8529 comes in near 1.8600. Wave structure supports a continued correction of the prior bull move to 1.9025. The rally from 1.8529 to 1.8879 appears to be the second wave of a three wave correction with the third wave ideally breaking below the 5/26 low of 1.8529 and towards the 38.2% fibo of 1.7226-1.9024 at 1.8338.
USD/CHF – USD/CHF trades near the bottom of a well defined range between 1.2015 (5/22 low, 6/5 low) and 1.2300 (5/11 high, 5/26 high, 6/1 high). With the proximity of mentioned support and hourly RSI rising from below 30, risk is limited to the downside. However, a break below yesterday’s 1.2014 low opens up the door for an assault on the 5/15 low at 1.1919.
USD/CAD – USD/CAD has rallied well past 1.1000 after the last two days’ lows held at 109.72and 109.76. Quite clear on a dealer chart is the formation of a head and shoulders continuation pattern although scope remains for continued strength towards the 61.8% fibo of 1.1265-1.0926 at 1.1135 or the 5/15 high at 1.1175. Strength beyond 1.11758 negates the h&s continuation pattern and its bearish implications. Favoring bulls is the massive positive divergence with oscillators on the daily after the 1.0927 low on 5/31. Such a strong signal on the daily chart often leads to a rather material move. Keep in mind that a h&s continuation pattern would not be completed until a break below the neckline (near 1.0925 at the moment), thus the positive divergence proposes a cautiously bullish stance.
AUD/USD – AUD/USD continues to trade near support from confluence of the 200 day SMA / 6/1 and 6/2 lows at .7440/62. Today’s low of .7439 pierced the 6/1 and 6/2 lows of .7440/44 and price subsequently snapped back above .7450 – leaving positive divergence with oscillators on the hourly and thus the possibility for gains in the short term. However, it appears as though AUD/USD is entering the third wave of the overall correction from the rise to .7791 and may eventually test the 61.8% fibo of .7312 in the coming weeks. Daily oscillators favor this view as MACD has just turned negative, RSI < 50, and CCI < 0.
NZD/USD – Kiwi trades within a range bound by the 6/5 high of .6353 and the 6/2 low of .6230. Volatility continues to contract as the pair digests the bear wave to .5991 that ended in late March. The consolidation pattern takes the form of a triangle and a break below exposes the 5/22 low of .6142. Strength finds resistance at the upper end of the triangle near .6390.
Jamie Saettele is a Technical Currency Analyst for FXCM.