EUR/USD â,“ 1.2780 has held as support and a the confluence of the supporting trendline from the 1.2456 low on 7/19 / the 10 and 20 day SMAs grants additional support at 1.2775/1.2801/1.2803. The consolidation from mid may has taken the form of an ascending triangle â,“ a bullish continuation pattern that favors the upside. The 8/21 high at 1.2938 is initial resistance. A daily close above the resisting line from 1.2976 grants confidence to the bullish argument. A break below 1.2775 encounters support at the 38.2% fibo of 1.2456-1.2938 at 1.2755.
USD/JPY â,“ The USDJPY rallied yesterday to test the upper Bollinger band on the daily / 8/14 high at 116.74 before falling back to just above the 116.00 figure. With the choppy action on the hourly, weâ,"ll look to the daily for direction. The head and shoulders pattern that began towards the end of June is still in play and the resisting line from 117.88 limits upside potential. The head and shoulders pattern would complete on a break below the neckline (currently at 114.25 and increasing about 7 pips per day). If weakness does play out, then the 8/17 low at 115.17 is also support. A push above 116.83 (8/22 high) encounters the 7/25 high at 117.38.
GBP/USD â,“ Cable is currently testing the high side of the downward sloping channel (see chart below) from 1.9144. Similar to EURUSD, the confluence of the 10 and 20 day SMAs is support at 1.8877/1.8900. The choppy nature of the decline from 1.9144 is in 3 waves and thus corrective. A break above the aforementioned channel exposes the 8/21high at 1.8996.
USD/CHF â,“ As EURUSD has consolidated within an ascending triangle, USDCHF has consolidated within a descending triangle. The pair has also formed a head and shoulders pattern that would complete on a break below the triple bottom at 1.2190. RSI has slipped below 50 on the daily â,“ which is bearish. A break below 1.2190 exposes the 78.6% fibo of 1.1919-1.2595 at 1.2064. Immediate resistance is at todayâ,"s high at 1.2362.
USD/CAD â,“ As we have expected, USDCAD continues to weaken. The pair appears to be tracing out the 3rd wave of a correction from 1.1456. Where might this correction end before buying returns? The 3rd corrective wave (beginning at 1.1319) would equal the first (1.1456-1.1170) at 1.1033. This is significant because the 78.6% fibo of 1.0927-1.1456 is at 1.1040 (just 7 pips away). This fits with the notion that initial moves at turning points are often retraced a large amount before a continuation. The initial move in this case is 1.0927-1.1456.
AUD/USD â,“ As we have focused on in recent commentary, the longer term bias is a bearish one as evidenced by the bearish divergence with oscillators on the daily at recent highs and a resisting trendline from the 3/8 high at .7988. Near term strength is getting overextended as RSI on the hourly is declining from above 70. The recent rally stalled just below the 78.6% fibo of .7699-.7551 at .7667. This is initial resistance but a break above would expose the 8/16 high at .7699. The rally off of the 8/18 low at .7551 is in 3 waves (corrective) but .7699 must hold in order to keep the near term bearish.
NZD/USD â,“ We have concentrated on the possible change in trend in Kiwi in recent days. Evidence includes â,"extreme CCI on the daily (above 100) and RSI very near extreme, the likelihood of a sustained rally is not great. In addition, Thursdayâ,"s inside day at the upper Bollinger band points to a potential change in trend.â, NZDUSD may be in the early stages of weakness as the pair currently trades below support from the 8/18 low at .6367. On the other hand, this could simply be a correction of the strength to .6439. RSI is nearing oversold and the pair is trading right at a supporting trendline (see chart below). Weâ,"ll need to see a break below the supporting trendline on the daily (from the .5927 low) before we have confidence in the downside. The daily trendline is at .6278 today and increases roughly 10 pips per day.
Jamie Saettele is a Technical Currency Analyst for FXCM.
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