In the end US equity markets were unable to hold on to their moderately strong open with DJIA down -0.18%, NASDAQ down -0.46% and S&P500 down -0.58% at the end of the trading day. Following the previous day’s big rally markets appear to have needed a technical correction using a poor read in New Home Sales to justify some position squaring. For currencies we saw majors retreating from new swing highs against the dollar in Euro, Cable, Aussy, and Loonie. Daily candles for the most part turned out to be tentative reversal patterns, not exactly matching the parameters to the letter. At this point we are seeing a mixed open in Asia, no excuse for following through the New York pullback, the more prudent course of action would be to wait for the European markets. Consider the strong close in Europe yesterday we may be vulnerable for technical correction in FTSE, DAX, and CAC 40 and spark a follow through sell-off in the currencies.
We see a qualifiable ‘dark cloud cover’ in daily EURJPY with indicators showing stochastic poised to come off overbought territory even as macd’s remain bullish. In intraday charts we have 4H stochastic pushing to oversold levels while macd has a relatively new bear cross. Hourly indicators for their part has stochastic coming off oversold levels while macd is dropping. From the big picture price action suggest we generate a pullback though we also face a strong support immediately at 101.05. For now we prefer remaining sidelined any hourly close under 101.05 should pave the way for a steep pullback of the weeks big rally. See a congestion just above 101.05 and we will likely see a bounce by the European session.
It appears USDCAD is having trouble staying under parity with Thursday turning into a hammer at the end of the trading day. Among indicators we have daily stochastic in the process of crossing higher while macd is still pointing down. In intraday charts we are seeing hints of a pullback as 4H stochastic heads up and macd bottoms out. Hourly indicators for their part has stochastic overbought while macd is also rising. Note that we are merely 20 pips away from the 38.2 Fib of the weeks sell-off at 1.0050, a strong resistance level. For now we prefer remaining sidelined and looking for patterns just under the 1.0050 area later on.
Much as the other majors we AUDUSD with a ‘shooting star’ in the daily charts though indicators here apper to be more mixed than seeing signs of a pullback in the works. Daily indicators show stochastic is flat while macd is still rising. In 4H charts we have a three black crows among the candles while stochastic is pushing to oversold levels and macd poised to cross lower. Hourly indicators for their part has stochastic reentering oversold areas while macd is heading lower. We already have an hourly close below a minor support this after prices gave up on the strong resistance at 1.0655 in the daily charts. As such we prefer taking the sell side from just under 1.0608 with stops tightly above 1.0655.
GBPUSD Thursday turned out to be qualifiable ‘shooting star’ with daily indicators showing stochastic coming off overbought levels though macd’s are still on the rise. In 4H charts we are seeing a confluence of bears develop as stochastic head for oversold territory while macd is crossing lower and candlesticks sees an evening star. Hourly indicators for their part has stochastic oversold and macd still heading lower. Note we are in the process of pushing under the 1.5670 strong support, a 4H close below this confirms a breakout. Immediate risk is for technical correction of the weeks’ gains though this looks limited to a move to the 1.5625 region.
In the end Euro saw a long wick for Thursday to end up with a qualifiable ‘shooting star’ with daily indicators now seeing stochastic come off overbought levels and macd still pointing up. In the lower time frames we have stochastic pushing to oversold levels while macd has just crossed lower. In the hourly charts we have stochastic crawling in oversold territory after a double was triggered in New York trade while macd is heading lower. At the moment we are in the process if pushing under the support at 1.3085, an hourly close under this opens the way for a possible pullback of the week’s rally. We may be looking at a pullback to the 1.2993 region, 61.8 Fib of the weeks rally should equity indices remain weak.
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