• Euro story still the same; looking for lower top ahead of next drop
• Dollar/Yen rallies Monday but needs to break 96.60 to remove downside pressure
• Cable considering retest of 2009 highs at 1.6665
• Dollar/Swiss setbacks seen limited to mid-1.0700's

6-29-09Classical-01

EUR/USD

EUR/USD - The market has been locked in some sideways trade since breaking below the neckline of a major head & shoulders top formation on June 15. However, we classify the recent price action as a bearish consolidation and look for an eventual break lower below 1.3850 to confirm our outlook and expose the measured move h&s objective by 1.3250. An ideal lower top is now sought out below 1.4210 (78.6% fib retrace of 1.4340-1.3750), with only a break above to negate and give reason for pause. Strategy: SIDELINED FOR NOW; LOOK TO SELL

USD/JPY

USD/JPY - For now, it looks like the market is content on trading within a broad range, loosely defined between the 94.00-100.00 area. With the price now gravitating to the bottom of the range, there is scope for additional weakness down towards the 93.55-85 over the coming days. Only back above 96.60 would delay bearish outlook. Strategy: STAND ASIDE; AWAIT CLEARER SIGNAL.

GBP/USD

GBP/USD - The breakdown that we have been anticipating over the past several days is taking longer to materialize, with the market caught in some sideways consolidation. However, any rallies have been well capped below the 2009, 1.6665 lows, with failed attempts resulting in lower tops by 1.6620 and most recently by 1.6605 last Wednesday. Key support comes in by the consolidation lows at 1.6185 with a break and close below to accelerate declines towards the critical 1.5800 neckline of what would be a very awkward topping formation. While our outlook still remains bearish, we would also not rule out the possibility for a retest and minor breach of the 2009 highs at 1.6665 before a resumption of setbacks below 1.6185. Strategy: SELL @1.6670 FOR AN OPEN OBJECTIVE; STOP 1.6820. Recommendation to be removed if not triggered by NY (5pm ET) close.

USD/CHF

USD/CHF - We had been writing of a potential inverse head & shoulders pattern on the daily, following the establishment of a 2009 low by 1.0590 on June 2. Although this didn't play out as we had hoped, the market was successfully propped ahead of 1.0590 last Wednesday, before a jackknife reversal through the 1.1000 neckline. The result has been the formation of more of a double bottom-like pattern which confirms the prospect for medium-term basing and opens the door for fresh upside over the coming weeks back towards the 1.1500 area. Any setbacks are now expected to be well supported in the mid-1.0700's. Strategy: SIDELINED FOR NOW; LOOK TO BUY


Written by Joel Kruger, Technical Currency Strategist for DailyFX.com. If you wish to receive Joel's reports in a more timely fashion, e-mail jskruger@fxcm.com and you will be added to the distribution list.

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