Forex Technical Update
Comm Dollars (Commodity Currencies) have been strong against the USD and JPY this week as equities and oil rallied. For example, S&P500 futures rallied roughly from 1340 to 1375, while WTI crude oil prices rallied from roughly 86.50 to 91.20. The risk-on dynamic buoyed comm dollar strength, but the EUR did not follow as if it has ankle weights on. This resulted in a slide in the euro against the Aussie, Loonie and Kiwi to fresh record lows (after setting them last week).
4H Chart 7/19/2012 9:10AM EDT
The EUR/AUD has been in a very sharp downtrend. The 4H chart shows the market in persistent bearish momentum as the RSI continues to push below 30 and stays under 60 on any pullback. Moving averages are in bearish alignment. We continue to dig up fresh record lows after stalling a bit last week at 1.1930. The weekly chart might give us some ideas of where this downtrend might be projected to, but there are no historical supports any more down in this abyss.
The weekly chart shows some bearish targets coming up.
1) 1.1712 is 61.8% expansion of the previous downswing from 1.4275, 2011 high to the 1.2130, Feb 2012 low.
2) 1.1560 is roughly the range breakout projection, using the range from 2010-2011.
3) 1.09 is the aggressive 100% expansion, or swing projection.
EUR/AUD Weekly Chart
4H Chart 7/19/2012 9:25 AM EDT
The EUR/CAD established new record lows last week when falling below 1.2440, and then extended lower at the beginning of this week. It consolidated briefly throughout the week until the 7/19 European-US session pushed the pair lower again.
Looking at the weekly chart, there is one projection in the medium term. If the decline since the end of 2008 is an impulse wave, then a conventional projection of wave 5 is equality of wave 1. In this case, that would target roughly 1.2040.
EUR/CAD Weekly Chart
4H Chart 7/19/2012 9:35 AM EDT
The EUR/NZD established record lows in a choppy manner last week, and remained so until the 7/19 US session, where it appears to be accelerating downwards, breaking a recent expansion pattern. The RSI and moving averages are all showing persistent bear trend, just like in the EUR/AUD and EUR/CAD 4H charts.
The weekly chart show a market in a declining wedge since the end of 2010. If the current decline extends further (on the 9th straight week already), then the EUR/NZD might be coming up against the wedge pattern support near 1.48.
Note that this target is short of the swing projection from the previous downswing, which would target 1.4450. But also note that the previous downswing WAS indeed shorter than the one before it (hence the wedge pattern instead of a something like a channel).
EUR/NZD Weekly Chart
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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