Euro Breaks Down to Expose Key Trend Lows. Dollar/Yen Profits Booked on Long. Cable Consolidating Ahead of Fresh Drop. Dollar/Swiss Still Well Capped on Rallies. Dollar/Cad Testing Triangle Resistance. Australian Dollar Approaches Trend-Line Support. New Zealand Dollar Contemplates Dip Back Under 0.5000.
The bearish descending triangle formation has been confirmed on Tuesday with the market taking out key short-term lows by 1.2705. This now opens a deeper setback towards the critical trend lows from late October at 1.2330 over the coming days with a break of the latter exposing psychological barriers by 1.2000. Former support should now act as resistance and we will look to sell into 1.2705 with a target of 1.2330. In the interim, 1.3095 is now seen ultimately capping rallies with a break of the latter required to negate outlook. Strategy: SELL@ 1.2750 FOR A 1.2330 OBJECTIVE, STOP @1.2875.
Price action in the major is starting to look more constructive after the latest round of setbacks off of the early January 2009 highs stalled out perfectly by 87.15, to match the previous trend lows from December. With weekly stochastics just having crossed up from oversold, there is plenty of room for gains to run over the coming weeks. The market had been trading below the daily Ichimoku cloud since mid-September but the current push higher is threatening this trend. The top of the cloud currently resides at 93.85 and a move back above will undoubtedly attract fresh bids. Another potential bullish formation that could be taking hold on the weekly chart is a textbook double bottom with neckline resistance by 94.60. A break back above the neckline at 94.60 would be significant as this pattern trigger would project additional upside back above 100.00 and towards the 104.00 area. Position: LONG FROM 90.80 BOOKED PROFIT AT 92.45, STAND ASIDE.
The market is in the process of consolidating following the latest drop out from the 1.4990 (9Feb High) bear channel top. Hopes for additional recovery have now faded and we look for a near-term break back below today’s low at 1.4125 to end the latest 4 day consolidation and accelerate declines back towards the critical trend lows at 1.3505 (23Jan low). A break back above 1.4605 will be required to negate outlook. Strategy: SELL@ 1.4120 FOR A 1.3505 OBJECTIVE, STOP @1.4320.
Remains locked in a multi-day sideways chop with much of the price action confined to the 1.1500-1.1785 area. However, given the broader up-trend, our bias is for a bullish continuation above 1.1785 back towards the key trend highs from mid November at 1.2300 (21Nov high). Dips should continue to be supported ahead of 1.1500 with only a break back below the latter to delay outlook. For now, we prefer to stay on the sidelines until a clear breakout has been achieved. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.
We have seen an ongoing contraction in volatility to the point where we have reached the apex of a very prominent triangle that has defined trade since late October. Falling triangle resistance comes in at 1.2685 and we will be looking for a daily close above the latter to confirm a breakout which will ultimately trigger a fresh upside extension exposing a direct retest of the 1.3020 October 28 trend highs. Ultimately, the upside break should project gains back towards 1.4005 (2004 Highs) over the coming months (measured move objective based off of widest point of triangle). Failure to establish above 1.2685 however, will keep the triangle intact and open yet another retest on the triangle bottom in the 1.2000 area. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.
The latest bout of consolidation has come to an end on Tuesday with the market breaking back below 0.6430 (12Feb low) to now open a deeper drop towards 0.6250 (2Feb low) over the coming days. There is some rising trend-line support which initially comes in by 0.6300 that is now expected to be taken out. Below 0.6250-0.6300 then exposes a full retracement back to the key trend lows at 0.6005 (27Oct low). Above 0.6645 (13Feb high) delays. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.
Hopes for a higher low have all but faded with the market breaking below the latest consolidation and now exposing a direct retest of the trend lows by 0.4960 (2Feb low). The market has stalled out by the 78.6% off of the 0.4960-0.5450 move on Tuesday, but we would expect to see continued weakness into Wednesday to 0.4960. A break back above today’s high at 0.5210 will be required to defer. Strategy: SIDELINED; AWAIT CLEARER SIGNAL.
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