•Euro consolidates latest setbacks ahead of next drop
•Dollar/Yen pulls back sharply to clear key support; bias still constructive
•Cable puts in bullish outside day; but no upside follow through expected
•Dollar/Swiss sees choppy session of directionless trade
EUR/USD - The much talked about head & shoulders top developing over the past few weeks has finally triggered on Monday and now projects additional declines towards 1.3250 over the coming weeks. Look for any rallies to now be very well capped by 1.4000, ahead of a drop back to challenge next support in the 1.3585-1.3730 area. Despite Monday's mild rebound, the market has managed to put in a fresh daily lower low and lower high to keep the pressure firmly focused on the downside. Strategy: SIDELINED FOR NOW; LOOK TO SELL.
USD/JPY - The market has been in rally mode since basing out by 93.85 in Mid-May, putting in a series of higher highs and higher lows. A fresh higher low is now sought out above the June 1, 94.45 low, to be confirmed on a break back above 98.90 over the coming sessions. Today's sharp intraday pullback leaves hourly studies oversold, and with the daily ATR (Average True Range) already well exceeded, and the market testing rising trend-line support, the risks from here are for renewed strength and as such, we have acted accordingly. Position: LONG @96.35 FOR AN OPEN OBJECTIVE, STOP @95.25.
GBP/USD - As per our commentary on Monday, rallies have been well capped by 1.6500 and a fresh lower top is sought out by Tuesday's 1.6510 high ahead of the next drop back below 1.6210, and towards key double top neckline support at 1.5800. A bullish outside day on Tuesday is somewhat concerning, but we do not anticipate any positive follow through from the bullish candle formation and continue to favor additional weakness from current levels. Ultimately, only back above 1.6665 negates. Strategy: SIDELINED FOR NOW; LOOK TO SELL.
USD/CHF - Setbacks have stalled out by 1.0650 in the previous week, which also coincides with previous resistance now turned support, and a fresh higher low is now sought out, to be confirmed on a break back above 1.0990 over the coming sessions. The result has been the formation of a potential inverse head & shoulders pattern that ultimately projects upside back towards the 1.1400 area over the coming weeks. Look for a break above 1.1000 to confirm and accelerate gains. Only back under 1.0650 delays. 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 firstname.lastname@example.org and you will be added to the distribution list.
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