EurUsd EURUSD continued to consolidate lower yesterday (1.3244 the low), but notably, it met ample demand ahead of 1.3234 (38.2% fibonacci retracement of the entire rally from 1.2874 to 1.3457) which bodes well for the bulls. We now see a potential cup and handle pattern forming on the hourly chart; one that has an impressive target around 1.4035. There's two ways to play this pattern; we have chosen the strategy which relies on a more bullish conviction and have gone long on the break out from the handle's range (around 1.3340), but the more cautious approach would be to wait until a break above the cup's rim of 1.3457 -thereby ensuring the break-out is true and the pattern genuinely active.Given the immense distance to the target there's obviously plenty of levels noted on the topside before us; Friday's high of 1.3457 (the rim of the cup) is the first, followed by the hugely important 1.3500 level -significant not only for its psychological effect, but also because it coincides with the 14 Dec high. Going forward the next levels to watch above are seen at 1.3635 (23 Nov high), 1.3785 (22 Nov high), 1.3825 (10-11 Nov highs), and 1.3975 (9Nov high). Supports remain at 1.3234 (38.2% fibonacci retracement), 1.3165 (50% fibonacci level) and 1.3145 (12 Jan high former resistance).Below there we have a large gap before major support at 1.3085 (the 29 Dec pivot and 13 Jan low).

 

GbpUsd GBPUSD is powering higher this morning as we await the release of December's CPI figure from the UK. At the time of writing the pair is on the highs around 1.5975, having effortlessly negated prior resistance levels at 1.5910 (14 Dec high) and 1.5950 (last seen 23 Nov). As such, we now find ourselves staring down the barrel of an assault on 1.6000. Should we manage to break through there with today's CPI release, the next resistance is only noted at 1.6095 (19 Nov high), with another long gap before we hit 1.6185 (9, 10 & 12 Nov triple high). Buyers on dips are likely to be everywhere, whilst near-term support comes in at 1.5870 pullback area seen late yesterday, 1.5810 (14 Jan low), 1.5785 (former resistance now turned support), and 1.5718 (13 Jan low).

UsdJpy Looks like USDJPY's 3-week uptrend finally gave up the fight overnight, as the heavy price action continued to dominate and led us back below 82.50 once more. There are still a couple of supports clustered in this area that could provide the platform for a bounce (yesterday's low 82.35 and 2-week downtrend support at 82.25), but the break of the 3-week uptrend certainly does not help the bull's cause. Should the momentum be sufficient to break lower, further sellers are likely to be attracted and we would expect a return to 81.70 (4 Jan European/US session low); with the possibility of extending to 80.95 (31 Dec low), 80.24 (31 Oct low), and the all-time low from 1995 at 79.75. From here, first resistance is Friday's high 83.05, the upper edge of the 2-week downtrend channel at 83.20, followed by 83.50 (11 Jan high), 83.70 (7 Jan high), and the formidable old range ceiling from early December at 84.40. This latter level managed to contain numerous rallies back on 29 Nov, 1 Dec, 2 Dec, 8 Dec, 13 Dec and 16 Dec -so it's likely to be a stubborn barrier should we manage to get back up there.

UsdChf We may have been neutral yesterday, but after the developments of the last 24 hours, we are now resolutely bearish on USDCHF in the short term. Not only have we seen the activation of a bearish flag pattern on the hourly chart (after the break below 0.9630), but also the activation of a head and shoulders pattern due to the break below 0.9605 (7 Jan & 14 Jan low)! As a reminder, the bearish flag pattern has a target around 0.9480 below (calculated by measuring the length of the flag pole and applying it to the point of break out). For those that missed this development, it's not too late to jump aboard the larger head and shoulders pattern that's also now in play; as this pattern has a neckline around 0.9605 and a target at 0.9425. Selling on any rallies back up towards that 0.9600 handle will certainly be high on our agenda. Only support noted on the horizon is 0.9530 (former resistance now turned support), while resistance levels to watch on the topside now stand at 0.9687 (Friday's high), 0.9784 (11 Jan high), 0.9850 (12-13 Dec highs) and 1.0065 (1 Dec high).