- Euro price action remains choppy; 100-Week SMA key
- Dollar/Yen eyes retest of critical trend lows
- Cable bearish reversal week could open deeper setbacks
- Dollar/Swiss carving out meaningful base
- Dollar/Cad gains seen extending to previous support turned resistance
- Australian Dollar stalling by longer-term moving average
- New Zealand Dollar supported by 10-Week SMA for now
EUR/USD - The market remains locked in a multi-day consolidation since positing fresh 2009 highs by 1.4340 back in early June. While our shorter term outlook has favored the bearish side (we are short from 1.4180), the medium-term outlook is more uncertain from here and it remains to be seen whether we are looking to put in a medium-term lower top by 1.4340, or a medium-term higher low by 1.3750. A break back below 1.3750 would signal a resumption of the broader bearish structure and expose a fresh drop to the 1.3000 area, while a sustained break above 1.4340 would bring 1.4720-1.4870 back into focus. The 100-Week SMA has been a pretty solid trend indicator and we have yet to close back above the longer-term moving average, which ultimately still keeps the focus on the downside. As such our strategy will continue to be to look to sell into rallies, even towards 1.4340, as another topside failure above 1.4300 could also potentially set up a medium-term double top scenario. As such, our outlook will only ultimately shift on a weekly close above 1.4340 and above the 100-Week SMA. POSITION: SHORT @1.4180 FOR AN OPEN OBJECTIVE; BOOKED PROFITS ON 3/5 OF POSITION AND STOPS AT 1.4180 ON REMAINING 2/5
USD/JPY - Remains locked in a fairly intense downtrend and is currently in the process of attempting to carve out a fresh lower top below 110.70 (August 2008 high) by the 2009 highs from April at 101.45, ahead of the next downside extension below the historic trend lows from a few months back set at 87.15. The key level to watch below comes in by 93.55, with a break to accelerate declines and directly expose 87.15 further down. Back above falling trend-line resistance at 100.00 would however delay the bearish structure, while above 101.45 ultimately negates. In the interim, key levels to watch above and below come in by 98.90 and 93.85. STRATEGY: STAND ASIDE; LOOK TO SELL
GBP/USD - Gains are stalling out by the 61.8% fib retracement off of the 1.8670-1.3500 September 2008-January 2009 move and with weekly stochastics still showing overbought, our bias tends to favor the downside. Fresh 2009 highs by 1.6745 could not be sustained and the result has been a sharp reversal to set up a bearish weekly close in early July. A break below 1.6185 will however be required to accelerate declines and confirm the medium-term topping structure. Below 1.6185 will accelerate declines to 1.5800, which ultimately guards against a full fledged resumption of the broader downtrend. Only a weekly close back above 1.6745 will negate and give reason for pause. STRATEGY: SIDELINED FOR NOW; LOOK TO SELL
USD/CHF - In the process of attempting to carve out a meaningful medium to longer-term base by 1.0590. However a period of choppy consolidation still needs to be convincingly broken to the topside to confirm the basing prospects and open a recovery extension back towards the 1.1500 area. The key level to watch above comes in by the recent highs at 1.1025 and a weekly close above this level will help to confirm our bullish outlook. Back under 1.0590 will however negate and open a bearish resumption back towards parity. STRATEGY: SIDELINED FOR NOW; LOOK TO BUY
USD/CAD - Continues with the recovery from the 2009 lows posted by 1.0785 on June 1, reaching 1.1655 thus far ahead of the latest minor setbacks. However, any setbacks are seen well supported ahead of 1.1330 with the market putting in yet another positive weekly close of higher highs and higher lows. Look for additional upside over the coming weeks back towards the 1.1800 area which acts as a previous support from January 2009, now turned resistance. From there, we will need to reassess the prospect for continued appreciation well into the 1.2000's or a bearish resumption. STRATEGY: SIDELINED FOR NOW; LOOK TO BUY
AUD/USD - Although it has not been a full-proof indicator, the 100-Week SMA has managed to offer itself as a formidable trend indicator over the past several years. The latest sharp recovery out from the late 2008 multi-year lows has finally showed signs of stalling out above 0.8000, which also coincides with a failure to overcome the 100-Week-SMA. While the market holds below the SMA, we favor the idea of looking to sell at current levels by 0.8000, in anticipation of a resumption of declines. The key level to watch below comes in by 0.7790, with a break to confirm our bias and open a deeper round of declines potentially back towards the 0.7000-0.7300 area. Weekly stochastics reaffirm bearish outlook, with the study showing overbought. Only a weekly close above the 100-Week will negate and shift our outlook. STRATEGY: SIDELINED FOR NOW; LOOK TO SELL
NZD/USD - The market has been having a hard time extending gains over the past couple of weeks, with the rally out from the multi-year 2009 lows by 0.4895 finally stalling out by 0.6600. This topside failure by 0.6600 also coincides with the 50% fib retrace off of the major 0.8215-0.4895 2008-2009 move and we look for a medium-term lower top to now carve out ahead of a resumption of the broader downtrend over the coming weeks. The 10-Week SMA has managed to support much of the up-move off of the 2009 lows and a close below the moving average will be used as a gauge for confirmation and an official bearish shift in the structure. A weekly close back above 0.6600 will however negate and open a fresh recovery rally. STRATEGY: SIDELINED FOR NOW; LOOK TO SELL
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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