Daily Technical Report: Major Currencies

1.3937 caps for now.

EUR/USD’s short-term recovery (worth almost 6%) has been capped below resistance at 1.3937.

Bears still need a meaningful confirmation beneath that all-important psychological level at 1.3000 to unlock further scope into 1.2860 (near 2011 low) and even further.

Key resistance remains at 1.3937 (15th Sept high), which is near the previous breakout zone at 1.4000. Confirmation above here will neutralise the status quo.

Inversely, the US dollar remains above the 200 day moving average as most other popular “risk” markets weaken from overcrowded uptrends. Short-term price activity has found initial support close to the previous breakout zone at 76.40.

Speculative (net long) liquidity flows are maintaining their spike above our trigger level of 15000 contracts and is holding at 3 standard deviations from the yearly average. This will help sustain the bull-run from historic oversold extremes (momentum, sentiment and liquidity).

GBP/USD

Consolidates just under the 38.2% retrace.

GBP/USD has entered into a period of consolidation just under the 38.2% retrace of the 1.6747-1.5272 fall. A sustained break under 1.5632 is now required to increase the probability of a lasting lower high near this key retrace.

Strategy is still hampered by a lack of reliable structure, largely due to the range bound nature of the market in the medium-term time frame. Should this continue then a larger recovery phase, back towards the 200 day moving average would then come back into focus. Remaining neutral is deemed best for now.

GBP/USD has already experienced a large devaluation versus the US Dollar, therefore any further strengthening in the US Dollar may not see the full participation of GBP/USD. Instead GBP/USD is favoured to remain stronger then most.

USD/JPY

USD/JPY is possibly basing around its all-time low.

USD/JPY is maintaining a confluence of DeMark™ exhaustion bullish signals, after the new post WWII record low which was carved out at 75.95.

These reversal signals are also following the second post intervention retracement in 2011, which is holding around a multi-week base pattern. It is also worth noting that our volatility measures remain very low and continue to favour a major breakout over the short-term horizon.

The medium/long-term view remains bullish, watching for a sustained move above our initial upside trigger level at 77.68. This would offer a resumption of the preferred new structural bull-cycle into the all-important psychological level at 80.00, near 80.24 (post BOJ intervention II high).

Keep in mind that such a scenario would help reactivate the longer-term technical bias, including prior monthly DeMark™ exhaustion signals, within the ending diagonal pattern, which was part of a major Elliott Wave cycle. Only a sustained weekly close below 76.25 will lead to a reassessment of the view and extend temporary weakness into 74.55.

USD/CHF

Rise from 0.8881 appears corrective in nature.

USD/CHF has completed an initial corrective phase lower finding support at 0.8881. From there a corrective phase has developed, with scope now for a return to the recent low. However, a push back over 0.9123 will suggest scope for renewed strength.

It is also noted that the current trading region is close to the location of the 50 week moving average, currently at 0.8952. Thus, a continuation of weakness would also warn of a breakdown of the recent recovery structure. However, back under 0.7712 is required to change the long-term bullish bias.

Thus, in the near-term, a breach of the 0.8881-0.9123 range is required. Our long strategy will be maintained at 0.8600 for now, as trade location is currently perceived to be optimised there.

Please see the attached chart below.