Trade setups are coming into focus. Look for an early week USDJPY low (final washout?) as well as turns in the EURUSD and GBPUSD. The USDCHF may have already formed an important low. There is a compelling setup in the EURAUD as well.
USDJPY
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The USDJPY has declined for 4 consecutive weeks. In fact, 4 week rate of change (see next chart) can be considered extreme at these levels. In the last 10 years, 4 week rate of change has only been lower just once; the week that ended 10/24/2008. Slightly less extreme RoC figures were registered in May 2006 and March 2008. A final washout into slightly lower levels would be ideal. Specific levels to keep an eye on are 92.55 and 91.96. Watch the downward sloping corrective channel as well (blue). On the upside, 96.95 is a significant level (big volume close) as is 97.52 (4/5 and 6/7 closes…both were followed by gaps higher). Friday’s DailyFX PLUS webinar provides additional detail.
FOREX Trading Strategy: Looking for an early week low.
USDJPY
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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USDCHF
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The USDCHF rallied for 22 weeks off of the 2011 low (8/12/11 to 1/13/12) and has traded sideways for the last 73 weeks. Consolidation has lasted 3.3 times (73/22) longer than the previous trend. This week’s low was registered at the trendline that extends off of the October 2011 and 2013 lows and just 8 pips below the open for the year.
FOREXTrading Strategy: Long while above .9110
EURUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: Decent selling pressure during the European session on Wednesday and Thursday may have been the ‘false start’ lower that are common at tops. There are levels just overhead that could produce a sharp reversal…the 2/7 close at 1.3396, 2/20 high at 1.3433, and the trendline that extends off of the 2011 and 2013 highs (a little over 1.3450 for the rest of the week).” One more high into 1.3400/50 may well finish the sequence from mid-May.
FOREXTrading Strategy: Expecting a top …watch with USDCHF. A new high in EURUSD that is not confirmed by a new USDCHF low would be a ‘tell.’
GBPUSD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The rally from the March low would consist of 2 equal legs at 1.5783. Don’t lose sight of the big picture. A year triangle was broken to the downside in February and price has returned to the breakout point. In fact, the line that connects the 2009 and 2012 lows (in red on chart) is just above 1.5783 on Friday. The 61.8% retracement of the decline from the January high is 1.5788 and the November 2012 low is 1.5822.
FOREXTrading Strategy: Same as EURUSD…can’t say we’ve topped yet but closing in on one.
EURAUD
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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FOREXAnalysis: The EURAUD has met the objective derived from the early year 1.3190-1.2220 range (add the width of the range to the breakout price of 1.3190 in order to achieve 1.4159). Action this week is consistent with a top. A gap higher Monday was followed by an outside day on Thursday. The weekly reversal also occurred slightly below the August 2011 high (1.4261) and right at the 2011 weekly closing high (1.4233). The top of former congestion at 1.3591 is of interest on the downside.
FOREXTrading Strategy: Expecting a deeper AUDUSD pullback anyway so don’t be surprised to see strength into 1.4100. Will short 1.4100 if reached.
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele
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Jamie is the author of Sentiment in the Forex Market.