• Euro convictions tested
• Dollar/Yen ready for 87.15
• Cable potential double bottom
• Dollar/Swiss testing 78.6% fib
EUR/USD – Our short trade has come under pressure today and the break above 1.4720 now opens some more upside towards the 78.6% fib retrace off of the latest moves by 1.4765. However, look for rallies towards 1.4765 to be well capped in favor of some bearish resumption. A break above 1.4765 will negate bias and expose retest of recent 2009 highs by 1.4845. POSITION: SHORT @1.4625 FOR AN OPEN OBJECTIVE; STOP 1.4775.
USD/JPY – Any hopes for a short-term base are being wiped away on Tuesday, with the market breaking back below 89.00 to put the focus on a retest of key short-term support at 88.25. A break below this level will expose a retest of the major 87.15 matched trend lows from late 2008 and early 2009. A break back above 90.00 will now be required at a minimum to take pressure off of the downside. STRATEGY: STAND ASIDE FOR NOW; LOOK TO SELL
GBP/USD – The break of the major h&s top by 1.6000 has failed to inspire any significant downside follow through thus far, with setbacks stalling out by 1.5770 ahead of the latest consolidation. However, scope now exists for a more material bounce, with a double bottom formation taking form that would be confirmed on a break above neckline resistance at 1.6130. A break above 1.6130 would then accelerate to a measured move objective into the 1.6500 area. STRATEGY: STAND ASIDE FOR NOW; AWAIR CLEARER SIGNAL.
USD/CHF – Has been pulling back quite sharply since rallying to 1.0455 in the previous week. We had been looking for a major base by the recent 2009 low at 1.0185, but this is now in jeopardy with the market currently trading back into the 1.0200’s. The 78.6% fib retrace off of the 1.0185-1.0455 move comes in by 1.0250 and this level represents the last chance for the recovery. Any sustained break below 1.0250 will inevitably open a retest of the 1.0185 yearly lows and potentially parity further down. STAND ASIDE FOR NOW; LOOK TO BUY
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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