Bullish recovery pushes above 1.4000 on positive EU News.
EUR/USD’s short-term bullish recovery has pushed above that all-important psychological level at 1.4000 (previous breakout zone). The move was triggered following today’s positive EU news to boost their bailout fund.
All-eyes are now watching probes into the long-term 200-day MA at 1.4097. Only a sustained confirmation above here will neutralise the larger bearish downtrend and offer further gains into 1.4220.
Failure to hold above the 200-day MA will warn of an emotionally charged bull-trap and ultimately a sharp downside reversal through 1.3799 (26th Oct low) and 1.3653 (18th Oct low), with scope into 1.3146 (Oct swing low).
Watch intermarket relationships across broad risk-related proxies such as the developed equity markets. The euro currently shares a high correlation of 0.85% with the S&P500 which has just climbed to an 8-week high.
Inversely, the USD Index is continuing to retrace (from its recent 6-month highs) and is testing initial support at 75.80-55.
Speculative (net long) liquidity flows are temporarily unwinding from their recent spike highs (3 standard deviations from the yearly average). This will remain strong and help resume the USD’s major bull-run from its historic oversold extremes (momentum, sentiment and liquidity).
STRATEGY: Awaiting Directional Confirmation.
Under 1.5632 would turn bias bearish.
GBP/USD is settling above 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.
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 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.
STRATEGY: Await signal.
USD/JPY still basing around its NEW all-time low.
USD/JPY maintains a confluence of DeMark™ exhaustion bullish signals, after yet another new post WWII record low which was carved out at 75.82.
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.
STRATEGY: Awaiting New Buy Trade Setup.
Testing its long-term 200 day MA (0.8741).
USD/CHF is now testing its 200-day moving average which is currently at 0.8741, having recently printed a lower high at 0.9083, following the recent break under 0.8881. While under 0.9123 a continuation of this weakness is favoured.
It is also noted that the current trading region is close to the location of the 50-week moving average, at 0.8927. 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.
The recent break lower also opens up the potential for a further extension towards 0.8600, where a return to a bullish bias would become attractive again.
STRATEGY: Buy limit 3 at 0.8600, Objs: 0.9000/0.9200/0.9316, Stop: 0.8500.
Bears push back into the psychological 1.0000 level.
USD/CAD bears have pushed back into the all-important psychological 1.0000 level (prior trading range).
Only a sustained close beneath here will extend bearish setbacks into the long-term 200-day MA at 0.9813.
Meanwhile, positive momentum needs to push above 1.0264 and 1.0400 to extend the recovery higher above the old resistance level at 1.0673 (August high & Congestion zone).
A strong directional confirmation above here will open a much larger recovery into 1.0850 plus. This would extend the upside breakout from the rate’s ending triangle pattern, which was part of a major Elliott Wave cycle.
Elsewhere, EUR/CAD is extending above its 200-day MA, within a large multi-month trading range. Key resistance continues to hold at 1.4379 (June swing high), which has for some time marked a strong distribution pattern.
CHF/CAD is retesting its support nearby the 200-day MA at 1.1265, following the dramatic price slide lower (triggered by the SNB intervention). The cross-rate has now retraced more than half of its 2011 gains.
STRATEGY: Buy Stop 3: 1.0275, Objs:1.0660/1.0850/1.1110, Stop: 1.0150.
Bulls reverse higher above 200-day MA and target 1.0765.
Exited Short at 1.0510. AUD/USD bulls reversed back higher above its 200- day MA and is now targeting next resistance at 1.0765 (01st Sept high).
In terms of the big picture, failure to hold above the 200-day MA will resume downside pressure on the rate’s multi-year uptrend.
The bears need to confirm beneath 1.0322 (26th Oct low) and 1.0188 (18th Oct low). A break here will unlock sharp setbacks into 1.0000.
Elsewhere, the Aussie dollar remains stable against the New Zealand dollar. The pair is still locked within its new bear cycle structure while it holds beneath its 200-day MA. Key support can be found at 1.2320 and 1.2100.
The Aussie dollar is also gaining against the Japanese yen, after pushing back above resistance at 80.00. Near-term support continues to hold at 77.6350 (18th Oct low). A break here will resume downside scope into 76.7000.
STRATEGY: Exited at 1.0510.
Range bound short-term, favouring a return to 122.65.
GBP/JPY saw a minor break under 120.34 which failed to hold, reaching 120.00. This is suggestive of the potential for a further recovery leg higher to test the region near 123.00.
The structure present since 116.84 is deemed corrective, with scope for a final swing higher to complete this corrective phase. However, a sustained push under the recent low at 120.00 will warn of resumption of weakness back towards the floor near 117.00. However, an eventual return to 116.84/98 is expected, below which would open up an extension towards 115.00 immediately.
A sustained break over 123.31 is required to change the current bearish bias. Should this take place a larger corrective phase higher would then be anticipated.
STRATEGY: Sell limit 3 at 123.15, Objs: 121.60/118.50/116.50, Stop: 124.40.
Consolidates above the 104.75/104.99 floor.
EUR/JPY continues to range just above the 104.75/99 floor, following initial support over the last few sessions. Provided this floor is not breached, scope is seen for a fresh swing higher to re-test the 107.68 level.
However, the larger structure present since 114.18 favours the formation of a lower high close to 108.03, for a return to re-test 100.76.
Failure to hold under 108.03 will warn of a larger recovery structure, negating our medium-term bearish bias. Also, if a push over 108.03 can be sustained this will bring into focus a potential false break lower out of a falling channel in the daily timeframe.
A move under the annual low would open up an extension to 97.50, ahead of 92.80, levels not seen since 2000.
STRATEGY:Sell limit 3 at 107.90, Objs: 106.90/104.00/100.00, Stop: 109.00.
Further swing higher anticipated towards 0.8886/85.
EUR/GBP has broken above its 200-day moving average, which is currently at 0.8727.
The rise from 0.8530 is viewed as being a corrective structure with scope for a lower high to form closer to the old 0.8886/85 double top. So, although further short-term strength may follow, supply is favoured to manifest near 0.8885.
Should this move be realised, it would also take us close to the upper end of the recent trading range. There is an increased probability of general range bound trade, thus short entry at higher levels is also supported by the potential of a return to a period similar to that between 2003 and 2007 (not shown).
A move back over 0.8960 is required to neutralise our mild bearish bias, in a generally rangebound environment.
STRATEGY:Sell limit 3 at 0.8870, Objs: 0.8750/0.8580/0.8400, Stop: 0.8970.
Fails to garner momentum close to channel resistance.
EUR/CHF failed to garner momentum after meeting supply close to the resistance of an hourly rising channel. The subsequent weakness is currently testing the support of this same structure. A failure to find support here would warn of a larger fall back down to the 1.2000 level.
Although bullish for the time being, it is expected that the 1.2500-1.3000 zone may limit the current recovery phase from 1.0075. It is anticipated that the market’s willingness to trade with the bias of the SNB may exhaust should this trading region be met, as further gains in this cross are likely to become more dependent on economic releases.
A sustained move under 1.2024 will alter our near-term bullish bias.
STRATEGY: Await fresh trading signal.
Risk of a larger decline beneath $1530.
Gold remains bearish after its dramatic 20% price fall, which helped confirm the extreme overbought conditions (marked by DeMark™ indicators). This also timed a key cycle peak, ahead of that all-important $2000 glass-ceiling.
Most concerning is that speculative (net long) flows have recently breached a key downside level which may threaten over 2 years of sizeable long gold positions.
In price terms, Gold’s latest 20% bearish slide is still worth less than the largest average drawdown measured since the start of the yellow metal’s long-term bull market in 1999.
There is heightened risk of a much larger decline if we confirm a weekly close beneath $1600 and $1554-30 (200-day MA/swing low), which has not been breached in 3 years!
A number of “bargain hunting” trend-followers will be watching this benchmark “line in the sand” for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000. Remember, this would still offer a unique buying opportunity in the near future.
STRATEGY: Awaiting New Sell Trade Setup.
Key support at $26.0700.
Silver’s latest price capitulation is a painful reminder to the investment community that lightning can strike twice. Note, this marks the second time silver has crashed, following its 30% fall last April.
The move was triggered following a DeMark™ exhaustion sell signal and has now wiped out almost 50% of silver’s prior gains (taken from Silver’s alltime high at 49.7900) which was last seen in 1980.
Such a dramatic move traditionally produces volatile trading ranges. This allows the market to have enough time to recover and accumulate renewed buying interest.
Expect a large trading range to hold between $37.0000-26.0700 over the multi-week/month horizon, with downside macro risk into $21.5165 (61.8% Fib-1999 bull market) and $20.0000. This would still maintain silver’s longterm uptrend and help offer a potential buying opportunity for the eventual resumption higher.
Continue to watch the gold-silver “mint” ratio which has now accelerated higher by 67%, suggesting further risk aversion over the next few weeks.
STRATEGY: Awaiting New Sell Trade Setup.
Source http://www.fxstreet.com/technical/analysis-reports/technical-trading-strategies/2011-10-27.html
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