Technical Analysis

EURUSD: 1.3384 Medium-Term Trend: sideways Outlook: A month I favored the long side as I thought the Contracting Triangle from the 2008 top had already ended and the single European currency was in its next bull market. However for the past month or so the Medium-Term picture has changed completely and now it is clear that the Triangle from the 2008 top is still unfolding. We have two almost equally likely scenarios now: 1.) if this Triangle is a contracting one, the decline from the May 2011 top is approaching its end and then a powerful rally will develop, most likely in early 2012. OR 2.) this Triangle is an expanding one in which case a decline below 1.18 will occur. I said these two scenarios are alsmost equally likely but at the moment I slightly prefer the red-line (bullish) scenario. But even in that case we should be prepared for more weakness in the next several weeks. Only a move abv...

GBPUSD: 1.5441 Short-Term Trend: downtrend Outlook: Last week I said that we were in a bear market and if the pair rallied to 1.5950, this would be a good opportunity to take a short position. The market however was so week that couldn't reach the 1.5950 level. Instead, it continued its decline and reached 1.5327 before recovering a bit. The next Fibo levels to watch are 1.5260 and 1.5000, so I expect further weakness going forward. but right now the market is severely oversold. In a downtrend that may mean nothing but still one should be more careful if they are not already short - shorting right now may be too late. Strategy: The short side is favored but the risk/reward ratio is not compelling right now.

GBPUSD: A strong sell off has seen the pair followed through lower the past week and opened the door further weakness in the new week. In such a case, the 1.5344/26 levels will be targeted with a breach setting the stage for further declines towards the 1.5296 level, its Sept’2011 low and then the 1.5122 level, its July 18’2011 low. Further down, support lies at 1.5000 level, its psycho level. Its weekly RSI is bearish and pointing lower suggesting further weakness. Alternatively, on any recovery, the 1.5633 level, its Sept 19’2011 low will be targeted with a loss of there setting the stage for further strength towards the 1.5779 level, its July 12’2011 high. A reversal of roles as resistance is expected to turn the pair back down at that level. Further resistance stands at the 1.5995 level, its broken trendline resistance.

EURUSD: The pair has broken below its key support at the 1.3491 level, its Sept 12’2011 low on the back of its Wednesday weakness. With that said EUR has resumed its medium term weakness started from the 1.4938 level and now looks to target its Feb’2011 low at 1.3245. However, its immediate challenge is to decisively breach the 1.3427 level and hold below it to trigger further weakness. Other supports are located at the 1.3088 level, its Jan 13’2011 low and the 1.3000 level, its major psycho level. Its daily RSI is bearish and pointing lower supporting this view. Conversely, on any recovery, EUR will aim at the 1.3491 level just eroded. A reversal of roles as resistance is expected there. Further out, resistance comes in at 1.3799 level, its Sept 21’2011 high ahead of the 1.3936 level, its Sept 09’2011 high. All in all, EUR has resumed its medium term downtrend and looks to weaken further. 

GBPUSD: The pair remains vulnerable to the downside following its gap lower on Monday. As long as that gap remains unclosed and GBP continues to trade below the 1.5863 level, we look for the pair to decline further. In such a case, the 1.5633 level, its Sept 19’2011 low will be targeted initially with a violation of there calling for a move further lower towards the 1.5600 level and its major support located at the 1.5480 level, its .50 Fib Ret(1.4229-1.6743 rally). Its daily RSI is bearish and pointing lower suggesting further weakness. Alternatively, above the 1.5870 level, its Sept 13’2011 high will have to occur to trigger a recovery higher towards the 1.5995 level. A cap is expected to occur here and turn the pair back lower. All in all, GBP remains susceptible to the downside on further weakness.

GBPUSD: 1.5786 Short-Term Trend: downtrend Outlook: The decline from the Aug top has moved prices below the July's low so my confidence that wave (g) has already ended has increased (though there are still some reasons to suspect one more rally twd 1.6650 may follow). The trending conditions have also improved and they indicate the current decline is strong. Thus, despite the oversold conditions I donot expect any big bounce from here. Most likely the market will rally only to test the 1.5947 level and wil then resume its decline. The key resistance on the upside is at 1.6100/10 as a move above there will negate the current bearishness. From a trading perspective, I favor a short positin if a rally twd 1.5947 develops against the 1.6100/10 resistance. Strategy: Shorts favorable toward 1.5950. Stop abv 1.6110. Target=1.5260.  

EURUSD: The pair has halted and then triggered a corrective recovery of its declines from the 1.4938-1.3491 levels.This development now leaves EUR targeting further strength as we enter a new week with upside risk towards the 1.3835 level. Unless the 1.3835 level is decisively taken out, the pair could turn lower again. However, on an eventual push through that level, the 1.3936 level, its Sept 09’2011 high will be targeted followed by the 1.4095 level, representing its Sept 08’2011 low and possibly higher towards its falling trend line currently at 1.4323 level. On the downside, major support lies at the 1.3491 level, its Sept 12’2011 low. A convincing violation of here will call for further downside pressure towards the 1.3422 level, its Feb’2011 low and then the 1.3300 level, its psych level. All in all, EUR may have triggered a corrective recovery but continues to maintain its short downtrend.

EURUSD: While corrective recovery may have been triggered, as long as the 1.3835 level remains as resistance our outlook on EUR remains lower. However, on an eventual push through that level, the 1.3936 level, its Sept 09’2011 high will be targeted followed by the 1.4095 level, representing its Sept 08’2011 low and possibly higher towards its falling trend line currently at 1.4323 level. On the downside, support lies at the 1.3491 level, its Sept 12’2011 low. A convincing violation of here will call for further declines towards the 1.3422 level, its Feb’2011 low and then the 1.3300 level, its psych level. Its daily RSI is bearish and pointing lower suggesting further weakness.

USDJPY – Our overall outlook remains bearish as USDJPY looks to decline further towards the 75.92 level, its 2011 low. A clean break below here will open the door for further weakness towards the 74.00 level and the 72.00 level, representing its psycho levels. Its monthly RSI is bearish and pointing lower suggesting further weakness. On the upside, unless its bottom forming scenario seen on the daily and weekly charts materializes, our downside outlook remains intact. The pair will have to break and close above the 80.19 level traded on Aug 04’2011 to put its broader long term weakness on hold and bring further gains towards its July’2011 high at 81.63. A violation of there will open up further upside risk towards the 85.51 level. All in all, we maintain a bearish bias on the pair in Sept with the risk being a break and hold below the 75.92 level.

EURUSD: 1.3653 Short-Term Trend: downtrend Outlook: Approximately two weeks ago I turned bearish on EUR/USD when it failed at the 1.4530/40 level ( I was bullish before that but this failure made me bearish). Last week EUR declined sharply and strongly justified my bearish position. As said before, the most likely downside target is seen at 1.3520. Of course further downside potential is possible considering the strong downtrend on the daily chart now. So, the short side remains favored here as long as the prices stay below 1.4045/1.4100 area. But considering the huge potential profits one may already have, they also can consider taking profits here. On the upside, only a move abv 1.4045/1.4100 will indicate the current decline has ended... Strategy: Trading from short side is still favored but considering the huge hypothetical profits from 1.4400+ area, one can also take profits here.