FX Weekly Report

Both the EUR/USD and GBP/USD moved up as anticipated last week. Although lines were breached reversals occurred and the overall patterns held.

Where we go from here will dictate the price action for the rest of the month.

EUR/USD – The triangle pattern is still in play – A sudden reversal took place on Friday to return the price back below the trend-line. So… Will the top hold or will there be more upside?

GBP/USD – I still maintain the potential of an ending diagonal in formation, however I am monitoring where the pattern becomes invalid. A drop below 1.60 would be the first sing of a new downward trend.

I’ve presented Elliott Wave Counts on both pairs this week that still suggests new tops are possible. However I would say my confidence is at best 60% towards this outcome.

Right now I suggest short to medium term trades until this range is properly broken.

The Dollar index is not giving any clues this week on where it may be headed. The EUR and GBP however have made temporary tops so it will be interesting to see if these levels now become more permanent turning points.

I’m showing the weekly charts this week as the candles/bars may be very relevant.

USDindex – No real directional bias

EUR/USD – Will last weeks top hold?

GBP/USD – Indication of at least a potential temporary top

USD/CAD – Reversal still in vogue

EUR/JPY – last weeks rejection candle is hard to ignore

Price action on most pairs has been range bound for the month of June to the noticeable exception of the USD/CAD.

With June coming to an end as the second quarter just prior to the 4th of July weekend, high volatility is certainly expected. Most traders and fund managers will be taking profit or cutting losses to close out the first half of the year on all markets. Bear in mind that the stock markets have put in an incredible performance in this second quarter and profit taking may trigger a sudden correction.

As far as currencies go; the ranges are getting tighter and should give way to some sort of break. The question still remains; will there be further USD weakness prior to some overdue strengthening.

USD Index – Door is still open to a double bottom suggesting fresh tops are possible on the EUR and GBP.

EUR/USD – New top is possible

GBP/USD – A break above 1.67 opens the door to 1.70

USD/CAD – The poor performing CAD may recover some but further upside in the chart is expected medium to long term

EUR/JPY – The pair appears to have topped however the short term suggest upside in the cards for now. A break above 1.3928 sends the pair higher. However the breach of the lower trend-line could send the pair to a new low.

Last week I wrote how the patterns are unclear and it is still very difficult to gauge which way the bias should be on the USD. Indeed we saw the USD loose some of the ground it recently made up.

This week is no different. Overall I still favor USD strength in the longer term, however in the short to medium term, momentum could shift either way.

Virtually all USD pairs have been moving in a choppy manner. In such cases this can equally signal the beginning of a trend or simply a final correction prior to a terminal thrust.

The last 10 days of the month should provide either a final thrust up or an accelerated continuation.

What I have attempted to do in this week’s report is; identify where the reversal/break-outs should occur.

Cheers and good trading this week.

Staying focused on the USD index as it is the proxy for virtually all other currency pairs we can see that there are two very distinct scenarios playing out. I have posted two potential counts and am not bias either way as I believe both are equally possible at this time.

And in fact, counts could require updating as the move up is still not clearly a reversal and may still be some sort of correction before a return to new lows.

What I do believe is that if the alternate count is played out that the downside will eventually give way to an overall turn that will last for several weeks.

The Dollar is oversold and as we go deeper into this territory the potential for a larger reversal increases.

So be patient and look for opportunities that are clear.

Key levels to watch this week are 81.50 and 78.32

Cheers and good trading.

Last week I focused solely on the Dollar Index as it was due for a hard and fast turn. Indeed the flip happened and we saw an unprecedented two day move towards USD strength, the likes of which we have not seen for several months.

So… is this now the turn?

As always, I see things as probabilities as no one has a crystal ball. Having said that; the move is very strong which is a good piece of evidence to consider. The channel resistance has also been broken so this adds to the possibility. What I am looking for now is a short term top with a 3 wave retracement back to fibonacci support and then a renewed action towards USD strength.

Whatever happens with the USD will translate into all other pairs, as we know that the USD has become the proxy for all currencies during these still very uncertain times.

This week I’m fully focused on the USD Index. From many perspectives it is entering oversold territory.

• Potential Elliott Wave count suggests we are in the last 5 wave cycle
• Trend is over-extending at the bottom of the channel
• Indicators suggest oversold
• COT (Commitment of Traders) at extremes
• Trends are time mature

There is a likelihood of continued bear action to begin the week however evidence continues to mount that the current cycles are due for a sharp flip. My thought is once the sentiment changes it will bring on a strong counter trend.

Cheers and good trading.

The Dollar index is an important barrier and oversold. Will this be the pivot point for a turn or will there be some downside still before a larger turn. I do think risk is moving towards dollar strength but the only evidence currently is oversold indicators.

EUR/USD

Similar to the index… where will the turn come?

GBP/USD

After a sudden reversal and then dramatic new high this pair is also over-bought but resistance also difficult to identify.

EUR/JPY

Recent price action looks corrective, and because this pair has struggled to make a new recent top I would speculate the risk is to the downside.

Observing the charts this week it looks like there is opportunity for more dollar weakness but I also see some evidence where a thrust against the dollar could be the catalyst for a bottom. I would expect the week to begin with a little more dollar strength giving way once again to further weakness and then the potential formation of a longer term bottom.

USD/Index

There is still room for weakness however the move is oversold.

EUR/USD

Has this topped? or is there one more top to come?

GBP/USD

This pair is also at a potential topping point

USD/CAD

The recent move up looks corrective and leave this pair open to one more attempt at a new low. I would look for a double bottom here.

EUR/JPY

There is a key trend-line that if broken should provide longer term direction. I don’t think a long term bottom is in place so risk is to the downside.