At a glance:
As the big event is nearly upon us, the price action stays decidedly range-bound. Still, yesterday’s price action was significant given the downturn in equities following a failure below key resistance levels particularly for the S&P near 1200. While the action is still quite range-bound as well, yesterday’s bearish reversal is a reminder that the market is not out of the woods yet. Moreover, key levels have continued to cap the August reversals for the commodity currencies while maintaining the bias that these retracements are mere corrections before the risk-unwind extends. In that regard, a sustained break of the 1.0600/40 zone for AUD/USD remains necessary to argue a deeper short term retracement can develop. Moreover, a push above the .8468/.8575 levels for NZD/USD would suggest a deeper upside retracement can develop. For USD/CAD, the .9740/.9648 levels now stand in the way to an extended decline of the rally from the July low.
Other USD pairs face important tests as well highlighted by the setup in EUR/USD as recent rally attempts continue to struggle against the 1.4500/1.4537 resistance zone. While these levels hold, the short term setup suggests a mere range with the onset of further risk unwind. From a cross perspective, note that both EUR/CAD and GBP/CAD are vulnerable to short term weakness after testing critical resistance at the medium term range highs. The corrective action for USD/JPY extended yesterday as the failure to sustain the break of the key 76.30/25 support zone and medium term range lows suggests additional near term retracement. Still, the overall downside risks remain intact particularly following the recent failure at the key 80.00 area. Downside breaks seek a closer test of the 74.72 April channel support with deeper targets near 73.10/00.
Precious metals should see some near term pause following yesterday’s reversals as the 1700/1680 area for Gold now takes on added importance. Still, this week’s sharp declines argue that a short term top is in place and the prices have entered into a new consolidation phase.
Trade Strategies:
- Short 2 units EUR/INR from 63.30 risking 68.50 targeting 55.50/52.
- Short 2 units PLN/HUF from 68.604 avg risking 68.600 targeting 64.00.
- Long 2 units USD/CZK from 16.85, add 2 units on a break of 17.65 risking 16.05 targeting 19.02.
- Short 2 units EUR/USD from 1.4205 risking 1.4600 targeting 1.3350/1.3120.
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http://www.easyforexnews.net/wp-content/uploads/2011/08/JPM_FX-Techs_2011-08-25_665284.pdf
J.P.Morgan
Global FX Strategy