EUR/USD has reached its initial corrective target of 1.3245/50, the 38.2% retracement of the move down from November. We would ideally like to see failure here, this is our initial corrective target/measurement and automatic Elliot wave count, but acknowledge that while above the near term uptrend at 1.3072 the market remains bid. Above 1.3250 would allow for an extension to 1.3437, the 50% retracement of the same move and then 1.3550, the December high. Below 1.3072 will target the 1.2878/54 zone – the 20 day ma and then 1.2530/88, the August 2010 low and the 78.6% retracement of the move from 2010-2011. We view near term strength as corrective only and our longer term bias is bearish – our longer term target is 1.2083/the 200 month ma..
GBP/USD last week saw such a lacklustre break of its 5 month down trend, we feel inclined to ignore it. While we would allow for further gains to the 1.5770/80 November and December highs, but we suspect that the market will struggle here. The market stays bid above the 1.5659 accelerated uptrend, failure here would question the break higher and trigger a slide back to 1.5573/45 (55 day ma). The market faces tough resistance at the 1.5760/80 November 2011 high and 1.5810 Fibo and we are alert to failure here. Above here would introduce scope to the 200 day ma at 1.5968.
USD/JPY has seen a severe rejection from 78.24/30 (December highs and the 200 day ma) and has started to erode the 3 month uptrend at 76.74 and looks set to retest the Fibonacci retracement at 76.20, which is expected to hold. While this holds our bullish bias remains. The market is on the defensive near term and in need of consolidation, our longer term bias is positive, the market has recently eroded the 4 year downtrend. Above the 200 day ma targets the 55 week ma at 79.49. This together with the 80.00/25 pivot is extremely tough resistance and is expected to take several attempts to break.
USD/CHF remains on course for 0.9080/66, the November low and the 50% retracement of the move up from October. We suspect this will hold, the market has significant divergence of intraday oscillators which is warning us of a correction higher. However while capped by the near term downtrend at 0.9223 the market will remain offered. Only above .9222 would alleviate immediate downside risk and allow for recovery to the .9340/45 then .9595 recent high.
AUD/USD last week worked higher and looks set to challenge the 1.0750/65 highs seen in September and October, these are expected to hold and provoke failure. We look for the upside to remain relatively limited, however will need to break below the 1.0289 2 month uptrend to alleviate upside pressure. Initial support is found at 1.0407, a near term uptrend and the 200 day ma at 1.0408. Below the 2 month uptrend at 1.0289 will alleviate upside pressure and initiate a move lower. This would then target 1.0046/00 en route to .9818 and .9664/80.
EUR/GBP is inching higher and looks set to challenge the 0.8421 end of December high, this together with the 55 day ma at .8426 is expected to hold the topside and provoke failure. Just ahead of here at .8418 we find the previous uptrend, which should also act as resistance (see weekly chart on next slide) A close below the 0.8321 uptrend is needed to negate upside pressure and concentrate efforts on the downside. We continue to favour failure, the market has recently registered a weekly close below the 0.8285 2011 low and targets the 0.8067/2010 low and then 0.7750 (long term Fibo). The close below 0.8285 level has seen these downside targets engage. The .8421/26 end of December high is key resistance and only above here would signal a deeper retracement to the 0.8498 (the 61.8% retracement of the move down from the end of November peak.
EUR/JPY correction higher last week terminated ahead of the 102.55/60 resistance. This is the 38.2% retracement of the move down from October 2011 high and the December 2011 high. We suspect that this will hold the topside on the initial test and provoke some profit taking. The market will need to regain this level to add weight to the idea that the market has based from a longer term perspective. Interim support lies at 101.00/100.77 (near term uptrend and October low) ahead of 98.90, only failure here will refocus attention on to the 97.04 January low. Today’s trade: Holding tiny longs 100.75, raise stops to 100.75. Cover longs on a move to 101.65 and sell into further strength to 102.00/25 – stops 102.60
EasyForexNews Research Team