EUR/USD: The market has mostly been locked in a choppy consolidation over the past several days, but a lower top looks to have carved out by 1.3500, with a break back below 1.2970 over the coming sessions to confirm and open the next major downside extension towards the 1.2585 platform base from August 2010. The latest topside failure above 1.3400 and subsequent sharp pullback strengthen our bias and a retest of next key short-term support by 1.3055 which guards against 1.2970 is expected over the near-term. From here, any intraday rallies should be well capped ahead of 1.3300.
USD/JPY: The latest setbacks have stalled out after the market had come under some intense pressure in the previous week to break back below the daily Ichimoku cloud and threaten a retest of the multi year lows from November 2010 just shy of 80.00. However, we have since seen a formidable bounce by the 78.6% fib retrace off of the November-December move and this could warn that the market is once again poised for a rally. Wednesday’s close back above the Ichimoku cloud (83.00) strengthens bullish prospects, while a close a sustained close above the cloud for the remainder of the week will officially confirm bullish shift. Look for any intraday pullbacks to be well supported ahead of 82.30.
GBP/USD: The market remains under pressure and now seems poised for a retest of the platform base from early September at 1.5295. Daily studies are however in neutral territory so we would not rule out the possibility for more of a bounce towards the 1.5700 area over the coming sessions from where a fresh lower top will be sought out ahead of an eventual drop to challenge and break 1.5295. In the interim, we remain sidelined and await a clearer signal.
USD/CHF: Overall price action is certainly concerning for our longer-term basing outlook with the market dropping to fresh record lows by 0.9300 thus far. However, cyclical studies are showing oversold and any additional declines below 0.9300 are not seen as sustainable. The latest bounce back above 0.9600 is certainly encouraging and the rally has also triggered the break of the previous weekly high to set up the potential for a bullish reversal week. Look for continued acceleration of gains back above parity over th coming sessions, with any setbacks expected to be well supported ahead of 0.9500.
TRADE OF THE DAY
USD/CAD: The market has been under some intense pressure, and after managing to match the 2010 lows from April on the final day of the year, has now extended declines to fresh multi-month lows just under 0.9900 on the first trading day of 2011. But daily studies are starting to look a little stretched, and this in conjunction with longer-term cyclical studies which warn of a major base, leave us looking for opportunities to buy rather then selling into the downtrend. We have used the latest pullback to previous hourly neckline resistance now turned support as our entry. POSITION: LONG @0.9935 FOR AN OPEN OBJECTIVE; STOP 0.9835.
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