USDCAD Just Getting Started; Shorter Term Setups in GBP Crosses
- USDCAD in 2014 is USDJPY in 2013?
- British Pound may come under ‘surprising’ pressure
- Key levels for EURUSD and USDJPY are 1.3745 and 102.50
I spoke at length about many of the rates below in Friday’s DailyFX Plus webinar (video is titled Jamie’s Webinar 01/10/2014).
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Jamie is the author of Sentiment in the Forex Market.
Weekly
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-After a month of trading between roughly 1.0700 and 1.0560, USDCAD has broken out. Measured objectives from the breakout above the 2011 high range from 1.1680 to 1.1910. The Jul 2009 high rests in this zone at 1.1724 and the 2007 high is near the top of the zone at 1.1875.
-From an Elliott perspective, it’s possible that the rally from the 2012 low composes a ‘3rd of a 3rd (or C)’ wave from the 2007 low. Such market swings tend to exhibit extreme rates of change (so please refrain from terms such as ‘overbought’ or ‘divergence’). Food for thought.
-Levels that could trigger reactions are now (2006 low, 2010 high (circled), and trendline that extends off of the 2002 and 2009 highs), 1.1125 and 1.1460.
Trading Strategy: Staying long. I am looking to add to the trade. Support is estimated between 1.0775 and 1.0850 next week. Stop remains 1.0640.
4Hour
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-GBPAUD may be forming a near term head and shoulders top. The top is within the context of a larger bull move however. If confirmed, the objective for the pattern ranges from 1.7761 to 1.7842. The December low is 1.7892. Also be aware of the trendline that extends off of the 2013 lows.
Trading Strategy: I am short with a 1.8610 stop and 1.7900 target.
GBP/JPY
4Hour
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-GBPJPY carved a massive outside day reversal on the first trading of the year along with a weekly key reversal the week that ended 1/3.
-The tape this week was bearish. After holding tendline support on Sunday/Monday, a ‘drift’ higher failed at former support (12/31 low) and price slipped below the trendline on Friday. Friday’s video covers GBPJPY in more detail.
Trading Strategy: I am short with a 173.20 stop and 166 target.
4Hour
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-Last week’s (week that ended 1/3) outside reversal broke a string of 10 consecutive down weeks, something that had not happened since 1982.
-The bounce from the 12/18 low is shallow and corrective. Still, the specter of 5 waves down from the Oct high at least warns of a stronger rally attempt. .9167 (former 4th wave price extreme) to .9267 (former range low) is likely resistance.
Trading Strategy: Flat (trading long intraday) but looking higher towards .9167-.9267 for the next top.
Daily
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-USDNOK has been coiling within a longer term bull trend since Nov 2013. Watch for support near a trendline confluence and/or 6.10. This market is also looked at in the 2014 outlook.
Trading Strategy: Flat but a possible long setup into 6.10-6.1150, against 6.05.
4Hour
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-On 12/27, EURUSD traded into the line that extends off of the 2008 and 2011 highs and reversed. On 1/2, price broke below the line that extends off of the 11/7 and 11/21 lows.
-The decline is impulsive and price has rebounded from support (1.3547 is the 11/6 high) in what may be part of a corrective rally. 1.3745 is of particular interest as resistance.
Trading Strategy: Flat but monitoring for resistance at 1.3745.
Daily
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-USDJPY has responded to the previously uncovered close from Oct 2008 at 105.30 (high was 105.43). A cluster of bearish outside days (1/2, 1/6, and 1/10) suggest big selling and there is little reason to suspect that it’s complete.
-At this point, one needs to treat weakness as part of a larger bull move. 102.50 is of interest as support. This level was the ‘lower high’ in May 2013, 12/17/13 low and more generally the middle of congestion that took place in the first half of Dec. I’m tracking a possible topping pattern in the S&P 500 as well.
Trading Bias: Flat but monitor for support if the market sees 102.50. Long seems like a crowded arena so respect the potential for the rate to overshoot into 101.50/60 (Dec 2013 low, Jul 2013 high, Apr 2009 high, 2005 low). Things could get worse if the S&P setup completes.
--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail [email protected]. Follow him on Twitter @JamieSaettele
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