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Ichimoku Report May 18th
EURUSD – Has some work to do
After getting hammered for the last two weeks shedding over 9 cents, the pair has started the week optimistic forming a rejection shy of the all important lows at 1.2328 which is the low of the 2008 drop all the way from 1.6000. If the pair can manage some more gains and close with a similar formation than it has now, it might inspire some bravado from the bulls thinking this is the bottom.
However, the pair has some work to do and we are not really convinced people want to be taking any major long positions on the euro at this point. The problems in the EU zone still persist and nothing new has entered to inspire confidence. Ultimately, the pair will have to have a weekly close above 1.2500 before people will start to look for upside moves. Until that happens, every gain is considered a rally to sell it for further downside.
The Tenkan is diving hard suggesting momentum is still persistent to the downside. The Kijun is now below the Kumo and the 20ema is also diving so buying now is highly risky on all fronts. Bears can take light shorts at 1.2500 and target 1.2400 and 1.2350. A weekly close below this weeks low will likely trigger more selling and an upcoming touchdown at the all important 1.2000 level.
GBPUSD – Likely to encounter more sales this week
After 4 weeks of straight declines, the pair started off this week selling finding a small bounce in the mid 1.42’s and has since bounced 200pips. However, it is still negative for the week so unlike the euro which has already swung to the positive, this pair still has not convinced people the parliament and UK’s financial troubles are over.
We have yet to come to any significant low so buying really does not make any sense at this point. The Tenkan, 20ema and Kijun are all diving so fighting this seems ill-advised. However, we have not rallied enough to warrant fresh shorts so tis a tricky pickle. Light shorts can be had just above 1.4550 with tight stops. Beyond that, we feel the lows in early March this year (also the 50% fib of the last downswing) would be more prudent should you be able to wait. 1.5000 also will likely act as a barrier for any gains in the near term and likely house fresh shorts waiting to take advantage as the pair attempts to unwind some oversold sentiments in the market.
We suggest waiting for more upside before placing new shorts or wait for a weekly close below this weeks low of 1.4255 before taking new shorts. The fib levels at 1.4719, 1.4863 and 1.5003 offer the better scenarios but the line of least resistance is clearly to the downside.
USDJPY – Likely losing confidence after 4 attempts
The pair has now made 4 stabs to close above the weekly Ichimoku and the longer this goes on, the less likely it becomes it will have a break and close above thus reversing the trend in the pair. We feel the pair will need to make its move in the next few weeks, otherwise the continued rejection of the topside of the Kumo will start to become a legitimate ceiling which the pair cannot break and thus become a rally point to sell.
The upcoming flat top runs all the way into late September so there is plenty of room to use it as support and it coincides with the 50% fib of the 2009 high to low so there is an added kudo in for the possible break and close above. We will hold out for this scenario till the end of May but after that, will join the camp which sells at the top of the Kumo for short downside profits.
Meanwhile, while we reside inside the Kumo, not much play accept for the 2x performing tenkan bounces which afford short term buys targeting the….top of the Kumo.
USDCHF – 1st time in over a year
For the first time in virtually 12mos, the USDCHF has broken above the Kumo top in convincing fashion. This was no doubt supported by strong euro sales and allowed the pair to feel quite virile. After stopping at the 61.8% fib of the 2008 high to 2009 lows with the final fib being parked at the 1.1380 level, the pair has retreated about 90 pips to test last weeks up close. The Tenkan has not had time to catch up to clear the Kumo so any dips will not have the extra support it can offer. However it is climbing fast suggesting momentum is still there so the 1.0997 50% fib may find the Tenkan offering support on any dips for the rest of May.
Since the pair was explicit in its 1st rejection of the last fib at 1.1380, we feel to wait for a pullback to the 50% fib or a daily close above 1.1500 before taking any new longs. Possible pullback coming but really the better play for adding new longs.
USDCAD – Kijun Holding
Even after the huge thrust up from two weeks ago making all the way up to 1.0730, the pair still has not been able to post a close above the Kijun. Last week hinted it might but this weeks early rejection and losses suggest the pair still does not have the gusto nor the interest from the market.
The uber-imposing Kumo should reject all upside thrusts and likely force more sales giving people a chance to sell the pair cheaper. Ultimately, unless the pair has a weekly close above the Kijun and 1.0500, we feel the pair is likely headed for another downside attack on the parity level. Should the pair close below here on a weekly basis, then we would be targeting 9056 which is the low from 2008.
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