Ichimoku Report May 24th

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EURUSD – Headed Back Towards the Lows?
Bolstered by last weeks central bank intervention with the SNB selling francs and buying euros bolstered this pair and possibly beyond its means.  After launching up 500pips from the lows of 1.2150 to 1.2650, the pair could not sustain those levels and started off this week gapping down and not filling the gap, only to sell off pretty much from the open.

This suggests the market and traders simply are not ready to be long euros as there are more issues inside the 16nation zone which hint the problems there are hardly over.  The pair is currently sitting around 1.2366 which is about 285pips off the highs of last week which is pretty impressive since the market just opened yesterday and has yet to hit the NY session.  If the DOW sells off and the euro falls with it, then the strength from the end of last week was merely a mirage and a simple consequence of the SNB buying euros which was heavily oversold against the franc.

Ultimately, we feel the markets quick selling this week is to be expected and more euro sales are likely in any rallies.  The lines of least resistance are clearly downward as the pair sits below the 08′ lows.  The Ichimoku cloud has nothing but bearish sentiment even though last weeks candle was up and slightly flattened out the Tenkan and Kijun – the pair sits way below the Kumo and those lines have been falling pretty much all year so we do not expect the selling to abate anytime soon.

GBPUSD – Continues to be sold even with the anti-USD rally from last week
Now posting its 5th week of declines on a closing basis, the pair looks set to resume its sales but will have to bust through the lows of last week at 1.4234 before getting a new technical models to add shorts.  The pair still looks vulnerable to more downside as it has opened, given a brief touch to 1.4500 and then sold off 120pips since then.  Although it has fared better than its little euro brother, it has found mostly sales to start the week.

With the Senkou Span A turned over and declining into the later part of this year, along with the falling Tenkan, 20ema and Kijun, we feel rallies will likely be sold as the momentum and trend has not changed.  Rallies up to the Tenkan which sits at the 50% fib of the last major downswing at 1.4869 will likely test the strength of any rally with orders parked there.  Then there is the 20ema which rejected the pair so well back at 1.5500 in early May so upside will have some hard fought gains to impress and change the sentiment – especially with the huge deficits in the UK, we feel rallies should be sold until we see something new on the charts.

USDCHF – Cleared Two Major Hurdles
Busting out of the Kumo with force like Seabiscuit in the final turn of a race, the pair has climbed for the last 5 weeks but last week cleared two major hurdles taking out the 61.8% fib of the 08′ highs to 09′ lows parked at 1.1389 and then the 1.1500 barrier with ease.  The pair opened this week just above it and has since climbed and looks set to attack highs in April of 09′ at 1.1742 and the 09′ yearly highs at 1.1966.  Beyond that, there is only the 1.2000 barrier which stands in its way for a full return to the 08′ highs at 1.2300.

The Kumo is rapidly changing to catch up with the strong gains as of late and the Tenkan, 20ema and Kijun are all rising which is opposite of the EU and GU pairs which have flattened from last weeks price action.  Dips to 1.1500 could offer good short term buys so watch for the opportunity.   There is nothing to be but long this pair as it has shown no signs of abating or turning.

AUDUSD – Inside the Kumo
For the first time since June of last year, the AUDUSD has entered the Kumo with its largest 1 week drop since the financial crisis of 08′.  The pair triple topped at .9400 and has since fallen for 4 straight weeks and dipping a good 50% into the Kumo.  This does not bode well for bulls, especially since the pair broke the triple top low for the formation at .8580.

Fortunes for the pair have heavily changed in the last three weeks and now the doors open for more two way action with some added pressure to the downside.  The fibs below from the 09′ lows to highs parked at .8200 and .7829 (38.2 and 50% fibs) will offer some interesting tests while the .8580, Tenkan and 20ema lines should hold 1st attempts at the upside.  Its a mixed bag inside the Kumo but short term momentum via the Tenkan is clearly down.  A break of the 38.2% fib at .8201 suggests a likely touch on the Kumo bottom which is also the 50% fib so there is some potential for some strong downside moves.  Beyond that, a weekly break below the Kumo and fib could open the doors to .7500.  Short term favors the downside.

EURJPY – Complicated Summer Ahead but Downside More Likely
The pair has sold off for 4 weeks straight but momentum has wanted in the last week with the downside rejection turning the Tenkan and Kijun flat for 2+ candles now.  The pair is below the 09′ lows at 112.15 but has not been able to hold the levels below here with two previous weekly rejections.

The Kumo is quite a mess turning over 2x in the last 7months and its quite thin so the summer trading could get complicated.  Short term favors more downside and the fib levels from the previous rejection off the 20ema at 125.00 are parked nicely with previous support levels so although the pair may gain some upside, rallies will have to work hard for gains so the line of least resistance is down for now.

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