Ichimoku Report June 1st
EURUSD – After a Week of Gains…Losses
This is to be expected and par for the course. Who really wants to be long Euros at this point? The pair has been losing ground against a huge basket of currencies and although the news and sensationalism has quieted a bit due to the holidays, we do not think things will change anytime soon for them. Spain just got downgraded and none of the other problems in Greece, Portugal or Ireland have changed.
Technically, the pair has found some rejection and buyers below at 1.2145 which was the low for the last two weeks. Although its not seen on this weekly chart, that low is the 50% retracement of the entire bull move from the absolute lows to highs for this pair so its not surprising the pair has bounced there. We suspect a series of weekly highs will continue to fall and the lows get closer to those levels until an eventual break.
The Tenkan has flattened due to these subsequent bounces off the lows but the Kijun has yet to be fooled and resumed its downtrend. The Kumo is getting thicker and also continuing its downtrend forecasting that if the pair does not rebound by this summer or early fall, it will start the next year below 1.3000. Should a weekly close below the 1.2145 level occur, look for 1.2000 to come under attack and below that, we are looking at 1.1675.
GBPUSD – Mid 42’s holding, back to the Tenkan?
After two solid rejections at the mid 1.42’s, the pair has started the week with some mild gains to start – unlike the euro. Although the gains are mild, this is to be expected considering the holiday and thin trading. If the pair continues the saunter upward, then the pair will likely have a hard time as it has two fibs which line up well just above and one of them parked right where the Tenkan is. The 20ema is also falling to meet the 61.8% fib soon so all of these could line up as nice rally points to sell the pair back down. The Tenkan lines up best with the previous weekly floors at 1.4878 which was a multi-week touch/low back in march – april.
With the Kijun still diving and the 20ema rejecting price action the last time, we feel this pair is probably in for some mild gains but will get sold again. Wait for the levels above as there is not much in between for a choice play. Line of least resistance is still down.
USDCHF – 1.1500 likely pullback level
After boasting some strong weekly gains the last few weeks and rocketing out of the weekly kumo, the pair has slowed a bit while still making good headway. The last two weeks have posted rejections reversing some of the weekly gains – each time getting a little stronger. This could signal some profit taking or warn of a possible pullback to the 1.1500 level which is not just a typical big figure, but also the 50% fib of the 1.3300 – .9645 downmove.
The Tenkan, 20ema and Kijun are all soaring supporting the buy on dips strategy. Should the 1.1500 level hold, it seems the pair is likely headed to the next fib which is the 61.8% fib at 1.1900 which was the 09′ highs and the double bottom in 2006 marking the key floor which started the new downmove in 2007 so the level is critical and will likely obstruct a straight shot to 1.2000. Ultimately, we only want to be buyers of this pair and like scooping the pair up on dips. Also with the SNB’s penchant for selling francs, this view is further supported.
One thing to keep in mind, the pair has been down-trending since 1.80000 way back in 2001 and yes yet to on a yearly basis eclipse the highs of the previous year on a weekly basis. Should the pair have a weekly close above 1.2000, this would be the first year in 10 it did that which would likely signify the 10 year trend has found a serious floor at parity so we could be witnessing a serious reversal of a very large trend. One last fact is every time the pair has broken the weekly kumo, its always done so through the weakest point or ‘Kumo Window’. However, this last time it did through quite a thick portion of the kumo suggesting the pullback higher is stronger and could very well be the real deal. Interesting times for this pair.
AUSDUSD – Critical Level Ahead
Beyond the big figure ahead at 8500, the pair is closing in on .8564 which was a critical level for the pair. Here are its highlights below;
-previous low for 2010 and last major low this year before the bounce forming the triple top
-3 week floor in August 2009
-two month floor in Dec. 2007 – Feb. 2008
Thus, at several points in time, this level has been a floor for this pair either launching it higher or being the start of a major breakdown. Last time it brokedown below this level was in 2008 which held the pairs fall for 3 weeks but eventually gave way and became a role-reversal level in Oct. 2008 only to see the pair fall 2500pips more. We are not suggesting this will be the same result here but its critical to note.
The pair is stuck inside a massive upward leaning Kumo that is rapidly shrinking in size ahead. This makes the outlook complex should the pair remain inside here for more than a few weeks. It could very well get stuck in here for the summer which would make trading more difficult. A weekly close out of it on either end will clarify things but until then, the short term floor is in at .8075 and the upward level to watch is the aforementioned .8564 / 75 range.
EURJPY – Not Ready to Give up 110.00. Will it happen soon?
Two thrusts below and two rejections followed. The pair has now survived two downside attacks on this level so there is some players willing to defend this level. This could result in a short term bounce for the pair but we feel the fate of this pair is likely that of the EURUSD – to accrue further losses heading into the year end.
Ironically this pair has some fib levels parked at good levels with previous price action and one lined up with the Tenkan at 118.40. The previous two month floor at 120.68 lines up with the 61.8% fib as well so some good rally points to sell the pair. The Tenkan and Kijun have flattened as of late likely picking up the rejections to the downside so selling on breaks is not recommended at this point as the pair has not been holding onto the lows in three of the last four weekly declines. Wait for a rally.
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