Market Research May 19th 2009
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The pair is offering a mixed bag of technicals with a slight bias signaling the next move is down. The reason for this is the failure to make new yearly highs with its 3rd attempt in the last two weeks. On the daily charts the oscillators are starting to tire and weaken suggesting possible failure at the yearly highs.
What makes the picture interesting is how the pair bounced off the 20EMA (blue line) and then went on to attack the recent highs. Although the pair is above the Tenkan (white line) and Kumo (blue cloud) it has yet to make any new ground. Breaking of the yearly highs (around 1.3720) is needed to add new technical buyers into the picture. A daily break below the 20EMA suggests likely breakdown to the Kijun (red line) at 1.3302 and a possible visit to the cloud top 1.3255 before any new buying would emerge. Suggestion is to buy on dips to 20EMA or Kijun line or wait for daily close above yearly highs before going long. Alternative scenario is to short on any rally towards yearly highs with tight stops and targets set towards 1.3630 and 1.3531.
This pair is probing the cloud bottom on the daily chart and had two attempts and two rejections there with buying coming in decently. The pair just executed an outside reversal day yesterday but then sold off mildly today (likely due to DOW selling off a bit today). The oscillators are still very negative so buying is recommended with a lot of caution. If we get a daily close below the cloud bottom around 95.00 then expect this pair to sell off a bit more heading towards the 94.30 and 92.84 region which are the 50% and 61.8% fibs of the most recent upmove from 87.00 – 101.00. Expect any upside rallies to find some medium to strong resistance around 97.00 which is where the 20EMA and Kijun line reside. Daily closes above there suggest an attack on the cloud top at 98.50 but since we are in the daily cloud, we suggest waiting till it exits out before any play.
Ironically, this pair seems the stronger of the two between its sidekick the EURUSD. The oscillators are strong both on CCI maintaining its levels and Momentum still consolidating at the top suggesting it should continue its mild climb. Since breaking the previous yearly highs around 1.5348 this pair has climbed nicely. Notice how its been above the Tenkan line since late April. This suggests strong buying along with the fact that its only had 4 days of selling in the last 15. We suggest buying on mild dips toward the Tenkan line currently at 1.5245 or lighter positions around 1.5345 and setting targets around 1.5475 and then waiting to see how the market responds to the 1.5500 big figure before taking profit or adding onto the position.
This pair has been climbing 39 of the last 55 days suggesting we like to buy 7 out of every 10 days. The pair has had an interesting climb from 6300 – 7700 either respecting the 20EMA or the Kijun. Because of the finicky-ness and inconsistency, we prefer to wait for pullbacks to the 20EMA or Kijun before buying as the oscillators are showing divergence suggesting we may be coming to a top soon. Buying on breaks has not been profitable too much lately as most breaks of key levels have retraced within 24hours and turned the trade into the negative often not making it a worthy venture. Buy on dips until we see a daily close below the Kijun line.
Selling off from the yearly highs at 1.3000 for 34 of the last 51 days, we suggest selling 2 out of every 3 days. Momentum and CCI are diverging a bit but have not made any new highs suggesting that until they do, selling will make you more money than buying. The fact that the pair has only had 3 days above the 20EMA since the beginning of April further highlights this fact. If you are looking to buy, there is a low risk buying opportunity around the yearly lows at 1.1475-ish with tight stops below. Until we see price action close above the 20EMA and Kijun line, we expect selling to continue and a possible move towards 1.1000 and 1.0800 which was the highs leading into October 2008 before the pair launched up towards 1.3000 in a mad 3 week sprint. Sell on rallies or daily closes below 1.1459.
The pair is currently floating in the daily Kumo (cloud) which is a general no-fly zone. Oscillators are mixed suggesting no clear direction is evident. Thus, we suggest playing the wides looking for shorts on approaches to 135.00 or on a daily close below the cloud at 125.75 which is also the swing low in late April this year. A daily close below the kumo and 124.75 (50% fib of recent upmove) could send this pair towards the 61.8% fib at 121.81 and then towards 120, possibly even 115 or the yearly lows around 112.
Showing the stronger bias like its parent GBPUSD (in comparison with EURUSD and EURJPY), this pair has not been able to close above the 150.00 level which could be the line in the sand for the bulls. Neither the Tenkan, 20EMA or Kijun has offered a clear support for this pair suggesting the cloud top or upper range for this year is your play for longs or shorts. Oscillators are not totally clear and we prefer only holding intraday positions for the meantime. If the pair enters the cloud and closes inside, expect a move towards the cloud bottom around 140.00. Daily closes below the cloud could start a large wave of technical selling towards 135 and 130, possibly towards the yearly lows around 120.
Analysis provided by 2ndSkies. No copy or reproduction without permission.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
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