Forex Investment and Currency Trading

EUR/USD – This market still has a rangy feel to it but the week will close out with EUR/USD trading above 1.4088, the top of a weekly triangle consolidation (red lines, formed by trend resistance drawn off of last year’s 1.60 high). Short, medium and long term charts show considerable bull trend momentum still (the DMI is bullishly aligned across multiple timeframes) and medium term MA signals are supportive. We should be thinking “breakout” but instead, the market continues to see consolidation, perhaps because this week’s struggle to break above 1.4225/35, the top of a bull flag (blue lines) looks significant with the top of this particular consolidation pattern formed by trend resistance stemming from the Sep, Dec and June highs. While a clear break above the low 1.42 zone would facilitate a break out, some very decent EUR-positive technical work has been done this week anyway. Traders look for further EUR appreciation towards 1.4550/1.46 in the next few weeks. Strong support now is at 1.4050/90 into next week.

USD/JPY – USD/JPY’s rebound from the early July slide is not that convincing and the market continues to face stiff resistance at 95.72 currently, the weekly cloud chart base. It should also be noted that the late week highs in spot coincide more or less precisely with the downward sloping 200-day MA (95.18 today). The March failure at 101 suggested to us that the longer term direction of the market turned lower again earlier this year and expect firm resistance above JPY95 from here in the near term now. Support is seen at 94.40 initially next week and key support at 93.75/85; a break of the latter point should see spot moving back to the low 91 zone.

GBP/USD – On the face of it, the Cable chart suggests the market is still struggling for direction, with no follow through on the late June rally above 1.6660 and little follow through on the early July break under 1.6190. The underlying structure still looks quite positive though and the compression in the trading range as well as the positively positioned MA signals suggest that the technical risk is mostly to the upside. Short term resistance in the low 1.65 zone may be challenged next week while the collection of short term trend and pullback support lines between 1.61/1.63 suggest strong underlying support for the GBP on
weakness.

NZD/USD – Technically, the Kiwi looks to be in the driving seat; the market posted a bullish outside range week last week and early week follow through buying secured a break out of the triangle consolidation, in place since early June. Late week buying interest has been limited but a decent gain on the week overall on top of last week’s surge suggests that the main directional risk remains higher within the well defined bull channel. Support is at 0.6490/0.6510 and bullish trend momentum suggests dips – even modest ones – are a buy.