Forex Investment and Currency Trading

EUR/USD – The EUR appears to be pushing the envelop, with spot pressuring the upper boundary of the 4 month bull channel; previous tests of the primary channel ceiling have been followed by a period of weaker, corrective price action. While Friday’s price action is ending the week on a rather indecisive (“doji” session) note, some do not think the EUR is facing a significant correction from the mid/upper 1.50 zone. Rather, the main risk is for price to respect the steeper, shorter term bull channel and for the current EUR rally to accelerate. Structurally, the EUR bull trend is much sounder now than on previous channel ceiling tests; moving averages continue to rise and are maintaining a decent spread. DMI signals on the daily, weekly and monthly chart are all pointing to an extended bull run for the EUR, which suggests very limited counter trend corrections and a bias for the market to give back very little and continue to grind higher. Market continues to target 1.5150 as the objective derived from the noted H&S continuation pattern. Now suspect any short term softness will be contained to the mid 1.49 area. Look to buy dips.

USD/JPY – The USD is grinding up towards short term objective of 92.55 derived from the late September/early October double bottom at 88.24. As expected, Ichimoku “cloud“ base resistance is dropping quite sharply and coincides with the 92.55 target today; the lower “cloud” resistance suggests that USD gains risk falling a little short of the target in the near term. Short term trend momentum is USD bullish, daily momentum less obviously so, meaning the mid 92 level will be pivotal for the USD. If the USD does manage to extend this run higher, a move through the top of the “cloud” resistance band would be a very bullish signal given the current set up (Ichimoku moving average signals poised to cross).

GBP/USD – How ugly can this get? The market has been whipped around badly in Cable over the past few weeks, betting initially that the break under July/September support would cause a tumble only to see limited losses and a sharp squeeze higher last week. The break above the July/October ceiling this week likely drove some spec long interest, only for the pound to crash sharply lower today. The mood is unlikely to be charitable. Now, with a big outside range lower on the daily chart today and the daily oscillator study turning lower from overbought, more GBP losses look inevitable. Short term rallies are likely to be limited to the mid/upper 1.64s at the moment.