The EUR/USD pair tried to rally during the course of the week, but as you can see failed at the 1.37 handle. The resulting candle is a shooting star, but it’s hardly a decent sell signal, as there is significant support down at the 1.35 handle. With this, we believe that ultimately this market continues to chop around sideways, and therefore we have no interest in a longer-term trade at this point in time as the market has essentially been taken over by the scalpers. It is not until we break out of this area that we feel comfortable with a longer-term position.
Ultimately though, we would be very interested in buying this market on a supportive candle closer to the 1.35 handle, as it has been so supportive.
The AUD/USD pair tried to break out to the upside during the course of the week, but you can see that the very top of the resistance box that we have drawn on this chart did in fact hold. The 0.95 level is the top of that resistance zone, and sellers did push the market down significantly from that level. With that in mind, it’s probably more or less a reaction to the better than anticipated job summer coming out of the United States, and that means that perhaps the Federal Reserve will not be able to keep monetary policy lose for an extended amount of time anymore. The Australian dollar of course is a higher-yielding currency as far as interest rates are concerned, but if the US dollar starts to yield more in the way of interest, that could in fact bridge the gap so to speak as interest rate differential shrinks.
The main trend also turned down on the daily chart last week when .9353 was violated. The main range is .9229 to .9504. The retracement zone formed by this range is .9366 to .9334. The AUD/USD actually settled inside this zone after running out of sellers at .9328. A short-term range has formed between .9504 and .9328. Because of short-term oversold conditions, the market may be setting up for a near-term retracement back to .9416 to .9437. Since the main trend is down, sellers are likely to come in on a test of this zone.
The GBP/USD pair broke out during the course of the week, breaking above the top of the hammer from the previous week it was sitting on top of the 1.70 level. Because of this, we really like this market for long positions at this point in time, and believe that ultimately we should continue to go much higher. In fact, we believe that this market goes to the 1.75 level given enough time, and that pullbacks going forward should continue to offer “value” as the British pound continues to strengthen based upon the fact that the British economy seems to be coming out of recession. This has the British pound looking strong against both currencies anyway, but this is the bellwether if you will, of Howell the British pounds going to do overall. So it really doesn’t matter which British pound-based pair you are trading, you need to pay attention to this particular market.
This market looks extraordinarily bullish at this point in time, so a break of the top of the range for the Friday session is more than enough reason to start going long again as far as we’re concerned. Pullbacks should continue to see plenty of support all the way down to the 1.70 level, and as a result we are “buy only” at this point in time, and we fully anticipate seeing this market go as high as 1.75 given enough time.
The USD/JPY pair rose during the course of the week, showing that the support still holds at the bottom of this consolidation area. However, the market is still start between the 101 and the 103 levels, so it’s difficult to place any longer-term trades. On a break above the 103 level, at that point in time we think that the market could go to the 105 level. However, until that happens we don’t really see much in the way of it trade as the area below 101 looks so supportive.
We believe that this market will head back the 103 level, and then ultimately break above there. However, in the meantime prefer buying dips and taking short gains as this market continues to chop around back and forth, possibly even for the length of the summer.
Currency Data for 07th July
|4:57am||AUD||AIG Construction Index||51.8||46.7|
|7:00am||AUD||ANZ Job Advertisements m/m||4.30%||-5.70%|
|11:30am||EUR||German Industrial Production m/m||-1.80%||0.30%||-0.30%|
|12:30pm||CHF||Foreign Currency Reserves||444.4B|
|2:00pm||EUR||Sentix Investor Confidence||7.5||8.5|
|6:00pm||CAD||High||Building Permits m/m||3.10%||1.10%|
|8:00pm||CAD||BOC Business Outlook Survey|