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The EUR/USD attempted to push higher this week, topped at 1.2921 after some positive fundamental data from the Euro zone and UK triggered short lived Dollar weakness but whipsawed to the downside, bottomed at 1.2664 and closed at 1.2707. Here are the facts which may lead Euro to fall further: First, the major bullish channel has been broken to the downside, indicating potential bullish failure. Second, we have a “head and shoulders” formation, which is a bearish reversal pattern with 1.2700 as the neckline. If price able to move consistently below 1.2700 next week, the nearest bearish target will be around 1.2523 – 1.2470.  Immediate resistance at 1.2930, which is at the right shoulder of the H&S formation.

Have a great weekend and see you guys next week.

There’s strong confirmation that the 15-minute GBP/USD has put in a top as price action has created a ceiling along the highs of 1.5701 and 1.5692. The 15-minute chart is currently in a distribution market cycle which makes the exhaustion fade off this ceiling an agressive way to short sell the weakness – if confirmed by an overbought Stochastics.

(FYI: I like to use a smoother, slower 21, 1, 3 setting on my Stochastics)

Chart date range 12-Aug 22:45 GMT-> 17-Aug 05:45 GMT Data Interval 15 Minutes

The challenge for trade is trade follow-through. The expectation for the Cable to simply sell-off sharply from here would be in contrast to the uptrend that is still in place on the daily chart despite the recent correction.

While the support around 1.5640 is a tempting downside target, keep an eye for 1.5659 tp offer near-term support. Additionally the 60-minute chart (which is in a very shallow uptrend) has a swing buy and 34 period EMA high support at 1.5658.

Analysis Rising Wedge identified at 17-Aug 01:15 GMT. This pattern is still in the process of forming.

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EURUSD Forecast: The EURUSD made a moderate recovery yesterday, topped at 1.2870 and closed at 1.2825. Further bearish pressure was rejected around the lower line of the bullish channel but I think it’s too early to say that the bullish scenario has back to it’s track. If we look at the daily chart, actually price still making lower highs and lows and we must have at least a new higher high to see further recovery. The minor trendline resistance (white) on h4 chart below could be an important technical focus at this phase. A consistent move above that trendline resistance could trigger further upside recovery towards 1.2930 area before testing 1.3000. On the downside, immediate support at 1.2780. Break below that area could trigger further bearish pressure testing 1.2700 and the lower line of the bullish channel.

Quote of the day: Earth provides enough to satisfy every man’s need, but not every man’s greed — Mahatma Gandhi

EURUSD

Trading strategy: small short at 1.2880, stop at 1.2960(0.5% risk), objective at 1.2730

Euro’s recovery on Friday was again limited by 1.2900 and the 3 weeks gains were cut in a single week as the euro lost 570 points in the last 5 days. Support was found at 1.2730 — level which provided support on July 21. Short-term sentiment is slightly bearish and a break above 1.3000 is what the bulls should look for, to confirm uptrend continuation. Meanwhile, selling into rallies or on a break down below 1.2730 are probably the safer strategies.

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I shouldn’t have been so complacent in declaring the paradigm shift in forex markets, whereby risk aversion had given way to comparative growth and interest rate differentials. While such a shift might have been present – or even dominant – in forex markets over the last couple months, it appears to have once again been superseded by the so-called safe haven trade.

In hindsight, it wasn’t that the interplay between risk appetite and risk aversion had ceased to guide the forex markets, but rather that they had been deliberately been put on the backburner. In other words, it’s now obvious that investors have remained vigilant towards the possibility of another crisis and/or an increase in risk/volatility.

How do I know this is the case? This week, there was a major correction in the markets, as diminished growth prospects for the global economy led stocks down, and bonds and the Dollar up. If investors were truly focused on growth differentials, the Dollar would have declined, due to a poor prognosis for the US economy.

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