EURUSD - Major Bullish weekly pattern or part of downtrend?

The EURUSD continues to show strength consistent with a potential set-up that I have been highlighting  in recent posts, which has the potential to see EURUSD move higher towards the high 1.4000s. However it has a number of hurdles to overcome along the way, including the resistance which has defined the downtrend pretty much since the top in 2008. This resistance is represented by a line which connects Weekly closing highs through 2008 and 2009 and acted as resistance in late 2010. Over the next couple of weeks this line comes in at 1.4040/1.4055, it will be very interesting to see how price acts at these levels, if it does get there.

In the much bigger picture a clear and sustained break over the 1.4040/50 area would favour strongly a move towards much higher levels in the bigger picture and will support a shorter-term move towards the high 1.4000s. The next chart shows a large Bull-Flag pattern which supports this argument. The other option, is that since 2008 we have been in a downward trend, and that this move back towards 1.4000 is just a rally within the on-going downtrend, with the low 1.40s acting as resistance before this trend re-asserts itself.

One argument which leads me to favour the upside, is the rejection of the breakdown of a 'Head and Shoulder' pattern early last year. Often (but not always) failed Head and Shoulders pattern come back to eventually re-test the high of the pattern.

The chart below shows the much bigger picture. The line emphasised on the above chart is shown as the upper line on the Huge Bull Flag pattern.

There is every chance that the next few weeks will lead to some sort of Bullish or Bearish conclusion.

USDJPY BASE - FAILING, and EURUSD update.

Over the course of recent weeks I have suggested that the USDJPY may have been basing, however price action over the past week leads me to think that this call was wrong.

The chart below highlights this: Of note are the :
Failed Head & Shoulder breakout: - This has implications, particularly if the low of the right shoulder is breached (around 80.90ish).
Possible Bearish Continuation Triangle: - This is still forming, so not yet confirmed, a sustained break through approx 81.30 would strongly favour this.

The downside triangle target would be around 77.50/78.00. However there is very strong support around the key 80 area (Psychological and previous lows from 1995 and 2010. , and at 79.00 from the declining monthly support line from 2004.


One final note on the USDJPY, which adds to my conviction of the bearish side of this trade: In the past few weeks Japan Long-term Sovereign debt was downgraded by both S&P and Moodys, despite this the JPY has remained strong versus the USD. This suggests that uncertainty around this issue is now on the back-burner, which seems to be JPY favourable as opposed to detrimental.

I can not rule out that all this price action may still be part of a very erratic and larger base, however I am saying what I see right now.

EURUSD update: - The CUP & HANDLE Pattern conviction from my last few posts continues to grow. Key for this view will be price action around 1.3850. Some profit-taking would be expected here, however what happens in the wake of that will be key. A sustained break could see this soar, a failed break however could put the nail in the coffin of this. - Also bear in mind that just above 1.3850 is a significant declining resistance line around 1.3950/75 which could also be key (See below).

EURUSD UPDATE 22 FEB 2011

Interesting Times - Some completely mental price action today.

In-light of the previous post from Friday re: the possible Cup & Handle (or other potential Bullish Set-ups). If today's rebound from the early morning (Europe morning) sell-off is maintained, then this should strongly favour (favor if you're across the pond) the bullish scenario. It will be interesting to see how this unfolds, further erratic price action would not be surprising, but assuming the rebound mostly holds and the price can start to move above last week's highs, then the case for the bullish outlook will continue to grow in strength.  - I have added a chart showing today's candle and how it  kissed the top of the recently formed wedge.

Note; from my experience of 'Cup & Handle' patterns in the Fixed Income markets, the price action during the formation of the Handle can be notoriously erratic and fickle. The handle represents an area where a serious battle is being waged between bulls and bears, and stop-running/false breaks are not uncommon. It is worth noting, that incomplete/failed patterns can be useful indicators themselves, as they highlight where the directional power is.

EURUSD - Bullish Cup and Handle forming ??

This is one of those incidences, where I am here to be shot down. In this case I am highlighting a potential chart pattern well before it is completed. As any tech analyst knows, this is always a dangerous activity.

The pattern I am talking about, is a potential Bullish 'Cup and Handle' pattern. -  It is worth noting that this is against a contra trend of lower peaks in the EURUSD since 2008 on the weekly, so it has some heavy work ahead of it in order to follow through on the upside, this could contribute to some erratic price action in the weeks ahead. 

The chart below shows the Cup and Handle pattern I am referring to.

 And here is the longer term weekly chart which shows the uphill battle it faces.

 

CUP and HANDLE PATTERN.

Some further info on 'Cup and Handle' Pattern. The illustration below shows a typical set-up. Note this is usually a continuation pattern. 

The chart below shows an example of a successful 'Cup and Handle' pattern. This is the German 10 Year Yield chart from 2006 - 2007.

EURUSD FX

A quick look at the EURUSD. I have no real clue as to where this is heading short-term. Longer-term I believe the upside will win-out, but my conviction on that is not strong and I try to keep as open a mind as possible. 

In the short-term I am watching the area around 1.3240ish to 1.3420ish, I think if there is a reaction here and it can start to rebound at some point, conviction for the upside grows, on the other hand if support at this zone is weak then I guess at a minimum a return to this high 1.20s could be on the cards.

 

USDJPY - basing pattern taking hold.

The basing pattern on the USDJPY is growing stronger. A clean and sustained break over 83.60ish would start to shift the odds strongly in favour of this.

USDJPY FX - Update 10 Feb 2011

I am still of the opinion that USDJPY is forming a major base, even though progress has been frustratingly slow.
The rally of the last couple of days is however showing promise.

The chart below shows some interesting developments, with key resistance being tried at 82.80/85. A clear break over here could be key.