EURUSD - WEEKLY CANDLE SET-UP WARRANTS CAUTION.

The EURUSD weekly canclesticks has produced a Bearish Harami pattern on the weekly charts.

 

A Bearish Harami pattern has the following key features:

  • Day 1 is a long positive-day bodied candle continuing an established uptrend.
  • Day 2 is a small bodied-candle whose range is within (or mostly) the first days body, above its midpoint.
 
I would not use this as a reversal signal in itself, but it does hint to the possibility of a small set-back or perhaps further extended consolidation. Bearish Haramis tend to be relatively moderate signals on their own, however it is worth keeping an eye on subsequent price action which could produce a further signal.

In range bound markets this formation will occur frequently with little significance. But if this pattern occurs after a protracted uptrend it is of greater importance. If this does turn out to be a reversal pattern the high of the two candles will likely turn into a significant resistance level.

My own view is that the breakout of the high 1.42s/1.43 of recent weeks is likely to be highly significant if it can be maintained, however, given its significance, it was always likely to be tested several times around the break. Initial support will be in the high 1.42s/1.43. A break could see a test back to the 1.4000 area, however I favour any moves below 1.42/1.43 being short-lived. - Of course, given fresh concerns around the Euro, I can not rule out a deeper correction, and given the number of new longs on the recent break to the upside, we may have a much deeper reversal, with the risk of the recent break being a false break.

USDJPY

I am throwing the towel in on my long USDJPY view of now. I believed it had turned the corner in recent weeks, and while this may still be the case, I am back to neutral on this for now.

EURCHF

Has struggled of late, helped by lingering concerns over the Euro, and as long as worries persist, I guess this will continue to meet sellers on rallies. I think it still may be forming a 'Double Bottom' pattern, but the jury remains out, unless a confirmed break over 1.3210/20 occurs.

BUND

Bounced beautifully off of last weeks Morning Star signal, may still have more upside, though I am aware of resistance around 121.70, and more particularly in a broad band from 121.41-121.89.