EUR/USD: The prospects for a head & shoulders top are fading following the latest break back above 1.4000, and the market is once again contemplating a fresh upside extension beyond 1.4160 and toward some major longer-term falling trend-line resistance by 1.4500 off of the record highs from 2008. For now, we will retain our bearish outlook and look for any rallies to be very well capped ahead of 1.4080, in favor of some renewed weakness. Key short-term support comes in by 1.3735 and a break below will be required to reaffirm outlook and accelerate declines.
USD/JPY: While we like the idea of the market establishing a major base by current levels over the medium and longer-term, short-term price action has still not confirmed any signs of a bottom, with the price action over the past few days more characteristic of a bearish consolidation ahead of the next drop towards the record lows. Ultimately, a close back above 82.00 will now be required to relieve downside pressures. However, we will be on the lookout for an opportunity to buy on dips below the 79.75 record lows.
GBP/USD: The latest close back above 1.6000 is concerning for bears, with the market contemplating a fresh upside extension beyond 1.6100. Still, the market has been very well capped on rallies above 1.6000 in recent weeks, and will look for another topside failure in favor of a some renewed weakness and a continuation of a broader multi-week range trade. However, should the market manage a close above the 1.6100 figure for more than two days, it will force a shift in the outlook and expose fresh upside towards 1.6500 further up. For now we remain sidelined and await a clearer signal.
USD/CHF: With daily studies finally crossing up from oversold and the market managing to close back above the 20-Day SMA for the first time since August, we are encouraged with the prospects for the formation of a major base by the recently established record lows at 0.9460. From here, look for any intraday setbacks to be well supported on dips towards 0.9700, with the market now eying a move towards next key resistance by 1.0000 over the coming sessions. Inability a couple of weeks back to extend declines to yet another record low below 0.9460, set up a strong bullish reversal week to end a sequence of 9 consecutive weekly lower highs. This further strengthens our constructive outlook and over the medium and longer-term we see significant upside risk. The market is now looking to establish back above the 50-Day SMA for the first time since mid-June.
Middle Eastern demand in Cable with a European CB on the offer. Japanese accounts selling in USD/JPY with a US prime name on the bid. A model name on the offer and a local importer on the bid in USD/CAD.
TRADE OF THE DAY
AUD/USD: Longer-term cyclical studies continue to warn of a near-term top in the pair, and we have once again established a counter-trend short position following the latest break above parity. While we are not sure at this point whether the market has indeed found the top, intraday studies suggest that our entry is most ideal over the shorter-term, with the daily ATR having already been met and our short triggering at an hourly RSI reading well above the super overbought 80 level. From here, we will look to see if the market can’t carve out a much needed intraday bearish reversal that will build into a more meaningful pullback on the daily chart. A break back below 0.9795 will now be required to relieve topside pressure and strengthen bias. POSITION: SHORT @1.0005 FOR AN OPEN OBJECTIVE; STOP 1.0115.