EURUSD, USDJPY & AUDUSD Direction
EURUSD
Despite EURUSD’s outsized change-of-direction candle in November on the monthly chart, and a lower low earlier this month, this market was able to break up thru 135.00 relatively easy this week to shift the Weekly trend higher. Given the chart reflects everything the market knows about itself, the risk environment for EURUSD appears to have been over-estimated in both the main stream media and blogdom. The intermediate-term trend on the Daily chart is now higher.
Last week’s buy signal on the Weekly chart, in-line with the Monthly chart, opens the door for a test of the November highs up above 140. The current long-term bearish pattern of lower highs and lower lows on the Weekly Euro chart points out the obvious problem of holding long positions into the mid-140 handle, while the intermediate-term trend remains higher.
USDJPY
USDJPY just did fail to reverse its bearish Monthly trend in November, which was a harbinger of the December sell-off. What became of that sell-off was a higher low at the end of Dec and a wide price range between the historic 1995 low at approx 80.00 and the current Monthly Directional Line at approx 84.00. The increase in trade signals on this daily chart that are all inline w/ the trend on the weekly chart highlights erratic trading behavior which we would describe as accumulation, where we would expect wide price swings and choppy directionless trade as the market carves out a long-term bottom.
Over the past few years long USDJPY positions has been such a losing proposition for professional trader’s that it’s often called the “widow-maker, and this Weekly chart supports it where we see many trades signals, which despite being in-line with the Monthly trend, prove to be losers. The consensus among many hedge-fund traders is that a bullish reversal for this market is likely once the U.S. economy can prove itself by showing continued positive job growth. A close above the 84.00 level on a weekly basis would be seen as a very significant technical event.
This Weekly USDJPY yen chart shows this market bouncing off the 1995 low at approx 80.00, and gives us scale. In trading parlance we can say ‘there is a lot of room on the upside”. The price pattern on this chart however – lower highs and lower lows – is still bearish.
AUDUSD
Despite an intraday rally last Wednesday the short-term trend of the Weekly trend remained lower in AUDUSD as this market close below its 5-month bull trendline. AUDUSD is an asset class market because of the high carry, and still benefits from a bullish monthly trend, and bullish price pattern on the Weekly chart. Despite current weakness this market still has not given a sell signal, those this could occur quickly on a close below 98.00.
A downside correction for Aussie and other asset class markets would be seen as a healthy sign for sustainability of the longer-term bullish trend. Should the current correction deepen global investors would likely target 95.00 in AUDUSD to add to long-term positions.
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Jay Norris is the Chief Market Strategist at Clovernest Financial Group and the author of Mastering the Currency Market, McGraw-Hill, 2009. Jay’s second book Mastering Trade Selection and Management, McGraw-Hill 2011, will be in book stores in the Spring.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Any charts shown here represent market conditions at a particular point in time. Such conditions may not be replicated in the future. Past performance is not indicative of future results.