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Classic Technicals: The Week Ahead, Apr. 15-20, 2012

Last updated 4/15/2012 3:55 PM EST (GMT -5) 3 Comments

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Matthew Weller

Technical Analyst, GFT

Follow @MWellerFX

Technical Developments to Watch:

EUR/USD key support at 1.30

GBP/USD approaching 1.5800 floor

USD/JPY bearish, but frozen at 81.00

USD/CHF at .9200 ceiling

USD/CAD at parity (1.00) watching 1.0050 resistance

* Bias determined by the relationship between price and various EMAs.  The following hierarchy determines bias (numbers represent how many EMAs the price closed the week above): 0 – Strongly Bearish, 1 – Mildly Bearish, 2 – Neutral, 3 – Mildly Bullish, 4 – Strongly Bullish.

EUR/USD

EUR/USD drops sharply off 20-day EMA resistance

The EUR/USD inched higher for most of last week before reversing sharply off resistance at the 20-day EMA on Friday. From a fundamental perspective, the EUR/USD continues to be driven by changes in periphery debt yields, though the key technical levels and indicators may help provide context for this week’s moves. Looking to the MACD, we can see that the momentum has turned bearish, with the MACD trending lower below its signal line and 0. If rates continue to drop in the early part of this week, watch for support to emerge at the round 1.3000 handle; a break and close below this key psychological level would foreshadow further drops in the pair toward 1.2900 or 1.2800.

  GBP/USD

GBP/USD bounces from 1.5800, but reverses back down on Friday

The GBP/USD traced out generally the path as the EUR/USD: the pair inched higher throughout the early part of the week before selling off sharply on Friday and erasing the previous gains. The momentum (MACD) is now bearish, and a quick move down to key support at the 1.5800 handle is likely to begin the week. The price action at this level will determine the bias for the rest of the week. A break and close below 1.5800 would reveal that the bears still have control and clear the way for a drop toward 1.5650 support, whereas a bounce from 1.5800 would leave a neutral bias for continued consolidation in the 1.5800 to 1.6000 range.

USD/JPY

USD/JPY drops early before hibernating in a tight range for the rest of the week

The USD/JPY continued lower early last week after breaking key support at 82.00 the week before. However, the pair finished the week consolidating in a miniscule 45-pip range on Thursday and Friday. The extreme lack of volatility late in the week shows traders are on edge after the BOJ officials commented that they were closely watching the recent strength in the Japanese yen. Technically, the unit appears to have room for further drops, with the MACD showing bearish momentum, though the Slow Stochastics are modestly oversold. Moving forward, we will watch for the downtrend to continue, with room down to support at the round 80.00 handle.

USD/CHF

USD/CHF bounces off support at the .9100 round handle

The USD/CHF initially dropped last week before finding a floor near .9100 late in the week. Rates bounced sharply on Friday on the broad-based U.S. dollar strength, leaving the pair just below 4-week highs near .9200. The MACD shows bullish momentum, as it continues to trend higher above its signal line and 0. Beyond that, USD/CHF traders should watch the technical and fundamental developments affect the EUR/USD, because as we noted last week, trading the USD/CHF is pointless right now.

USD/CAD

USD/CAD finishes a volatile week near key psychological level at parity (1.00)

The USD/CAD had a wild ride last week, with the pair rallying sharply early in the week to test key previous resistance at 1.0050 before dropping back below parity to close the week. The 1.0050 ceiling has capped rates on 4 occasions in the past 10 weeks, and represents a critical level to watch moving forward. The underlying characteristics of the market are strong, with the MACD showing bullish momentum and the Slow Stochastics indicating room for further bounces before rates become overbought. Traders should wait for a break above 1.0050 resistance before turning bullish on a longer-term basis, but if we do see that break higher this week, buying opportunities will be favored.

AUD/USD

The Aussie was also volatile last week, with rates initially dropping to support at 1.0225 before surging midweek to break above the 20-day EMA. Unfortunately, the pair was unable to hold the break and dropped back below the 20-day EMA on Friday. The recent price action has left the near-term technical picture unclear, and even the secondary indicators are unclear, with the MACD near its signal line and the Stochastics far from overbought or oversold territory. For this week, the AUD/USD may consolidate as traders recover from last week’s volatility, though a break below key support at 1.0225 would suggest strong selling pressure with the potential for a drop down to 1.0140.  

NZD/USD

The Kiwi traced out a nearly identical path to the Aussie last week, with the strong midweek rally taking rates above resistance before they reversed lower on Friday. In a bright note for the bulls, the MACD has ticked up above its signal line, suggesting a shift to bullish momentum for the first time in 2 months. For this week, the .8260 level may still serve as a key barometer of trade; a break and close above this level may suggest that the NZD/USD is moving up into a higher consolidation zone, whereas continued trade below .8260 leaves the bias modestly bearish for a move lower during the week.

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Comments (3)

G

April 16, 2012 at 02:03 AM ET

Hi,
Really like your work. This is more of a heads up on you website. You know those little chart rollovers, the ones with the double underlines? They're nuts. If you rollover, you get a mishmash(up) of data: The EU/USD show a Last of 1.3385 with a chart showing it rising through 1.2480. Now we all know, that just ain't right. I've mentioned this before, but maybe you will take more notice.

Darkdoji

April 16, 2012 at 01:12 PM ET

Just one request for those not living stateside - is it possible to have this before trades open Sunday every week? It is some stress waiting to get it before planning moves. Though I am sure it will be a lot of stress as well for you to find time (you might need for your leisure) to change the time. Just that it is that critical - so if there is anything you can do, it will very welcome.

MWeller

April 16, 2012 at 01:24 PM ET

Good suggestion Darkdoji - I will try to work on publishing this a bit earlier, but no promises :)

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About The Author

Matthew Weller has been actively trading the various financial instruments including stocks, options, and forex since 2005. From his first exposure to forex, Matt was fascinated by the vast liquidity and volatility offered 24 hours a day in the forex market. He has specialised in currency trading ever since.

Matthew focuses on candlestick patterns and pivot points to identify logical trade entries and exits. In addition, he has discovered a passion for teaching others about trading and has conducted over 400 educational webinars on different aspects of trading the forex market. His analysis has been quoted in Reuters, MarketWatch, and on the NASDAQ newswires.