Chart of the Day: EUR/USD
EUR/USD: The EUR/USD continues to trade at elevated levels relative to short term historical averages. We are starting to see some stalling at these levels, however, with a clear range now seen forming just above the key psychological mark at 1.30. This activity is not entirely surprising, given the range proximity to the 38.2% Fib retracement of the decline from the yearly highs at 1.37 (now seen at 1.3130). This area marks critical resistance going forward but we will need to see a weekly close above this level in order to ensure against false breaks in momentum strategies. Overall, the medium term bias is to the topside as long as support in the 1.3040 area holds.
USD/JPY: The USD/JPY is continuing on with its massive monthly rally, but we are starting to roll over in anticipation of psychological resistance in the 100 area and prices are now set on a test of support turned resistance in the 96.60 region. A downside break here would be a very bearish event and signal that a near term top is in place at the previous resistance of 99.85. With prices trading near such highly visible levels, we can expect a pickup in price volatility that will most likely favor breakout strategies.
AUD/USD: The AUD/USD is once again failing at the upper end of the medium term symmetrical triangle (which we discussed for most of last month), and key resistance is now found at 1.0570. Longer term, an upside break is expected given that we were able to close above 1.05 on a weekly basis. Shorter term, a downside break of support at 1.0355 could complicate things as this would violate both historical levels and the 100/200 period EMA cluster on the Daily charts.
USD/CHF: The USD/CHF is grinding through Fib support levels after posting new highs for the year at 0.9560. We are unlikely to see an end to this downside reversal until prices drop to 0.9225, which is the 61.8% Fib retracement of this year’s rally. This area can be used as a basis for swing buy positions as indicator readings are starting to suggest oversold prices.