Weekly Market Analysis

Completing its first 3 week decline since Jan. of 09′, the pair found brief support at the price base just a hair above the weekly kumo flat top.

Completing its first 3 week decline since Jan. of 09′, the pair found brief support at the price base just a hair above the weekly kumo flat top. The structure is definitely more bearish for the pair and the line of least resistance is to the downside starting on Monday. The kumo top starts to decline from the opening bell of the year so support is falling and the kumo base does not come back until 1.3805 which happens to be the 50% fib of the 09′ low to high. This could be a good place for bulls to try and re-establish longs. If this fails, there is a relatively small kumo below and the 61.8% at 1.3485. Breaks beyond this are not good for the EURUS which does not have another price base until about 1.3000 and 1.2500 which was the relative low for 09′. If you are thinking of getting long, a healthy amount of caution is advised an confirmation for the bulls will not come till a break and close above the 20ema.

Stuck inside the weekly kumo, the pair is about to exit it since it goes twister style by early feb. Until that happens, we feel the structure is not pretty and the wide range between 1.7000 and 1.5700 should dominate. However, keep in mind the pair declined for 6 straight weeks and only recovered last week with a little bounce. With all the lines going flat, momentum is in neither direction so heavy positions are risky at this point. The picture gets more complex until mid April where price will find a mild support from the kumo or the flat bottom will be resistance. Overall, the picture is messy.

Finding solid support off the 20ema, the pair now has to contend with the Tenkan which is flat and should offer some upside resistance at .9069. Day traders can take an aggressive short here targeting the 20ema at .8827. After this, we have the yearly highs for those feeling bearish on the aussie just above around .9400. Only the 20ema is climbing so we could see a range build between 8800 and 9400 for a little bit. However, we feel any major dips to the Kijun or Kumo top become good buying opportunities for another long term move up to 9400 and possibly parity. The kumo keeps rising and does so at a strong pace so support will continually want lift this pair for at least the first half of 2010.

Hemmed in by the 20ema on the weekly charts, the only sensible thing to do is sell just below it targeting 1.0400 or buy around 1.0200 but price is forming a short term wedge which is not a favorable price action formation to be trading, especially since we are over 80% into it so risk is increasing while reward is decreasing as the formation continues on.

First to break down and the first to go more corrective than impulsive in the breakdown against the USD, the pair had a very structured decline which was relatively corrective in nature with a little more gusto in the downside than the upside – the pair has not found support off the 20ema and bounced about 190pips since then and is making a case to push through the Tenkan. The corrective wedge structure has a top about another 100pips above and a break of this level aims for a push back to .7630 (09′ high) and would suggest we have a short term base in at .7000 for bulls to take longs if price gets there again. Any dips have to first take out the 20ema and then the flat Kijun which would take a good deal of elbow grease, however breaks below these levels should find support around .6500 where price should climb higher for the first half of 2010. Line of least resistance in the short term is mixed but medium term is to the upside.

Chris Capre is the current Fund Manager for White Knight Investments (http://whiteknightfxi.com/). He specializes in using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He has built Ichimoku Systems for Institutions and is at the forefront of Ichimoku models and analysis. For more information about his services or his company, visit http://2ndskiesforex.com