Currency Analysis 20th August
EUR/USD
Weekly Trend direction: Bearish
Weekly trend reversal level: 1.3340
Key G7 resistance levels: 1.2900/20, 1.2960, 1.3030, 1.3100
Counter-trend and scalping opportunities:
Strategy: Whilst below the weekly trend reversal level sell rallies to resistance levels after an entry signal.
Today’s trade suggestion: A sudden reversal of fortunes for the Euro has created a large bearish weekly candle and a drop below last week’s reversal level. That means we are bearish this week, whilst below 1.3340, a long way above us. Remember that August is traditionally a tough month to trade due to thin markets creating sudden swings in both directions. The two hundred period moving averages are around about the first resistance levels between 1.2900 and 1.2960, and these are the first levels where we’ll look to sell. Targets will be back down at 1.2750 and perhaps lower.
Update: Pretty much ranged since the start of the week. The strategy remains the same – sell into rallies, with resistance levels unchanged. After last week’s dramatic move lower, it’s not unusual to get a period of
consolidation whilst the traders not on holiday digest the moves.
Update Friday: No change – strategy remains the same!
Summary: Sell rallies to resistance levels, starting at 1.2900, after a clear G7 entry signal. Target 1.2750 and
perhaps lower.
GBP/USD
Weekly Trend direction: Bearish
Weekly trend reversal level: 1.6000
Key G7 resistance levels: 1.5680/1.5700, 1.5780, 1.5820, 1.5900
Counter-trend opportunities:
Strategy: Whilst below the weekly trend reversal level sell rallies to resistance levels after an entry signal
Today’s trade suggestion:
Similar to the euro, the pound formed a large bearish engulfing candle last week, reversing the weekly direction this week to short. We have fallen back to the weekly trend line and seen and small bounce. The strategy is very simple this week, and resistance levels are well defined, with confluences of technical resistance all the way up to 1.5900. At the moment, the most likely candidate for a sell level is 1.5680 – 1.5700, and we’ll watch closely for a clear G7 reversal signal before selling. If this fails, look for signal higher up at 1.5780 and 1.5820.
Update: The pound moved up to the first resistance level at 1.5700 yesterday before falling back to last week’s low. We were able to sell into the rally during session yesterday, but we got taken out at breakeven due to the intraday chop. The strategy remains unchanged. It will be interesting to see if we break below 1.5530 today – in which case the resistance levels will need to be adjusted.
Update Friday: Strategy remains unchanged. We’ve had two great opportunities to sell into the news rallies, with over 110 pips gained. Perhaps best to call it a week.
Summary:
Sell rallies to 1.5680/1.5700 after a clear G7 signal. Target 1.5550. If this should fail, watch for reversals at the resistance levels higher up.
USD/JPY
Weekly Trend direction: Bullish
Weekly trend reversal level: 84.70
Key G7 support levels: 85.80, 85.50, 85.30, 85.00
Counter-trend opportunities:
Strategy: Whilst above the weekly trend reversal buy dips to support levels after an entry signal.
Today’s trade suggestion:
Sigh…A weekly “piercing pattern†candle last week means we have reversed to long. Whether we’ll hold above the magical 85.00 level (15 yr low) remains to be seen. The weekly “falling wedge†pattern, last week’s piercing pattern and the ever-present danger of price protection by the Bank of Japan, means that long trades are the best bet whilst above 84.70. Look to buy the dollar into dips whilst above here, for a target of 86.40 and then 88.00.
Update: The Dollar fell back to the key hourly 78.6% Fibonacci level yesterday, where we bought. Still hovering around the entry at 85.35, and still inconclusive. Will we fall through the 78.6% and retest the 15 yr lows at 84.70, or will support hold? Today should tell. Holding longs from 85.35, with updates as the day progresses!
Update Friday: Unchanged. Messy and annoying. Currently long the dollar, but the jury is still out. Weekly
direction is long.
Summary:
Buy into dips into support levels whilst above 84.70, after a clear G7 entry signal. Target 86.40 and then 88.00




