EURUSD Possibly Repeating 2010-2011 Trading Pattern

DailyFX

EURUSD price pattern since the 2012 low is nearly identical to price pattern off of the 2010 low. If the pattern continues, then the EURUSD will trade above the February high in the coming months before reversing lower again.

EURUSD

Weekly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_eurusd.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: Wrote last week that “1.3047 is minor resistance with 1.3133 probably a bit more important. Focus later in the month centers on 1.3320/40 (former pivot and 61.8% level). It’s worth mentioning that a JS Spike (key reversal with a specific volatility condition) formed this week. This is only 5th such occurrence since 2011. The 4 previous ones the weeks of the January 2011 low, 2011 high, mid-September 2011 (false), and 2012 low.” This week’s follow through on the reversal argues for additional gains. The recent low is in line with significant lows of recent years. Here is where things get interesting; price pattern since the 2012 low is strikingly similar to price pattern off of the 2010 low. In both instances (see below chart),

  1. the initial rally from the low was in 3 waves
  2. the subsequent decline was sharp but bottomed short of the 61.8% retracement
  3. the secondary low (last week) was marked by an outside week reversal / JS Spike

FOREX Trading Strategy: May not get the opportunity to buy between 1.2934 and 1.2985 so looking for an early week low. The Daily Technicals will update developments. Declines on news often offer good entries as well. There are also opportunities in EURGBP and EURAUD.

EURUSD

Weekly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_eurusd_1.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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USDJPY

Weekly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_usdjpy.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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FOREXAnalysis: The USDJPY has responded to the 50% retracement of the decline from the 2007 high. Yesterday’s technicals explained that “a sharp drop for at least 1 day may be near as price traded into the 50% retracement of the decline from the 2007 high on a small range and ended the day little changed (call it a doji or whatever…the point is that momentum slowed at an important reference point).” 98.50 is the minor pivot…weakness below there would shift focus to the gap at 97.82 and uncovered close at 97.52.

“Over the long term, there is a lot more upside. Remember, the decline from 2007 was a 5th wave terminal thrust. The implications are for a return to the 4th wave extreme, which isn’t until 124.13 (end of pattern) or 147.66 (price extreme).”

FOREX Trading Strategy: Look to the left of the chart and you’ll notice a circled area. That area is just after the breakout that followed the initial pullback after the 2005 low. The point I’m trying to get across is that there will be pullbacks. Near term, the upward sloping channel (see below) provides a point of reference to trade from. The channel is of smaller degree than the one that was broken in December but the trading logic is the same. That is, watch the top side of the channel (at about 98.25 on Monday) for support. In summary, 97.50-98.50 is a zone to keep in mind as near term support.

USDJPY

Daily

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_usdjpy_1.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

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Gold

Weekly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_gold.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREXAnalysis: The emotions that surround the gold decline are typical of sentiment extremes and market turns BUT this is a market that the public has been heavily involved in for years and may therefore require additional downside. Levels of interest include where the decline would consist of 2 equal legs from the all-time high at 1398, the 2011 low at 1308.45. Ultimately, 1156/87 is a level that could produce an important low. This level is defined by the 161.8% extension and 61.8% absolute retracement (1921.49 x .618).

FOREX Trading Strategy: 1508/25 is resistance and price needs to stay below Friday’s 1565 low in order for this breakdown to remain valid.

Gold

Monthly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_gold_1.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

AUDUSD

Weekly

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EURUSD_Possibly_Repeating_2010-2011_Trading_Pattern_body_audusd.png, EURUSD Possibly Repeating 2010-2011 Trading Pattern

Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0

Are you new to FX or curious about your trading IQ?

FOREXAnalysis: No change: “The AUDUSD remains well supported. The reversal at structural support on Monday (former 4th wave) is bullish. The longer that the AUDUSD spends trading around the trendline from the 2011 highs, the more one must consider the possibility of an upside breakout.”

FOREX Trading Strategy: Went long on 4/9 and would like to see price stay above former range high if 1.0496 on daily closing basis but 1.0345 is the stop for now. A measured objective based on the range since August is 1.1135. If price can break through then breakout systems are of interest.

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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