This text is from blog famous currency strategist Joel Kruger .
A WEEK OF PROMISE – Overall, a good deal of activity in the FX markets this past week, with the price action far from underwhelming. The Euro managed to extend gains against the buck, while also, perhaps more importantly, outperforming all other major currencies in the period of broader US Dollar weakness. EUR/USD successfully extended gains towards my 1.2600 topside objective, while EUR/AUD finally showed promise, with my forever long position in this market finally breaking back to average cost in the 1.2000 area.
OBJECTIVE MET BUT DON’T SELL EUROS JUST YET – At this point, it looks as though the anticipated base in EUR/AUD is finally taking form, and I believe there is major upside in the cards over the coming weeks. For EUR/USD, despite the Friday pullback away from 1.2600 and back below Thursday’s low, I still see this market breaking above 1.2600 and towards 1.2700, with any setbacks expected to be very well supported above 1.2445 on a daily close basis. While the underlying tend remains EUR/USD bearish, there remains room for additional upside before proper consideration is to be given for downtrend resumption.
YEN FRUSTRATES BUT NOT DISCOURAGED – Elsewhere, things have not played out as ideally in USD/JPY, with the very impressive bullish outside week in the previous week, showing no real follow through, in favor of a sizable retreat back into familiar territory in the 78.00′s. The rally was unable to extend beyond the top of the daily Ichimoku cloud, and the market was simply not yet ready to mount a formal assault on critical resistance at 80.60. Still, I recognize that this is the nature of the markets, and most of the time, we do not get what we want right then when we want it.
YOU MIGHT HAVE TO LOOK HARD…BUT SIGNS STILL THERE – Trading markets requires a good deal of patience and discipline, and with this in mind, the constructive basing outlook for USD/JPY is still very much intact, despite the lack of follow through this week. On a positive note, setbacks are still very well supported above 78.00, and the market was still able to put in a fresh weekly higher high and (hopefully) higher low above 78.15. Ultimately, even if the market breaks down further, any weakness should continue to be very well propped on dips, in favor of an eventual bullish acceleration back above 79.65, which guards against 80.60.
‘HARD’ TRUTH ABOUT ‘SOFT’ LANDING PROSPECTS – Moving on, not a lot going on over the past 24 hours on the fundamental front, although, my warnings of a more intensified China slowdown have begun to realize, with economic data out of the region consistently disappointing, and analysts finally waking up to the fact that a soft landing is not a very realistic outcome here. The materialization of this threat has been the primary source of underperformance in the very correlated Australian Dollar this past week, and I continue to project more weakness in the commodity currency going forward. An article out from China’s People’s Daily entitled “China Should Prepare for economic Uncertainty” has been getting a lot of attention, and offers a very accurate assessment of the current situation.