This text is from blog famous currency strategist Joel Kruger .
TAKING A BACKSEAT – Nothing really going on with EUR/USD on Monday, and overall, the market is still locked in some tight interday consolidation. At this point, a break and daily close back above 1.2445 or below 1.2250 would be required for clearer directional bias. Still, I do retain a constructive outlook, and anticipate the next break will be to the upside. I am looking for a push above 1.2445, towards the projected objective at 1.2600, which represents a key fib confluence (38.2% of 2012 high-low move, 78.6% of June-July high-low move). However, although short-term direction in EUR/USD is tougher to calculate at the moment, there are some other markets that are quietly making some interesting moves and well worth the look.
IS THIS LATEST USD/JPY MOVE FOR REAL? – This market has finally broken out of a multi-day consolidation in the 78.00′s and many are now wondering whether it is the start to something bigger, or if the move is nothing more than a bull trap, with the pair looking to roll back over and trade down towards 78.00. At this point, the rally has stalled by the top of the daily Ichimoku cloud. This is significant as the price has not been able to break above the cloud since April. Should we see a break and close above 79.65, it would help to validate the latest break-out and open the door for additional gains towards next critical resistance by 80.60. However, inability to establish above 79.65, would put the pressure back on the downside. I contend that we are in fact on the verge of a breakout, with the very impressive latest bullish weekly close acting as the catalyst for the start to the next major upside extension. Any setbacks this week should be very wel supported on dips ahead of 78.80.
COULD EUR/AUD FINALLY BE READY FOR A CHANGE? – The relative outperformance in the Euro last week, and relative underperformance in Aussie, resulted in some interesting price action in this cross rate, which was lifted from record lows. I have been drawn to this cross for many months now, given how relentless the downtrend has been since 2008, with the market remarkably dropping from 2.1000, all the way down to 1.1600. Medium and longer-term studies are well oversold, and with the market putting in an impressive bullish reversal week, I wonder if this could finally be the start to a much needed healthy corrective bounce. In fact, I contend that when the market does decide to break higher, the move will be more than corrective, and the start to a major trend reversal. Look for any setbacks this week to be very well supported above 1.1700 on a daily close basis.
S&P 500 LOOKING FOR RETEST OF YEARLY HIGH – US equity markets (global as well) have been very well bid over the past several months, with the charts showing a consistent push to the upside. However, upon closer glance, it seems we are nearing a critical inflection point, with the S&P very close to a retest of the 2012 highs from March. Daily studies are not quite overbought just yet, but I suspect once the 2012 highs are retested and possibly slightly exceeded, the market will be looking to reverse sharply in favor of a fresh wave of bearish activity. As such, I recommend looking for opportunities to fade rallies above 1425, in anticipation of a sizable pullback in the weeks ahead. Ultimately, only a weekly close above 1425 would delay and give reason for concern.
MAYBE OIL PUSHES ABOVE $100, BUT NOT MUCH FURTHER – Quite an impressive rebound in this market since basing out by 77.50 back in June. However, any additional upside from here could very well be limited. I would be looking for rallies to soon stall out with some key resistance ahead. The 61.8% fib retrace off of the 2012 high-low move comes in around 98.00, while there is also some formidable previous support turned resistance from mid-April at 100.65. As such, I will be looking for an opportunity to fade additional strength once the market breaks into the 98.00-100.65 area, with the catalyst for the short entry contingent on the location of the daily RSI and intraday volatility at that time. More likely than not, the short trade will be established above 100.00.