Weekly Currency Index Technical Analysis – 05 January

Currency Index Notes

AUDLFX

  • Bearish flag on weekly with reversal near 127.2%. Expecting a rally to 100% – 78.6% correction.
  • No strong candlestick patterns noted
AUDLFX Weekly Analysis - 05/01/2015
AUDLFX Weekly Analysis – 05/01/2015

Conclusion: Medium term bullish correction on a larger bearish trend.

CADLFX

  • Price broke out from a medium term trend line, dipped to retest break out level and resumes uptrend.
  • Price action tricky as 3 weeks ago, PL pattern was formed, followed by last week’s bearish engulfing/DCC pattern.
  • Price above 52 EMA, so we could see a decline to test the 52 EMA + trend line confluence.
CADLFX Weekly Analysis - 05/01/2015
CADLFX Weekly Analysis – 05/01/2015

Conclusion: Short term bearish on a larger bullish price action

CHFLFX

  • Price broke out from a major rising trend line, indicating a bearish shift to sentiment.
  • After break out, price rallied to retest the break out level near 1.95 – 1.9437 forming a bearish engulfing.
  • Next support at 1.8910, a break of which will confirm CHF to be bearish.
  • Daily charts shows a PL pattern formed on Friday but below 200 EMA. Expect a test to 200 EMA at 1.9210 which is also a confluence of daily charts minor trend line.
CHFLFX Weekly Analysis - 05/01/2015
CHFLFX Weekly Analysis – 05/01/2015

Conclusion: Very short term bullish with a shift of bias to bearish in the long term. Monitor daily charts for further clues and reversal near 1.921.

EURLFX

  • Bearish engulfing near 52 EMA, followed by a trend line break. Immediate support near 2.29 – 2.28. A break above 2.339 will invalidate bearish outlook.
  • Daily charts formed PL pattern, indicating a rally back to daily charts break out level at 2.30
EURLFX Weekly Analysis - 05/01/2015
EURLFX Weekly Analysis – 05/01/2015

Conclusion: Price action in Euro shifting to bearish with the short term corrective bullish rally likely to be the final retracement ahead of a decline. Sell Euro rallies.

GBPLFX

  • Week before formed a hammer pattern with last week closing bearish, indicating a trend reversal in the long term for GBP.
  • Daily charts forms a weaker bearish engulfing, but covers a lot of previous candlesticks.
  • Weekly closing line chart shows a triangle/wolfe wave pattern with wave 5 completed (confluence with Hammer). Expecting major declines into May 2015 (coincides with UK elections and effect looks similar to the drop before the Scottish referendum last year).
GBPLFX Weekly Analysis - 05/01/2015
GBPLFX Weekly Analysis – 05/01/2015

Conclusion: Stay short on GBP against stronger currencies

LFXJPY

  • 4 weeks ago, price formed a bearish engulfing at the top, but followed up with a sharp pin bar rejection candlestick and then a bullish closing candle.
  • Last week’s candlestick then formed a bearish engulfing again, indicating a move to the downside.
  • Next support is at 60.68 – 60 levels. Sharp declines expected?
  • Daily charts show break down from a medium term trend line. So expecting a decline to next support at 61.167 and then a rally to retest the break out level at 62.77 and then a decline.
  • Alternatively, since price bounced off the trend line but made a lower high, we could expect to see a straight down sell off.
LFXJPY Weekly Analysis - 05/01/2015
LFXJPY Weekly Analysis – 05/01/2015

Conclusion: Stay long on JPY but close ahead of Wednesday’s ADP jobs report and other US data which could turn JPY bearish again.

NZDLFX

  • Monthly chart paints a very bearish picture with price still in the larger triangle pattern. A monthly break out from this could spell disaster for the Kiwi in the long term.
  • Weekly candlestick forms what looks like a shooting start but can be confirmed only if this week closes bearish.
  • Daily charts shows a reversal already taking place, declines likely to be capped by 200 EMA and daily medium term trend line.
NZDLFX Weekly Analysis - 05/01/2015
NZDLFX Weekly Analysis – 05/01/2015

Conclusion: Stay aware of the bearish decline potential. This week, Kiwi could dip lower for the short term.

USDLFX

  • Monthly chart looks bullish and upside resistance long way away, enough breathing room for the US Dollar rally.
  • 3 weeks ago, bullish engulfing confirmed the upside. Support found at 1.8660 levels, likely to be tested logically.
  • Friday closed on a bullish Marubozu, indicating a strong up trend to be continued.
USDLFX Weekly Analysis - 05/01/2015
USDLFX Weekly Analysis – 05/01/2015

Conclusion: Bullish as bullish can be.

Prepared with LiteForex Currency indices.

Ideal Currency Pairs to trade this week

AUDCAD: Long positions recommended based on short term Aussie strength and Canadian weakness. But close before Friday’s Canadian payrolls data would be a safe bet. Also make note of Wednesday’s Canada trade balance and Ivey PMI data releases. Optionally, move trade to break even ahead of Wednesday’s data.

GBPJPY: Short positions recommended based on respective currencies strengths and weaknesses. GBPJPY formed a weekly bearish engulfing despite the long legged doji formation two weeks ago. Daily chart shows a break out to the downside after Thursday’s bullish inside bar. Short, targeting 183.29 support

AUDCHF: Long positions based on a piercing line pattern formation two weeks ago. Expect a minor dip in AUDCHF based on short term CHF strength. Look to buy from 0.8028, targeting 0.81 and 0.82 for the week.