EURUSD fall from the January 13, 2010 high of 1.4579 remains active as ONLY a daily open and close above 1.3871 will complete this fall while last week’s 1.3433 low holds. As to the downside, a daily open and close below 1.3482 will confirm resumption of the downside extension with 1.3030 followed by 1.2885 as the next objective.
Short Term Trade Recommendation: For the session ahead, look to buy EURUSD within the 1.3568-1.3595 zone with stop loss below 1.3529 for 1.3656, 1.3735, 1.3778 and 1.3871 targets.
Long Term Trade Recommendation: Sell EURUSD within the 1.3871-1.4006 zone with stop loss above 1.4086 for 1.3433, 1.3030 and 1.2885 targets.
GBPUSD fall from the January 19, 2010 high remains active as ONLY a daily open and close above 1.5422 will complete this fall while the March 1, 2010 low of 1.4782 holds. A daily open and close above 1.5422 will see further price extension to the upside within a 1.5422-1.5817 consolidation zone before another attempt to the downside. As to the recent rise from the March 1, 2010 low of 1.4782, this corrective wave remains active as ONLY a daily close below 1.5019 will complete this fall with prices then continuing to move lower within a 1.4928-1.5019 consolidation zone before another attempt to the upside. Once prices have moved within the sited consolidation zone, a sustained break of this consolidation zone will see further price extension in the direction of the break.
EURUSD moved higher last week as was my forecast with nearterm risk for further rise towards 1.3788 while 1.3548 supports. However, the February monthly close suggest further downside extension will unfold in March with 1.3089 as the next objective while prices remain below 1.4093. Our sited target for the week of Feb. 14 was 1.3418 as prices reached 1.3444, thus. a daily open and close below this level will firm the outlook for 1.3089. For the week ahead, EURUSD remains in a near term consolidation pattern as risk for further rise 1.3788 followed by 1.3878 remains while prices hold above 1.3548. Look for opportunity to sell EURUSD ahead of 1.3878 for 1.3089 in the weeks ahead.
GBPUSD remains offered as has been my forecast for several weeks with 1.4854 as the next objective. The medium term fall from the January 19, 2010 high of 1.6457 remains acive as ONLY a daily open and close above 1.5615 will complete this fall with prices then contnuing to move higher within a 1.5615-1.5937 consolidation zone before another attempt to the downside.
FOR THE WEEK OF FEBRUARY 21-26, 2010
EURUSD
EURUSD continued to move lower last week as our forecast targeted 1.3418 with prices reaching 1.3444, a few pips shy of our objective.
The BROAD OUTLOOK at this juncture remains corrective as the rise from the April 22, 2009 low of 1.2885 is complete at November 2009 high of 1.5143, with prices currently sustained below the 1.3748-1.4280 previously sited consolidation zone. A previously sited, a daily open and close below 1.3748 will see further downside extension as we saw this unfold last week, but at this juncture daily prices will need to open and close below 1.3418 to confirm further downside extension targeting the April 22, 2009 low of 1.2885. As to the upside, ONLY a daily open and close above 1.4092 will complete the corrective fall from the November 2009 high of 1.5143 while last weeks 1.3444 low holds, as price will then continue to move higher within a 1.4092-1.4492 consolidation zone .
As to the MEDIUM TERM OUTLOOK, the fall from the January 13, 2010 high of 1.4579 remains active as ONLY a daily open and close above 1.3878 will complete this fall while last weeks 1.3444 low holds, as prices will then continue to move higher within a 1.3878-1.4145 consolidation zone before another attempt to the downside. As always the case, once prices have moved within the sited consolidation zone, a sustained break of the sited consolidation zone will see further price extension in the direction of the break.
The SHORT TERM fall from the February 17, 2010 high of 1.3788 is complete at 1.3444, as hourly prices have opened and closed within the 1.3525-1.3657 consolidation zone with risk for further consolidation within the above mentioned zone before another attempt to the downside. Failure to move back below 1.3525 will favor further rise with 1.3657 followed by 1.3786.
TRADE RECOMMENDATION Buy EURUSD within the 1.3510-1.3555 zone, stop loss below 1.3485 for 1.3878 initial target followed by 1.4011.
GBPUSD
GBPUSD continued to move lower last week as our forecast targeted 1.5407 with prices exceeding our target reaching 1.5345.
The BROAD OUTLOOK remains corrective as the rise from the April 22, 2009 low of 1.4396 is complete at the August 2009 high of 1.7042 as prices remain within the sited 1.5407-1.6031 consolidation zone.
As to the MEDIUM TERM OUTLOOK, the active wave from the January 19, 2010 high of 1.6457 continues to unfold reaching 1.5345 last week and ONLY a daily open and close above 1.5770 will complete this fall while 1.5345 holds, as prices will then move within a 1.5770-1.6032 consolidation zone before another attempt to the downside.
The SHORT TERM OUTLOOK remains offered as the fall from the February 17, 2010 high of 1.5815 has reached 1.5345 as ONLY a 2 hour open and close above 1.3525 will complete this fall while 1.5345 holds, as prices will then continue to move higher within a 1.5525-1.5635 consolidation zone.
AUDUSD
AUDUSD continued to move higher last week reaching .9036, a few pips shy of our .9042 target sited in our February 14, 2010 update.
The BROAD OUTLOOK remains corrective as the fall from the January 2010 high of .9329 is complete at the February 5, 2010 low of .8577, as prices have moved within the .8864-.9042 consolidation zone. Look for a daily open and close outside this zone to witness further price extension in the direction of the break.
Both the MEDIUM TERM and SHORT TERM OUTLOOK remain bid as the rise from .8577 remains active as ONLY a 2 hour open and close below .8861 will complete this rise while .9036 caps, as prices will continue to move lower within a .8752-.8861 consolidation zone before another attempt to the upside.
TRADE RECOMMENDATION Look to buy AUDUSD within the .8806-.8861 zone, with stop loss below .8752 for 9042 followed by .9152 target.
EURUSD has reached our initial 1.3748 target sited in our January 30, 2010 update with prices continuing to move lower towards our next objective 1.3418. As to the fall from the January 13, 2010 high of 1,4579, this wave remains active as ONLY a daily open and close above 1.3931 will complete the fall while last weeks low of 1.3531 holds. A daily open and close above 1.3931 will see prices contune to move higher within a 1.3931- 1.4179 consolidation zone before another attempt to the downside.
GBPUSD closed last week higher as the nearterm outlook favors further upside extension but the broad outlook risk remains for prices to continue to move lower with 1.5407 as the next objective while 1.5886 caps. However, a 2 hour open and close above 1.5738 will see further price extension to the upside towards 1.5886 before another attempt to the downside. As to the fall from the January 19, 2010 high of 1.6457, this fall remains active as ONLY a daily open and close above 1.5886 will complete this fall while the February 8, 2010 low of 1.5522 holds, as prices will then continue to move higher within a 1.5886-1.6184 consolidation zone before another attempt to the downside.
AUDUSD also closed last week higher with risk for further upside extension in the days ahead with 0.8953-0.9042 as the next objectives while 0.8788 holds. ONLY a 4 hour open and close below 0.8788 will favor further downside risk with 0.8708 followed by 0.8577 as the next objectives.
Spot Gold broad outlook remains bid as ONLY a weekly open and close below 1018 will favor further downside extension within a 889.30-1018.42 consolidation zone before another attempt to the upside. Once prices have moved within the above sited consolidation zone, a sustained break of this zone will see further price extension in the direction of the break. As to the current corrective fall from the December 3, 2009 high of 1,226.38, this wave remains active as ONLY a daily open and close above 1,113.79 will complete this fall while the February 5, 2010 low of 1,046.20 holds.
DJIA broad outlook remains bearsih as the rise from the March 2009 low of 6,466.00 is corrective of the 14,192-6,466 fall, as ONLY a weekly open and close above 11.241.0 will eliminate the braod bearish outlook. As to the corrective rise from March 2009 low of 6466. prices have moved within the previously sited 9417-11,241 consolidation zone as a sustained break of this zone will see further price extension in the direction of the break. The corrective rise from 6,466 remains active as ONLY a weekly open and close below 9,096 will complete this rise while the January 2010 high of 10,722 holds. Once below 9096, prices will then continue to move lower within a 8,091-9.096 consolidation zone before another attempt to the upside. As always the case, once prices have moved within a sited consolidation zone, a sustained break of this zone will see further price extension in the direction of the break.
SP500 Index remains in a corrective rise of the 1,575-665 fall as prices have currently moved within the previously sited 1013-1228 consolidation zone. The broad outlook remains bearish as a sustained break of the 1013-1228 zone will see further price extension in the direction of the break. However, the corrective rise from 665 remains active as ONLY a weekly open and close below 965 will complete this rise while the January 2010 high of 1,151.45 holds, as prices will then continue to move lower within a 851-965 consolidation zone before another attempt to the upside.
EURUSD’s broad outlook remains corrective as the rise from the April 22, 2009 low of 1.2885 is complete at the Nov 25, 2009 high of 1.5143, as prices have now moved within the previously sited 1.3748-1.4260 consolidation zone. Risk remains for further price extension to the downside next targeting 1.3748 before another attempt to the upside. ONLY a daily open and close above 1.4353 will complete this fall from 1.5143 while today’s 1.3862 low holds. Now that prices have moved within the 1.3748-1.4260 consolidation zone, a sustained break outside this zone will see further price extension in the direction of the break.
As to the medium term outlook, the fall from the January 13, 2010 high of 1.4579 remains active with further downside risk targeting 1.3748. ONLY a daily open close above 1.4136 will complete this fall while today’s 1.3862 low holds as prices then contine to move higher within a 1.4136-1.4305 consolidation zone before another attempt to downside.
Intraday, the fall from the January 25, 2010 high of 1.4195 remains active with prices reaching 1.3862 as of this writing. Look for continued downside risk as ONLY a 2 hour open and close above 1.3989 will complete this fall while today’s 1.3862 low holds as prices will then continue to move higher within a 1.3989-1.4067 consolidation zone before another attempt to the downside. Once prices have moved within the sited consolidation zone, a sustained break of this zone will see further price extension in the direction of the break.
EURUSD’s rise from the April 22, 2009 low of 1.2885 remains active as ONLY a daily open and close below 1.4094 will complete this rise while the October 23, 2009 high of 1.4843 holds. A daily open and close below 1.4095 will see prices continue to move lower within a 1.3633-1.4095 consolidation zone before another attempt to the upside. As to EURUSD”s fall from yesterday’s 1.4483 high, this wave remains active as ONLY a 1 hour openand close above 1.4362 will complete this fall with prices then subsequently moving within a 1.4362-1.4408 consolidation zone before another attempt down. For the session ahead, sell EURUSD at 1.4360, stop loss above 1.4405 for 1.4250 target.
EURUSD’s rise from the April 22, 2009 low of 1.2885 remains active as ONLY a daily open and close below 1.4094 will complete this rise while the October 23, 2009 high of 1.4843 holds. A daily open and close below 1.4095 will see prices continue to move lower within a 1.3633-1.4095 consolidation zone before another attempt to the upside. For the month ahead, continue to buy EURUSD on dips, especially ahead of the August 5, 2009 high of 1.4446 and above key support at 1.4095, with 1.5176 as the objective.
GBPUSD’s rise from the April 22, 2009 low of 1.4396 is complete at the August 5, 2009 high of 1.7042, as prices will continue to move lower with 1.5719 as the next objective. To the upside, ONLY a daily open and close above 1.6041 will confirm the corrective fall from 1.7042 is complete at the September 28, 2009 low with prices then continuing to move higher with 1.6556 followed by 1.6740 as the next objective
EURUSD’s broad outlook remains within a 1.3745-1.4446 consolidation zone as a sustained break of this zone will see further price extension in the direction of the break. A daily close above 1.4446 will see prices continue to move higher initially targeting 1.4620 while to the downside a daily close below 1.3745 will see prices continue to move lower initially targeting 1.3664. The medium term rise from the April 22, 2009 low of 1.2885 remains active as ONLY a daily open and close below 1.3850 will complete this rise while the August 5, 2009 high of 1.4446 holds. As to the corrective fall from the August 5, 2009 high of 1.4446, this fall is complete at the August 17, 2009 low of 1.4045, as a daily open and close above 1.4251 will see further price extension to the upside with 1.4351 followed by 1.4446 as the objective.
GBPUSD’s broad outlook remains in a broad consolidation phase within a 1.6043-1.7042 consolidation zone. A sustained break of this zone will see further price extension in the direction of the break with a daily open and close above 1.6990 favoring further price extension to the upside with 1.7614 as the objective, while to the downside, a daily open and close below 1.6043 favors further price extension to the downside with 1.5719 as the initial objective. As to the medium term rise from the April 22, 2009 low of 1.4396, this wave remains active as ONLY a daily open and close below 1.6031 will complete this rise while the August 5, 2009 high of 1.7042 holds. Short term, the corrective wave from 1.7042 remains active as ONLY a daily open and close above 1.6491 will complete this fall while the August 27, 2009 low of 1.6151 holds, as prices will then continue to move higher within a 1.6491-1.6702 consolidation zone before another attempt to the downside.
EURUSD’s outlook remains bid as the rise from the April 22, 2009 low continues to unfold with the December 18, 2008 high of 1.4718 as the next objective. Only a daily open and close below 1.3850 will complete this rise while the August 5, 2008 high of 1.4446 caps. For the week ahead, look to buy EURUSD within the 1.4195-1.4264 zone for further price extension targeting 1.4446, 1.4620 and 1.4718.
GBPUSD’s rise from the April 22, 2009 low remains active as ONLY a daily open and close below 1.6031 will complete this rise while the August 5, 2009 high of 1.7042 holds. As for the corrective fall from 1.7042, this fall reached 1.6274 on August 17 and remains active as only a daily open and close ablve 1.6567 will complete this fall with prices then continuing to move higher within a 1.6567-1.6749 consolidation zone. Should prices open and close on a daily basis within the above mentioned zone, a sustained break of this zone will see further price extension in the direction of the break.
DJIA-the Dow Jones Industrial Average has reached our 9433 target as sited back in our April update with last weeks close of 9506, as prices will need to close higher this week to confirm the fall from the 2007 high of 14,198 is complete at the March 2009 low of 6488. A close higher this week will see continued upside risk as prices move within a 9433-11,249 consolidation zone before another attempt to the downside. Failure to close higher this week along with a close below 9433 would suggest that the move up from 6488 may be complete as ONLY a daily open and close below 8,357 would confirm this outlook. However, the rise from the March 2009 low of 6488 remains active as ONLY a daily open and close below 8,357 will complete this rise while Friday’s 9506 high holds, as prices will then continue to move lower within a 7202-8,357 before another attempt to the upside.
Gold-As to the broad outlook, gold prices remain firm as the rise from the October 2008 low of 680 remains active and reached 1,005 in Febuary 2009, as ONLY a daily open and close below 881 will complete this rise while 1005 holds. As to the meduim term outlook, prices again remain firm but continue to move within a symetrical triangle pattern with higher lows and lower highs suggesting a break out is imminent and will certainly occurr before the end of September. The sysmetrical pattern has some very unique characteristics and provide very unique trading opportunities. By connecting the lower highs and higher lows, the trend lines extend and the triangle pattern takes shape. You could also think of it as a contracting wedge, wide at the beginning and narrowing over time. As the price action consolidates over time, sellers begin to sell at lower highs while buyers begin buy at higher lows. Eventually, one group overwhelms the other and the result is a dramatic breakout, with the momentum and duration of such breakout directly proportionate to the duration of consolidation.
Below I have listed essential triangle or symmetrical triangle pattern criteria, all of which apply to the current pattern witnessed on the daily charts for XAUUSD (Gold/USDollar).
1. Trend : In order to qualify as a symmetrical pattern, an established trend should exist. The prior trend should be several months old and the symmetrical triangle marks a consolidation period before continuation or trend reversal. The current trend is consolidating as prior to this consolidation pattern was in a very bullish rise from the October 2008 low and mist recently from the April 2009 low.
2. Four (4) Points: At least 2 points are required to form a trend line and two trend lines are required to form a triangle. Therefore, a minimum of 4 points are required to begin considering a formation as a triangle. Ideally, the breakout occurs after 6 points (3 on each side). At this writing there are 4 lower points and 2 upper points.
3. Volume:As the triangle extends and the trading range contracts, volume begins to diminish. Such has been the case the last few weeks. This is known as the quiet before the storm, or the tightening consolidation before the breakout.
4. Duration:The triangle can extend for a few days to a few months and is directly related to the recent trend. In this case, gold reached a low recent low of 864 on April 20, 2009 which was essentially 38.2% of the October 2008 low and the February 2009 high. As the 38.2 held, this suggest the trend remains firmly to the upside as was witnessed in the weeks following the April 2009 low. In the current pattern, the duration is 15 weeks whereas if the pattern were less than 3 weeks, such a pattern would be considered a pennant and almost always results in a continuation of the prevailing trend.
5. BreakoutTime Frame: The ideal breakout point occurs 1/2 to 3/4 of the way through the pattern’s development or time-span. The time-span of the pattern can be measured from convergence of upper and lower lines. A break before the 1/2 way point might be premature, as occurred on the June 6, 2008 pattern break, while a break too close to the apex may be insignificant. After all, as the convergence of the trend lines approaches, a breakout must occur. Going back the April 2009 low, the current pattern is already more than 3/4 complete and a break out will certainly occur at anytime and certainly within the next 3-4 weeks.
6. Breakout Direction:The future direction of the breakout can only be determined after the break has occurred. Sounds obvious enough, but attempting to guess the direction of the breakout can be a bit tricky. However, the medium and broad term trend remain to the upside and symmetrical patterns tend to be continuation patterns.
7. Breakout Confirmation:For a break to be considered valid, it should be on a closing basis with a price (3% break) or time (sustained for 3 days) filter to confirm validity. However, in that the current pattern duration is more several weeks in duration, a daily open and close above 970 or below 920 at this juncture will see further price extension in the direction of the break. As the breakout unfolds, an expansion in volume will occur. Additionally, as often occurs, once prices break above or below the trendlines, a retest of the trendlines as support or resistance usually occurs, thus allowing opportunity to enter a position once the breakout is confirmed.
8. Return to Apex:After the breakout (up or down), the apex can turn into future support or resistance. The price sometimes returns to the apex or a support/resistance level around the breakout before resuming in the direction of the breakout. Two points of interest here are the June 2009 high of 990 and the April 2009 low of 864.
9. Price Target:There are two methods to estimate the extent of the move after the breakout. First, the widest distance of the triangle can be measured and applied to the breakout point. Second, a trend line can be drawn parallel to the pattern’s trend line that slopes (up or down) in the direction of the break. The extension of this line will mark a potential breakout target. Using the parallel trend line method, the initial upside target price is 1,062 while to the downside the initial target is 802.
Conclusion: The current consolidation pattern is nearing its end, with p otential for a breakout to occur within the sometime over the next 4-5 days. Finally. this pattern has a very reliable history as seen in previous breakouts which occurred in 1995 when after the symmetrical pattern, the US dollar rallied for 10 months, in 1996, after the symmetrical pattern consolidated for 5 months, the US dollar rallied 10 months, in 1998 when the US dollar rallied 26 months (wave 3), 2002 when the euro rallied for 36 months, and finally in 2005 the US dollar rallied for 8 months, and in 2006-2007 when the EURUSD rallied for 12 months, all subsequently to triangle consolidation patterns. However, all of the above examples occurred after significant consoldation for several weeks. As stated earlier, there is a direct correlation between the duration of the pattern and the intensity of the break.
EURUSD’s fall from the August 13, 2009 high of 1.4326 remains active as ONLY a 2 hour open and close above 1.4152 will complete this fall while the August 17, 2009 low of 1.4045 low holds. No change in the broad outlook, as the rise from the April 22, 2009 low of 1.2885 remains active as ONLY a daily open and close below 1.3850 will complete this rise while the August 5, 2009 high of 1.4446 holds. Daily studies are attempting to confirm a sell as a daily close below 1.4045 will confirm further downside extension in the days ahead. For the session ahead, sell EURUSD within the 1.4113-1.4129 zone for 1.4015 initial target.
GBPUSD’s corrective fall from the August 5, 2009 high of 1.7042 remains active as ONLY a daily open and close above 1.6567 will complete this fall at the August 17, 2009 low of 1.6274. As to the broad outlook, the rise from the April 22, 2009 low of 1.4396 remains active as ONLY a daily open and close below 1.6031 completes this rise while 1.7042 caps. For the session ahead, sell GBPUSD within the 1.6493-1.6518 zone for 1.6274 as the initial target.
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