EURUSD has extended its recovery to trade above the 1.2459 high of Dec. 4, activating the
stop on the recent short I recommended at 1.2391. This activity opens the door for further
upside extension in the short term, with potential for a test of 1.2602, the Nov. 19 extreme.
The trending condition is however still bearish, as reflected by the MACD being below its
zero line, which suggesting that longer-term risk is still for an extension of the downtrend.
Look for either a confirmed failure at higher levels, or momentum crossing lower again to
trigger a breaks of the 1.2246 December low.
USDJPY has traded below support at 119.547, the midpoint of the Nov. 27 to Dec. 8 advance,
which has triggered a deeper selloff. I had been long from 118.63, but was stupped out at
119.50. The decline doesn’t seem to represent a confirmed bearish reversal, but has exposed
the pair to the Nov. 27 low of 117.234, and perhaps even 115.49, the 38% retracement of the
October-to-December advance. With the longer term outlook still more constructive, setbacks
are opportunities to re-establish longs. A cross higher in momentum, which could trigger
earlier upside, would need a close above 121.006 to occur.
Having posted yet another new correction low on Tuesday, at 0.8222, AUDUSD then rallied
to make a more positive candle on the day. This is not, however, a reversal within candlestick
analysis, and while strength can possibly be extended further over the short term, bearish
potential remains. Momentum did cross higher, but this means little with the MACD still
below its zero line and its own moving average, suggesting little more than a limited recovery
within an ongoing downtrend. My focus is on resistance at 0.8384, the mid-point of the latest
selloff range, as while this holds further downside still seems the risk, with potential to
0.7946, the 62% retracement of the 2008 to 2011 advance. I am short from 0.8530, targeting
0.7950 with a stop at 0.8390, just above the mid-point of the latest selloff.