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USD/JPY is in a sensitive support zone

January 24, 2014 in Chart Alert

USD/JPY moved as we had expected and indicated in the previous chart alert “USDJPY May Go Deeper For Further Consolidation“. The pair has completed the 38.2% retracement of the upward move from 96.94 to 105.44. In fact the fall took it below this level but found immediate support.

Are we looking for further consolidation or a recovery? Let’s have a look on the price-action:

USD/JPY completing the 38.2% retracement

USD/JPY and the support levels

Further consolidation towards 101.62 can not be ruled out but a strong support is expected near that level. In case there is a decisive break of that support then USD/JPY may extend the fall to complete the 50% Fibonacci retracement of the above mentioned upward jump. However, we would expect a strong support near 101.19 because of the psychological push of the approaching 100.00 range.

USDJPY may go deeper for further consolidation

January 23, 2014 in Chart Alert

Since the first week of November 2013 i.e. for close to 3 months USD/JPY’s price-action has been well over 55-day EMA. In fact the support was coming near 22-day EMA during any consolidation.

The pair had broken the 55-day EMA support recently but an immediate recovery took place. However, the pair could not sustain the upward jump.

USD/JPY back to 55-day EMA support level

USD/JPY at 55 day EMA support

The current price is at 55-day EMA support. The fact that the pair could not sustain the recovery after the recent break of this support and also the fact that the resistance came again at the short-term resistance trend-line is making the case that some deeper consolidation may take place.

USD/CHF 2014 outlook – who is winning as the safe haven currency?

December 30, 2013 in Chart Alert

USD/CHF is not stopping to prove the bearish sentiments. The race seems to be continuously on to prove which is the safe haven currency and which is “THE” safe haven currency. The last week’s move to 0.8799 was just a “touch and go back” move but there was a lot to read between the lines.

Between the lines

Well, what we mentioned about “reading between the lines” was not just an figurative expression. In USD/CHF’s case it has been literally the case. The pair has been moving between two definite lines for long. A lot of big moves spanning close to a thousand pips but practically without any real direction. This sideways price action had been contained for past over 2 years between the 38.2% and 61.8% retracement levels of the fall from 1.1731 of the week of May 31, 2010 to 0.7069 of August 9, 2011.

Before we go ahead, we wish to mention that this update is the second followup of the first alert “Is USD/CHF Heading For A Nosedive?“. The first followup of that post can be checked here. We may re-post some of the charts from the previous updates for the ready reference and convenience.

USD/CHF literally between the lines

USD/CHF weekly chart - The pair has been in the sideways range but has been trying to break out from the range

A closer look on the price action of USD/CHF for the past 3 weeks.Three weeks back the first sign came for a possible wake-up call. Or shall we say that a sign came for a deeper sleep. Whatever, we can play around with the words but the actions have been simple. Let’s put those in bullet points:

  1. Week of December 9: USD/CHF touched a low of 0.8840 (9 pips below the 0.8849 level)
  2. Week of December 16: After some recoverly, USD/CHF touched 0.8832.
  3. Week of 22: The pair touched 0.8799.

The attempts for breaking out from the long standing support are evident. And even if the tails are long i.e. the gaps between the lows and the open/close prices for these weeks were very wide (which indicate uncertainty for the further drop) but one thing is clear that the lows have been getting lower. At least we take it as continued bearish pressure and the indication that the pair may be heading for much deeper dives. Don’t you? But then, let’s have a look on the overall trends of USD/CHF.

USD/CHF in a long-term downtrend

USD/CHF historical chart of past 10 years - A long-term downtrend

The above 10-year historical chart of USD/CHF shows that the pair has been in a long-term downtrend. We also notice an approximate double-top chart pattern and the price action is breaking below the neckline, which is another technical indication for possible deeper declines.

Safe Haven Currencies – Who will be the winner?

The above historical chart clearly indicates that the Swiss franc has been continuously gaining weight over the U.S. dollar. The strength of the Swiss franc and hence the fall of USD/CHF does not seem to stop. By all means the franc seems to weigh over the dollar as a safe haven currency.

What about the fundamentals?

We will touch base with some of the indicators here as a brief comparison for the economical factors which have been driving forces behind the long-term downtrend favoring CHF’s strength over the USD.

Unemployment – United states versus Switzerland

United States historical unemployment status

United States unemployment (historical data) - Unemployment in the U.S.A. before and after Lehman shock

Switzerland historical unemployment status

Switzerland unemployment (historical data) - Unemployment in Switzerland before and after Lehman shock

The average unemployment in the U.S. during 1948 to 2013 has been 5.83% (Source: U.S. Bureau of Labor Statistics). Post Lehman Brothers collapse and the global economic turmoil the U.S. had seen a steep rise in the unemployment. The situation started improving from 2010 beginning and there has been a steady decline in the unemployment but its is evident that the current status is far worse than what it used to be before the Lehman shock. The unemployment in the U.S. was 7.30% during October 2013 and in November 2013 it again slightly improved to 7.0%. On the other hand the unemployment in the Switzerland as reported by the State Secretariat for Economic Affairs has been much less in comparison. The average unemployment from 1995 to 2013 has been 3.40% and the October 2013 figures were 3.10%. The other thing to be noted is that though Switzerland had also seen a steep rise in the unemployment after the global economic turmoil of 2008 but the current figures are not so much different that those were at that time. Switzerland balanced itself faster.

Annual GDP Growth – U.S.A. versus Switzerland

United States annual GDP growth (historical data)

United States - annual GDP growth historical data

Switzerland annual GDP growth (historical data)

Switzerland - annual GDP growth (historical data)

The 3rd quarter of 2013 saw 1.9% year to year GDP growth in the Switzerland and 2% in the United States. Overall the GDP growth in the U.S. has been more stable during the past 13 years but though Switzerland has seen some deeper bottoms than the U.S. during this time, the peaks have also been higher than those of the United States. Since 2006 Switzerland has seen some attempts to cross over 4% annual GDP growth but that has not been the case in the states.

Trade Balance – U.S.A. versus Switzerland

U.S. Trade balance historical data

Continuous trade deficit in the United States - Historical data

Switzerland Trade balance historical data

Switzerland - Balance of trade - continuous surplus - historical data

As we all know and as clear from the above charts that though since 2009 the trade balance situation in the U.S.A. has seen some improvement but the country has been in continuous trade deficit with imports of goods and services much higher than the export. Switzerland, on the other hand has been in trade surplus and though there has not been a steep increase but a gradual increase is also evident.

Current Account – U.S.A. versus Switzerland

Historical current account situation in the U.S.

United States Current Account - Historical data - continuous deficit

Historical current account situation of Switzerland

Switzerland - Current Account - Historical data - continuous surplus

As the current account of the nation is basically the difference between the income/savings and investments, the trade balance is a major part of it even though it factors the net income from abroad and the cash transfers. As America has seen some improvement in the trade balance situation the same has been the case for the current account. However, there has been a continuous current account deficit in the U.S.A. and a continuous current account surplus situation in Switzerland. The situation has been further improving after 2008.

The bottom line – Government debt to GDP ratio

U.S.A. – Debt to  GDP ratio

United States - Government Debt to total gross domestic product (GDP)  ratio

Switzerland Debt to GDP ratio

Switzerland - Government Debt to total gross domestic product (GDP) ratio.

Government Debt To Gross Domestic Product in the U.S.A, reported by the U.S. Bureau of Public Debt averaged 60.3% From 1940 until 2012. In 2012 the ratio was 101.60 of country’s total GDP. Switzerland, on the other hand, presents a much healthier situation. The historical data of the debt to GDP ratio shows an opposite picture than the United States. There has been a continuous reduction and the figure recorded in 2012 indicated a national debt of  just 35.3% of the gross domestic product.

USD/CHF 2014 outlook

The four things which are clear from what we mentioned above are:

  1. USD/CHF has been in a long-term downtrend.
  2. The economic fundamentals indicate Switzerland in a much better position to have it’s currency better placed as a safe-haven currency.
  3. On technical front the recent break of long standing supports indicate that further declines are highly probable.
  4. The approximate double-top chart pattern of the monthly chart also supports the above outlook.

Where next?

USD/CHF - outlook for the year 2015. The fall may extend to complete 50% retracement.

If the resistance holds at or below 0.9250 then the year 2014 should see further declines first towards 0.8611 to 0.8640 support zone, however there are all the indications that the declines may extend towards the 0.8568 support witnessed During October 2011 and then most likely 0.8520 to complete the 50% Fibonacci retracement of the gains from 0.7069.

Can USD/CHF break below 0.8500?

Well, considering the overall downtrend the possibilities of a break below 0.8500 are quite high. If the double-top chart pattern works as those are supposed to then the fall may extend to 0.8200 or below. However as mentioned above that the first level support from the longer-term perspective, is expected near 0.9250. Any failure of that support will start neutralizing this outlook but a better indication for a near-term bottoming will only come if the resistance at 0.9455 fails.

We remain bearish for USD/CHF.

Please share your thoughts and opinions in the comment box below. You may also like to check the USD/CHF outlook which is updated weekly.
Connect with the author on Google at: +Himanshu Jain

EUR/USD 2014 outlook – The pair is at two years high but is it done?

December 28, 2013 in Chart Alert

EUR/USD has not only broke over the high of 2 years but also broke over the 61.8% retracement of the great fall from 1.4940 to 1.2041 by jumping to 1.3894.

Though a strong resistance was witnessed before the pair could enter 1.3900 ranges and hence the psychological resistance territory of 1.4000 but this break strengthens the bullish outlook further. Some other points to be noted from the above chart that the 76.4% retracement, which we get by deducting 23.6% Fibonacci retracement from 100.00, is just 3 pips above one of the very strong previous resistance level.

EUR/USD weekly chart – the break over 61.8% retracement

EUR/USD brings more bullish outlook by breaking over the 61.8% retracement - Weekly chart

Let’s also have a look on the bigger picture by checking the past 10 years’ price action.

EUR/USD’s price action during past 10 years

EUR/USD's historical chart of past 10 years.

The above chart is indicating the fact that the price-action had clearly missed forming a double-top chart pattern when the pair bad missed retesting the low of 1.1877. Any break below 1.1877 would have formed an approximate double-top formation by one top at 1.5144 and another slightly below that at 1.4940.

EUR/USD 2014 outlook

With only 2 trading days remaining in the year 2013, it’s time to see what we can expect in the year 2014 from the point of view of pure price-action analysis.

The bullish sentiments are clearly strong for the euro. The break over 1.3500 during September 2013 was the first indication and the recent jump which took the pair to 2 year’s high and also over the 61.8% retracement came as another strong indication for the underlying bullish sentiments. A break over 1.4000 should now only be a question starting with “When” and not with “Whether”.

Targets above 1.4000

Any decisive break over 1.4000 should take EUR/USD to at least half way through to the next psychological level of 1.4500 i.e. towards the resistance zone of 1.4240 to 1.4250. As mentioned above, it is interesting that the 76.4% retracement of the fall from 1.4940 is just 3 pips above the resistance level of 1.4947. If the pair breaks above this resistance then it should target 1.4500. This level will not be just a psychological resistance but will also bring in the resistance of the trend-line as indicated in the 10-year’s chart above.

What may change the above outlook

The trend line support for EUR/USD

A support trend-line has emerged as indicated in the weekly chart above. Any failure of this support would be the first indication of a near-term topping. This support should hold near 1.3560 which is also important because of the support of the psychological ranges of 1.3500. However, overall a failure of 1.3500 support will indicate that EUR/USD might have already done it’s best .

Please share your opinions in the comment box below to discuss the price action and possibilities further. You may also like to check the EUR/USD outlook which is updated weekly.

Connect the author on Google at +Himanshu Jain

Follow up on USD/CHF price action

December 19, 2013 in Chart Alert

We had recently talked about the possibilities that USD/CHF may be heading for deeper declines in the near future. You may please check it at “Is USD/CHF heading for a nosedive?“.

There has been a strong upward jump recently which took the pair to 0.8859. Slight resistance is being faced around this level which is also near the 22-day EMA.

USD/CHF’s upward jump

USD/CHF near 22-day EMA

USD/CHF near 22-day EMA

Considering the strong jump some more upward consolidation can not be ignored but lets check out what we can expect.

USD/CHF and expected resistance levels

USDCHF and expected resistances

Some further gains towards the 55-day EMA i.e. 0.9020 can not be ruled out but a strong resistance will be expected there. This resistance will be a combined effect of the following 3 forces:

  • 55-day EMA
  • The short-term trend line resistance
  • The psychological resistance of 0.9000 ranges.

In fact the gains can even extend to 0.9060.

With the above resistance if the prices fall below 0.8849 again and manage to sustain below it for sometime then further declines, as indicated in the previous post as quoted above will be expected.

To quote it for the ready reference: “A drop towards 0.8568 to 0.8630 support and then lower can be expected. Considering the overall price -action we do not rule out the possibilities of a fall even towards 0.8240 or more in the days to come.”

Do share your opinions in the comment box below.

You may also like to check the  USD/CHF weekly forecast and the USD/CHF daily analysis.

GBP/USD enters the zone of strong supports

December 18, 2013 in Chart Alert

You may be getting bored that for many months we have been talking about the same resistance and support trend lines for GBP/USD. But then, if we have been talking about the same lines for long, those same lines have been in the existence for over 4 years. So can’t help. You may like to check one of the previous updates about the same at “GBP/USD broke 4 year old resistance trend line” before we move ahead with this GBP/USD chart alert.

As we had mentioned in the previous post, the pair had broken over the long-term resistance trend line when it had broken over 1.6260. As was expected, the break form the containment had brough further upward gains. GBP/USD had moved as high as 1.6467. The resistance there was a natural phenomena because of the strong psychological pressure of 1.6500 level. Well, the resistance had worked and the pair had moved down to as low as 1.6217 for a consolidation.

What is expected is that the old resistance support line should act as support now.

GBP/USD weekly chart with the trend lines

GBP/USD weekly chart - the resistance trend line is now acting as support.

As evident from the above chart, the pair is acting as expected. The old resistance trend line is now acting as support.

What adds to this support zone is the support from the 55-day EMA. Let’s have a look on the daily chart:

GBP/USD daily chart with 55-day EMA.

What is expected?

The combined forces of these two support forces may keep the pair in check. As we have been mentioning the our “FX Daily Dose” section that sooner or later we expect GBP/USD to overcome the psychological resistance of 1.6500, however if the current support breaks and a move below 1.6200 takes place then further consolidation towards the next support zone of 1.6125 to 1.6140 can not be ruled out. Even if the fall extends, we would expect it to be limited to 1.6160/1.6180 zone where the strong support of the lower trend line would come into the picture.

If the current support holds then the pair should reverse back towards upside.

Do share your opinions to take this discussion forward.

You may check the weekly GBP/USD forecast and the daily GBP/USD analysis.

Is USD/CHF Heading For A Nosedive?

December 16, 2013 in Chart Alert

The strong downtrend which had started from the week of May 31, 2010 had taken USD/CHF from 1.1731 to 0.7069 during the week of August 8, 2011. The recovery to 0.9315 from the low of 0.7069 had a very strong momentum and had come as quite promising but then the momentum slowed down even though the pair managed to touch 0.9972. The resistance came just shy of the psychological level of parity i.e. 1.0000 but also just 22 pips above of the 61.8% retracement of the great fall from 1.1731. Since then the pair has been in a very volatile sideways range between the 38.2% retracement support and 61.8% retracement resistance level. In fact we can say that this sideways price action has been in place for over 2 years.

USD/CHF’s journey during the past three and a half years

USD/CHF weekly chart - the price action during past three and a half years.

USD/CHF weekly chart – the price action during past three and a half years.

And then the story reverses – Highs going lower and so the bottoms

Let’s have another look on the same chart

USD/CHF chart for past 3 and half years with change in the direction

USD/CHF chart for past 3 and half years with change in the direction

This is evident that The first resistance during the recovery was a minor one at 38.2% retracement level. The break came soon and the pair, then found resistance below the 50% retracement level. Till USD/CHF finished the 61.8% retracement, the peaks were going higher and the lows were too. The story seems to have reversed from there. The peaks started going lower and so the bottoms too. However, the one thing which was keeping the pair in check was the support at 38.2% Fibonacci retracement level. The price action was contained above that support.

What’s new

The 38.2% retracement is at 0.8849. The pair just touched 0.8840. It was just a touch and go situation as the support was felt immediately, nevertheless it was a break. And then sometimes initial small indication end up in big moves.

The larger picture and what is expected

Let’s have the larger view of the historical price action of USD/CHF during past 10 years

USD/CHF historical chart for past 10 years indicating an overall downtrend.

USD/CHF historical chart for past 10 years indicating an overall downtrend.

It is clear that the pair has been is a strong downtrend for over 7 years now. The failure at the 61.8% retracement and then the recent slight break below the above mentioned support may have very strong implications for a continued downtrend. It is not just that USD/CHF might have just finished the consolidation by retracing to 61.8% level and finding the resistance below the parity level but another look tells us that the previous support trend-line seems to have turned into a resistance trend line.

The bearish sentiments have been there in the larger picture but have started coming back into the near-term picture as well. If the price action sustains below 0.8849 for sometime then a drop towards 0.8568 to 0.8630 support and then lower can be expected. Considering the overall price -action we do not rule out the possibilities of a fall even towards 0.8240 or more in the days to come.

Safe Haven and “The Safe Haven”

The U.S. dollar and the Swiss franc both have been in the safe haven currency  category for long. It is clearly evident that the dollar is losing the grounds the franc  in this battle for the status of “The safe haven currency”.

Do share your opinions in the comment box below to take this discussion forwards.

You may also like to check the weekly USD/CHF outlook and the daily USD/CHF analysis.

Is EUR/JPY Coming Out of The Reverse Gear?

December 1, 2013 in Chart Alert

How can we not talk about EUR/JPY after we just talked about GBP/JPY. After all the story of EUR/JPY is also not much different even though differences are there. Do also check the update about GBP/JPY.

During September 2008, the pair has seen a volatility of 1295 pips. Yes, September 2008 was a month which had filed itself in the the history of global economy. After all Lehman Brothers  bankruptcy had shaken down the economy for years to come. During the subsequent month EUR/JPY witnessed a volatility of 4607 pips. That kind of volatility is a record in itself. After that great fall the pair had remained in a very volatile sideways range for four months. The subsequent effort for the recovery had failed at 139.23 and then the 3 year long downtrend continued which went up to August 2012. Well, Why are we using the past tense? Has the downtrend already ended? Oops, questions are difficult but then let’s check what the charts are saying?

EUR/JPY monthly chart of past 10 years

EUR/JPY historical chart - 10 years

The first indication for the possibilities of some significant upward gains or even a reversal had come in December 2012 when the price action had broken over the channel which was containing the price inside it for three years and three months. Well, it was something major but not as major as what happened during last week. EUR/JPY very bullishly broke over 139.23. Not only this level had proved to be a strong resistance after the great fall but this also represents the psychological resistance territory of 140.00 level. Last week the pair went as high as 139.71, just shy of 140.00.

What can we expect from EUR/JPY now?

EUR/JPY 10 year chart - ForexAbode

Well, 140.00 can still try to exert its psychological pressure to bring some volatile sideways moves or even some consolidation.  However, the momentum is not showing any slowdown and the pair should at least complete the 61.8% retracement of the fall from 169.98 to 94.12 by targeting 141.00.

The previous resistance is now expected to turn into support and hence if the support in the range of 139.23 holds then it will be an indication for the reversal. In such case a hit to 145.00 should come in handy.

If the support at 139.23 fails then further consolidation may take place towards 135.23 before another recovery effort. We stay bullish for EUR/JPY.

You may also like to check EUR/JPY weekly analysis and also the daily outlook of EUR/JPY. Also do keep an eye of the Forex Daily Dose.

Please share your opinions in the comment box below to discuss the price action further.

Is GBP/JPY Up For Reversal?

December 1, 2013 in Chart Alert

Lehman Brothers had filed for bankruptcy on September 15th, 2008 and during that month GBP/JPY had shown a volatility of 1386 pips with the month’s high as 198.31 and low as 184.45. But then which currency trader can forget the month of October 2008? During that one month GBP/JPY had moved 6101 pips. Such volatility is rare to be seen. The high of the month was 189.93 and the low was 138.92.

Once the subsequent recovery failed at 163.07, the pair had remained in the ongoing downtrend which had started in 2007 till May 2012.  The upward gains which had started since then could have been just considered as a consolidation till the pair broke over 163.07.  The break over 165.00 could be taken as the second milestone and also as the second indication that GBP/JPY might have already bottomed up and may be on it’s way to the reversal. Other interesting thing is that the exact level of 116.84 had given support to GBP/JPY once again in September 2011. The fact that the support had come exactly at 116.84 for the second time also supports the idea that a bottom might already be in place from the longer-term perspective.

What should be the next target?

GBP/JPY 10 year chart - ForexAbode

Well, the momentum is not showing any indication of slowing down. The least what is now expected is a move towards 168.12 which will complete the 38.2% retracement of the long-term downtrend from 251.09 to 116.84. However the momentum also suggests that the pair may not only stop there but may try to take out the psychological resistance of 170.00 next. The previous resistance at 163.07 should now turn into support and if this support holds then who knows that GBP/JPY also manages to knockout 175.00  or more?

EUR/JPY also seems to be running on the same lines. Do check that at: Is EUR/JPY coming out of the reverse gear?

You may also like to check GBP/JPY weekly analysis and also the daily outlook of GBP/JPY. Also do keep an eye of the Forex Daily Dose.

Please share your opinions in the comment box below to discuss the price action further.

GBPUSD broke 4 year old resistance trend line

November 27, 2013 in Chart Alert

Two resistance and support trend lines have been guiding the price action of GBP/USD for past 4 years. We have been mentioning about these for past many months and the previous  update was in this chart alert. Today that history was broken when GBP/USD did not only broke above the resistance of 1.6260 but broke above this 4 year old resistance trend line to touch 1.6303.

The break

GBP/USD breaks over the resistance

Now where?

The next target should be 1.6381. A strong resistance may be faced there but a break over that should lay the red carpet for a test of the next psychological range of 1.6500. GBP/USD has been below that level for over past 2 years. The last effort was during the week of August 21st, 2011 when the pair had failed to sustain over 1.6500 after touching 1.6572

GBP/USD – Will the history repeat?

November 24, 2013 in Chart Alert

For quite some time we have been talking about the long-term resistance and support trend lines for GBP/USD. We have been talking for quite some time because these trend lines have been in place for quite some time and that is over past 4 years. There was a break of the support trend line during February 2013 and after that the GBP/USD support line had turned into resistance but then during the mid-September the pair had come back into the normal range i.e. between these old support and resistance trend lines and has been staying there since then. There have been many efforts to break over the resistance but all failed. Now the pair is once again trying to break over and this time the effort seems to be rather aggressive. Let’s look at the weekly charts as follows:

GBP/USD weekly chart with resistance and support trend lines

GBP/USD - trying to break the resistance

Please note that the above chart is not covering the past 4 years and for that refer to the chart on one of the old updates as per the hyperlink mentioned above.

A closer look of the weekly chart

A closer look of GBP/USD weekly chart

What to expect?

As we mentioned above that the recent attempts to break over this resistance have been very quick and none of the failures has brought any reversals as on the previous occasions. This makes the possibilities of a break quite high this time. A break over the recent 1.6260 would confirm a failure of this trend line resistance and such a move should take GBP/USD towards the next psychological range of 1.6500. However, if another failure takes place at 1.6260 then a drop towards 1.6060 or more can not be ruled out.

Please share your opinions in the comment box below to discuss the price action further.

USD/JPY – Does this break confirms it?

November 13, 2013 in Chart Alert

We had covered the possibilities of USD/JPY’s break over the 200-day moving average after 3 failed attempts to sustain above it in the post “USD/JPY Talking“.

The break of that resistance had finally taken place.

200-day moving average break

USD/JPY and 200 day SMA

We had also talked about the resistance of 99.63 to 99.67 in the old post “USD/JPY – What the charts are saying“. Well that resistance was also taken out when the pair went up and touched 99.80.

We had also talked about the 6 month old resistance trend line and the triangle formation in which USD/JPY has been contained in the previous weekly outlook update and that resistance has also been finally broken.

USD/JPY breaks over the triangle

USD/JPY breaks over the triangle

Well, can’t we safely say that the barrier of 100.00 will soon be taken out too? I think we can. Say cheers to USD/JPY :)