This week’s trading will be extra spicy due to both the Yellen, who has the chair at the US Federal Reserve (FED) and Draghi, who is president at the European Central Bank (ECB). Yellen and Draghi are giving speeches and testifying on both Tuesday and Wednesday.
Yellen is expected to testify on the Semiannual Monetary Policy Report before 2 committees (both the Senate Banking Committee and the House Financial Services Committee). Draghi is speaking at an unveiling of a new banknote on Tuesday and testifying on the ECB Annual Report of 2013 before the European (EU) Parliament.
All 4 events could heavily impact the EURUSD, other USD pairs, and other Euro pairs. Of course this is besides the looming and increasing Greek uncertainty with the ECB and other Euro zone members.
Let us review the technicals of the majors.
The EURUSD chart is showing 3 weeks of indecision in a row. The tight zone is marked by support at around 1.1275 and resistance at around 1.1450.
With price slowing down to a snail’s pace it could take a substantial event before the EURUSD is able to escape and break below or above the support and resistance layers.
In the long run, a bullish break still faces an important 1.1530-1.1680 resistance zone and I am expecting the long-term down trend to continue from here (orange circle in screenshot). If price does break above this resistance, then the EURUSD has changed trends and it could be in an uptrend.
A bearish break would need to push below 1.11 before a bigger down trend can fully be expected. In that case the round 1.10 number is the next target followed by 1.07-1.08.
The correction on the USDJPY’s daily chart has lasted even longer than the EURUSD’s triangle: 11 weeks and counting. The USDJPY consolidation zone is also a bit wider as it has support around 116-117 and resistance at 120.50-120.80.
For the moment the larger USDJPY uptrend is not in any serious danger and it seems to be a question of when (and not if) the bullish trend will continue. Price would need to break below the 50% Fibonacci retracement at 113.50 before I consider the uptrend to be over and potential down trend to be possible.
Contracting triangles often build 5 internal swing highs and swing lows before being completed. There are 2 options, although at the moment the first one seems more likely.
The first scenario indicates the completion of the triangle (purple lines) near the support trend line (green). The 5th purple line would become the last part of the contracting wedge before price bounces strongly to the upside and breaks above the key decision spot and the various layers of resistance (blue arrow).
The second scenario indicates an expansion of the correction with another bearish leg (red arrows). Price will build a bearish contracting triangle (orange lines) In this case, price will probably reach the 50% Fibonacci retracement level at 113.50 before continuing the uptrend (green arrow).
What do you think of the majors?
What levels are you looking at trading at?
Thanks and Happy Hunting!
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