EURUSD continues to meander sideways following last week’s rip but that should change with U.S. inflation data tomorrow. I’m wondering if the ‘ideal’ support is 1.1345. This is the top side of the trendline from May and trendline from the May low. It’s also the 38.2% retrace of the rally. A drop to there could complete 3 waves down from last week’s high.
UUP (USD ETF) completed a weekly volume reversal last week! Most signals since inception of the ETF have been identified important turns in the ETF and therefore the USD in general.
January produced some monthly reversals of note. SPY made a 1 bar monthly volume reversal. Notice that reversals also occurred in June/July 2007 (high) and October 2002 (low). There were failed signals however in 1997. Obviously, monthly signals may not be all that timely. These are ‘big picture’ observations. It’s important to understand in light of weekly bullish reversals in indices last week! These charts are shown below the monthly charts in this post.
USDJPY spiked above the noted line off of the September and December lows but closed just under the line. As such, I’m thinking that today’s high is a lower high within a bearish sequence from the 1/4 high. Focus remains on 112.20/50.
GBPUSD sports 5 waves down from the high in what is probably wave an of a small 3 wave correction. As such, expectations are for a small bounce in wave b. The proposed resistance is 1.3690s. Eventually, the top side of the former channel resistance is proposed support near 1.3600.
Pay attention to the USD indices over the next few days. The big level for USDOLLAR is about 12115. This is the trendline from the May low and September high. A break below would ‘announce’ that the USD trend is lower.
Well, the re-test is out of the question but this USDJPY move could be a false breakout. The chart above shows square root levels. Square the year opening price and add/subtract that number in increments. For USDJPY, the square root of 11510 is 107 so the first square root up is 116.17. The idea is to look for a turn at the first square root level during the first week of the year in a market that is already extended. Several examples are below. An Elliott case is also made for a top as the rally from January 2021 consists of 2 equal legs (log scale). This chart is below. An objective trigger isn’t present yet.
AUDUSD has pulled back from just shy of the noted .7290. I want to see support at/near .7160/70 in order to maintain a constructive view. Failure to do so would leave me neutral at best.
This is the last update of 2021. A new calendar year is significant and those details will be addressed next week. The charts in this post highlight why I’m heading into 2022 with a USD bearish mindset. The chart above is a starting point insofar as making a USD bearish argument although the big picture ‘textbook’ trigger doesn’t occur until a break of the channel near 95. Until then, respect potential for strength into the 61.8% retrace of the decline from March 2020 at 97.73.