xxxJPY the focus for now....

Now that Bernanke has straightened things out, I can only imagine we are left with the Japanese upper house election as the next major event risk, overshadowing the G20 meeting over the weekend. The relationship? Not too much in the USD against the world but attention will shift towards the xxxJPY which will have indirect impact. The textbook play should be buying USDJPY for Abe's victory but how the market pans out subsequently will depend largely on how much that has been factored in by Friday's close.

Europe order book:
Stop loss: 1.2990, 1.3050-40, 1.3065, 1.3080 and 1.3210
Limit: 1.3060/50, 1.3150, 1.3170-90, 1.3210 and 1.3250/60

Primary trend: Bullish
Intermediate trend: Range between 1.2800 to 1.3200/50
Minor trend: Mildly bearish

Technically, shorter intraday indicator is in o/b zone but longer ones around mid level. Intraday momentum indicator suggest consolidation and at current level of 1.3136, there is more downside bias.
Along with other technical signals, I still prefer to fade into rallies. Expected trading range 1.3170/90 to 1.3000/20. Its Friday, stay nimble, try to take as much off the table and enjoy your weekend.

E$ Daily chart - Potential price action for today....

The deeper "B" wave has unfolded in USDJPY and topped off at 100.86 before a quick correction lower. However, I am still not very convinced that USDJPY is ready for sharp sell-off just yet before another attempts for 101.53 and 103.73 which will be dogged by some choppy price action, as witnessed earlier. Staying out of this pair ahead of major risk event.

USDJPY Daily chart - Possible scenarios...

Firmer EURAUD for 1.4400 implies softer AUDUSD in the coming trading session. Expect AUDUSD to fall back to 0.9020/30 with 0.9200/20 to cap.

USD back on track.....

Market whipsaw as expected during the NY session as Bernanke clarified his stand on Fed's action on QE. Amid the volatility, DXY closed Wednesday weaker below the DMA21. USD bears' victory was short lived as the index surged through the resistance to recapture the pivot point this morning. Having observed the price action in the past 24hrs, it has become apparent that the recent USD correction might have already run its course and is ready to power ahead again in the coming weeks.

Europe order book:

EUR:

Stop loss: 1.2990, 1.3050-40, 1.3065, 1.3170-90

Limit: 1.3060/50, 1.3150, 1.3170-90, 1.3200-10 and 1.3250/60

JPY:

Stop loss: 98.80, 99.25/20, 100.45/50, 100.90/00, 101.50 and 102.00

Limit: 99.00, 100.45/50, 100.80, 100.90/00, 101.50 and 102.00

E$

Primary trend: Bullish

Intermediate trend: Range between 1.2800 to 1.3200/50

Minor trend: Mildly bullish but capped at 1.3200/50

Still maintaining my view that E$ will be capped around the upper band 1.3200/50 and eventually fall back to 1.2750/2800. But however, EUR crosses should remain relatively firm.

Technically, intraday indicator has unwound from its o/s condition but still has room on the upside. However, daily indicator is just getting into o/b level. Shorter intraday momentum indicator suggest range consolidation between 1.3080/90 to 1.3180/200 but longer ones are beginning to point lower.

Expected trading range 1.3170/90 to 1.3040/50. Prefer to fade into rallies. 

E$ Daily chart - Pretty much sums up my view for 2013....

USDJPY

In view of the USD strength, USDJPY should continue to stay firm with initial target of 101.53. However, one has to take note of the event risk i.e. the Japanese election over the weekend. Strong supports levels are 98.00/10, 99.00/10 and 99.60/70. 

USDJPY Daily chart - Y99.00 has formed a solid base to propel it higher....

AUDNZD

Price action in the past 12hrs has not been encouraging and coupled with the view that AUDUSD has probably seen its near term highs around 0.9300, I have decided to cover the long and take a small loss. In the coming weeks, I expect AUDUSD to fall towards 0.8800/50.

Flying into the danger zone....

Having witnessed how the markets reacted to both versions of his take on QE in recent weeks, I am quite sure Bernanke would during his Humphrey Hawkins testimony deliver a message where the possible outcome will be one where he won't get himself buried by more interest payment burden. Smart choice of the sequence I must say, if it was intentional. That being said, if his message for these 2 nights at 10:00pm (Sin/HK) is going to be consistent with the latter, it will support a USD negative environment, at least in the near term after some initial vicious whipsaw.

With the main fundamental focus for the next 2 days being a pure USD against the rest of the world, E$ will somehow slip into a zombie state (look at the order book!!!) Like I have always likened E$ being caught in between 2 tectonic plates as she slips into her quasi USD role. But do not get overly bullish at current levels as we are trading around the upper band of the defined range (see chart 1). Expected range 1.3070/90 to 1.3180/200. Would prefer to trade from the short side if I have to.

USDJPY presents another direct USD play as trend indicator suggest this pair is ripe for a reversal as supported by the dark cloud cover weekly candlestick pattern. However, how deep the "B" wave can extend (see chart 2) really depends on the guidance by Bernanke. I look to fade into rallies but mentally prepared for Scenario 2. Expected trading range 97.50/70 to 99.60/80 (expanded 100.60/80). Watch support at 98.00/10.

However, if you insist on trading but hope to insulate yourself from the direct impact (kind of) from the Bernanke related volatility, one can dabble into AUDNZD where I would attempt to buy on dips. Expected trading range 1.1660/80 to 1.1810/30 (watch first resistance at 1.1740/60)

European order book:
E$
Stop loss: 1.3050/40 and 1.3170/80
Limit: 1.3170-90 and 1.3250/60
$JPY
Stop loss: 98.10/00, 100.05/10, 100.20/30, 100.45/50 and 100.90/00
Limit: 98.10.00, 100.05/10, 100.45/50, 100.75/80, 100.90/00 and 101.20

E$
Primary trend: Bullish
Intermediate trend: Range between 1.2800 to 1.3250 before 1.2400
Minor trend: Mixed with limited upside to 1.3200/50

E$ Daily chart - Right there at the upper band.....

USDJPY 8-hourly chart - How deep will this "B" wave be?

Softer USD for now....

E$ finally took a dip below 1.3000 to 1.2993 to flush out some sell stops before it returned to the defined range. Market is looking forward to German ZEW out at 5:00pm (Sin/HK) and also Wednesday and Thursday's Humphrey Hawkins where Bernanke will be testifying.
Looking at the stop loss orders, market is seemed to be alittle lopsided and I expect a squeeze above 1.3100 in the later part of today's session. As the price action unfolds itself, the probability of seeing 1.3200/50 is getting higher.

Below are a couple of A$ charts to substantiate my view for a firmer Aussie towards 0.9350/0.9400.

Europe order book:
Stop loss: 1.3050-40, 1.3100, 1.3120/30, 1.3145/50 and 1.3170/80
Limit: 1.3145/50

Primary trend: Bullish
Intermediate trend: Range between 1.2800 to 1.3250 before lower for 1.2400
Minor trend: Mildly bullish

Technically, shorter intraday indicator was in o/b region and market in the process of unwinding. Shorter intraday momentum indicator suggests consolidation but longer intraday one is pointing higher.
Taking other technical signals into consideration, I expect an initial dip before higher again. Expected trading range 1.3010/30 to 1.3140/50.

E$ 8-Hourly chart - Strong support region

A$ Daily chart - Bullish convergence 

A$ Weekly chart - Long engulfing body Doji after prolong downtrend is an important signal....

Buying time....

Following the short squeeze last week, E$ is now ensnared by moving averages in both the daily and weekly charts leaving it in a relatively tight range. The quick reversal that I was expecting on Thursday and Friday did not materialize as it held 1.3000 to close the week firm at 1.3064 forming a bullish engulfing candlestick pattern. Despite the initial bearish reversal view, one has to sit up and pay some attention and respect to that technical signal though I still maintain that the recent high of 1.3206 may still stay intact. However, I am mentally prepared for another spike higher towards 1.3250 before lower again which at the moment does not have a high probability of happening (see chart).
Surprisingly, the order book has been very light and it may appear that many are still not back into E$ yet after that vicious move. Until such time when there is big enough sell stops built below 1.3000, market is probably going to consolidate further with a slight upside bias. Hopefully, the German ZEW data due out tomorrow at 5:00pm (Sin/HK) will inject some action into this lacklustre pair.

A brief technical outlook for the following:
USDJPY: Mildly bullish for 101.00 but be aware that last week closed a dark cloud cover candlestick pattern. Coupled with signal that this pair is ripe for a reversal in the trend indicator, one has to avoid getting overly bullish.
AUDUSD: Decreasing downside momentum with bullish convergence and potential reversal signal in the trend indicator should alert one not to get overly bearish especially when nearer 0.8850/900.

CFTC's COT report: Speculator's accounts as of 9 July 13
EUR:  -40,900 vs -16,090
JPY:   -80,305 vs -70,736
AUD: -63,255

Europe order book:
Stop loss: 1.2995
Limit: 1.2930/20 and 1.3005/00
(Note: the large sell interest and stop order at 1.3130-50 is no longer around)

Primary trend: Bullish
Intermediate trend: Bearish for 1.2400
Minor trend: Mixed

Technically, most indicators have gone into neutral zone and today's range is expected to be confined within 1.3020/30 to 1.3080/90.

E$ Weekly chart - Another possible scenario....

End of USD bull trend? .... Wait!

Market has definitely gotten ahead of itself and this overnight vicious shortcovering must have been painful for some. Very clearly, the overnight price action is so characteristic of a short squeeze and needless to say, its objective was to flush out the loads of buy stop orders.
I don't get it right all the time but this round has been really fulfilling, in a way vindicated. Especially when I anticipated this move since last week and expressed in "Watch EURAUD....", 4 Jul Thu. Clueless as I may have sounded on Tuesday, its often a turning point, laced with uncertainties. For those who were patient with me, "Hardier than expected...", 10 Jul yesterday, would have gotten you out of trouble or helped you make some money.
So is this the end of the USD rally? I beg to differ and feel that this blip is but a correction within a bullish USD trend, which have another wave to go (see 10 Jul and today's charts).

Europe order book:
Stop loss: 1.3000, 1.3210 and 1.3250
Limit: 1.3130-50

Primary trend: Bullish
Intermediate trend: Bearish for 1.24
Minor trend: Bearish for 1.2750/2800

Technically, this is a very uncommon move as E$ breached more than 2 standard deviations in the overnight rally based on time and price (for the shorter intraday technical readings). Shorter intraday indicators are in o/s level now, whereas the longer intraday ones are close to o/b condition. At this moment, intraday momentum indicator signals are inconclusive due to this unusual price action. From here, I expect 1.3080/3100 (1.3150/80 stronger resistance) to cap any rebound and market to drift back towards 1.2900/30 today.

E$ Daily chart - 1.3200 objective met!!

Hardier than expected....

Dovish comments from ECB's Asmussen and Italy's downgrade pressured E$ through the 1.2800 option barrier and sell stop orders to print a low of 1.2755 yesterday. To add on to the bearish tone, it closed at 1.2780, a trigger for Goldman Sachs to cut loss on their long euro call. This morning, China's weaker than expected trade figures sparked a sell-off in the AUD, pulling the E$ lower but it only managed to print 1.2765 low before rebounding (A$ staged an even more spectacular rebound). The next focus will be minutes from the FOMC meeting which will be released at 2am (Sin/HK, 11 Jul) and Bernanke will be speaking at 4:10am (Sin/HK, 11 Jul). I have in my previous updates expressed my apprehension of getting overly bearish E$ when closer to 1.2800 and I am still standing by that view at this point in time. Though I am not expecting a major reversal here but there are increasingly more technical signals that support a deeper rebound before E$ resumes its bearish trend (see chart). This view will be invalidated if 1.2745 is broken with a close below. In the same vein, I do see a A$ rebound to 0.9350/80.

Europe order book:
Stop loss: 1.2735/30, 1.2745/40 and 1.2860/65
Limit: 1.2700 (opt), 1.2755/45 and 1.2880/900

Primary trend: Bullish
Intermediate trend: Range between 1.32 to 1.24
Minor trend: Mildly bullish (corrective)

Technically, shorter intraday indicator is in o/b level but the longer intraday ones are only just coming out of the o/s territory. The daily indicator is still in o/s condition. Shorter intraday momentum indicator is suggesting consolidation which at current level of 1.2805, there is still some room on the upside. But longer intraday to daily indicators are still pointing lower. Bullish convergence signal has emerged and that also has increased the probability of a near term bottom. Expected trading range 1.2780/90 (stronger support at 1.2750) to 1.2880/90 (stronger at 1.2920/30)

E$ Daily chart - Though E$ closed below 1.2800 yesterday, I still can't get overly bearish, at least for now........