Price and Time: EUR/USD Double Top or About to Breakout?

06/23/2015 9:00 am EST

Focus: FOREX

Kristian Kerr

Chief Technical Strategist, Forex Capital Markets LLC



Kristian Kerr, of DailyFX.com, questions whether the euro is currently undergoing a double top backtest before turning lower or if it is about to breakout and extend the multi-month advance and offers his take on what either of the next directional moves could signify.


Talking Points


Foreign Exchange Price and Time at a Glance:

Price and Time Analysis: USD/JPY

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Chart Prepared by Kristian Kerr
Click to Enlarge

  • USD/JPY continues to consolidate above the 50% retracement of the May-June advance at 122.40
  • Our near-term trend bias is lower in the exchange rate while below 124.40
  • Weakness under 122.40 is needed to set off a more important move lower in USD/JPY
  • Minor turn windows are seen Monday and Wednesday
  • A close over 124.40 would turn us positive on the exchange rate

USD/JPY Strategy: Like the short side while below 124.40.

Price and Time Analysis: GBP/USD

chart
Chart Prepared by Kristian Kerr
Click to Enlarge

  • GBP/USD traded at a new 7-month high last week before stalling out near the 50% retracement of the 2014 high and this year’s low
  • Our near-term trend bias is higher in Cable while above 1.5675
  • A close over 1.5875 is needed to expose a Fibonacci/Gann cluster between 1.5990 and 1.6020
  • A minor turn window is seen around the middle of the week
  • A daily close below 1.5675 would turn us negative on the pound

GBP/USD Strategy: Like the long side while over 1.5675.

Focus Chart of the Day: EUR/USD

chart
Chart Prepared by Kristian Kerr
Click to Enlarge

EUR/USD recorded a new month-to-date high late last week and actually came within a few pips of testing the quarter-to-date closing high at 1.1442 before stalling out. Is the euro undergoing a double top backtest before turning lower or is it about to break out and extend the multi-month advance? Monday and Tuesday should prove key in determining which path the euro will take as near-term cyclical analysis suggests we have reached an inflection point of sorts. If the broader downtrend is going to re-assert itself here then EUR/USD shouldn’t really rally past last week’s 1.1435 high. Traction above this level would be a strong sign that multi-month correction in the single currency is nowhere near finished. A failure, on the other hand, at or around current levels followed by a break of median-line channel support at 1.1230 over the next few sessions would confirm a change in behavior and re-focus attention lower in the single currency.

By Kristian Kerr, Senior Currency Strategist, DailyFX.com

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