EurUsd The short term battle between 1.4684 and 1.4876 has been making things a little messy on the in traday picture, especially with the Fed meeting last night. However, a look at the 4 hour chart and one can see clearly that the RSI divergence play has continued to trade like a dream as it trends lower in perfect order. Those brave enough to follow this theme by shorting last night are sitting pretty this morning with a full figure on the P&L. 1.4684 has given the pair support overnight so the range bound action all around this resistance zone is likely to remain choppy as the battle between bulls and bears continues. The RSI reading here will remain key. Watch for a break below 40 on the 4 hour chart to confirm impending weakness and an increased chance of the pair to break lower. To the upside, be vigilant for a break of the RSI downtrend which could trigger stops for the big divergence players. A move higher in the price back to the major resistance at 1.4850 / 75 with an RSI continuing downwards will simply provide the shorts with yet another opportunity to add to their position. The stops above that level must be getting rather large to say the least.
GbpUsd We said on Tuesday that any move to 1.6435 would provide a great short entry and we have been fortunate enough to see the pair reach that level before contiuning its move through the head and shoulders formation, dropping this morning to sub 1.6200. The neckline of the internal shoulders sits at 1.6078 and a break there will likely send the pair spiralling to the major neckline at 1.5947. The scary thing for UK importers is that this move so far has been all about GBP weakness rather than USD strength. Add a small dose of deflation talk to this market and the pain will intensify. Updates on this picture throughout the day upon request.
UsdJpy We said on Tuesday that 92.50 would likely cap the pair despite it being outside of the 6 week downtrend and after one touch of the level the pair has resumed its downtrend to retetst the lows at 90.20. The picture does not look great for the bulls as the 4 hourly RSI has more room to go before becoming oversold. Expect 90.20 to provide some intraday bounces as some short covering occurs but ultimately there is a strong chance that the level breaks. For those searching a short entry point, the downtrend now comes in at 91.20 and 91.70 / 80 is the first significant resistance. A break below 90.20 targets 89.71 and 88.60 thereafter.
UsdChf "The trend is your friend......until its about to end" .....never has it been so true as with USD CHF for the last month but one should always remember the second half of the sentence. Complete mirror image of the EUR USD on a 4 hour chart with positive divergence for the last couple of days. The pair printed a low last night of 1.0186 which is close enough to the target of 1.0150 and after a 6 figure run on the pair, expect large shorts to be scaling back. There may be another flush out in USD but with the Fed's worryingly continual usage of the phrase "muted inflation" (which to me is their way of preparing people for deflation) then risk reward against further USD weakness is diminishing. Intraday shorts can again be expected at 1.0300/30 but will they have enough firepower to battle with some potential mass short covering? Probably not.
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