forex analysis February 2012

EURUSD The market has finally managed to find some bids and although the broader underlying trend remains intensely bearish, the risks from here are for additional corrective gains back towards the 100-Day SMA in the 1.3400 area before the next lower top carves out. Some falling trend-line resistance has already been broken on the daily chart and the 10-Day SMA has now crossed back above the 20-Day SMA to provide added confirmation for short-term bullish structural shift. Setbacks should now be well supported ahead of 1.2800, while only a daily close back under this figure would negate short-term bull bias. A bullish reversal week further supports short-term constructive outlook.

USDJPY: Despite the latest pullbacks, we continue to hold onto our constructive outlook while the market holds above 76.55 on a daily close basis. We believe that any setbacks from here should be limited in favor of a fresh upside extension back towards 79.55 over the coming weeks. Look for a break above 78.30 to confirm and accelerate, while only a daily close below 76.55 negates and gives reason for pause.

GBPUSD:The market has mostly been locked in some sideways chop over the past few weeks with any rallies very well capped ahead of 1.5800 and setbacks supported on dips below 1.5300. Until either side is convincingly broken, we would expect to see additional range trade. Therefore the preferred strategy is to look to buy range dips and sell by range highs. Only a weekly close above 1.5800 or below 1.5250 would give reason for outlook shift.

USDCHF:Although our overall outlook remains intensely bullish, the market is in the process of some interday consolidation before the next major upside extension beyond 0.9600 and towards parity. As such, from here, we see risks for additional setbacks towards 100-Day SMA by 0.9100 from where a fresh higher low is sought out. Ultimately, only a sustained break back under 0.9000 would negate constructive outlook and give reason for pause. Dips towards the psychological barrier should therefore be used as formidable buy opportunities.

AUDUSD:The recent break and close back above the 200-Day SMA is concerning and compromises our broader bearish outlook for the pair. However, we still see any additional gains beyond 1.0500 as limited with the market at risk for carving out the next major lower top ahead of a fresh downside extension back below parity. Rallies have now extended beyond 1.0600 to leave daily studies in overbought territory and the market now focuses on next key resistance by 1.0755 from late October. We will look to be aggressive sellers on a push beyond 1.0700 in anticipation of a major bearish reversal back below parity.

NZDUSD:The recent break and close back above 0.8000 is concerning and compromises our broader bearish outlook for the pair. However, we still see any additional gains beyond 0.8000 as limited with the market at risk for carving out the next major lower top ahead of a fresh downside extension back below 0.7400. Rallies towards the late October highs by 0.8240 will therefore be used as formidable sell opportunities, while a break and close back below 0.7865 will also confirm bearish outlook.

USDCAD: Our constructive outlook remains intact despite the latest interday pullback with the market largely still consolidating above parity ahead of what we believe will be an eventual retest of the key October highs by 1.0660. From here, look for any interday pullbacks to be very well supported above 1.0000 on a daily close basis, while ultimately, only below 0.9900 would give reason for concern.

EURJPY:Although the market remains locked in an intense downtrend, daily studies are finally correcting from oversold territory and out from multi-year lows with the market looking to establish back above 100.00. From here, there is room for additional corrective gains, with a break back above 102.55 to officially alleviate immediate downside pressures and potentially open a legitimate trend reversal. Setbacks should now be well supported ahead of 98.00, while only back under 97.00 negates and opens fresh downside. A bullish outside week further confirms short-term constructive outlook.

GBPJPY:The latest setbacks have been very well supported ahead of the record lows at 116.80 from September, with the market reversing course and potentially looking to carve a fresh base. For now, the underlying trend remains grossly bearish, but there is room for this correction to extend, with a break back above 123.00 to officially alleviate immediate downside pressures. Interday setbacks should now be well supported ahead of 118.00, while only back under 117.25 negates and gives reason for concern.

USD DOLLAR INDEX: The market remains locked in a multi-day consolidation and continues to chop between the 9,800-10,100 area. Overall, we do retain a bullish outlook given the broader recovery structure out from a major base in 2011 and therefore recommend looking to buy on dips towards 9,800 or on a break back above 10,135.

FOREX ANALSIS

EUR/USD: Rallies have stalled out just ahead of the 78.6% fib retracement off of the major 1.4940-1.3970 move, and the market could finally be in the process of carving out a fresh lower top by 1.4700 ahead of the next major downside extension back towards the 1.3970 recent trend lows. From here, look for a daily close below 1.4400 to confirm bias and accelerate declines, while only back above 1.4700 delays and gives reason for concern. Look for intraday rallies to be well capped ahead of 1.4650.



USD/JPY:After undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support in the 80.00 area and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported around 80.00 with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming weeks and a break and close back above 81.00 will help to confirm.



GBP/USD: Rallies have been very well capped in the 1.6500's with the market looking like it wants to carve out a fresh lower top by 1.6550 ahead of the next downside extension below 1.6060. A daily close back below 1.6285 will reaffirm outlook and accelerate declines, while only back above 1.6550 negates and gives reason for pause..



USD/CHF: The latest minor recovery has proved to be just that, with the market finding a fresh lower top ahead of 0.9000 in favor of a drop to yet another record low below 0.8400. Daily studies are however still looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. Look for a break and close back above 0.8450 to encourage bullish reversal prospects, while a drop below 0.8300 delays.



AUD/USD: Continues to show signs of topping after posting fresh post float record highs just over 1.1000 several days back. The latest corrective rally therefore is expected to be well capped ahead of 1.0800 where the next lower top is sought out ahead of a fresh downside extension below 1.0440 and into the 1.0200's. Ultimately, only a daily close back above 1.0800 negates and gives reason for concern.



NZD/USD: The intense uptrend looks to have finally found some form of a cap after surging to fresh 26-year highs by 0.8300, with the market stalling out to alleviate immediate topside pressures. From here, look for deeper setbacks back towards 0.8000, with a break below to further accelerate declines down to test key medium-term support by 0.7755. Ultimately, only a daily close above 0.8300 delays.



USD/CAD: The market has finally managed to mount a nice recovery since basing out by fresh multi-month lows in the 0.9400's and could be in the process of attempting to establish a more meaningful base. The latest break and close back above 0.9700 triggers an inverse H&S pattern that now projects additional gains towards parity over the coming days. Look for setbacks to now be well supported above 0.9650 on a daily close basis.



EUR/JPY: The latest sharp pullbacks into the 113.00's have been intense, although the market has now found some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out above 113.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. Only a daily close below 113.00 concerns.



GBP/JPY: Market setbacks have been very well supported on dips below the 200-Day SMAs and we look for the formation of a fresh medium-term higher low by 130.00 ahead of the next major upside extension back towards and eventually through 140.00. Ultimately, only a weekly close below 130.00 would delay and give reason for concern.



EUR/CHF: Any hopes for a material base by 1.2400 have now been shattered, with the market dropping to fresh record lows below the figure and threatening deeper setbacks towards major psychological barriers by 1.2000. Still, while medium and longer-term studies show overextension, we continue to like the idea of looking for opportunities to buy into dips rather than selling. For now, we will stay on the sidelines and await the next opportunity. A daily close back above 1.2320 will be required at a minimum to relieve immediate downside pressures.



US DOLLAR INDEX: Although the overall downtrend has been quite intense, the market could be showing signs of basing following the latest impressive rebound. Look for a break back above the 24May high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 24May high will keep the pressure on the downside and open a retest of the recent trend lows. A more constructive weekly chart does help to reaffirm recovery outlook, and we look for a higher low over 9400.

TODAY CURRENCIES ANALYSIS

EURUSD The market is once again very well bid with the latest gains managing to accelerate beyond resistance in the lower 1.4500's and into the 1.4600's thus far. From here, we still retain an overall bearish bias, but would look for gains to potentially extend some more towards the 78.6% fib retrace off of the major 1.4940-1.3970 move by 1.4730 before considering the possibility for bearish resumption. Back below 1.4450 would now be required to relieve immediate topside pressures.

USDJPY After undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support in the 80.00's and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported by 80.00 with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming weeks.

GBPUSD Rallies have been very well capped in the 1.6500's with the market looking like it wants to carve out a fresh lower top by 1.6550 ahead of the next downside extension below 1.6060. A break back below 1.6285 will reaffirm outlook and accelerate declines, while only back above 1.6550 negates and gives reason for pause.

USDCHF The latest minor recovery has proved to be just that, with the market finding a fresh lower top ahead of 0.9000 in favor of a drop to yet another record low below 0.8400. Daily studies are however still looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. Look for a break and close back above 0.8450 to encourage bullish reversal prospects, while a drop below 0.8300 delays.

AUDUSD Continues to show signs of topping after posting fresh post float record highs just over 1.1000 several days back. The latest corrective rally therefore is expected to be well capped ahead of 1.0800 where the next lower top is sought out ahead of a fresh downside extension below 1.0440 and into the 1.0200's. Ultimately, only a daily close back above 1.0800 negates and gives reason for concern.

NZDUSDThe intense uptrend looks to have finally found some form of a cap after surging to fresh 26-year highs by 0.8265, with the market reversing back below 0.8200 to alleviate immediate topside pressures. From here, look for deeper setbacks back towards 0.8000, with a break below to further accelerate declines down to test key medium-term support by 0.7755. Ultimately, only back above 0.8265 delays.

USDCAD The market has finally managed to mount a nice recovery since basing out by fresh multi-month lows in the 0.9400's and could be in the process of attempting to establish a more meaningful base. The latest break and close back above 0.9700 triggers an inverse H&S pattern that now projects additional gains towards parity over the coming days. Look for setbacks to now be well supported above 0.9650 on a daily close basis.

EURJPY The latest sharp pullbacks into the 113.00's have been intense, although the market has now found some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out above 113.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. Only a daily close below 113.00 concerns.

GBPJPY Market setbacks in May have been very well supported on dips below the 100 and 200-Day SMAs and we look for the formation of a fresh medium-term higher low by 130.30 ahead of the next major upside extension back towards and eventually through 140.00. In the interim, any intraday setbacks should be well supported above 130.00.

EURCHF

Any hopes for a material base by 1.2400 have now been shattered, with the market dropping to fresh record lows below the figure and threatening deeper setbacks towards major psychological barriers by 1.2000. Still, while medium and longer-term studies show overextension, we continue to like the idea of looking for opportunities to buy into dips rather than selling. For now, we will stay on the sidelines and await the next opportunity. A daily close back above 1.2320 will be required at a minimum to relieve immediate downside pressures.

US DOLLAR INDEX Although the overall downtrend has been quite intense, the market could be showing signs of basing following the latest impressive rebound. Look for a break back above the 24May high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 24May high will keep the pressure on the downside and open a retest of the recent trend lows. A more constructive weekly chart does help to reaffirm recovery outlook, but setbacks will need to hold above 9430 for recovery outlook to remain intact.

EURUSD: In the process of a corrective bounce following a 10 big figure drop in May with the market rallying from below 1.4000 and in search of a fresh lower top ahead of the next major downside extension below 1.3970. From here, look for any rallies to be well capped ahead of 1.4600, with only a break back above 1.4600 negating negative outlook and giving reason for concern. Back below 1.4300 confirms and should accelerate declines.

USDJPYAfter undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support by the bottom of the daily Ichimoku cloud and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported in the 80.00's with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming weeks.

GBPUSD Rallies have been very well capped in the 1.6500's with the market looking like it wants to carve out a fresh lower top by 1.6550 ahead of the next downside extension below 1.6060. Wednesday's bearish price action helps to confirm negative outlook and we look for a close below 1.6250 to provide added confirmation. Ultimately, only back above 1.6550 negates.

USDCHF The latest minor recovery has proved to be just that, with the market finding a fresh lower top ahead of 0.9000 in favor of a drop to yet another record low below 0.8400. Daily studies are however still looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. Nevertheless, we will look for some kind of bullish confirmation before considering the long, and at a minimum, would like to see a break back above 0.8550 to encourage basing prospects. Until then we recommend standing aside.

AUDUSD Continues to show signs of topping after posting fresh post float record highs just over 1.1000 several days back. The latest corrective rally therefore is expected to be well capped ahead of 1.0800 where the next lower top is sought out ahead of a fresh downside extension below 1.0440 and into the 1.0200's. Ultimately, only a daily close back above 1.0800 negates and gives reason for concern.

NZDUSD The intense uptrend looks to have finally found some form of a cap after surging to fresh 26-year highs by 0.8265, with the market reversing sharply on Wednesday to set up a bearish reversal day. From here, look for deeper setbacks back towards 0.8000, with a break below to further accelerate declines down to test key medium-term support by 0.7755. Ultimately, only back above 0.8265 delays.

USDCAD The market has finally managed to mount a nice recovery since basing out by fresh multi-month lows in the 0.9400's and could be in the process of attempting to establish a more meaningful base. The latest break and close back above 0.9700 triggers an inverse H&S pattern that now projects additional gains towards parity over the coming days. Look for setbacks to now be well supported above 0.9650 on a daily close basis.

EURJPY The latest sharp pullbacks into the 113.00's have been intense, although the market has now found some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out above 113.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. Only a daily close below 113.00 concerns.

GBPJPY Market setbacks in May have been very well supported on dips below the 100 and 200-Day SMAs and we look for the formation of a fresh medium-term higher low by 130.30 ahead of the next major upside extension back towards and eventually through 140.00. In the interim, any intraday setbacks should be well supported in the 132.00 area.

EURCHF

Any hopes for a material base by 1.2400 have now been shattered, with the market dropping to fresh record lows below the figure and threatening deeper setbacks towards major psychological barriers by 1.2000. Still, while medium and longer-term studies show overextension, we continue to like the idea of looking for opportunities to buy into dips rather than selling. For now, we will stay on the sidelines and await the next opportunity. A daily close back above 1.2320 will be required at a minimum to relieve immediate downside pressures.

US DOLLAR INDEX Although the overall downtrend has been quite intense, the market could be showing signs of basing following the latest impressive rebound. Look for a break back above the 1April high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 1Apr high will keep the pressure on the downside and open a retest of the recent trend lows. A more constructive weekly chart does help to reaffirm recovery outlook, but setbacks will need to hold above 74.00 for recovery outlook to remain intact.

FOREX ANALYSIS

EURUSD In the process of a corrective bounce following a 10 big figure drop in May with the market rallying from below 1.4000 and in search of a fresh lower top ahead of the next major downside extension below 1.3970. From here, look for any rallies to be well capped in the 1.4400-1.4550 area, with only a break back above 1.4550 negating negative outlook and giving reason for concern. Back below 1.4255 confirms and should accelerate declines.

USDJPY After undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support by the bottom of the daily Ichimoku cloud and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported in the 80.00's with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming weeks.

GBPUSD The 100-Day SMA has proven to be formidable support for the pair, with the price rallying substantially out from the 1.6060 lows to trade back above 1.6500. However, we would expect rallies to now be well capped below 1.6600 on a daily close basis. Look for a lower top in the 1.6500 area ahead of the next major downside extension below 1.6000 over the coming days. Ultimately, only a daily close back above 1.6600 would negate outlook.

USDCHF The latest minor recovery has proved to be just that, with the market finding a fresh lower top ahead of 0.9000 in favor of this latest sharp drop to yet another record low in the 0.8500 area. Daily studies are however still looking quite stretched to us, and we continue to like the idea of taking shots at buying on dips in anticipation of a major base. Look for current declines to hold around the 0.8500 area and a break back above 0.8740 to encourage basing prospects and open the door for the potential formation of a major interday double bottom (neckline by 0.8950) projecting gains back towards 0.9500. A daily close below 0.8400 would negate.

Continues to show signs of topping after posting fresh post float record highs just over 1.1000 several days back. The latest corrective rally therefore is expected to be well capped ahead of 1.0800 where the next lower top is sought out ahead of a fresh downside extension below 1.0440 and into the 1.0200's. Ultimately, only a daily close back above 1.0800 negates and gives reason for concern.

NZDUSD Remains very well bid with the market breaking to fresh yearly and 26-year highs above 0.8250. Daily studies are however starting to look stretched, but a break back below 0.8150 will be required at a minimum to relieve immediate topside pressures. A daily close above 0.8250 however, will open the door for yet another upside extension towards next key psychological barriers by 0.8500 further up.

USDCAD The market has finally managed to mount a nice recovery since basing out by fresh multi-month lows in the 0.9400's and could be in the process of attempting to establish a more meaningful base. The latest break and close back above 0.9700 triggers an inverse H&S pattern that now projects additional gains towards parity over the coming days. Look for setbacks to now be well supported above 0.9600 on a daily close basis.

EURJPY The latest sharp pullbacks into the 113.00's have been intense, although the market has now found some formidable support by the previous resistance area now turned support. Look for a fresh medium-term higher low to carve out above 113.00 ahead of the next major upside extension back towards and eventually through the recent highs by 123.35. Only a daily close below 113.00 concerns.

GBPJPY Market setbacks in May have been very well supported on dips below the 100 and 200-Day SMAs and we look for the formation of a fresh medium-term higher low by 130.30 ahead of the next major upside extension back towards and eventually through 140.00. In the interim, any intraday setbacks should be well supported in the 132.00 area.

EURJPY Any hopes for a material base by 1.2400 have now been shattered, with the market dropping to fresh record lows below the figure and threatening deeper setbacks towards major psychological barriers by 1.2000. Still, while medium and longer-term studies show overextension, we continue to like the idea of looking for opportunities to buy into dips rather than selling. For now, we will stay on the sidelines and await the next opportunity. A daily close back above 1.2360 will be required at a minimum to relieve immediate downside pressures.

USD INDEX Although the overall downtrend has been quite intense, the market could be showing signs of basing following the latest impressive rebound. Look for a break back above the 1April high on to officially confirm bullish reversal prospects and accelerate gains. However, inability to establish above the 1Apr high will keep the pressure on the downside and open a retest of the recent trend lows. A more constructive weekly chart does help to reaffirm recovery outlook, but setbacks will need to hold above 74.00 for recovery outlook to remain intact.

EURUSD

: Daily studies could be in the process of attempting to correct from overbought, with the RSI looking to roll over from above 70 levels, and we would look for a daily close below 1.4750 on Thursday to confirm short-term topping and open the door for a more significant short-term corrective decline towards the 20-Day SMA by 1.4600. A sequence of consecutive daily higher lows has also been broken to warn of the potential bearish reversal, but with the trend having been so intensely bullish, we would wait for the daily close below 1.4750 for confirmation. Ultimately however, any setbacks from here are still viewed as corrective, with the market very much confined to a well defined multi-week up-trend from early 2011. Perhaps a daily close below the 20-Day SMA would officially shift the shorter-term outlook. Back above 1.4940 however, exposes next critical resistance by 1.5000 and then the 2009 highs further up at 1.5145.

USD/JPY

:Despite the latest slide back below 82.00, we continue to retain a constructive outlook for the market so long as it holds above the daily Ichimoku cloud. Use the cloud as a reference point and look to buy dips towards 80.00. Ultimately, only a sustained break back below the cloud would negate constructive outlook.

GBP/USD:

The latest surge through psychological barriers at 1.6500 has now negated the multi-week range trade and potentially exposes fresh upside ahead. The 2009 highs come in by next critical resistance in the form of the 1.7000 barrier and we could now se a test of this level over the coming days. Still, this market has proven to be very well offered on any fresh rallies, and we would therefore recommend proceeding with caution. Tuesday's setbacks confirm our theory and could now open a deeper drop before buyers reassert. In the interim, we remain on the sidelines and await a clearer signal.

USD/CHF

: The latest break to fresh record lows below 0.8600 is certainly concerning and threatens our longer-term recovery outlook. Still, we do not see setbacks extending much further and continue to favor the formation of some form of a material base over the coming weeks for an eventual break back above parity. Look for the market to hold above 0.8500 on a daily close basis, while a daily close back above 0.8650 will officially relieve immediate downside pressures and accelerate gains. Only a break and weekly close below 0.8500 ultimately delays outlook.

AUD/USD

: The uptrend remains firmly intact and the intensity of the move has been unrelenting. Still, we continue to see the greater risk over the short-term for some form of a more meaningful corrective reversal, with daily studies rolling over from overbought and the market trading just off 30-year and post float record highs above 1.1000. The market has most recently broken back below the 10-Day SMA, and a daily close below the 20-Day SMA on Thursday could officially signal the onset of a short-term corrective reversal exposing the 1.0300-1.0500 area further down.

NZD/USD:

The rally out from the mid-March 0.7100 area lows has been most impressive, with the market trading all the way back above 0.8000 to leave daily studies severely overbought. However, any additional gains from here are seen limited, with the greater risk for some form of a medium-term lower top by 0.8100 in favor of a bearish reversal back towards and eventually below 0.7820. A topside failure above 0.8000 and break over the coming days back below 0.7820 would set up a meaningful topping formation that would then open a fresh drop all the way back towards the 0.7600 area. A break and daily close back above 0.8100 negates and gives reason for pause.

USD/CAD:

Any recoveries in this market have been short-lived, with the price dropping back below 0.9500 in recent trade to fresh multi-month lows in the 0.9400's. However, despite the weakness, we see risks for additional declines from here as limited, with the greater risk for the formation of a longer-term higher low above 0.9055 ahead of the next major upside extension beyond 0.9975 and back through parity. Ultimately, only a weekly close below 0.9400 would delay. Wednesday's daily close back above 0.9580 further confirms bias and should accelerate.

EUR/JPY:

The market has finally taken out some critical multi-week range resistance in the 116.00 area and we believe this to be a significant medium-term development. The break above 116.00 now suggests that a major base is in place with fresh upside now projected back towards the 125.00 area over the coming days. Daily studies are however in the process of consolidating from overbought and buying into dips would be the preferred strategy. Look for any inter-day pullbacks to be well supported above the 50-Day SMA.

GBP/JPY:

Following the break above some critical multi-week resistance by 138.00 several days back, we have shifted our outlook to the constructive side and see risks for more material gains over the medium term beyond 140.00. As such, the latest pullback is classified as corrective and any additional weakness should prove to be well supported by the 100/200-Day SMAs in the 132.00 area. Only a sustained break back below these longer-term moving averages would negate.

EUR/CHF:

The market remains very well supported on dips and following the successful defense of the record lows by 1.2400. Look for any setbacks from here to be well supported above 1.2700 on a daily close basis. Back above the 20-Day SMA confirms and should accelerate gains. In the interim, we remain sidelined amidst the latest consolidation.

DXY:

The market remains under intense pressure with the price dropping to yet another fresh yearly and multi-month low below 73.00 thus far. However, with daily studies tracking oversold, we are not sure how much further setbacks can extend before a necessary corrective rebound, and as such, we would be on the lookout for such a reversal. Weekly price action is already showing potential, with the market putting in a series of bullish doji closes. A daily close above 73.30 will confirm.