Sell EUR/USD and buy USD/RUB

This week we present two strategies: sell EUR/USD and buy USD/RUB.

EUR/USD – 2 year rising wedge break weakens the outlook further

Summary – Sell into any short-term rallies for weakness to 1.3249 and then 1.3020. Place a stop above 1.3701.

EUR/USD has broken down through a two year trendline to complete a major rising wedge pattern. This follows earlier negative signals from a 1.3967/1.3995 double top and a shorter timed framed rising wedge. 90 and 50 day moving averages have also crossed lower to support/confirm the negative structure. Below the 3 Feb 2014 low at 1.3477 is now also seeing the market register fresh year-to-date lows.

Momentum has clearly turned lower and the loss of 1.3477 has shifted the immediate focus onto 1.3399, the 21 November 2013 reaction low. A further loss here will then sight 1.3295, the 7 November 2013 spike low, ahead of 1.3249, the 38.2% retracement level of the major 1.2042 to 1.3995 rise. Further out, 1.3105 and 1.3020, the 6 September 2013 low and 50% retracement point, are also likely to be tested.

Above, 1.3549 provides a lower ceiling that should cap any immediate rallies. However, to shift the longer-term focus higher again the early July lower top at 1.3701 must be breached.

USD/RUB – A clearance of 35.285 completes a higher base/opens 35.907

Corrected from 36.732 (17 March record high, also 40mth bull channel top) to 33.540 (27 June low, also 3 September 2013 high and near 61.8% of 31.510/36.732) before bouncing. A multi-tested three month falling trendline was breached in mid July and the market has since extended to reach 35.285 (18 July high, nr 50% retracement of 36.732/33.540), before ranging. Daily/weekly and monthly studies (not shown) are all building in confirmation of the l-term uptrend resumption and a sustained clearance of 35.285 would complete a potential 2-1/2mth inverted head and shoulders base formation over the key 33.540 low and project an initial advance to 35.545 (7 May high/ 61.8% retrace) then 35.907 (2 May high/nr 76.4% retrace). Beyond would re-open 36.353 (15 April lower high), which protects the 36.732 record high.

It would take a return through the former multi tested 3mth falling trendline at 34.134 (nr 61.8% retrace of the 33.540/35.285) to compromise thoughts of an inverted head and shoulders base and re-open very significant support at 33.540 (also nr an 18mth rising trendline). Below negates upside scope and risks 32.987 (10 January higher low), possibly 32.742 (76.4% retrace of 31.510/36.732).