EURUSDAfter forming a new yearly low last week, the pair produced its strongest 3 day climb (from top to bottom) for the entire 2012 year which is impressive considering the economic situation is far worse than it was in 2011. I suspect this was more of a short squeeze than anything, and am really just waiting for the shoe to drop (any) which means either Spain asking for another bailout and admitting they are broke, Greece leaving the EZ, or Germany not wanting to bail out any more countries. Regardless, I’m taking the sell rallies approach, especially considering the range of the last two days which is a choppy range with the 1.2389 highs and 1.2224 lows. Intraday players can look for price action reversal plays at these levels should volatility and volume be down for tomorrow. Meanwhile, my sell on rally point is first parked at 1.2415 which was range support for the last 3 weeks of June. My other medium term rally point to sell is the weekly 20ema and Jan. 12′ lows at 1.2630.
In last weeks price action & ichimoku chart commentary, I talked about how the EURAUD was a pair I was looking to sell on pullbacks to the Tenkan line as it held below this since late June, and every pullback to the tenkan line resulted in a rejection and further losses. This is exactly what happened last week as the pair (after forming an outside bar) faltered into the tenkan line, and continued selling off over 150+pips so with very little stop needed so hopefully you profited from this. Intraday ichimoku traders can wait for a pullback again to the daily tenkan, or perhaps a deeper pullback to the 1.1750 level which is the 4hr tenkan and range support that is now resistance.
Speaking of the Aussie, the AUDUSD has climbed for the last 5 days which is impressive since its only done this 5x in the last 1.5yrs. What is interesting to note is it has not had a 6 day climb for all of 2012 and only 2 of 2011. This, combined with the fact (from an ichimoku number theory perspective) we have already climbed for 1 period and 1 section since the yearly bottom on June 1st I am suspecting a bear day tomorrow is the higher probability outcome. Although the Chikou has finally cleared the Kumo, and the tenkan/kijun are still climbing strong, I am looking for the pair to fade in the very near future, either at 1.0551 or 1.0642 and will look for intraday ichimoku sell signals at those levels. Bulls can meanwhile wait for corrective pullbacks towards the daily kijun which held the last bounce and produced the 5 day climb you see today.
Climbing for three days straight, the DOW is approaching a major resistance which is the yearly highs at 13300 and the triple top as well which starting the sell off towards the yearly lows so it’s pretty hard to ignore this potential signal coming up. I will look for price action triggers at this level along with weakness on the intraday charts with tight stops above targeting 13151 and 13042 offering some really strong reward to risk ratios. A break and close above the yearly highs suggests likely continuation so look for a breakout pullback setup here.