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Wednesday, 4 August 2010

In-between days & EUR, AUD, CAD

ES bounced off the strong support level at 1113.5 again overnight. I'm not expecting much of interest to happen either today or tomorrow but we could break 1113.5 to fall to the next strong support level at 1104.5. On Friday I'm expecting a last move up to test the June high before a pullback lasting at least a week.

In the short term I have a possible short term rising channel on ES, but as I said, I'm not expecting a move towards the upper trendline today. It will be interesting to see whether the lower channel trendline holds as support:


In the short term EURUSD has also pulled back a bit, and I'm expecting to see some more consolidation before we see a move to the top of the rising wedge on Friday:


I was talking about the strong history of wedges forming and playing out on EURUSD yesterday, and here's the five year weekly chart to illustrate that point. Only one of the four big past wedges in that period failed to play out to target, but it played out most of the way after the initial spike up and sharp pullback at the end of 2008. That said, the failed wedge looked almost identical to the one that has broken and is playing out now:


AUDUSD has now recovered most of the losses after the peak in April and looks close to an interim top, which I'm expecting in the 92.5 to 93.5 area:


On the weekly chart there is a strong right angled and descending broadening formation that suggests that the next AUDUSD top may well be a very major top. I posted this pattern on the 21st of April giving a target in the 81.5 to 82.5 area, a fall of over 1000 pips which then played out over the next few weeks. The likelihood of a bearish resolution for AUDUSD is backed up by the broken rising wedge that preceded the broadening formation:


CADUSD on the other hand has a very bullish chart to my eye. The IHS I have marked up has a target at 103 which may be overambitious, but the broken triangle with a target of 100.6 looks very interesting, though triangles have a habit of breaking one way and then resolving the other that makes them dangerous to trade. CADUSD may well pull back to retest the broken trendline in the next couple of days though, and I'm considering a long at 97.2 with a stop at 96.9. A pairs trade long CADUSD and short AUDUSD is also something to consider:

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