Long Term Charts Analysis

I am reviewing my system results and refining it based on further research. In the process, I am also reviewing the charts and I think it’s worthwhile noting the longer term patterns. Although I don’t directly use longer term charts in my system, it helps to keep in mind the long-term patterns as they give extra vigor to certain movements or warn of potential fake moves in other directions.

AUDUSD: The Aussie is clearly stuck in a triangle for all of 2012. On the weekly chart, the triangle is clear, and on this timeframe it looks like the pressure is slightly more to the upside than the downside. Here’s the weekly chart:

AUDUSD Weekly 27Dec2012

On the daily chart this longer term triangle is not so clear, as there is another symmetrical triangle from September to December within the bigger 2012 triangle. The pair is currently just below the lower bound of this triangle – given the thin markets I suspect this is a fake-out and AUD will reverse from here and move up smartly to the upper edge of the triangle. Here’s the daily chart:

AUDUSD Daily 27Dec2012

If this pair decisively breaks either edge of the weekly triangle, we will see a large sustained move in that direction, probably lasting many months. My reading of the chart is that this break is likely to the upside – but then I’m happy to be proven wrong as I don’t trade based on such opinions, even my own!

EURUSD:

The Euro has had a volatile year, but at the end of the year the charts are clearly bullish. On the weekly chart the pair has closed above an important down-trend line for two weeks now, although the thin year-end holiday markets weaken the case. On the other hand, a monthly and yearly close above the down-trend line from 1.49  through 1.45 is a strongly bullish signal. Here’s the weekly chart:

EU Weekly 27-12-12

Another bullish signal is the break of the inverse H&S pattern, with a sloping neckline. This pattern is not well-formed due to the two candles sticking out on the left shoulder, but in combination with the trendline breaks it adds to the bullish picture. The targets of the inverse H&S fall in the range 1.45 – 1.49 depending on where one draws the neckline.

On the daily chart the trendline break looks very decisive. There is also a smaller, better formed inverse H&S pattern here, whose target is 1.3592. This will be the first target and one can expect a severe reaction here, as it is a confluence of many resistances. A test of the neckline again at near 1.32 should provide a great long entry for a long-term trade to beyond 1.36. Here’s the daily chart:

EU Daily 27-12-12

The theme for the first half of 2013 is surely Euro bullish, the only question being if it is very bullish or tentatively bullish. i.e. we go to 1.36 and struggle, or shoot through to 1.45 and 1.49.

USDJPY:

This is the hero of the moment, the flavour du jour. The most somnolent pair has finally woken up  and is charging up like a steamroller. Here’s a long term weekly chart:

USDJPY weekly 27-12-12

This pair has broken very decisively the long-term down-trend line from the pre-GFC highs. It has done the text-book re-test of the break when it touched the 79 level in mid-November and after that has shot up. The weekly pattern shows a nice, rounded saucer bottom which is typical of slow-moving pairs like UJ. From the weekly chart, I’d say a target for sometime in 2013 is 99.85, the 50% Fibo of the big move down. We will likely get an overshoot of that to the 61.8% Fibo. 85 and 95 levels are important markers along the way and we will see significant corrections at those levels. Here’s the daily chart:

USDJPY daily 27-12-12

This confirms the bullish break-out and the resistance at 85.2 – 85.5, but doesn’t add much more information.

EURJPY:

This pair is USDJPY on steroids. When UJ makes a 100 pip move, expect EJ to make a 200 pip move! From the weekly chart we can see that it has broken cleanly above the down-trend line from pre-GFC levels. The next key levels are  123-125 with some significant resistance in the 113-115 area. Here’s the weekly chart:

EURJPY weekly 27-12-12

The long term goal for this pair, based on the weekly chart is 141.8 and likely 148! Seems a long way off but then just last month EJ was trading at near 100, and today it’s at 112! The 50% goal is quite achievable for 2013.

Here’s the daily chart. It does not add much more information, just shows the detail of the long term price action. The resistance near 112.5 is holding it down for the moment and we may get a retracement here which will be a great long entry!

EURJPY daily 27-12-12

To summarize, the big themes for 2013 are EURUSD strength and USDJPY weakness, implying big moves in EURJPY. I’ll mainly be trading these pairs.

I’ll also be keeping an eye on EURAUD which tends to trend well, but the 10-pip spread on this pair keeps me out of it!

Let the fun begin!

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