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The best trade this week, in percentage terms, was short EUR/USD, falling slightly more than 2% or 259 pips.

To me, only one line on the weekly EUR/USD chart matters — 1.2623. That was the 2012 low. It all likelihood, this pair will be closing below 1.26 and that puts it clearly in sell territory with a target at the 2010 lows.

Selling bounces is the preferred trade. I can envision a bounce to 1.2600 or 1.2623 but not higher.

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The USDJPY is trading between the Goal Posts as defined by the 100 and 200 hour MA (blue and green line). The price extended above the 200 hour MA earlier and below the 100 hour in the London morning session.  The price just tested the 200 hour MA and found sellers.

So the market is coiling between the support and resistance.  On the next break (either up or down), I would expect the price to have momentum in the direction of the break.  On the upside, the 79.78 followed by the 79.92 will be the next targets (61.8 and topside trendline). On the downside, the 79.35 followed by the 70.20 would be the next targets.

The 1.2500 barrier option that Jamie pointed out was broken and the subsequent corrective move higher took the price above the 38.2% -50% of the trend move down (see chart above).  That move above the 50% took some steam out the trend move and although the price has since rotated back down, the 1.2514 area (low from yesterday) may give cause for pause.

What the move back down does do for the longer term bears is it keeps them happy and comfortable.  It may not be a trend type day down (one of the pre holiday steam rolling variety) but there is no need to panic either.  The London/Europe last hour of trading is taking place and this can lead to squaring up swings.  Then we can likely expect real quiet trading conditions for the rest of the trading day.

The EURUSD is pushing the 50% of the sharp move lower at the 1.2540 level.  If the price moves above this level, I would characterize the market to be more balanced now. Staying below keeps the shorts in control. 

The quick bounce on the break of the 1.2500 level needless to say was option related. Now that the level has breached, the market can trade more freely.  The low at 1.2514 from yesterday will resume it’s role as support.  A break below is needed to catch the markets attention again.

The AUDUSD held the 100 hour MA (blue line in the chart above) and has moved back lower. The price is back in the main range over the last 2 plus days of nontrending.  The high for the main range comes in at the 0.9778 area and I would expect that traders look to sell against this area now.   A move toward the low of the main range at the 0.9726 is the next target.

The EURUSD has hit an air pocket and the selling has pushed the price through the low for the week/new low for the year.   The next targets for the pair come  in at the 1.2480/82 . These were  the lows from July 2nd and July 6th 2010. Those days formed the base before the EURUSD surged higher (see hourly chart from the period in 2010 below). 

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We mentioned this earlier, I’ve got the level coming in near 1.2820 which is where we are currently trading. If we get a clean break lower then I will look to implement a sell-rally strategy.

5/24/2012 – Price action on GBP/USD (a daily chart of which is shown), as of 5/24/2012, has reached its downside target around the 1.5640 price region, which is also the 61.8% Fibonacci retracement of the latest uptrend run from mid-January to late-April. Therefore, price is currently at a critical juncture.

Having dropped down to hit the key 61.8% retracement level after having spent the entire month of May thus far in essentially a freefall that broke down below a large and significant wedge pattern, the pair currently continues to experience exceptionally bearish momentum.

In the event of continued bearish momentum, which would be confirmed by a further breakdown that breaches the current 1.5640 price region, the next major downside target resides around the important 1.5500 support region.

Upside resistance on any rebound currently resides around the 1.5750 price region.

(Chart courtesy of FXDD – Metatrader. Uptrend lines in green, downtrend lines in red, horizontal support/resistance lines in black, Fibonacci retracements in purple, 200-period simple moving average in blue, 100-period simple moving average in brown.)

Topic: Anticipating the Trends
Traders (like athletes/like businesses) need to anticipate to be successful. Anticipating a trend is an even better. I will start a mini series today by looking at this idea and explain how you can start to anticipate more trend moves in your trading.

To watch the REBROADCAST, click on the following link: https://www1.gotomeeting.com/register/945707617

See you there.

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