More from JP Morgan’s Global FX Strategists ‘FX Market Weekly’ client note, this time some of the technical analysis (earlier post here: JP Morgan Global FX Strategy: Buy EUR/GBP (waning UK cyclical momentum), buy USD/JPY to neutralize USD exposure).

In summary:

  • EUR – A new downtrend has been established -recoveries provide selling opportunities from now on
  • GBP – Fresh signs of weakness suggest the broader up-trend could be due for an intermediate break
  • Stay long USD/JPY, USD/SEK, USD/NOK, USD/TRY, EUR/AUD, EUR/NZD, USD/CZK, USD/CLP, MXN/CLP & short CAD/MXN

On the EUR/USD:

  • A regime change for the EUR has been confirmed when the row of higher lows broke at 1.3477
  • The exceptionally short-lived wave 2 rally to 1.3701 in EUR/USD last month plus the following break below 1.3477 (last major low) basically confirmed a long-term trend reversal at 1.3993 (May high).
  • Given the extent of the decline from 1.3701 it is highly likely that we are dealing with an internal 3rd wave impulse with a projected target at 1.2908 (wave 1 x 1.618), provided key-resistance at 1.3495/1.3503 (minor 38.2 %/pivot) is not taken out.
  • Above the latter though, we’d have to be prepared for a minimum recover y to 1.3622 (minor 76.4 %) and to 1.3665/73/80 (200 DMA/pivot/50 % on higher scale).
  • Chart 1: EUR/USD – Daily Chart: The break below 1.3477 puts the odds in favor of a new bear trend
EUR USD daily chart technical analysis JP Morgan Elliot Wave 04 August 2014
  • Only a decisive break above the latter (i.e. above 1.3701 = pivot) would suggest that we are dealing with 2nd wave rebound on higher scale to 1.3845 (int. 76.4 %). On the downside we see interim support at 1.3295 and at 1.3104 (2013 lows) before 1.2908 would come into focus.

Also, GBP:

  • The broader GBP up-trend has been dented and looks to be due for a broader setback
  • Falling short of coming anywhere close to the next higher resistance barrier at 1.7332 (50 %/monthly Ichimoku lagging), Cable started retreating and broke below first support between 1.7003 (minor 38.2 %) and 1.6914 (daily trend, now resistance).
  • This weakens the bullish outlook and opened the door for a broader setback to 1.6394 (int. 38.2 % on higher scale) if not to 1.6178 (weekly breakout line). Only a break above 1.7105 (minor 76.4 %) would brighten the picture, whereas breaks below 1.6695/30 (pivot/200 DMA) would reaffirm the temporary bear view.
  • Chart 3: GBP/USD– Daily Chart: the breaks below 1.7003 & 1.6914 suggest that a much deeper setback has been launched
GBP USD JP Morgan daily technical analysis Ichimoku 04 August 2014
  • A broader GBP setback to at least 169.54 and 168.14 (pivot/weekly trend) is also looming in GBP/JPY, but for the latter to be triggered it takes breaks below 172.71/38 (daily tre nd/pivot). A break below 168.14 would even call for a much deeper setback to 164.58/163.88 (int. 38.2 %/pivot) if not to 153.77/19 (int. 38.2 % on higher scales).
  • No change within the downtrend of EUR/GBP where bounces can stretch out to 0.8072 & 0.8216 (int. 38.2 % on 2 scales) without questioning the down-targets at 0.7755/44 (2012 low/50 %) and at 0.7492/86 (weekly trend/C = A)