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The Euro Jumps Aboard the Bull's Train, but the Aussie Dollar Is Being a Wet Blanket


The euro-US dollar cross was finally able to conquer its short-term resistance over the last few days. But that's not the end of the story.


The second Aussie chart to watch is the Aussie dollar / Japanese yen cross (AUDJPY – shown below). This cross is at critical "correction" resistance right here and right now. On a daily chart (not shown here), the AUDJPY already has closed above both the 100% Fibonacci projection line (for wave "c & ii") at 88.516 and the horizontal line resistance (created by the intraday high for wave "c & 2") at 88.627. What I've learned over time in studying the Aussie currencies is that it's the weekly charts that really matter – not so much the daily charts. Some would grouse about not being Johnny on the Spot right when breakouts occur and that you're missing some of the move by waiting for confirmation from the weekly charts. However, I would say that if you're trading for such small moves that missing out on a few hundred pips is a deal-breaker for you, then you might be headed down the wrong path. In currencies, you will almost certainly find that the big money is made by playing for the big macro moves – not the day to day gyrations. If there's going to be a 3,000 to 5,000 pip move, does it kill me to miss 500 pips while waiting for weekly closes to confirm a technical break? Not really – there's still plenty of money to be made.

Anyway, as we head into Friday's close, it will be interesting to see if the Aussie dollar can get its act together and stage breakout rallies in both the AUDUSD and AUDJPY. If they occur, the risk bulls will really be holding all the cards. If they don't come to fruition, the bears out there may feel emboldened.

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Back to the euro – can the EURJPY break out above key resistance as well (especially on a weekly basis)?

I noticed in my chart scans that the euro / Japanese yen currency cross (EURJPY) – which for years has been a favorite of intermarket technicians as a gauge for the global appetite for risk – is also on the verge of a fairly significant technical breakout.

This time, instead of horizontal line resistance, the EURJPY is working to close the week out above "correction resistance" at the 100% Fibonacci projection line (for wave "c & (ii)") at 111.248. As of 11:17 p.m. on Wednesday night, it was trading at 111.432. Again, the weekly charts can sometimes "be more truthful" than those tricky daily charts. In this case, a weekly close above 111.248 would open up potential upside to the next clear resistance at 114.754 (around 3,500 pips above current levels). On the other hand, a failure to hold this breakout – and a subsequent reversal lower – could lead to a massive move lower in the EURJPY (perhaps all the way down to new all-time lows below 95). So, watch this cross carefully as we head into the weekend!

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No positions in stocks mentioned.

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