Monthly Chart
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While bearish momentum remains strong for now, it is likely to be overturned when a revisit of the 73.20 level comes about and the pair breaches the upper trend-line of the falling wedge formed over the last two years. The maturity of the pattern suggests that the rate could limit its weakness even before the level is reached. The chart leaves room for interpretation, however, implying that the movements could fit into a descending channel pattern with a single breach as well. From this perspective we would look for the channel to break in late 2016 or early 2017, giving in to the senior support. The channel therefore loses to the wedge in terms of utility for the present circumstances, but could come into play in case the actual strength of the senior support turns out to be overestimated.
Weekly Chart
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Steady bearish momentum cannot be disregarded
A junior rising broadening wedge directs the short-term movements of the pair in the 4-hour time-frame, implying a 73 percent chance of a downward breakout, consistent with the pair's way inside of the senior wedge in the nearest future.
The 4-hour chart shows SMAs pressuring the currency pair from the upside, which will facilitate further downward movements outside of the junior pattern, where 77.40/44 awaits action. Four more levels at 77.09, 75.99, 75.84 and 75.21 consequently will interfere in the pair's way towards the senior demand level. It is unlikely that the rate will overcome the amount of resistances that has been established now, and make its way towards the upper trend-line of the broadening wedge, continuing the pattern for one more wave.
4 Hour Chart
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On the other hand, similar supply pressures dominate the weekly chart as well; however, we do not expect then to prevail after the 73.20 level is reached. With only the daily aggregate technical indicator showing signs of a bullish future movement, the downtrend cannot be underestimated for now. Meanwhile, a 40/60 long-short ratio brings the uptrend into the picture to support our scenario.
Some comforting Japanese data, namely the BSI Manufacturing Index (2.9 vs. a -6.5 forecast) and the Preliminary Machine Tool Order (-8.4% up from -19.7%), failed to move the markets significantly, with potential for more distinct volatility to come on Friday when significant Canadian data – Manufacturing Sales and Foreign Securities Purchases - comes out.
Aggregate Technical Indicators
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