18 July 2016 at 14:52 GMT
- FX markets consolidate from Friday's chaotic close after news of Turkish coup bid
- Post-Brexit GBPUSD forms upside-down head and shoulders with 1.3500 neckline
- Look for enormous JPY bounce from post-Brexit lows to fade ahead of BoJ
- Friday's AUDUSD reversal from local new highs looks like bearish signal
The Australian dollar's rally was no winner of beauty pageants. Photo: iStock
By John J Hardy
Few developments in FX today as currencies have spent much of the day consolidating after a chaotic close on Friday when news of the Turkish coup attempt hit the wires just before the market close. Some of the technical developments, however, like the bearish reversals in JPY crosses and in a number of currencies against the US dollar, were largely in place ahead of this move, though the failed Turkish coup exaggerated both the closing levels and some of the bounce in Monday's Asian session. (Please see the Notes of Interest in the attached FX Board PDF and the chart comments below.)
The consoliation in GBPUSD
since the Brexit vote has created an upside-down head-and-shoulders formation with a neckline at the important 1.3500 level, which also represents the old lows from the global financial crisis in early 2009. This neckline needs to stay in place to keep the focus lower,and bears are encouraged by Friday's tactical reversal and what would look like the completion of an even smaller-scaled head
GBPJPY in bearish reversal
reversed late Friday in line with the reversal in most other JPY pairs and after a small attempt at an extension through the earlier highs. This is a classic bearish reversal setup, but we'll need today's highs to stay intact over the next couple of sessions to keep the reversal relevant as we possibly look for the enormous bounce from the post-Brexit lows to fade ahead of the Bank of Japan's meeting late next week.
AUDUSD rally fizzles
The AUDUSD rally was never going to win any beauty pageants, and Friday's reversal from local new highs looks like a bearish signal. We'll be watching for follow-through lower, though it will take some doing to get a full, clear return of the bear as there are layers of range to work through, but a start would be an acceleration in downside momentum and a takeout of the rising trendline.
— Edited by John Acher