Financial and forex markets currently appear undecided at best and schizophrenic at worst. One day markets trade on the “recovery story,” with stocks and commodities rising while bonds fall, causing growth currencies such as the Australian, Canadian, and New Zealand dollars to appreciate against the safe-haven currencies such as the U.S. dollar, Japanese yen, and Swiss franc. The next day, the situation reverses, and the resulting up-and-down motion gives many charts a jagged and unruly appearance that barely deserves the technical term “consolidation.”

In the current market, bears and bulls seem, like many political parties, about evenly matched, with just enough traders sitting on the economic fence to tug the market from highs to lows and back again in response to the latest fundamental announcement or risk event. Possibly optimists and pessimists are aligned by political affiliation, but this has not yet been measured. In such circumstances, market consensus means nothing; either an economist buys into the recovery story or he doesn’t, and the answer to that question determines whether the drop in U.S. April housing starts is expected or otherwise.

The situation has its humourous side. Current headlines at Bloomberg.com include Yen, Dollar Advance on Speculation Optimism at Global Recovery Is Overdone just above Canada’s Dollar Gains for Second Day on `Recovery Story’ as Stocks Advance, showing that agreement is limited even within the same publication.

It’s a day or range trader’s market requiring level-headed assessment of technical indicators as well as tight and trailing stops to lock in profits. Some current themes include:

EUR/USD has not been able to rally above 1.3750 since early January despite five attempts, the latest occurring 12 and 13 May. Nor has it dropped beneath 1.2850 since mid-March, giving the world’s most popular trading pair a 900-pip range. Despite the now-apparent depth of the Eurozone’s recession, EUR remains at a high level, particularly against USD and the pound sterling, both of which have been weakened by quantitative easing programmes undertaken by their central banks. If you buy the recovery story, expect EUR to rise further; if you don’t, expect it to fall; if you remain undecided, day trade on technical indicators.

AUD/USD on weekly charts formed a lopsided double bottom at roughly 0.6225. By breaking through resistance at 0.7267, set on 6 January 2009, the double bottom has been completed and the price target set at 0.8250. Whether or not it shall be reached in this market remains a valid question; however, the long-term trend is now to AUD strength, with the price on daily charts above the 200-MA.

AUD/JPY also appears to have broken to the upside, initiating an uptrend on 2 February. The high of 76.15 reached on 11 May is a level not seen since mid-October 2008. For shorter-term traders, drawing a Fibonacci retracement between 28 April’s low of 66.81 and 11 May’s high of 76.15 shows that 18 May’s low of 70.50 falls at the 61.8% level with a price target of roughly 81.00, the 161.8% extension. However, today’s Westpac-Melbourne Institute consumer confidence is currently weighing on AUD, as it fell 4.3% and printed at 88.8, with pessimists outnumbering optimists for the sixteenth consecutive month.