EURUSD-EUR reversed almost all the previous week’s gains at the end of last week closing lower at 1.2678 after a brief visit below its three months rising trendline.It later closed back above it, forming a price rejection candle implying that the bulls are protecting lower levels for now. Despite this,EUR still looks vulnerable to the downside as long as it holds below 1.2718/33 levels which is where its 50 and 100 emas are situated coinciding with its Sept 28’06 high at 1.2733.Daily momentum indicators are pointing lower supporting the above view. On a successful breach of the trendline/1.2629 level, the next target will be its.786 Ret/ July 26’06 low at 1.2563/60 ahead of its year-to-date low at 1.2459(July’06 low).On the other hand, a break above 1.2718/303 zone is required to put the pair in position to push for a retest of its Sept 22’06 high at 1.2830 ahead of its 2006 high at 1.2981.From the big picture perspective,EUR is limited to a range between 1.2981 on the upside and 1.2459 on the downside. On the whole, EUR’s short-term trend points lower making downside price losses likely in the days ahead.
GBPUSD-GBP pushed below its rising trendline established in April’06 to close the week lower at 1.8719 on Friday. Friday’s lower close marked the fifth consecutive days of lower price losses in this pair which started at the beginning of last week following a failure at 1.9063/73 levels. This development suggests that GBP should continue to push for downside price losses as long as it remains below its broken rising trendline, which is supported by a bearish engulfing candle pattern formed on the weekly, which is a sign of weakness on the part of the bulls. This puts the immediate downside target at 1.8602/00, its Sept’06 low. A violation of this level brings its July 26’06 at 1.8389 into focus ahead of its July’06 low at 1.8229.Although the daily stochastic is still pointing lower,with a rejection candle formed on Friday and an oversold condition displayed on 4hrs chart (not shown here), a correction towards its broken trendline could occur but the trendline should now reverse roles as resistance and push the pair to the downside facilitating further price losses. A close back above this trendline could push the pair towards 1.8860 and may be a retest of its Sept’06 high at 1.9073.There is no technical evidence yet that this could happen. All in all, short term risk is to the downside, therefore further price losses should be expected.
Support Comments
1.8929/18 Broken rising trendline/Sept 14’06
1.8754 Sept’06 low
1.8621/02 .50 Ret/Sept’06 low
1.8500/1.8489 .618 Ret/Round number
Resistance Comments
1.9088 Aug 31’06 high
1.9143 Aug’06 high
1.9218 April’05 high
Mohammed Isah
Independent Analyst
Exclusively for Spencer Financial LLC
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