EURUSD-Although EUR closed lower (weekly basis) at the end of last week,it however rose off 1.2774/61 levels, its Nov 15 & 17’06 lows on Friday to close at 1.2825 reversing some of its earlier losses and forming a bullish engulfing candle pattern on the daily chart, a bottom reversal signal which needs a follow-through to the upside as confirmation. The pair is still trading below its Nov’06 high at 1.2901 but if a decisive break above 1.2830/1.2901 is seen, scope for further upside gains towards its year-to-date high and psychologically important level at 1.2981/1.3000 is expected. If this key zone is violated,EUR should target its April’05 high at 1.3126 level with a break setting the stage for more gains towards 1.3482 level, its Mar’05 high ahead of its Dec’04 high at 1.3667.In addition, weekly studies are positive and the daily studies are now turning higher supporting the above view. However, any failure below 1.2830/1.2901 zone could put the pair under pressure and trigger downside price losses towards 1.2774/61 levels, its Nov 15 & 17’06 lows with a loss of this zone exposing 1.2690/79 levels, its Nov 03 & 06 lows.Other key support levels come in at 1.2641/29 zone, its Sept’06 lows and 1.2488/82, its Oct’06 lows. On the whole, EUR remains limited between its six months broader range with 1.2981 on the upside and 1.2459 on the downside. A decisive break of any of these levels would be needed to create meaningful directional moves.
Support Comments 1.2774/47 Oct 03’06 high/Nov 08,15,17 lows/.618 Ret 1.2690/79 Nov 03 & 06 lows 1.2629/69 Sept’06 lows/Oct 02/04’06 lows 1.2560 July 26’06 low
Resistance Comments 1.2830/1.2901 Sept 22’06 high/.786 Ret/Nov’06 high 1.2981 Year-to-date high 1.3126 April’05 high 1.3482 Mar’05 high
GBP In Corrective Mode
GBPUSD-GBP shot to the upside off its lows at 1.8837/34(Nov 15 & 17’06 lows) on Friday to close at 1.8946 but ended the week on the negative side forming a bearish engulfing candle pattern on the weekly, a top reversal signal which requires a follow-through to the downside as confirmation. Friday’s bounce is coming on the heels of its 4 days sell off resulting from a loss of momentum above 1.9143 level(its Aug’06 high) the previous week. With oversold condition seen on the daily and 4hrs charts prior to this bounce, this new move is seen as a corrective bounce to unwind this condition and further downside losses should follow. Downside targets are seen at 1.8858/34 levels, its Oct 20’06 high/Nov 15 & 17 lows followed by 1.8777, its 4hrs rectangle price objective ahead of its LT rising trendline/Oct 24’06 low at 1.8671/61.On upside immediate resistance comes at 1.8948/65 level, its Nov 06’06 low/Nov 17’06 high. A penetration and negation of these levels should extend upside gains towards its long term (LT) falling trendline/late Aug’06 high at 1.9069/88 with a close above this zone required to challenge its Aug’06/Nov’06 highs.On a successful breach of these levels, if seen, GBP could push higher targeting its April’05 high at 1.9218 before its Mar’05 at 1.9327.Daily studies are now turning higher supporting the corrective bounce. On the whole, GBP should resume its short term downtrend when the present corrective bounce is over.
Resistance Comments 1.8948 Nov 06’06 low/Nov 17’high 1.9088/67 Aug 31’06/LT falling trendline 1.9143/77 Aug’06/Nov’08 highs 1.9218 April’05 high
Mohammed Isah Independent Analyst Exclusively for Spencer Financial LLC misah@spencerfx.com
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