EURUSD-After achieving a three-week high (1.3295) on Tuesday, EUR failed to maintain its upside gains on Wednesday collapsing to a low of 1.3141 and breaking below its ST rising trendline established since late Oct’06.This sell off has not only formed a bearish engulfing candle pattern (a top reversal signal which needs a follow-through to the downside as confirmation) but has turned the daily RSI indicator lower suggesting that more downside price losses are likely. In such a situation, the violation of 1.3231, its .786 Ret and 1.3169 levels, its ST rising trendline yesterday should now push the pair lower towards its April’05 high/Dec 11’06 low at 1.3131/26.A break below this zone will target 1.3070/37, its 50 ema/Dec 18’06 low/.38 Ret (1.2761-1.3365 rally) where a loss of this support zone if seen, will validate a double top formation highlighted on the chart thereby increasing the odds for further downside losses aiming at its Jun’06 high/.618 Ret/psychological level at 1.3000/1.2981.This zone must hold to keep EUR’s longer term uptrend alive. On the upside, its broken ST rising trendline at 1.3191, which should now revert to resistance, should contain any strength from the present level. If this level gives way due to further upside pressure, its Dec 20’06 low/.786 Ret at 1.3231/45 should come in as the next upside target followed by 1.3365, its Dec 03’06 high and 1.3405, its range breakout price objective. Beyond here targets its Mar’05 high at 1.3482 with a decisive penetration shifting the focus to its Dec’04 high at 1.3667.On the whole, as pressure is building up on the downside,EUR must defend the 1.3000/1.2981 zone to maintain its longer term uptrend.
Support
Comments
1.3070/37
its 50 ema/Dec 18’06 low/.38 Ret
1.3000/1.2981
Psycho level/Jun’06 high
1.2901
Nov’10’06 high
1.2761
Nov 17’06 low
Resistance
Comments
1.3126
April’05 high
1.3231/45
.786 Ret(1.3667-1.1640)/ Dec 20’06 low
1.3292
Dec 12’06 high
1.3365
Dec’06 high
GBP Drops Sharply Off 1.9727/48 Levels
GBPUSD-GBP bounced off 1.9727/50 levels on Wednesday giving back all its last week/Tuesday’s gains and forming a bearish engulfing candle pattern(a top reversal signal).This suggests that the present weakness has more distance to cover especially now that its daily studies are negative and heading lower. Further downside losses were seen in early morning trading today heading towards 1.9407 level reinforcing yesterday’s losses. If a successful close below its Dec 18’06 low/.382 Ret/range bottom at 1.9465/29 materialises,GBP could push even lower targeting its Mar’06 high/Nov 27’06 low at 1.9327/06 and 1.9218/1.9177 levels, its April’05/Nov 10’06 highs but it must maintain the latter to keep the resumption of its longer term uptrend alive. Technical resistance on a bounce from here will target its.382 Ret/range bottom at 1.9460/62 ahead of its Dec’04 high at 1.9552 with a break triggering gains towards its ST range top/Dec 13&20’06 highs at 1.9727/48.Further upside pressure could see the pair challenge its 14-year high at 1.9848 set in early Dec’06.Above here puts the pair in position to move towards its psychological resistance at 2.000 and possibly its 1991/1992 highs at 2.0045/2.0110.On the whole, GBP needs to hold above 1.9218/1.9177 zone to protect its longer term uptrend.
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