EUR/USD on Friday saw a strong rebound from support at 1.3000. This has been stronger than we thought, but is viewed as a correction only. It is possible that this rebound will return to the 1.3291/1.3325 region, however we would again expect that to provoke failure. Initial resistance is last weeks high at 1.3191. Key near term support remains 1.2974/54, the February low, with a break below here triggering the slide to the 1.2624 January low. We continue to view the 1.3487 recent high as an interim ceiling for the market. While trading below here, the outlook will remain bearish.
GBP/USD spent all week sitting at key short term support at 1.5650/43, and finally on Friday gave up and rallied strongly higher. The move has re-tested the 200 day ma at 1.581 and while we could allow for an extension towards 1.5927 (8th Feb high), we continue to view the 1.5992 recent high as an interim ceiling for the market. Initial support lies at 1.5729, but the market will need to close below 1.5643 to trigger another leg lower and this should leave the focus on the 1.5235 January low. Interim supports.
AUD/USD last week sold off towards and bounced ahead of the 200 day ma at 1.0405. This rebound was deeper than we anticipated, however we look for the market to find interim resistance at 1.0670 and remain capped by the 1.0857 February peak. Beyond this rebound we maintain our bearish bias – we view the market as having topped recently and we target 1.0382/40, the December 2011 high and a top measurement to 1.0340. Today’s trade: Shorts from 1.0760 profit stopped 1.0575. Reinstate shorts on a rally to 1.0640, 1.0690, stops 1.0765.
USD/CHF was rejected by the .9317 October 2011 peak and the .9342/61.8% retracement towards the end of the week and sold off aggressively, this was enough to stop out our long position but not enough to negate our slightly longer term bullish bias. We would allow for a slide back towards .9141 and possibly key support, which remains the .9066 November 2011 low and while this continues to hold the downside we will maintain an overall bullish stance. Rallies will find interim resistance at .9229/43 but will need to close above the .9317 pivot to initiate further upside buying interest towards the .9595 January peak.
USD/JPY continues to consolidate/correct lower very near term following its move last week to its initial target of 83.80. We would allow for a slightly deeper retracement towards the 82.23 May 2011 peak. We view this as corrective only – this is not regarded as the end of the move. We look for the retracement to be contained by the base of the cloud on the 240 minute chart. The cloud is currently located at 81.98/61. While this holds, the bull move is fully entrenched and targets are 85.53, the April high then 86.80. This is the 23.6% retracement of the move down from 2007.
EUR/JPY ended the week in a very strong manner. It has registered a weekly close above the 55 week ma for the first time since July 2011. The market remains directly bid above the 6 week uptrend which is located at 107.67. The market is poised to encounter tougher resistance offered by the 50% retracement of the April-to-January decline at 110.26 and the October peak at 111.57, we suspect that the market may struggle to take these out on the first attempt. Longer term we target 113.29, the 61.8% retracement of the move down from the 2011 peak. Below 107.67 would target the 2 month uptrend at 105.34, where ideally we should see signs of stabilisation. Note that we consider KEY support to be 102.21/101.79, the 14th February low.
EUR/GBP has eroded the 2 month uptrend at 0.8320 and we should now see a break lower. This should be enough to signal the resumption of the down move and target the .8265 February low and then the .8221 January trough. We assume that the recent peak at .8423 is an interim peak but key resistance remains 0.8505/24 (the recent high and the 8 month downtrend). While capped here our medium term outlook is bearish. Today’s trade: Shorts reinstated on rallies to .8345, add .8385 and place a stop at .8425.
EasyForexNews Research Team