EUR/USD The daily RSI is trading at oversold levels not seen since December which leads us to believe that EUR/USD will manage to heave itself back up towards the 61.8% Fibonacci retracement of this year’s advance at 1.2954 in the days ahead. Corrective rebounds should remain tepid, however, and may already fail around the psychological 1.3000 level. Our medium term downside target remains to be seen at the 1.2624 January low. Interim support is at 1.2809, the 78.6% retracement. Above the 1.3000 level resistance can be seen at 1.3026/33 (early February and early April lows) and at 1.3055, the 50% Fibonacci retracement.
GBP/USD retests the April high at 1.6062 which has so far acted as support. We remain sceptical about the markets ability to resume its up move – but for now – while above 1.5999, the four month uptrend, we will give the upside the benefit of the doubt. While above here the currency pair remains on course to challenge 1.6356, the 100% Fibonacci extension of the January-to-February rise, projected higher from the March low and then 1.6425 78.6% Fibonacci retracement of the move down from the 2011 peak. Key support is the 1.5805 April low.
AUD/USD has seen a rebound from the base of the short term channel at approximately 1.0000 last week. This is also psychological support and we would allow for profit taking early this week here. Rallies should find resistance at 1.0122 ahead of 1.0200/28, the 23.6% retracement of the move down from February and the April low. Key resistance is the top of the channel at 1.0386. Beyond a rebound, our outlook remains negative and we look for losses to .9950/19, a double Fibonacci retracement. Our long term target is for a slide back to .9407/.9388. This is where the 2011 low and the 2009 and April 2010 highs can be found.
USD/JPY has charted a low of 79.42 last week and this has not been confirmed by the daily RSI. We therefore suspect that the market is attempting to recover in the next few days. In order to confirm upside intent we will need a break above the 80.47 downtrend channel line. At this stage we remain unable to rule out further slippage to 79.15/78.88 (61.8% retracement and the 55 week ma), where we would expect the market to stabilise and recover. Only a break above the current May high at 80.61 would signal the end of this corrective phase and allow for gains to the 81.78 mid-April high.
USD/CHF is likely to pull back to its one month uptrend line at .9260 and could also probe the April peak at .9252 in the days to come before resuming its May up move. It remains well placed for further gains this week, though. Slightly longer term, we view the price action this year as a consolidation in an overall bull trend. Our medium term upside target zone at .9317/42, the March peak, pivot and 61.8% retracement of the down move seen this year, is currently being tested but should cap the currency pair today, however. A close above here will target .9595, this year’s high.
EUR/JPY charted another inside day on Friday, the break out of which is expected to be seen today. Rebounds should be capped by the 104.625 April low, though. We believe that further downside should be seen this week once the current minor consolidation has run its course. Failure at last week’s 102.76 low would introduce scope to 100.12/00 (78.6% Fibonacci retracement), where we would expect the market to attempt to base. Key resistance is the downtrend line at 105.37. While capped here, the market will remain directly offered.
On Friday EUR/GBP briefly dropped to .7997 before reversing higher. We thus would allow for a small rebound to now take place. Rallies should find initial resistance at .8096 (time zone gap) ahead of the .8123 resistance line. Key resistance remains at .8221, the January low. In the course of this week the .8000/.7997 support zone should be retested and is likely to give way. The 61.8% Fibonacci retracement of the move in 2007-2008 at .7795 will then be in focus.
EasyForexNews Research Team