Friday May 21, 2004 - 10:26:51 GMT
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Shooting Star in Dollar/Yen
Daily Forex Technical Report 5-21-2004
· Shooting Star in Dollar Yen
· Range Trading Dominant Theme in Dollar Swiss
The rebound in the EURUSD off of yesterday's low brings the pair right back into the 1.1940-1.2060 range. The series of lower highs and continual rejection of trendline resistance which coincides with the 38.2% fibo of 1.1760-1.2180 indicates that bears still have the upper hand. Continual weakness below Thursday's 1.1895 low would expose 1.1760, the lower Bollinger / April-26 low / 2-yr bull channel support. Strength above Monday's 1.2060 high will give bears a chance to target the May 5th high at 1.2180. The shooting star on the daily in USDJPY signals that shorts are prepared to make a run for key support at 112.40, the former March 5th top / May 12th low and 50% fibo support from the Aug-April bear wave. A break below that level would reinforce the development of an interim top at 114.85, the May 14th high and expose 111.07, the April 29th high. Bulls will have an opportunity to buy on dips on the latter level and towards the 38.2% fibo of 103.40-114.92 at 110.50. The bounce off of trend line support from the May 14th low highlights the lack of notable action in the GBPUSD. Unless the pair can break above Wednesday's 1.7860 high for a chance to target the more meaningful level of resistance at 1.8000, the risk is still for a continued decline towards the lower Bollinger at 1.7542 and then the 200-day SMA at 1.7375. Range trading remains the continual theme in USDCHF. The confluence of moving averages above capped Thursday's rally at 1.2915. The inability to extend beyond that level does increase the chance for a move back towards the lower Bollinger at 1.2713. Despite the series of higher lows, bulls will need to amass a significant amount of strength in order to break above 1.2930/40, the 20-day SMA and 61.8% fibo 1.3085-1.2700. Even if that level is taken, the 200-day SMA and psychological resistance at 1.3000 will attract a good number of renewed shorts. A close above the 1.3100 former highs would be needed to negate short-term bearish momentum and give bulls an opportunity to target a move towards 1.3200, the 50% fibo of Aug-Jan bear wave / upper Bollinger and 1.3230, the 4/26 high.
USD/CHF broke the 2900/3000 area and seems to be in the middle of a typical breakout / retracement pattern. As a result, bulls will have decent opportunities at 3150/80 on the breakout R now S and 50 SMA. A break below will however trigger a momentum that the bear will try to exploit. 2800 will then be intermediate S thanks to the 38.2% Fibo from the Nov - Jan bear wave. Higher, bears will concentrate on the swing High, High BB and 50% Fibo from the Aug - Jan bear wave in the 3250/80 area. A sustained break above will open the door to 3450/3500 (61.8% Fib from the Aug - Jan bear wave). Finally, if the market comes back below 2800, 2540/80 will be to watch since it is the 23.6% Fibo from the Nov - Jan bear wave. Reversal players will not miss it.
USDCHF failed to hold the uptrend and is now slightly bearish since we are below the 200 SMA and the former breakout level. Aggressive bears will step in at 2920/50 in order to exploit a strong Fibo confluence (38.2% Fibo from the Sep - Jan bear wave & 50% Fibo from the Nov - Jan bear wave). Another solid R is to be found at 3100/3130 thanks to the 20 EMA and 50 SMA. Finally another decent risk to reward area is 3220/70 where the 50% Fibo from the Sep - Jan bear wave is present. A break above would open the door to 3450/3500 and the 61.8% Fibo from the Sep - Jan bear wave. Reversal bulls will probably try to get in at 2620/70 thanks to a robust Fibo confluence (76.4% Fibo from the 95 - 01 bull wave & 50% Fibo from the Jun - May bull wave) and the Low BB. If the area cracks 2200 and the 7 years low will be the next stop.
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