Wednesday June 1, 2005 - 13:01:52 GMT
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FX Technical Outlook for the Month
EURUSD: Throughout the month of May, the Euro has remained in a 250-pip-wide declining trend to reach the years low of 1.2295. This descent which was started from 1.3130 on April 21st is wave 3 of a bigger 5-wave decline, since passing the initial target of 1.2430, next projected target of this wave 3 is for 1.2160 and finally 1.2000. In moments of strong trends, the most dangerous strategy is trying to cash in on reversals and corrections, therefore refrain from trying to play Euro-long positions and rather take advantage of any bounces to sell again. This week, good resistance can be seen at 1.2430 and 1.2500, look to sell to enter fresh short positions up there, should the downside stretch down to 1.2000, expect this move to last another 10-15 trading days to complete this wave 3 after which we should get a healthy bounce of at least 350 pips (=wave 4) later in the month.
GBPUSD: As in EURUSD, Cable has dropped for the last 6 consecutive weeks, shedding some 5.7% of its value on the way. Major difference to the Euro-charts: It has yet to break any significant medium-term support-level, the first one is very near at 1.8150, it was briefly scratched on Tuesday, and another very strong support waits at 1.8000. These two are expected to slow down any further depreciation and I feel more comfortable picking bottoms to go long and hope for a bounce, which should take it to 1.8550 or even as high as 1.87 by month-end. Should cable continue to fall from here and close the week bellow 1.80, next target will be the 3-year bullish trend-line at 1.7700.
USDJPY: Back in March, the currency pair broke the 3-year bearish-trend, the month of May was in continuation of the consolidation phase that ranged 105/109, establishing a rising support in the process, this support currently runs through 105.70. The outlook for June starts positive, we have a 2-week trend-support at 107.90, expecting an immediate rise to the April-high of 108.90 and very high chances to advance to 109.50 quickly. Ultimate target this month will be 111.50, but keep an open mind for 2-way traffic and do not rule out sudden set-backs, which should be viewed as opportunities to enter longs at favorable prices, buy levels are at 107.10, 106.60 and of course near the support-line.
USDCHF: The month of May was market with very solid performance of the US Dollar and we continued to hold a bullish trend, in place sine the 2nd week of March. Applying the same Eliot-wave as with the Euro, we find ourselves in the impulsive rise of wave three, its projection is to extend to 1.2650 or 1.2910 in the first 10 days of June, followed by a correction which may not pass 1.2220 key support.
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