Thursday April 29, 2004 - 01:20:55 GMT
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Forecast on FX Majors 29th April 2004General Market Conditions
The Dollar managed a deeper pullback than expected against the Europeans and this morning looks quite weak against the Euro and British Pound. However, key levels have still not yet been broken and until these do we have to assume that we are still within a larger consolidation. If we are to look at each side of the ranges any break of the dollar topside would appear to have quite aggressive bullish implications. On the Dollar bearish side we still need break of 1.1950 Euro, 1.2950 Swissie, 1.7970 Pound and 108.50 Yen. Breaks of these areas would maintain an erratic and choppy medium term correction. Our longer term view (for the rest of the year) is Dollar bullish but we are aware of some shorter cycles turning lower lower at this time that could have effect for the next 10-15 days. What is less clear is how strong the longer cycles are and whether they can override the shorter term softness. Thus we look for price breaks to generate the next larger move.
Resistance: 110.30 ... 110.55 ... 110.70 ... 111.10
Support....: 109.85 ... 109.65 ... 109.25 ... 109.00
Mixed - waiting for breaks
The Dollar has reached the minimum target at 110.23-30 and further strength will require a move above this level in order for gains to move to the next resistance at 110.55-70 which we feel could generate a pullback. Note the presence of a possible uptrend channel high around this level. Any further gains will require a break above 110.70 and then 111.10 to push price further to 111.55-75. Next resistance is at 112.85.
Having seen the move to 110.23-30 we need to be a little cautious. There does appear to be room for further minor gains through to 110.55-75 but while this holds and on a break below 109.85-95 we would envisage a pullback towards 108.75 once again.
Resistance: 110.70 ... 111.55 ... 112.85 ... 113.40
Support....: 108.75 ... 107.55 ... 106.85 ... 106.00
The upside remains dominant with further gains being seen above the 4-hour Pivot Cloud to maintain the bullishness of the recovery from 108.30. Schaff Trend Cycle has recovered and is close to 100 while FXS-RSI has moved higher close to overbought territory. While not confirmed until we break above the 109.85-110.25-45 area, the structure does appear to look more positive. However, we do suggest waiting for this break else a move back to 106.70-107.20 is possible.
Yesterday's comments continue to apply:
The unexpected recovery yesterday does bring a certain bullish feel to price here but we have only seen a three-wave (corrective) move higher thus far. Therefore any bullish stance should ideally wait for a break of the 109.85-110.25-45 area before considering follow-through to 111.55 and possibly as high as 112.15.
Failure to break down to lower levels yesterday was somewhat of a surprise but until 110.25-45 is broken we feel that the downside has not been erased completely. Thus should price break down below 108.65 then the odds would then favor the losses continuing towards the strong 106.70-107.20 support zone.
(Updated 19th April)
Resistance: 109.25 ... 111.15 ... 112.30 ... 114.90
Support....: 104.80 ... 103.30 ... 101.30 ..... 99.50
Having seen a move back above the 107.21-65 area the emphasis appears to be back on the upside in line with the bullish weekly and monthly cycles. We require 104.80-00 to hold for this and a move back above 109.25 would encourage gains up to 111.15, 112.32 with 114.90 being a higher target to keep in mind. Back below 104.80 would threaten the 103.42 low and call for losses down to 100.40.
Resistance: 1.1850 ... 1.1875 ... 1.1905 ... 1.1930
Support....: 1.1805 ... 1.1780 ... 1.1858 ... 1.1725
Mixed - waiting for breaks
The reversal from 1.1950 has been strong and is testing lower as we write. To maintain any chance of a more bullish stance we need to see price remain above the 1.1758-1.1805 support zone. While this support holds and on a break back above first 1.1850 and then 1.1875-1.1905 we would then see room for recovery. Further resistance is at 1.1950 once again.
We are seeing a test of the first support at 1.1805 as we write. This does have potential to hold with further support at 1.1758-80. Thus only a break of the 1.1758 low (and a long term daily uptrend support) would provoke a much stronger reaction lower. First support is at 1.1725 which should be watched and on a break here losses would favor a move through to 1.1650 at least.
Resistance: 1.1940 ... 1.2085 ... 1.2135 ... 1.2205
Support....: 1.1855 ... 1.1725 ... 1.1645 ... 1.1530
Price once again failed at the 1.1950 level and provoked a reversal below the 4-hour Pivot Cloud and dents the bullish outlook. Schaff TC1 is now declining while FXS-RSI has reversed from overbought territory. The 1.1725 - 1.1940 range is crucial to the next larger move and break will generate the sentiment for the coming month. Be aware that any break of the 1.1725-60 area could produce an aggressive reaction lower.
Yesterday's comments continue to apply:
The recovery from 1.1775 threatened the 1.1940 resistance on Friday and while there has been a new low at 1.1758 there has been no confirmation of the downside yet. Still, break at 1.1950 is required to generate a correction to the entire downside from 1.2927. Any further gains now would imply follow through to 1.2035 and probably back to 1.2160. Further resistance is at 1.2220-40.
With a further test of the 1.1940-45 area the structure appears to be failing the downside view. However, the only chance we see of further losses would be if yesterday's high at 1.1947-50 holds and we see loss of 1.1855 which we feel would then favor a retest of 1.1758 and breach here would allow losses to resume towards 1.1645 and probably 1.1510-30.
(Updated 19th April)
Resistance: 1.2085 ... 1.2325 ... 1.2455 ... 1.2655
Support....: 1.1720 ... 1.1560 ... 1.1310 ... 1.1165
While the progress lower has been choppy we do feel that the repeated rejection around 1.2400-55 and the decline from there should now allow price to move down to the Double Top target around 1.1720-50 and we suspect now a stronger decline. Support at 1.1560 may hold for a while but we while 1.1820-50 holds we consider the larger risk to be lower to 1.1165 over the next 4-6 weeks.
Resistance: 1.3105 ... 1.3120 ... 1.3140 ... 1.3160
Support....: 1.3065 ... 1.3040 ... 1.3015 ... 1.2970
Mixed - waiting for break
The pullback from 1.2952 confirmed a 3-wave structure lower from 1.3226. However, this could still be part of a larger decline and we need to watch for signs from short term price behavior. We feel that a test of 1.3120 is probable at the very least. Break here is needed to take price to the next resistance at 1.3160 which could well hold. Thus only above 1.3160 would allow price to accelerate higher towards 1.3226 once again and probably higher.
Failure to break below 1.2952 yesterday was disappointing. This now leaves one possible bearish view which would require 1.3120 and 1.3160 to hold. Thus on a rejection from this area and a break back below 1.3040-50 we would then look for losses down to 1.2950 once again and probably lower to 1.2825-45.
Resistance: 1.3160 ... 1.3225 ... 1.3385 ... 1.3485
Support....: 1.2950 ... 1.2835 ... 1.2770 ... 1.2710
Price held above 1.2950 and broke back above the 4-hour Pivot Cloud which brings us to a pivotal area where bullish & bearish sentiment are balanced. Schaff Trend Cycle has recovered and is moving towards 100 while FXS-RSI has recovered from oversold territory. We see the 1.2950 area as important with a minor uptrend line resting here while the 1.3160 area presents important resistance on the topside. If the topside breaks, be aware that the reaction could be quite aggressive.
The recovery to 1.3100 has disappointed but we require a move above 1.3160 to bring a stronger bullish case. Only a break here would trigger a retest of the 1.3225 high and a probable follow-through to 1.3385 with 1.3485 also implied.
Failure to move below 1.2952 is a concern for the bearish view and represents a minor uptrend line from 1.2710. Note also how on the 4-hour chart we have seen a series of lower highs in FXS-RSI and thus a break of 1.2950 would confirm this divergence and a decline to 1.2710 once again.
(Updated 3rd April)
Resistance: 1.3085 ... 1.3235 ... 1.3410 ... 1.3700
Support....: 1.2625 ... 1.2515 ... 1.2180 ... 1.1700
The expected move higher has met with some early choppy price action but we feel this should now move onto the 1.3220-35 area this month at the very least and do see some risk of seeing gains extend to 1.3410. Watch this area since it could cause a pullback. Further resistance is around 1.3700.
Resistance: 1.7700 ... 1.7725 ... 1.7760 ... 1.7795
Support....: 1.7665 ... 1.7640 ... 1.7625 ... 1.7575
Mixed - waiting for breaks
The failure at the 1.7970 resistance generated a strong reaction back lower. On the face of it this looks quite bearish but will not be confirmed until 1.7625-40 is broken. Thus while the 1.7640-65 area holds and a move is seen first back above 1.7700 and then 1.7725 we can begin to look for cautious gains once again. Next resistance would then be at 1.7755-65 and then the pivot resistance at 1.7815.
The drop from the 1.7970 resistance has been aggressive and does give a bearish feel. However, we will remain cautious until we see break of 1.7625-40. Only then would we feel the larger picture is turning aggressively bearish and would look for immediate follow-through to 1.7490 at least - slight caution here - and if this breaks then further losses are likely towards 1.7450 and possibly lower.
Resistance: 1.7815 ... 1.7970 ... 1.8030 ... 1.8160
Support....: 1.7625 ... 1.7490 ... 1.7330 ... 1.7255
Price held to the bottom end of the 1.7970-00 resistance advised yesterday and prompted an aggressive decline back below the 4-hour Pivot Cloud that is poised above the key 1.7624-40 lows. Schaff Trend Cycle is declining and close to zero while FXS-RSI has matched this decline and is close to oversold. Overall we still require a break of the 1.7624-1.7970 range to provide the new medium term direction. Care if the downside breaks as the move could be aggressive.
With price failing at the low end of the 1.7970-00 resistance advised, it confirmed a three wave move higher and caused a strong reaction lower. While this does not appear to support a bullish view, while 1.7624-40 holds there is still a scenario that could see a move back to the 1.7970-00 area. Break of 1.7815 confirms.
The reaction lower from 1.7970 has been swift but we need still to be a little cautious until the 1.7624 low breaks. Should this occur the downside is once again favored to 1.7490 at least. This level needs to break to generate a continued strong move lower that should reach 1.7254 at least and possibly as low as 1.7135-65.
(Updated 19th April)
Resistance: 1.8300 ... 1.8605 ... 1.8875 ... 1.9025
Support....: 1.7650 ... 1.7165 ... 1.6905 ... 1.6565
The move lower has met with a choppy start but we feel that we should now see losses resume and expect to see progress to the next support at 1.7650 this week. From there we should see a correction develop but the coming 4-6 weeks looks bearish towards 1.7165.
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