Tuesday June 22, 2004 - 10:08:21 GMT
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Sterling's attempt to break resistance feeble
Daily Forex Technical Report 6-22-2004
· Sterling's attempt to break resistance feeble
· The euro's second attempt to break above major Fib level comes under selling pressure
The EUR/USD made a touch and go from the monthly and weekly central pivots (1.2085) as we had noted yesterday. The bounce over the 38.2% retracement of 1.0800-1.2330 (1.2120) was brief as the pair made its second foray above the 38.2 in 36 hours only to be sold off shortly thereafter. Asia trading has been mixed thus far while the pair winds into the apex of a descending triangle formation. First support comes in at 6/17 highs (1.2050) with the most significant support line coming in at the base of the descending triangle (1.1990/2000). The USD/JPY has adopted a period of consolidation since the collision with the regression trend line (108.30) on 6/21. The 240-minute charts that had offered oversold readings across various oscillators yesterday has since begun to ascend from oversold. The daily studies have simultaneously indicated a contrary indication with the stochastic (11.9) pointing lower still and the RSI (40.8) also sloped downward. At the moment the pair trades at the intra-day central pivot (108.58). The pivot table indicates solid resistance at 108.93 with the R2 level coming in at 109.33. Moves to the downside should be contained near the R1 (108.18) and the 61.8% retracement of 103.44 -115.00 (107.85). Dollar weakness seems to be catching up with the GBP/USD in recent sessions. As we noted recent publications the steam seems to be leaking out of the sterling rally. Late in Asia trading the pair plummeted over 60 pips, further adding to recent weakness. On the daily scope a double top seems to be forming with the second leg of the double top coming into the picture with the failure of the 1.8410 level. The level also coincides with the first leg of the double top's double doji/ candlestick reversal formation. On the downside we see the 100-day SMA (1.8266) providing the first sticking point for the bears with the 100-day EMA (1.8064) following that, as the level provided a solid barrier on the most recent test (6/14). The MACD histogram presently calculates near the zeroline on daily and 240-minute time frames leaving us to deduce that the recent trend is waning. Additionally, some conviction is apparent as the bears have steadily chipped away recent gains for two sessions. The USD/CHF has made a significant gain on the dollar in Asia trading registering a 0.4% gain. The pair continues to trade below the 100 and 200-day MA's while other major dollar pairs trade a bit closer to these respective levels. Local resistance comes in just above at the price the pair left the regression trend line lower band (1.2550). The 23.6% retracement of 1.4280-1.2139 (1.2645) could also provide some significant resistance near term. A break above would clear the way to the 50% retracement of 1.2120-1.2710 (1.2510).
Comment from 05/28
On 05/07 Cable had a high at 8044 (slightly below our 8060/8100 area) before it fell to the 05/14 Low at 7480 (slightly below our 7500/7550 low), 564pts below. Today, 820pts higher, the downtrend trend is clearly broken and Sterling seems to be back in its LT uptrend. The excessive past day's price action suggests that buy on dips strategy are the best risk to reward. Bulls will in fact have to watch 7750/7790 thanks to the MT Trend now S and 61.8% Fibo from the Sep - Feb bull wave. Eager buyers might also consider the 8000 level since it is the 50 SMA & 50% Fibo from the Apr - May bear wave. Bears will have few clear shots but 8460/8500 might inspire reversal players thanks to the 61.8% Fibo from the Feb - May bear wave. If the area breaks R will become S and 8650 will be the next intermediate R.
On 06/02 Sterling had a high at 8493. The pair then fell to the 8042 Low on 06/14 - 451pts lower (slightly above the 8000 level). The market rallied from the lows to find yesterday's high at 8413 - 371pts higher. The outlook remains bullish and aggressive buyers will step in at 8250/80 in order to exploit the 20 EMA and 100 SMA (ADX = 25). Below, the 8000 level is still valid thanks to the 50 SMA, low BB and 50% Fibo from the Apr - May bear wave. Bears do not have the upper hand as long as we are not back below 8000. However, bearish players will probably try another reversal play at 8450/00 thanks to a robust Fibo confluence (61.8% Fibo from the Feb - May bear wave & 23.6% Fibo from the Nov - Feb bull wave). A sustained breakout above would turn the area into strong S and 8650 would be the immediate R.
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