Thursday May 6, 2004 - 01:25:06 GMT
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Forecast for FX Majors 6th May 2004General Market Conditions
Further losses seen for the Dollar yesterday that met targets apart from the British Pound that failed at the lower resistance at 1.8016-20. We feel that in general the cycles are suggesting a bounce for the Dollar around this time frame but our analysis suggests there should be some further losses before the recovery can develop. Thus we continue to err marginally on the downside but do acknowledge the break levels should the cycles have an earlier effect. In general we see potential for the Dollar to reach 1.2245-50 Euro and 1.2655-80 Swissie. The British Pound is rather mixed and may well have reached a high so we would rather look for breaks for the next move here. Against the Japanese Yen we have seen a thorough test of the 108.29 corrective low. Our preference is to see a recovery from here but will need to wait for breaks.
Resistance: 108.85 ... 109.00 ... 109.20 ... 109.50
Support....: 108.45 ... 108.30 ... 108.00 ... 107.80
Marginal bias in favor of the upside
Losses were seen all the way to the prior support at 108.30 and we marginally prefer a bullish stance today. Break of 108.85 will help and should assist price towards 109.00 and 109.20. Final break higher should be on a move above 109.20 which should see a move to 109.50. Further resistance is at 109.95 and 110.35.
A base seen at 108.30 as suggested though it is early to confirm the reversal higher. A bearish scenario would be highlighted again should first support at 108.45 break and a move below 108.30 would imply a move to 108.00 which again has potential to form a base. Any break would see a sharp drop to the 106.75-107.25 area.
Resistance: 111.15 ... 111.60 ... 112.20 ... 113.25
Support....: 108.00 ... 106.75 ... 106.30 ... 105.20
Losses continued below the 4-hour Pivot Cloud and through to key support at 108.30. Schaff Trend Cycle has remained at zero while FXS-RSI has drifted lower into territory. We have seen a test at the key 108.30 level and there is further support at 108.00 but any lower would force a larger reversal and a move back to 106.75-107.25 quickly.
The 108.00-30 area now needs to hold to retain the bullish scenario. With daily cycles appearing to find a low in this timeframe we are cautiously optimistic that we should see a recovery from this support zone. Confirmation of the upside resuming will first be on a break of 109.50 and then of 110.70. Once seen we feel there should be a continued move through to 112.30 and 113.00 with a marginal risk of 114.10 where a larger cap should form.
Yesterday's losses were slightly deeper than we had hoped, but have not yet cleared crucial support in the 108.00-30 area. Only if this support is broken would we be forced to re-evaluate and look for a longer sideways correction to the entire rally from 103.42. A break of 108.00 would see a quick drop to the 106.75-107.25 support zone which could force a pullback. Further support is at 106.30.
(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: 1.2175 ... 1.2205 ... 1.2225 ... 1.2245
Support....: 1.2140 ... 1.2120 ... 1.2100 ... 1.2070
Cautiously bullish to 1.2245-75
Gains were seen to the mid point of our resistance zone between 1.2165-1.2205 and the pullback has been a broad sideways move. On balance we still feel there is some upside here and look for the 1.2140-50 area to hold and generate a move to the 1.2205 resistance initially where a further pullback is possible. From here, while 1.2160-70 holds we look for a move to 1.2245-75 where a cap could develop. Further resistance is at 1.2310.
While there is an argument that a cap has been seen. we still feel there is marginal upside still likely. Thus only a direct break below first support at 1.2140 would trigger losses down to 1.2100 and if this breaks further losses to 1.2050 are probable. Further support is found at 1.1990-1.2000.
Resistance: 1.2275 ... 1.2335 ... 1.2385 ... 1.2485
Support....: 1.2000 ... 1.1925 ... 1.1860 ... 1.1760
Price has made further gains above the 4-hour Pivot Cloud reaching 1.2180. Schaff TC1 remained at 100 while FXS-RSI is also heavily overbought but is displaying no divergence. We still feel the bias for now is towards 1.2245-75 but with daily cycles looking to find a high around now we need to be cautious about being too bullish at this point.
Price development yesterday does suggest a risk of further gains towards 1.2205 minimum and probably 1.2245-75. However, we feel this may form a cap with daily cycles suggesting an imminent correction. Thus we can only get more bullish should 1.2275 yield to the upside in which case price could follow-through to 1.2335-85. Further resistance is at 1.2455-85.
As we move higher to our resistance areas we are beginning to look for signs of a reversal lower. We feel that 1.2245-75 does have potential to provide a selling opportunity but to be certain a break back below 1.2100-40 would be preferred. Next support is at 1.2000 and good support around 1.1915-20. Direct loss of 1.2100-40 signals an immediate move lower.
(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: 1.2765 ... 1.2780 ... 1.2800 ... 1.2825
Support....: 1.2725 ... 1.2000 ... 1.2680 ... 1.2655
Cautiously bearish to 1.2655-80
The decline has tested the 1.2700-10 support and as such does give one argument for a directly bullish stance. However, until 1.2765-80 breaks we still feel there is risk for a final drop to 1.2655-80. Thus on a test of 1.2680 or a direct break above 1.2780 look for price to rally once again back to 1.2855-65. Further resistance is at 1.2900-20.
Losses have been contained within the downside limits stated around 1.2700-10. However, while 1.2765-80 holds we do see a scenario calling for one last decline down to 1.2655-80 but would look for this to form a base for further gains. Below 1.2655 sees support at 1.2555.
Resistance: 1.2860 ... 1.2920 ... 1.3030 ... 1.3100
Support....: 1.2700 ... 1.2655 ... 1.2555 ... 1.2495
Losses continued below the 4-hour Pivot Cloud and thoroughly tested the 1.2700-10 support. . Schaff Trend Cycle remained at zero while FXS-RSI matched this decline to extreme oversold but without signs of divergence. Having reached support at 1.2700-10 we feel the downside, if any is restricted and feel a pullback at the very least is likely.
With the test of 1.2700 we feel that there is argument for a pullback at the very least. We should allow for one dip to the 1.2655-80 area but while this holds we favor a move back to 1.2855-65 at least and probably to the 1.2900-20 Fibonacci & Pivot resistance. Break of this resistance is required to generate a stronger bullish stance.
Losses have been on target to the 1.2700-20 support and although we see short term risk of a dip down to 1.2655-80 we are basically looking for a reversal higher. Thus, only on a direct break of 1.2650 would we re-evaluate and look for losses to extend down to 1.2555 and 1.2495.
(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: 1.7920 ... 1.7950 ... 1.7975 ... 1.8015
Support....: 1.7860 ... 1.7840 ... 1.7820 ... 1.7795
Mixed - waiting for breaks
As suggested a peak seen just short of the 1.8020 target and a move lower from there. We are mixed and see potential for either side to break and the dip this morning appears to favor the downside. Thus to return to a bullish scenario we need to see gains back above 1.7920-50 and once the higher level breaks we should see follow-through towards 1.8045 at least with risk of 1.8145 on a stronger move.
While we are mixed, the dip this morning to 1.7888 looks mildly bearish. To be safer on this we would prefer to see a break of 1.7860 which we feel would allow the decline to continue back to 1.7790-00 at least. An aggressive move could take us back to 1.7700-45 quite quickly.
Resistance: 1.8020 ... 1.8075 ... 1.8145 ... 1.8210
Support....: 1.7865 ... 1.7800 ... 1.7730 ... 1.7670
Gains stalled at 1.8016 allowing price to return to test the 4-hour Pivot Cloud support. Note that the reversal came around the apex of the triangle - a classic timing for reversal after a triangle. Schaff Trend Cycle remained at 100 while FXS-RSI oscillated around the overbought line. We have to be a little cautious here and play with breaks.
The rally has reached the minimum target at 1.8016-20. To allow further gains to take price higher we need a quick return back above 1.7950 which we feel should then cause a test of 1.8045 at least and after a small pullback we would then look for further gains to 1.8140 at least with 1.8205 also providing good resistance.
Having met the minimum target at 1.8016 we need to be a little cautious. Any failure to make further gains today and a break below 1.7860 and then 1.7790 would imply a long sideways consolidation. Break of 1.7790 would return price quickly to 1.7700 and possibly 1.7660-85. However, around this area we should see support developing.
(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.
(c) FX-Strategy Inc
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