Thursday May 6, 2004 - 08:16:29 GMT
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Cable/Dollar rallying from double bottom
Daily Forex Technical Report 05-06-2004
· GBP/USD rallying from double bottom
· USD/CHF bouncing from lower Bollinger
EUR/USD continued its rally today before stalling at upper Bollinger. There is resistance at the 4/8 high of 1.2220, but more important than the level itself is the fact that stochastic is overbought and savvy buyers will likely wait for a pullback instead of chasing the move. The longer bulls can stay above the psychological level of 1.2000, and with more pressure they will be able to put on shorts to cover. After a sharp 3-day decline USD/JPY hit a lower low before bouncing off the 50-day SMA. Traders who questioned the strength of April rally off a fragile bottom will now anticipate a head and shoulder pattern. They will sell any rally toward the psychological level of 110.00, a convergence of the 200-day MA and 04/22 high as well as a possible right shoulder. On the downside, a close below 50-day EMA at 108.00 will trigger a panic sell-off. Consolidation day for GBP/USD after the rally stalled. Bulls have to defend the 05/04 breakout low of 1.7700 low at all costs and they will need to close above 1.800, a significant psychological level at the 100-day EMA. Double bottom remains in play and bargain hunters will likely buy into any significant dips. It was an oversold bounce from lower Bollinger on USD/CHF. Bargain hunters will take profit gradually as the pair moves toward 1.3000 psychological levels and 200-day EMA, where bears would love to reload their shorts as well. In order to get there, buyers will need to defend the 04/01 low at 1.2595. A close above 50-day SMA at 1.2850 will also get the momentum going.
Comment from 04/13
On 03/18 CHF/JPY had a low at 83.66 (slightly above our 83.00/50 zone) before a small rally to the 85.44 high a day later (178pts higher). On 03/29 the cross had a low at 81.72 before retracing to the 83.21 high on 03/30, 149pts higher. The outlook today is slightly bearish, but CHF/JPY is still stuck in an important Fib area. Aggressive buyers swill look to step in at 81.50/70 thanks to a Fib convergence (23.6% Fibo from the Mar bear wave & 23.6% Fibo from the Jun - Nov bear wave). If a sustained move below 81.50 occurs, 80 becomes the next target. Conservative bulls can look to step in at 79.60/90 to exploit the 61.8% Fibo from the Nov 01 - May 03 and the lower BB. Above, 83.70/84 is key for the bears thanks to the 20 EMA and 38.2% Fibo from the Mar bear wave.
On 04/13 CHF/JPY posted a low at 81.63 before a rally to the 84.32 High on 04/19, 269pts higher (slightly above our 83.70/84 zone). The cross then fell back briefly to the 82.44 Low on 04/26, 188pts lower. Today, the situation is quite mixed and range trading with an immediate bearish bias seems to be the headline. 86.40/80 will attract reversal players thanks to the High BB and 76.4% Fibo from the Mar bear wave. Below, the aggressive buy on dips crowd will step in at 84.00/50 in order to exploit the numerous key MA present there (20 EMA, 200 & 50SMA) and a strong Fibo confluence (50% Fibo from the Mar bear wave & 23.6% Fibo from the 00 - 03 bull wave). More conservative bears will wait for the obvious 87.20/70 area which benefits from a robust Fibo confluence (61.8% Fibo from the Jan 03 - Nov 03 bear wave & 76.4% Fibo from the Aug 03 - Nov 03 bear wave). Finally a key area for the bulls will be 79.50/80, the 38.2% Fibo from the 00 - 03 bull wave.
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