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Friday May 7, 2004 - 00:03:25 GMT
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Forecast on FX-Majors May 7th 2004

General Market Conditions

The Dollar losses we had thought were possible did not eventuate and a direct recovery was seen. This is in line with the daily cycles and it gives us a cautiously bullish outlook. However, critical resistance have not been breached to confirm a resumption of the uptrend and until then we shall remain vigilant and be aware of any suggestion that there is still a last decline to go. However, given that background scenario we feel that today should see little, if any, new ground and that the week should end on a quiet note. In particular the British Pound looks locked in a range while the other Europeans could drift back slightly in a correction. The recovery against the Japanese Yen has been very progressive and while we feel more strongly about a more positive scenario here we feel the 110.15-35 area will stall current gains and join the Europeans in quiet end-week trading. Have a great weekend.


USDJPY
Price: 109.75

Day View
Resistance: 109.95 ... 110.15 ... 110.35 ... 110.70
Support....: 109.45 ... 109.20 ... 109.00 ... 108.80

Bias: Looking for a marginal new high around 110.10-35 before drifting lower again

Bullish: Break of 109.20 was seen yesterday and this spurred price higher towards the next larger resistance at 109.95, price stalling this morning at 109.88. We feel there are marginal gains to be made but as we see price move above 110.00 be cautious. There is good resistance between 110.15-35 and this area is expected to hold on the day. Further resistance is at 110.70.

Bearish: The recovery from 108.30 looks positive and suggests the downside maybe choppy and corrective when seen. We feel that levels above 110.00 will produce good selling opportunities with stops above 110.40. Fibonacci targets are seen at 110.15 and 110.35 - watch these areas closely. From there we look for a move down to 109.45 at least and we feel a test of 109.00-20 is probable.



Week View
Resistance: 110.35 ... 111.00 ... 112.10 ... 113.00
Support....: 109.00 ... 108.30 ... 107.20 ... 106.30

The recovery from the key support at 108.30 has taken price back above the 4-hour Pivot Cloud although this break has not been too convincing. Schaff Trend Cycle has returned towards 100 while FXS-RSI has recovered into neutral territory. The recovery from 108.30 looks positive and while 109.00 holds we tentatively look for a retest of the 111.00 high and follow-through.

Yesterday's comments continue to apply:

Bullish: 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.

Bearish: 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.


Month View
(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.



EURUSD
Price: 1.2070

Day View
Resistance: 1.2105 ... 1.2135 ... 1.2175 ... 1.2205
Support....: 1.2050 ... 1.2025 ... 1.2005 ... 1.1970

Bias: Mixed - tend to prefer a sideways consolidation

Bullish: No follow-through above 1.2180 and a drift lower to 1.2060. We are at a critical point with support at 1.2050-60 and while this holds there is still one scenario that would allow new high. For this we need a direct move back above 1.2135 to bring price back to 1.2175-80 and possibly 1.2205. Alternatively, an earlier break of 1.2050 would take price down to 1.2005-25 but from here we would look for recovery to 1.2060-1.2100.

Bearish: Break of 1.2100 has allowed price to move down to 1.2060 and is hovering just above key support at 1.2050. This needs to break to allow losses to extend lower to the 1.2005-25 area where we anticipate a pullback to end the week. Thus only below 1.2000 would provoke a sharper decline to 1.1790 and probably 1.1920.



Week View
Resistance: 1.2205 ... 1.2270 ... 1.2335 ... 1.2385
Support....: 1.2000 ... 1.1920 ... 1.1860 ... 1.1760

Price has moved lower from 1.2180 to test the 4-hour Pivot Cloud support and price support around 1.2010-50. Schaff TC1 reversed lower from 100 and is now at low levels while FXS-RSI also moved below overbought territory. We are at a critical juncture and feel that today will not confirm break in either direction - and for next week we should trade with breaks.

Bullish: Although price failed to follow-through higher yesterday and has drifted down to the 1.2050-60 support the picture remains mixed. The 1.2050 level look critical and while it holds it retains the last scenario for one further rally to 1.2205 at least and probably up to 1.2270. However, if seen this should spurn a good pullback. Only above 1.2270 would allow gains to extend towards 1.2335-85.

Bearish: The 1.2050 area looks important and any break would put the bias back on the bearish side although we do not foresee this being aggressive. If the break is seen we should see a pullback from the 1.2005-25 area and we will have to wait for next week to see further losses. These would then allow a move down to 1.1920 at least which should cause price to stall. Further support is at 1.1860.


Month View
(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.



USDCHF
Price: 1.2845

Day View
Resistance: 1.2865 ... 1.2880 ... 1.2900 ... 1.2920
Support....: 1.2820 ... 1.2790 ... 1.2775 ... 1.2745

Bias: Mixed - tend to prefer a sideways consolidation

Bullish: Direct recovery was seen from 1.2700 which has thus far tested 1.2860. Indeed, the 1.2860-65 area looks important and we feel it may well hold to provoke some sideways consolidation today. However, any break above 1.2865 would suggest room for a move through to 1.2900 though if seen we feel this will cap prices on the day. Further resistance is at 1.2945.

Bearish: The recovery from 1.2700 looks more corrective we feel though could see a further high should 1.2865 break. If so we would view the 1.2900 area as a good selling opportunity for a drift back lower to 1.2820 at least and possibly 1.2775-90. Alternatively a direct break below 1.2820 would cause an earlier sell-off towards 1.2775-90. Next support is at 1.2745 and 1.2720.



Week View
Resistance: 1.2900 ... 1.2945 ... 1.3030 ... 1.3100
Support....: 1.2700 ... 1.2655 ... 1.2535 ... 1.2460

Direct recovery was seen above the 4-hour Pivot Cloud from the 1.2700-10 support which provides a modestly bullish impact. Schaff Trend Cycle reversed higher and is now approaching 100 while FXS-RSI matched this recovery and is rising in neutral territory. While the expectation of a recovery has been correct this has still not yet confirmed a resumption of the uptrend and until then we still need to remain cautious and flexible.

Bullish: We have seen the pullback from 1.2700 which reached the 1.2855-65 first resistance mentioned yesterday. While this is encouraging it has not confirmed a reversal higher just yet. There is still key resistance at 1.2900 and 1.2945 and only once these areas are broken can we look for stronger gains that should eventually reach 1.3475-1.3610.

Bearish: The pullback was expected although we did not see any marginal new low yesterday. This tends to provide a more positive outlook but until 1.2900-45 is broken we cannot rule out one further attempt lower. Thus, shoudl we see support at 1.2745 break there is a stronger argument for price to break below 1.2700 and move down towards 1.2535 at least with marginal risk of seeing 1.2460.

Month View
(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.



GBPUSD
Price: 1.7940

Day View
Resistance: 1.7970 ... 1.7985 ... 1.8015 ... 1.8040
Support....: 1.7925 ... 1.7905 ... 1.7890 ... 1.7870

Bias: Sideways ranging

Bullish: Price has stalled in an erratic sideways consolidation and we tend to look for this to continue today. Thus areas around 1.7880-90 should provide buying opportunities but given the expectation of continued choppy price behavior do take profit early. Alternatively a direct break of 1.7985 would imply an immediate move higher that should take price towards 1.8040, 1.8090 and we feel 1.8145.

Bearish: The 1.7860-75 support is holding and we feel this will continue to hold today. Thus any attempt by price at the 1.7970-80 resistance would look to provide a good selling opportunity within a tightly ranging market. Alternatively a direct break of 1.7860 would provoke a sharper move lower towards 1.7815 which should hold on the day.



Week View
Resistance: 1.8020 ... 1.8090 ... 1.8145 ... 1.8210
Support....: 1.7865 ... 1.7810 ... 1.7700 ... 1.7660

Price has settled into a choppy sideways move around the 4-hour Pivot Cloud and this is expected to continue in teh short term before a break higher. Schaff Trend Cycle remained at 100 while FXS-RSI has now dipped lower from overbought territory. We have to be a little cautious here and play with breaks but we feel that the upside probably has more legs next week.

Bullish: 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 1.7980 which we feel should then cause further gains to 1.8140 at least with 1.8205 also providing good resistance. However, we feel this higher area should hold and prompt a larger pullback.

Bearish: 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.

Month View
(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 2004

Disclaimer: Pro Commentary, FX-Strategy, FX-Strategy Pro Charts, and any related products or services, are analytical tools only and are not intended to replace individual research. The information provided here should not be relied on as a substitute for extensive independent research before making your trading/investment decisions. FX-Strategy is merely providing this service for your general information. No representation is being made that any software or training will guarantee profits or not result in losses from trading. The views are not necessarily those of FX-Strategy, its owners, officers, agents or employees. In addition any projections or views of the market provided may not prove to be accurate. FX-Strategy will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this service. Be sure to closely read and understand the risks of foreign currency trading as described on the FX-Strategy website.

 

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