Monday May 10, 2004 - 10:14:03 GMT
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Dollar/Yen hits new YTD High
Daily Forex Technical Report 05-10-2004
· New YTD High in Dollar/Yen
· USD/CHF above 200-day SMA
After failing at the 100-day EMA / upper Bollinger and subsequently breaking support at the 200-day SMA, bears remain in control in the EURUSD. A sustained breach of the next level of support at 1.1845-60, which is the 50% fibo of the Sept-Feb bull wave and the 76% fibo of the 4/26-5/5 rally would give bears the opportunity to take profits at 1.1760, which is the 4/26 low and lower Bollinger. Bulls may look to bid around this level, but on the upside, only a break back above the 5/5 high and pivot at 1.2180 would negate our bearish scenario. After making 7-month highs, USDJPY is not taking any breaks following Friday's strong 280-pip rally. The 10-day SMA crossing above the 100-day SMA and break of the 3/8 high at 112.35 indicates that bulls remain firmly in control. A break above psychological resistance at 113 would pave the way for a rally towards the 50% fibo of the 125.64-103.44 sell off at 114.55, Bears can only find conviction on a failure below Friday's low of 109.70. Shorter-term support can be found at 112, the 38.2% fibo of the 125.64-103.44 sell off. A new range appears to be developing in the GBPUSD between 1.75-1.80. With a break below the 10-day EMA support turned resistance, bears will be compelled to sell rallies towards the 100-day EMA / former head & shoulders neckline and psychological resistance at 1.80. More aggressive shorts will look to exploit near term resistance at the 5/5 low at 1.7875. The Mar-4 low at 1.7700 is an attractive entry for bulls, but they may want to patient and wait for more meaningful support at 1.7580/1.76, the 4/29 low and lower Bollinger. The surge above the 200-day SMA in USDCHF gives bulls a strong psychological boost and immediately exposes the pair for a move towards the 4/27-4/29 highs at 1.31 and for a possible return to the year to date high at 1.3230. Bulls who have missed the rally may seek to go long on dips towards the 200-day EMA and psychological support at 1.3000. Bears will find 1.3200, which is the 50% fibo of the 8/26-1/12 down move and lower Bollinger an attractive area to initiate shorts.
Comment from 04/14
On 03/12 EURGBP was briefly above our 6800/20 R zone with a high at 6849, the cross failed at the level and collapsed to the 6543 low, 306pts lower. The cross had a brief reaction on the 04/07 low 6558 (slightly below our 6580/6610 area) and reached the 04/08 high at 6629 and 71pts higher. Today the outlook is still bearish (we have a textbook breakout/retracement from the 6580/6610 area) but the cross is about to reach serious S. 6490/6510 could be an aggressive entry for the bulls thanks to the ST trend S and Low BB. However the key S below is the 6410/6450 area. Bulls will step in the zone to exploit the former breakout pt now S and 38.2% Fibo from the Apr 01 - 03 bull wave. Bears will check the 6670/6700 area to exploit the 38.2% Fibo from the 00 - 03 bull wave and 20 EMA. The area would become serious S for the bulls if a sustained breakout above occurs. Finally, a come back to 6880/6900 would be a decent opportunity for the bearish crowd thanks to the 200 SMA and 23.6% Fibo from the 00 - 03 bull wave.
On 04/16 EURGBP had a high at 6718 (slightly above our 6670/6700). A retracement followed to the 6624 Low on 04/20, 94pts below. The same scenario played out on 04/22 (high at 6729) where EURGBP had a correction to the 6623 low (04/27), 106 pts lower. The R area broke on 04/29 and acted as S from 04/30 to 05/05 (lows between 6117 & 6731). The outlook is still bearish LT but the MT picture looks now quite neutral. 6600/6630 will attract bullish range players thanks to a robust Fibo confluence (50% Fibo from the 01 - 03 bull wave & 23.6% Fibo from the Mar - Apr bear wave). If the area cracks, breakout players will immediately add to their Sterling holdings while more conservative trend followers will wait for a bounce back to the area (former S now R). Below, 6520/40 will be a decent reversal play for the bulls thanks to the Low BB and swing low. 6410/6450 would then be the next important S (breakout pt now S and 38.2% Fibo from the Apr 01 - 03 bull wave). Finally, if the market comes back to higher levels, bears will pay attention to the 6800/6830 zone where the 100 SMA, High BB and 50% Fibo from the Dec - Apr bear wave are present. 6900 is the next stop above.
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