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Forex Technical Report

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Monday Open: Euro Breaches Psychological Levels at 1.30

EUR/USD: The Euro was sold heavily against nearly all of its major trading counterparts, and some of the most significant volatility was seen in the EUR/USD itself. The 1.30 level is significant not only for psychological reasons, but also because it was historical support, but also because it comes near the 38.2% Fibonacci retracement of the rally from 1.2030 (at 1.3060), and at the confluence of the 100/200 day EMAs (at 1.3140, and 1.3060). This downside break turns the longer term view bearish, with the next medium term target at 1.2870 (50% Fib), followed by 1.2680( historical support, 61.8% Fib).

USD/JPY: The USD/JPY saw a resumption of the strong rally that has been in place since last September, after bouncing sharply from support at 90.80. This area will now be viewed as critical for the longer term prospects of the pair, as the outlook as bullish as long as 90.80 holds. Pulling out to the weekly charts, we can see that to the topside, the main level to watch is the 94.40 area, as this is the 38.2% Fib retracement of the decline from 123.50, so an upside break here will be important in generating a new wave of bullish momentum and sending prices to test the upper 90s. Specifically, a 94.40 break targets 99.50, as this is the 50% retracement of the same move.

GBP/USD: The GBP/USD was one of the big losers this week, and prices managed to close well below former support at 1.5270. This weakness also generated important Fibonacci breaks, and this suggests a long term test of the May 2010 lows at 1.4220 at some point later this year. This week, bearish trades can be taken on the approach of 1.5220, as this resistance is likely to contain prices near term.

USD/CHF: The USD/CHF was one of the biggest winners this week, and prices managed to close above previous resistance at 0.9380. Long term outlook is bullish, but this week traders should wait for a retracement back into support at 0.9380 before entering into long positions. Next upside target is now seen at 0.9490.

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