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Currency Technical Report

Mon, Sep 8 2008, 10:03 GMT
by George Antonakos

FXGreece

EUR/USD

Resistance : 1,4420-30/ 1,4455/ 1,4480/ 1,4510/ 1,4540-50
Support : 1,4350-60/ 1,4300/ 1,4260-70/ 1,4200/ 1,4170/ 1,4130/

Comment : During a move that was caused by panic and surrender in the downtrend, euro broke important support levels at 1,4300-30 on Friday, and moved until 1,4200, as even the last euro bulls saw that the only solution was dollar’s rise. Fannie Mae and Freddie Mac were rescued by the US government on Sunday and this fact led to a boost in the financial markets and the dollar was pressured, reversing Fridays decline completely.
Such moves, usually indicate the reversal of important trends, as the complete surrender to the previous trend, makes even the last resistant to follow the trend. Usually a break of important resistance or support levels follows, and will probably be reversed the same or the next day. When everyone has taken a position in the market, who is going to support the previous trend? No one, and usually markets form striking reversals after the Capitulation Spikes.



So are we facing with such a situation after Friday’s decline, and is it possible that what we described above, happen in the huge currency market? Even if this were possible, we should mention that the market balance and strength is completely different. No one knows how much longer can euro’s supply last and how willing are euro’s bears to support the decline, as the motives of this move cannot be clearly economic...
The fact is that a huge decline was formed for euro against most other currencies, below important long term support levels, whose reach, under normal circumstances, would give good opportunities for buy orders.On the contrary, the market moved 100 and 200 pips lower, indicating a clear break. Of course, we need to see a break of important resistance and a daily close above 1.4400 to confirm the reversal, but the market’s reaction is very suspicious and we should be very cautious.
Are Fannie and Freddie responsible for this week's start? This is a common phenomenon. Such reversals are usually formed after an event, whose meaning could be ambiguous, but in such a volatile market it causes nervous reactions and sharp position closure.
After the sharp decline, important resistance levels are still high, as the area of 1.4480-00 and 1.4550-60 will confirm the trend reversal. First resistance is found at 1,4420-30. High volatility is expected today, as we will see how the market will react to the recent developments. The sharp rise in the beginning of the week would give room for retracements within the day and we should be very cautious.
The areas of 1,4360-75 and 1,4310-20 are the first support levels, while the gap at 1,4260-70 seems as a threat to the reversal scenario. Euro’s possible retracement below these levels and a daily close below 1,4300, would indicate that the scenario mentioned above, will be late and next possible targets are set at 1,3900-1,4000, or even 1,3700-3800. We should see how this week will start, as we will not see these levels again in the immediate future...

TRADING EUR/USD
SWING TRADING : Friday’s sharp decline made us close some positions in terms of risk/performance. We will try sell positions in the retracements from 1,4330 until 1,4250, with stops below 1,4200. We will keep our positions small, as the risk is high, and the most safe horizon seems to be in the short term...
INTRADAY TRADING : We will try buy positions in the short term, at the retracements towards 1,4310-30, with stops below 1,4290 and more buy orders at 1,4260-65, with stops below 1,4200. Sell positions could be tried at 1,4420-30 and 1,4480-00...


 


GBP/USD

Resistance: 1,7940-50/ 1,7980/ 1,8010-20/ 1,8070-80/ 1,8120
Support : 1,7880/ 1,7850/ 1,7820-30/ 1,7780-90/ 1,7720-30

Comment : The pound formed new lows and remained within the support ranges according to the channel in the weekly chart. The reversal that was formed after the week's opening confirms the support levels and the break of the first resistance will confirm it. Resistance is found at 1,7970-00, followed by 1,8100-8150 area.
The rise leaves much room for retracements and this is why we will need signs from today's market reaction and the daily close in order to follow any reversal scenario. The area of 1,7800-25 is the first important support level for today and the gap closes at 1,7670-00, allowing a further decline...



TRADING GBP/USD :
SWING TRADING : Support at 1,7600 held and allowed us to try positions (stops below 1.7500) and profit from dollar's rise. Our basic targets are set at 1,8150-00.

INTRADAY TRADING : For short term positions, we will try sell orders at 1,7970-00 with stops above 1,7930 and target at 1,7800. Buy positions could be tried at 1,7770-with stops below 1,7740 and target at 1,7900...

USD/JPY

USD/CHF

• fxgreece_currency Technical Report_080908

Published on  Mon, Sep 8 2008, 10:08 GMT