HIGHLIGHTS:

GBPUSD:Outlook Remains Lower Below Its Channel - Even though GBP reversed part of its Monday losses to close higher at 1.4688, as long as it continues to trade below its invalidated rising channel, threats remain to the downside.

EURUSD: Testing Its Channel Base With Further Downside - Although price activities have been on the upbeat following the pair’s Monday weakness, as long as the 1.3097/93 area or even the 1.3113 level remains unbroken, nearer term outlook for the pair remains to the downside.

GBPUSD: Even though GBP reversed part of its Monday losses to close higher at 1.4688, as long as it continues to trade below its invalidated rising channel, threats remain to the downside. In that case, its April 21’09 low at 1.4467 will come in as the next downside objective with a cut through there paving the way for a decline towards the 1.4305 level, its Mar 06’09 high and then the 1.4111 level, its Mar 30’09 high. Its daily stochastics remains supportive of this view as it is pointing lower. On the other hand, if a follow through higher on its Tuesday recovery occurs, we could see further upside towards its Jan 16’09/Feb 09’09 highs at 1.4981/86 and next the 1.5066 level, its April 16’09 high. Beyond the latter will clear the way for the resumption of the pair’s recovery off the 1.3655 level, its Mar 11’09 high. All in all, having lost its rising channel and triggered a fresh leg of declines, nearer term outlook has now turned lower.

EURUSD: Although price activities have been on the upbeat following the pair’s Monday weakness, as long as the 1.3097/93 area or even the 1.3113 level remains unbroken, nearer term outlook for the pair remains to the downside. Having said that, a clean invalidation of its Mar 16’09 low at 1.2833 will call for additional declines towards the 1.2456 level, its Mar 04’09 high. Below there will set off further declines towards its 2008 low at 1.2330. Daily stochastics and RSI remain bearish as well, pointing towards further weakness. Our alternative scenario will be a halt in the present declines triggering a recovery and targeting its eroded support turned resistance at the 1.2991 level. Beyond there should yield further upmove towards the 1.3097/93 area, its Feb 09’09 high/.50 Ret (1.2456-1.3738 rally) ahead of the 1.3113 level, its Mar 30’09 low. We expect a combination of these two levels to reverse roles and provide resistance thereby turning the pair back down again. Further out, resistance is located at the 1.3330 level, its Jan 27’09 high. On the whole, having maintained continued downside losses since tumbling off the 1.3738 level, risk remains to the downside.