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Weekly Technical Strategist

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GBPUSD: Price Collapse Turns Risk Lower

Mon, Oct 26 2009, 06:34 GMT
by Mohammed Isah

FXTechstrategy

In This Issue:

EURUSD: Upside Momentum With Cautious Hold Above 1.5000 - A third consecutive week of upside gains saw EUR printing a 14-month high at 1.5059 and closing above its big psycho level at 1.5000 the past week.

GBPUSD: Price Collapse Turns Risk Lower - The inability of the pair to sustain its recovery higher and its subsequent failure at the 1.6694 level saw it collapsing the past week through.

EURUSD

EURUSD: Upside Momentum With Cautious Hold Above 1.5000

EURUSD - A third consecutive week of upside gains saw EUR printing a 14-month high at 1.5059 and closing above its big psycho level at 1.5000 the past week. This current medium term upside strength is coming on the back of a rally initiated at the 1.4481 in early Oct ‘09. With that said, an extension of its current upside momentum is expected towards the 1.5082 level, its Aug 10’08 high with a loss of there exposing the 1.5283 level, its May 04’08 low. Its weekly RSI remains bullish to overbought. We are cautious of our call for further upside gains above the 1.5000 as another weekly close is required to maintain a firm hold on that level. However, if its Friday price hesitation develops further to the downside, we could see corrective declines towards its Oct 15’09 high at 1.4968 with an invalidation of there allowing for additional downside pressure targeting the 1.4844 level where its Sept 23’09 high is located. We envisage a hold in price at this level if tested as it should reverse roles and provide support thereby pushing the pair higher again. Further down, another support is sited at its Oct 12’09 low at 1.4672. On the whole, while EUR remains biased to the upside medium term, it must hold above the 1.5000 level to maintain that trend. The risk to this analysis will be a failure above the 1.5000 level.

GBPUSD

GBPUSD: Price Collapse Turns Risk Lower

GBPUSD - The inability of the pair to sustain its recovery higher and its subsequent failure at the 1.6694 level saw it collapsing the past week through key supports at the 1.6466 and 1.6411 levels, its Sept 23’09 high/channel breakout point. GBP is now back into its falling channel (clearly seen on the daily chart)earlier invalidated the past week(Wednesday) and has printed a rejection candle following that sell off. We believe that further risk remains to the downside and GBP should push lower towards its Sept 30’09 high at 1.6124 where a break will create scope for further weakness towards the 1.5708 level printed on Oct 13’09. Below there will trigger the resumption of its short term downtrend. On the other hand, GBP must close above the 1.6694 level to avert its current downside threats and bring further upside towards the 1.6740 level, its Sept 11’09 high with an eventual loss of there setting the stage for a retarget of its YTD high at 1.7041. Beyond the latter will activate the resumption of its medium term uptrend on hold since Aug’09. From what the charts are showing there are more downside evidence than upside at the current price levels. On the whole, while GBP trades within its falling channel, risk remains to the downside with eyes on its short term downtrend resumption.

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Published on  Mon, Oct 26 2009, 06:45 GMT