Following is a selection of comments from analysts on important technical developments in the foreign exchange market.
EURO/DOLLAR: "More range trading ahead of new highs. Last week's reversal from a marginal new high at $1.2925 saw a significant wash-out of long positions, but effectively has only seen prices drop back to the bottom of the previous $1.2330 to $1.2900 trading range.
The declines so far within this range have been breaking up into waves of 3 and continue to suggest that this is just part of a more complex correction process ahead of a final 5th wave rally towards our $1.30-$1.33 medium-term targets. We are therefore expecting a larger choppy range to develop in the days and week ahead."
"Prices are over completing a 5-wave rally, so be careful on any further strength. Prices accelerated higher on the breakout of the previous 'wedge' formation, and through important resistance at 107.90-108.10 yen. However, we now look to be completing the 5th wave within this move and although further near-term gains are likely, they should be used as a profit-taking opportunity on longs. Once a top has been seen, we should witness a pullback towards 108.10/107.00 yen."
STERLING/DOLLAR: "Range possible before a rally to new highs. Cable has been one of our problem counts, as we could arguably count a 5-wave rally into the $1.9140 highs, especially against such an aggressive decline last week. However, we have been waiting for confirmation that a top had truly developed by way of a 5-wave decline.
"Tuesday's reversal through $1.8840 confirmed that the losses we have recently witnessed have only developed in a 3-wave manner and is therefore corrective within the ongoing dollar bear trend. We therefore view declines as a buying opportunity for a rally to new highs in the coming weeks. The difficulty at the moment is gauging how deeper the pullbacks can still be. We are watching the price action closely."
EURO/DOLLAR: "A large double-top formed at $1.2899-$1.2030. Double tops tend to have high failure rates unless the 'neckline', or trigger, is taken out, in this case $1.2334.
Under that, calls for a drop to $1.2113-$1.2101 and possibly as far as $1.1900, $1.1846, and then the pattern's target of $1.1754-$1.1735. Holding above $1.2334 calls for renewed upside, with first confirmation above $1.2517. Main euro support at $1.2334 is under pressure first. Resistance is at $1.2517."
STERLING/DOLLAR: "Key-day reversal bar popped up at $1.9137, causing dip lower. First support at $1.8305 backed up by the line at $1.8180. Under that, then $1.7790 and $1.7827 could easily be reached. Holding there could cause a rebound to $1.8575, forming the last 'shoulder' of a potential head-and-shoulders reversal pattern. So, trend is weakening with first support at $1.8305 and resistance at $1.8697 and $1.9137."
DOLLAR/YEN: "Prices are holding above a support cluster starting at 104.75 yen and this is giving the market a boost. Above 110.03 yen targets 111.50 yen, which if taken out suggests that the old 'neckline' at 115.10 yen could get tested as new resistance. Failing to clear 110.03 yen targets down to 107.52 yen. Holding there forms a small reverse head-and-shoulders pattern.
Above 110.03 yen, then 111.50 yen should fall and 115.10 reached. Possible bottom brewing. Above 110.03 yen and 111.50 yen targets 115.10. Support at 105.16 yen."
Currency bid prices at 12:13 pm EST (17:13 GMT). All data taken from Reuters calculated from the levels at 4:30 pm (21:30 GMT) in the previous New York session.
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