Following is a selection of comments from analysts on important technical developments in the foreign exchange market. CMC eyes euro/USD squeeze near $1.3580.
CMC MARKETS
EURO/DOLLAR: "The single currency continues to find progress above $1.3500 tough to sustain but at the same time a dip below 1.3400 was similarly rebuffed.
"A neutral close continues to keep the balance of risks evenly poised as the market looks to squeeze towards $1.3580, which is 50 percent retracement of the decline from the $1.4280 highs to the lows this month at $1.2870. "To diminish the risk of an upside break-out towards $1.3700 we would need to see a move below this weeks lows around $1.3240 as well as the 55-week moving average.
"Last week's bullish engulfing candlestick remains a key factor in thinking that in the short term we could well get a test higher first, before lower later.
"The longer term target remains for a test towards the $1.2795 61.8 percent Fibonacci level of the $1.1880/1.4280 up move; however this move would be threatened in the near term, on any break and close above $1.3580."
DOLLAR/YEN: "The 81.80 yen level held successfully yesterday and as US bond yields jumped after the US economic data yesterday the dollar went with them, dragging the yen back above 83.00, but as yet not above the trend line resistance from the 84.50 December highs at 83.20.
"The dollar needs to overcome trend line resistance at 83.20 from the 84.50 December highs as well as the 83.70 area to target the 84.40/50 area."
EURO/STERLING: "Yesterday's euro rally saw the single currency close on the cusp of both the 55- and 200-DMAs. Last week's failure at 85.00 pence was an important factor in keeping the downside scenario intact; however it looks to be at risk for now. We still remain in the broad trading range between 84.80 and 83.00 for now, but a break above 85.00 could trigger a rethink.
"The rally yesterday found resistance at 84.80 just above the double moving average resistance and the hope is that this should continue to hold.
"We need a break below support around 83.30 to retarget 82.85 and then the expectation remains for a revisit of last years lows at 80.65 on a break below 82.75 in the longer term.
STERLING/DOLLAR: "Yesterday's plunge in the pound was not entirely unexpected given that it had just posted nine successive positive daily closes in succession, matching a sequence last seen in July and August last year, as some profit-taking kicked in.
"As long as the pound does not break below the $1.5820 support then the potential remains for a test back towards this weeks highs around $1.6060, however yesterday's break below the $1.5920/30 level makes diminishes the chances of that scenario a little.
"It would need a move back below this weeks low around $1.5820 to undermine the probability of a test of $1.6185 trend line from the $1.7045 2009 highs and target $1.5720 and possibly lower. The major support remains around the 200-DMA around $1.5430."
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