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Thread: Eur/Usd Weekly Technical Commentary

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    Default Eur/Usd Weekly Technical Commentary

    Chart Levels:

    Support 1.3420..1.3400..1.3375..1.3340.
    Resistance 1.3550..1.3638..1.3683..1.3850.

    This week: →
    This month: ↗

    Slowly forming an interim low against retracement support and the fairly pivotal 1.3400 area. A fat Ichimoku 'cloud' should help put a floor under the Euro and send it back to the top of the 'flag' formation. If we start holding consistently above 1.3600 more positions are likely to be added in the futures market and some will have to review current FX strategy as Reuters' polls mean forecast is for the Euro to hold below here all year. We feel we are still several weeks' away from a break to a new all-time high. A weekly close below 1.3400 would force us to review our medium term outlook while a monthly close above 1.3665 should see upside pressure increase considerably.


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    After a choppy week, EUR/USD ended up closing nearly flat. No progress was made and the outlook remains basically unchanged. EUR/USD is still struggling around 55 days EMA (now at 1.3438) and be supported above mentioned 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369). With this support remains intact, it's unclear whether fall from 1.3681 is merely a correction to rise from 1.2865 or the start of a deeper decline. However, the lack of decisive downside momentum, as seen also in bullish convergence condition in the 4 hours MACD and RSI are starting to favor the former case, i.e. EUR/USD is merely in a correction, which is about to complete and some more upside will be seen before making an important top.



    Nevertheless, from a short term angle, another dip is still in favor as long as 1.3477 resistance holds. But still, sustained break of 1.3364 cluster support is needed to confirm underlying bearishness. Otherwise, short term outlook remains rather neutral. On the upside, break of 1.3477 will argue that whole correction from 1.3681 has ended at 1.3391 already. Stronger rebound will be seen to retest short term falling trend line (now at 1.3540) and then 1.3609 resistance.

    In the bigger picture, risk of 1.3681 being an important medium term top is still high. As discussed before, medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 is treated as resumption of the whole up trend from 1.1639. With such interpretation, we'd expect risk of medium term reversal to increase significantly after EUR/USD met resistance zone between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. Hence, focus is now on reversal signals.



    On the downside, break of the short term rising channel support is already a warning that the rise from 1.2865 has completed. Decisive break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) will confirm such case. More importantly, with bearish divergence condition in daily MACD and RSI, this will warn that the whole rally from 1.2483 has also completed, and, so is the whole up trend from 1.1639. Focus will then be back to medium term rising channel support (now at 1.3049).



    In the longer term picture, it's still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective in nature, thus, favoring the latter case. And therefore, as discussed above, focus will be on reversal signal when EUR/USD met resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But sustained break of this resistance zone will path the way towards 95 high of 1.4523.


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    Euro formed a doji on the weekly chart while it did manage to take out for a brief time the 1.3410 support. Retesting the previous week high at 1.3522 and getting just a few pips of the 1.3365 support with the indicators in the overbought area on the weekly charts leaves room for another try to get bellow December's 3rd high of 1.3365 support level. Looking at the daily charts we can see that the high for the week was established on Tuesday and the low on the US news release on Friday afternoon, the rest of the week's days were pretty calm EurUsd trading between 1.3410 and 1.3470. With this in mind we will have to wait and see which of the two currencies has more strength depending on which side price breaks and gets out of the range mentioned. A break south towards December's 3rd support at 1.3365 will confirm the weekly downside bias, although we have some important support levels worth mentioning, closest is the 1.3300 level established on January 7th followed by February 27th high at 1.3260 both of which could send the pair back up. If on the other hand Euro manages to gather some strength and to reverse the midterm trend we might see a move above 1.3523 towards May 7th high of 1.3630 as next resistance before the YTD high of 1.3680.

    Resistance Levels

    * 1.4532 - March 2005 High
    * 1.3668 - December 2004 High
    * 1.3630 - May 7th High
    * 1.3523 - April 16th Low
    * 1.3459 - May 10th/11th Lows

    Support Levels

    * 1.3365 - December 3rd High
    * 1.3300 - January 7th High
    * 1.3260 - February 27th High


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    Eurozone

    a quiet week for Eurozone releases, with the May CPI data the main feature. The market will be extra sensitive to this data given the recent sell-off in the bond market. French, Italian and Eurozone industrial output numbers are also due, while the ECB monthly report will merely reiterate the message advanced by Trichet at the ECB meeting.

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    Recapping previous discussions, medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483 is treated as resumption of the whole up trend from 1.1639. As discussed before, with this interpretation, the up trend from 1.1639 is expected to end between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. EUR/USD has already touched this resistance zone back in April and focus is on reversal signal since then.

    Last week's break of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369) was a significant development as it's now confirmed that rise from 1.2865 has ended at 1.3681 already. More importantly, with bearish divergence condition in daily MACD and RSI, it's likely that the rally from 1.2483 has ended too, so is the whole medium term up trend from 1.1639.

    Hence from a short term angle, outlook will remain bearish as long as 1.3553 resistance holds and further decline should be seen to medium term rising channel support (now at 1.3072) and 55 weeks EMA (now at 1.3025). Decisive break of this support zone will confirm that whole up trend from 1.1639 has ended and turn medium term outlook bearish.

    However, on the upside, above 1.3553 will indicate fall from 1.3681 has completed and is merely a correction in the medium term up trend only. A retest of 1.3681 would be seen and the rebound could extend further towards 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But focus will remain on reversal signal as even in such case, the up trend from 1.1639 is still expected to conclude between 1.3668 and 1.3822.

    In the longer term picture, it's still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective too, thus, favoring the latter case. Sustained break of of the medium term channel support and 55 weeks EMA will confirm this case and could probably extend medium term weakness to 1.1639 to complete the consolidation pattern. But sustained break of 1.3822 fibo resistance will dampen this view and path the way towards 95 high of 1.4523.




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    EUR/USD extended weakness to as low as 1.3262 last week but found support after meeting 100% projection of 1.3681 to 1.3391 from 1.3553 at 1.3263. Subsequent rebound extended further on Friday, pushing EUR/USD through 1.3374 cluster resistance (38.2% retracement of 1.3553 to 1.3262 at 1.3373) and reached as high as 1.3388 to close the week higher. A short term bottom is in place at 1.3262 and further rebound is now in favor towards 61.8% retracement of 1.2865 to 1.3681 at 1.3177 or above. But overall short term outlook will still remain bearish as long as 1.3553 resistance holds. Below 1.3304 minor support will suggest rebound from 1.3262 has completed and bring retest of this low.

    In the bigger picture, the rise from 1.2865 ended at 1.3681 already after prior breaking of 1.3364 cluster support (38.2% retracement of 1.2865 to 1.3681 at 1.3369). With bearish divergence condition in daily MACD and RSI, it's likely that the rally from 1.2483 has ended too. As discussed before, whole medium term up trend from 1.1639 is interpreted as having first move completed with three waves up to 1.2978, subsequent sideway consolidation completed at 1.2483. Rise from 1.2483, which is trended as resumption of up trend from 1.1639, is expected to terminate between 1.3668 and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. With EUR/USD has already touched this resistance zone back in April, it's also likely that the whole up trend from 1.1639 has completed at 1.3681 too.

    Hence, short term outlook will remain bearish as long as 1.3553 resistance holds, which indicates fall from 1.3681 is still in progress. Focus will be on medium term rising channel support (now at 1.3094) and next key cluster support at 1.3070 (50% retracement of 1.2483 to 1.3681 at 1.3082 and 161.8% projection of 1.3681 to 1.3391 from 1.3553 at 1.3084, 55 weeks EMA at 1.3050). Sustained break of this support zone will confirm that whole up trend from 1.1639 has ended and turn medium term outlook bearish.

    But before the confirmation, rise from 1.1639 could still be in force with EUR/USD staying in the medium term rising channel. Strong rebound to above 1.3553 resistance will indicate fall from 1.3681 has completed and is merely a correction in the medium term up trend only. A retest of 1.3681 would be seen and the rebound could extend further towards 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But focus will remain on reversal signal as even in such case, the up trend from 1.1639 is still expected to conclude between 1.3668 and 1.3822.

    In the longer term picture, it's still early to conclude whether medium term rally from 1.1639 represents resumption of multi-year up trend from 0.8223 or just part of a large scale consolidation that started at 1.3668. But, the three wave corrective nature of the rise from 1.1639 to 1.2978 suggest that this whole rally from 1.1639 will be corrective too, thus, favoring the latter case. Sustained break of of the medium term channel support and 55 weeks EMA will confirm this case and could probably extend medium term weakness to 1.1639 to complete the consolidation pattern. But sustained break of 1.3822 fibo resistance will dampen this view and path the way towards 95 high of 1.4523.








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