Forex weekly review and outlook

ForexTV.com Commentary, News, & Analysis.

FOREX WEEKLY REVIEW AND OUTLOOK

Oct 02 2005 09:10 am

EUR/USD

EUR/USD's decline was just contained above cluster support of 1.1964/70 (with 61.8% projection 1.2582 to 1.2098 from 1.2269 at 1.1970) last Tuesday and turned into volatile sideway trading since then. Even though the downside momentum of the fall from 1.2269 is not convincing, EUR/USD is still trading well below 4 hours 55 EMA and the short term falling trend line. Overall short term trend is still downwards

As discussed before the fall from 1.2582 is treated as either (i) resumption of medium term down trend from 1.3668; OR (ii) a falling leg of wide
range consolidation pattern from 1.1873. In either case, the immediate question is how far this fall will go.

At this point, the fall from 1.2582 is still expected to continue as long as cluster resistance of 1.2119/23 (50% retracement of 1.2269 to 1.1976 and 23.6% retracement of 1.2582 to 1.1976 at 1.2119) holds. But weakness could only be confirmed by firm breaking of 1.1964/70 cluster support. In such case, further decline towards 1.1873 low should follow. But, the real test lies in cluster projection target at 1.1759 (1.1759 being Apr 04 low, 50% projection of
1.3483 to 1.1873 from 1.2582 at 1.1777, 100% projection of 1.2582 to 1.2098 from
1.2269 at 1.1785). Strong rebound above this level could mark the end of the
fall from 1.2582 and bring another leg of consolidation pattern from 1.1873.
Decisive break of 1.1759 will add much credence to the scenario that medium term
fall from 1.3668 has resumed.

On the upside, break above 1.2119/23 resistance will indicate the whole fall from 1.2582 has possibly finished and opens up a few short term bullish scenarios. But in any case, EUR/USD should head towards next cluster resistance at 1.2269 (50% retracement of 1.2582 to 1.1976 at 1.2279) first.

Stay tuned with our daily and mid-day newsletters

GBP/USD

Even though, crawling lower to as low as 1.7565 last week, cable's fall is still contained above 78.6% retracement of 1.7271 to 1.8498 at 1.7530. From a bigger picture, since we're treating the fall from 1.8498 as resumption of medium term down trend from 1.9554, further decline to cluster support of 1.7271 (161.8% projection of 1.8498 to 1.7959 from 1.8146 at 1.7274) is still being expected in the coming week(s). However, the question is, whether a corrective rebound will happen in the near term first.

Zooming in the the near term picture. Even though, cable is cable is still trading well below falling trend line and 4 hours 55 EMA, downside momentum is not convincing as bullish convergence is displayed in 4 hours MACD. Further consolidative trading is favored and cable could recover towards cluster resistance of 1.7797 resistance (with 38.2% retracement of 1.8146 to 1.7565 at 1.7787 and 23.6% retracement of 1.8498 to 1.7565 at 1.7785). Break above this level will indicate the fall from 1.8498 could have finished and opens up a few near term bullish scenarios. But in any case, break of 1.7797 will push cable towards next cluster resistance of (with 61.8% retracement of 1.8146 to 1.7566 at 1.7924 and 38.2% retracement of 1.8498 to 1.7565 at 1.7921).

Firm break of 1.7530 will signal down trend resumption for 1.7271.

Stay tuned with our daily and mid-day newsletters

USD/CHF

Similar to EUR/USD, USD/CHF's rally was limited at 1.2996, slightly below 61.8% projection of 1.2239 to 1.2825 from 1.2654 at 1.3016 last Tuesday and turned into sideway trading since then. This rally from 1.2239 is either resumption of medium term up trend from 1.1288 or forming a wide range consolidation pattern from 1.3079. But in either case, further rally should push USD/CHF for retest of 1.3079 resistance.

Zooming into near term picture, USD/CHF is still trading well above the rising trend line. As long as cluster support of 1.2825 (with 50% retracement of 1.2654 to 1.2996 at 1.2825, 23.6% retracement of 1.2239 to 1.2996 at 1.2817) holds, further rally is still in favor. But since upside momentum is not convincing, a break of 1.3016 is needed to confirm underlying strength.

A break below 1.2825 cluster support will signal a top should have been made at 1.2996 and opens up a few bearish scenarios. But in any case USD/CHF should fall towards 1.2654 support first.

Also, the key medium term resistance level lies in 1.3226 cluster resistance (1.3226 being Apr 04 high, 61.8% projection of 1.1481 to 1.3079 from 1.2239 at 1.3227 and 100% projection of 1.2239 to 1.2825 from 1.2654 at 1.3240). Any strong bouncing off from this level will indicate USD/CHF could still be bounded within wide range consolidation mentioned above and bring deep retreat to below 1.2654 level. On the other hand, firm break above 1.3226 will add much credence to the scenario that USD/CHF is in resumption of up trend from 1.1288.

Stay tuned with our daily and mid-day newsletters

USD/JPY

USD/JPY did rose to as high as 113.68 last week as expected, just slightly below mentioned 113.74 resistance. As discussed before, the rally from 108.75 is either resumption of the rise form 101.65 or part of wide range consolidation pattern from 113.74. But in either case, the first target of 113.74 is nearly met.

For the coming week(s) close attention will be paid to how USD/JPY react around 113.74 to 114.87 (with 114.90 being May 04 high and 50% projection of 101.65 to 113.74 from 108.75 at 114.80). Any sell off from this level could mark the end of the rise from 108.75 and bring deep correction. Meanwhile, firm break above 114.87 will add much credence that up trend from 101.65 has resumed.

Zooming into near term picture, breaking of cluster support of 112.66 support will at least turn near turn up trend into sideway consolidation and risk further pull back to 112.09 support. However a firm break below 1.2209 strongly suggest that the rise from 108.75 has ended and risk will significantly increase for a much deeper decline.

Stay tuned with our daily and mid-day newsletters