Euro and Pound - January 2011 Overview

EURO AND POUND TABLE OF SUPPORTS AND RESISTANCES

at market close - December 31, 2010

EUR/USD

MONTHLY

After a 125% retracement to the downside on the last swing high, the Euro-Dollar recovered about 50% of the move to the upside followed by a deep fall in last November. December saw a tight range after bouncing back up from SMA100 and I would expect a bullish continuation to break the 34 period SMA and follow through to the upper Bollinger Band and reach psychological level 1.6000. The pair is trading inside a symmetrical triangle formation which is itself embedded in the bearish channel. A break back to the downside would test last lows and SMA200, looking forward to a fall to near 1.1000 if the strong support doesn’t hold.

WEEKLY


Weekly charts show the steady ascending move that the Euro-Dollar started at the end of May 2010, the prices are evolving inside a symmetrical triangle formation but we still can expect a bearish move as the moving averages are still upside down. The price bounced up in the last week of December 2010 after a 75% retracement on last swing high, and the next levels to be retested would be the SMA100 at around 1.3640 and further on the SMA200 around 1.3960 (which was already pierced and consolidated above in October), aiming to form a double top at the strong resistance that formed at 1.4290. If SMA34 and lower trend line break to the downside, we could reach an extension to the starting point of the last swing high at 1.2590 and further down to retest May lows, near the 138.2% Fibonacci extension.

DAILY



Daily charts show a consolidation with tight moving averages throughout all December 2010, where either a break up to 1.4280 or down to 1.2620 can be expected. Risk-to-reward ratio favors a bearish move but on the short-term there is no clear direction in sight yet.

MONTHLY

The British Pound-Dollar shows a descending triangle formation on the monthly charts. The longer term outlook for this pair is definitely bearish and I would expect a fall to previous lows at 1.4400 and further down to the next support at around 1.3530. If the bearish sentiment keeps strong, we could push later on to the 125% extension on last swing low, at around 1.1600.
  

Weekly charts show a tight consolidation area although we could attempt a break to the upside for a test of the SMA200 if SMA100 doesn’t hold. The continuation of the bearish trend can go for a retest of the lows at around 1.4250, followed by a push down to previous lows at 1.3550.

DAILY
Prices are in a descending channel on the Daily charts, with a retest of SMA34 after the crossing down. The support SMA200 did hold but we can expect a new attempt to break 1.5350 level and reach further down to 1.5133 and  psychological level 1.5000, which are respectively the 138.2% and 161.8% Fibonacci extensions on the last swing low.     

 

EUR/GBP

MONTHLY

The Euro-Pound evolves inside a descending channel and has formed an inside candle in December 2010. I would expect a push down for a test of the SMA100, lower Bollinger Band and lower trendline of the channel, near psychological level 0.8000, but a break to the upside would bring us to 0.9420 (upper Bollinger Band) looking forward to a retest of January 2009 highs.





 

WEEKLY

On weekly charts, I would expect a break of SMA200 and continuation to the downside in extension near psychological level 1.7600 (around 138.2%). If the moving average holds, we could get back up to the highs at 0.9420. The direction is not clear however, as the pair has been evolving inside a wide range during all 2010. 

DAILY

We seem to have a double bottom here on daily charts, and price has broken the three SMAs to the upside, however the risk-to-reward ratio favors a bearish position. I would expect a push up to 0.8945 for a test of the highs as a first target, probably followed by a retest of the break. The pair is still mostly ranging, though.