Euro and Pound Medium-Term Overview – Dec. 5-10, 2010
Weekly and Daily Close = December 3, 2010
Monthly Close = November 30, 2010
SUPPORTS AND RESISTANCES
MEDIUM TERM OVERVIEW
EUR/USD
On Weekly Charts, the Euro-Dollar is showing a symmetrical triangle pattern and has bounced from a 61.8% Fibonacci retracement from the second bullish swing since its lows in the first half of the year. It is now trading just above 1.3400, and a continuation of the ascending move would be probable, targeting the previous higher highs above 1.4250. A break to the downside would need prices to get below 1.3000 to really be considered bearish and we would be targeting the 1.2600/1.2500 levels as a first support.
On Daily Charts, the price has reached the upper line of the downtrend channel and should show a clear break of the resistance area between 1.3400 and 1.3480, before giving way to a further bullish push towards the 50% and 61.8% Fibonacci levels of retracement from the swing low (November higher high and lower low). If the pair was to continue in its present bearish channel, we could see some strong support at around 1.2980/1.2900, which if broken could bring us down to 1.2800 (138.2 Fibonacci extension) and further test the lowest lows at around 1.2700 (161.8 extension).
GBP/USD
The Pound/Dollar has been strongly rising since the middle of this year and is forming a symmetrical triangle on the Weekly charts, with prices just below the area of resistance between 1.5800 and psychological level 1.6000 I would expect a wide range consolidation before a break upwards targeting a retest of the last highs, with a possible Fibonacci extension to 1.6600 (127%) then further to 1.6700 (138.2%) and finally if the strength of the Pound holds, to the 161.8% extension which is just above previous higher highs attained in the end of 2009. Should the break occur to the downside, there is a very strong support area between 1.5350 and 1.5500 where I would expect this pair to consolidate for a while and bounce back up.
The descending channel on the Daily charts has widened, which would indicate a further continuation of the bearish move. Prices are touching the upper trend line of an hypothetical steeper new channel, however we could expect them to push further up to the original downtrend upper line, meeting 1.5800 or even 1.5900 which represent the 38.2% and 61.8% Fibonacci retracement levels on the leg down from the higher highs of last November. before going back down.
EUR/GBP
Although this pair broke the weekly descending channel to the upside, it went back below its upper trend line and has been consolidating in a tight range for the last few weeks. We now have a symmetricall triangle in formation, with a new upper downtrend line in a less steep angle. The strong rejection at 0.8338 has formed a pinbar that is still to be confirmed but the pair is trading slightly above the broken resistance level, now support at around 0.8500, which gives the possibility of a continuation to the upside, and a retest of the last swing highs if resistance area between 0.8650/0.8700 is clearly broken. An extension to the Fibonacci levels 127/138.2, matching the highs attained in the first quarter of this year, and a further bullish continuation to the highs of 2009 in extension to 161.8, will be on the cards if double top level at 0.8950 is broken.
Daily charts are showing a falling wedge inside a bell-patterned descending channel, which makes me think that we could indeed be having a bottom here, and a possible inverse head and shoulders in formation bringing us to 0.8510 as a first target (38.2% Fibonacci retracement and last retested area of resistance), then further up to around 0.8700 (61.8%) and a probable sticking of the prices around the previous steady consolidation area between 0.8700 and 0.8800 (October 2010). However, we could be seeing a retest of the lows and lower line of the wedge before this move upwards.
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