Euro and Pound Monthly Overview - April 2011

Weekly updates: April 01/04 close.

EURUSD

March monthly candle almost reached last November highs for the Euro-Dollar and price is still trading below the bearish trend line. It has since made a new high yesterday at 1.4267 but hasn’t retested yet 1.4280. We seem to be having a double top forming in all three time frames (monthly, weekly and daily) and the first target for a bearish correction would be a fall to SMA34 and middle line of the Bollinger bands at 1.3700/1.3690. Next levels on line would be the 38.2% Fibonacci retracement on the previous swing high at around 1.3400, then the 50% correction at 1.3100 and monthly SMA100.

Last week’s closed almost at the top point of a rising wedge, and daily charts show a very volatile Friday where price did a quick bounce back up after a 38.2% correction on the previous swing high. As said above, we might be having a double top, which scope to the downside would be a retest of the support and 50% Fibonacci retracement at round number 1.4000 as first bearish target, then a retest of March lows at around 1.3760, and finally an extension to the 138.2% level and daily SMA100 at 1.3570. On the weekly charts, I would expect a correction to the 38.2% level and confluence of the SMA34 and middle line of the Bollinger bands, near round number 1.3500/1.3480. Given the wedge pattern and multi-timeframe double tops I don’t think there might be a continuation of the bullish run, however we should be attentive of a break of the monthly bearish trendline should it occur, as we could then reach 1.4450/1.4500 in extension if November highs are surpassed.

GBPUSD

The Pound-Dollar ended March candle on a retest of the previously broken SMA34, coming back to the 61.8% level of correction on the former swing low. This pair seems bullish now and aiming to retest March highs at 1.6400, barely above the SMA200. Next targets on a middle-to-long term are November 2009 highs (1.6875) then August 2009 highs (1.7040), and finally the SMA100 level at 1.7580/1.7600. The support at 1.5880 seems to be holding nicely, however if price breaks again below this level we would be targeting 1.5340 (December 2010 lows), 1.4770 (March 2010 lows and probable level of the actual ascending trend line) then 1.4230 at previous May 2010 lows.

We have a tweezer bottom which formed earlier last week, and Friday’s big engulfing candle is definitely a confirmation of the return of the bullish sentiment for this pair. Price is presently trading above the daily SMA34 and middle line of the Bollinger bands, at 1.6240/60, and my views favor a return to the highs at 1.6400, which if broken would lead to an extension towards 1.6700/1.6690 (weekly 127% and daily 161.8%), with a final aim to reach the weekly SMA200 above 1.7000. Should the support break down, we would be targeting 1.5760/50 (daily 138.2% extension on the previous swing low and SMA200 – weekly 61.8% retracement on the recent swing high and SMA100).

EURGBP

March candle went slightly above the upper trend line of the symmetrical triangle, but this can’t be considered a clean break and price is presently back again inside the formation, however the SMA34 and middle line of the Bollinger bands was broken and we are still above those levels so we could expect a continuation to the upside in the following weeks. Next target would be October highs at 0.8940/50. On the bearish side, I would expect a fall to June 2010 lows at around 0.8080/0.8120, and on a longer term approach, an extension to 0.7750 (138.2% of the range of the swing high) and further to 0.7600/0.7540 (161.2% and SMA100).

Euro-Pound made another bullish candle last week, inside a rising wedge, where I would expect a correction to the broken resistance level and SMA100 at 0.8680/70. Friday ended on a doji and price started falling on Monday, and we are presently quite near this first bearish target. This could just be a retest of the level for a subsequent bounce back up targeting October 2010 highs at 0.8940, however if this support doesn’t hold, we would be aiming towards next support area at 0.8550/00.