Euro and Pound Weekly Update - May 06 close

EURUSD

The Euro-Dollar started its bearish correction last week as expected, and broke below our first targeted resistance and further crossing the strong support at 1.4530, reaching near round number 1.4300 and at a 30 pips distance of October 2010 highs at 1.4280, while also piercing the daily SMA34, and ending on a long bearish engulfing candle.. After Sunday open, the price retraced 38.2% of Friday’s move and was rejected at the 4-hour SMA200 level, falling further in extension 100 pips before the 127% on the daily (1.4253). I would expect a continuation of the bearish sentiment to that level as a first target, which is also matching April lows. Second target area would be around 1.4000 which is the level of the weekly SMA200 and finally a third attempt could be made towards the daily 261.8% Fibonacci extension on the same move, at around 1.3865/70, which also corresponds to the weekly 138.2% extension.

Should the present support area hold, first target from a bullish perspective is around the broken support level, 1.4490/1.4530 and if broken back upwards, a retest of the recent highs near round number and psychological level 1.5000.

GBPUSD

The Pound-Dollar failed to extend to the upside and retraced like the Euro-Dollar with a 61.8% retracement on the previous swing high, closing at the support area 5 pips below the round number 1.6400 which was our second expected target in our bearish alternative forecast. Friday ended on a small doji inside a 100-pip consolidation range that formed on the 4-hour charts between 1.6340 and 1.6440, closing above the SMA200 of that timeframe and just sitting above the daily SMA34.

Price extended a little further today piercing the 4-hour SMA200 but was rejected back up and we might end the day on a long-wicked pin bar, but we need to close above the1.6430 and SMA34 resistance levels. I would wait for a confirmation before entering longs, as the 4-hour scope looks really close (1.6480 with confluence of 100 and 34-period moving averages). I would favor a continuation to the downside provided we remain under the resistances, for a fall near round number 1.6000 (weekly middle line of the bands and SMA34 area), which lays between the daily SMA100 and SMA200, near March lows.

EURGBP

The Euro-Pound reflected the same move as its pairs coupled with the US Dollar, following our bearish scenario to the letter, reaching mid-April lows but 6 pips (0.8746) and giving back all the gains it had made over the last two weeks. I would favor an extension of this fall towards the weekly 127% or 138.2% Fibonacci extension on the range of the previous swing high, with the SMA100 level as first target at around 0.8700/0.8670, next target being the middle line of the bands and SMA34 at around 0.8630, in the area between the daily 100 and 200-period moving averages (presently 0.8600 and 0.8660).