Euro and Pound Weekly Update and May 2011 Monthly Overview - April 29 close

EURUSD

May 2011 Overview

The Euro-Dollar broke the double top and upper trend line of the descending channel, rising near the 127% extension level from the previous swing high. As of today, price has already tested round number 1.4900 and it would seem it will try to reach November/December 2009 highs around 1.5140 as next step, near the 138.2% extension. We might have a retest of the broken level at 1.4300/1.4280 afterwards, but the Euro looks definitely bullish and might push forward to the 161.8% level and further to reach April and July 2008 resistance area above psychological level 1.6000.

The last week of April was heavily bullish for the Euro-Dollar, breaking the previous highs and reaching near the 127% extension on the recent weekly swing high. Price ended on Friday with a hammer candle indicating some exhaustion, however a new high was made today touching psychological number 1.4900 and remaining just below, above the 4-hour SMA20 and middle line of the Bollinger bands, which are tightening for a possible new break upwards. On Daily charts, we could have a slight correction take place for a retest of the broken resistance at 1.4650 which could extend further down to around 1.4530 where we have a strong support. The overall picture, as said above, is bullish but we can expect some retracement before looking for higher highs on this pair.

GBPUSD

May 2011 Overview

As we were expecting last month, the Pound-Dollar did a further bullish run breaking above the SMA200 and March highs, reaching 1.6745. We still maintain our previous medium and longer term targets at November 2009 highs (1.6875) then August 2009 highs (1.7040), and finally the SMA100 level at 1.7580/1.7600. A retest of support around 1.5900 could be on the lines if the SMA200 level doesn’t hold.

The Pound-Dollar went straight to the 138.2% Fibonacci extension on the previous weekly swing high, and near the 161.8% extension on the daily charts. I still see more upside for this pair, which could try to extend further to the 161.8% on weekly, coinciding with the SMA200 near 1.6960/70. A failure to progress upwards would bring us back to the support area around 1.6560/70 on a first step, then the next support and target would be around 1.6430/00.

EURGBP

May 2011 Overview

As we had expected last month, the Euro Pound made new highs in April however losing some of its steam after almost reaching October 2010 highs. The month ended on a spinning top and there might be a correction to the confluence of the middle line of the Bollinger bands, SMA34 and 38.2% Fibonacci retracement levels. We seem to have a double top, however a continuation to the upside after the correction is still possible and we would be targeting March 2010 highs at 0.9130/50 near the 127% extension on the previous swing, then October 2009 highs on a longer term, at the round number 0.9400 and further extension to the 161.8% near the next round number 0.9500 (0.9485).

The Euro strength brought this pair to new highs last week, reaching the 138.2% Fibonacci extension of the previous swing high on daily charts, however not making more than a dozen pips above mid-april resistance level at 0.8922. Price seems actually in a consolidation mode, and weekly pattern looks like a double top but we could be surprised to the upside once more and break above to reach the 138.2% weekly extension on last bullish swing, bringing the pair to around 0.9130/50. Daily charts look a little more bearish to me and a correction to the middle line of the Bollinger bands to 0.8830 is possible, with further extension to the SMA34 at 0.8780.