Daily Outlook: The bullish channel continued unabated yesterday, pushing slowly but surely toward 1.40. To gain a sense of how strong this uptrend has been one only has to look at the beginning of this month: the pair was trading almost 1000 pips lower, around 1.28, just 16 days ago on Jan 10th, 2011.
The question, of course, is how long will the uptrend continue? Well, the next major resistance coming up is at 1.3738 - the 68.2% retracement of the Nov 4th, 2010 high to Jan 10th, 2011 low. If we are going to see a correction before 1.40 then this is where we'd see it. Beyond that, technically speaking, there is no clear reason to doubt this uptrend besides the pair starting to get just a touch overbought on the daily chart now - this bullish uptrend is tried and true. We would be a little more weary if there was a break to either the top of bottom of the channel (a top break would signal possible exhaustion and extinction, a bottom break would just be plain bearish).
Don't forget also the FOMC meeting is today. We expect rates to stay exactly the same but as always people will be watching the statement closely for any changes in language.
Trading Idea: Primary trade is a long from 1.3620-3650 support zone with targets (from 3620) at 3645, 3670, 3695 and 3725 for 125 pips profit.
A much more aggressive long would be in the vicinity of 3680 to catch a possible bounce here, but the SL would have to be pretty tight as you are not getting anywhere near the bottom of the channel on this one. Top of the channel is around 3750 currently and should be the top-end of any long.
Finally if 1.3650 is broken to the downside watch out for a re-challenge of the bottom of the channel, currently around 1.3600.