EurUsd Last week EURUSD only seemed capable of heading in one direction, as the pair soared off its 1.2874 lows (seen 9-10 Jan) and finally hit a peak of 1.3457 on Friday. But that was last week; and since hitting those highs, we have pared back lower -just this morning breaking below the 1.3315-20 support (Friday lows and 23.6% fibonacci retracement of the whole rally). Despite this retracement, we do feel that last week's price action was symptomatic of a change in the market's core view, and that buying on dips is the way to proceed. In terms of how deep those dips may be, next supports to watch will be 1.3234 (38.2% fibonacci retracement), 1.3165 (50% fibonacci level) and 1.3145 (12 Jan high former resistance).Below there we have a large gap before major support at 1.3085 (the 29 Dec pivot and 13 Jan low). Looking at the topside, Friday's high of 1.3457 is the first resistance level of note, followed by the hugely important 1.3500 level -significant not only for its psychological effect, but also because it coincides with the 14 Dec high. Going forward the next levels to watch above are seen at 1.3635 (23 Nov high), 1.3785 (22 Nov high) and 1.3825 (10-11 Nov highs).
GbpUsd GBPUSD has managed to hold onto its gains much better than EURUSD going into this week, buoyed possibly by the retracement in EURGBP since Friday. The high so far in this rally has been 1.5890 (touched late on Friday); and should we manage to break above there, next levels are expected at 1.5910 (14 Dec high), 1.5950 (last seen 23 Nov), then the significant psychological level 1.6000. With UK CPI data due tomorrow (and risks naturally skewed to the upside) there is a possibility the rally could continue straight on up through 1.6000, in which case we note next resistance at 1.6095 (19 Nov high) and 1.6185 (9, 10 & 12 Nov triple high). Near-term support comes in at today's low 1.5815, then 1.5785 (former resistance now turned support), and 1.5718 (13 Jan low). More distant supports noted at 1.5583 (12 Jan low), 1.5513 (11 Jan low), 1.5476 (10 Jan low) 1.5427 (200-day moving average), and 1.5405 (Friday's low).
UsdJpy Just as we suspected would happen in our last report, USDJPY found support just ahead of its 3-week uptrend channel (around 82.40), and has now managed to rebound back towards 83.00. Nevertheless, the price action is still pretty subdued, and the pair will have to break above 83.25 (upper edge of a 1-2 week downtrend channel) to prove it has shaken off the bears. Until that point, watch for any further re-tests of the 3-week uptrend, whose trendline now comes in below at 82.50. There are quite a few support levels clustered in that area at the moment which may slow downside progress; aside from 82.50 uptrend support we also have Friday's low 82.40, and the lower edge of the current downtrend at 82.35. Should the momentum be sufficient to clear those levels, further sellers are likely to be attracted and we would expect a return to 81.70 (4 Jan European/US session low); with the possibility of extending to 80.95 (31 Dec low), 80.24 (31 Oct low), and the all-time low from 1995 at 79.75. First resistance is 83.25 (as previously mentioned) followed by 83.50 (11 Jan high), 83.70 (7 Jan high), and the formidable old range ceiling from early December at 84.40. This latter level managed to contain numerous rallies back on 29 Nov, 1 Dec, 2 Dec, 8 Dec, 13 Dec and 16 Dec -so it's likely to be a stubborn barrier should we managed to get back up there.
UsdChf USDCHF remains in consolidation mode between 0.9600 and 0.9700, so for the time being our bias is neutral. We have however been following the progress of a potential bearish flag pattern on the hourly chart which has a target around 0.9480 below (calculated by measuring the length of the flag pole and applying it to an approximated point of break out). At the end of last week there were a number of dips below the lower edge of this flag, but none could hold below the flag perimeter for long, so there's good reason to be cautious when proceeding with this pattern. However, if the pair can break below Friday's low of 0.9605 (also the 7 Jan low), then there may be a dual reason to be bearish, as it will have potentially activated a bigger head and shoulders pattern on the hourly chart, with a target around 0.9425. Only other support noted on the horizon is 0.9530 (former resistance now turned support). Resistance levels to watch on the topside now stand at 0.9687 (Friday's high), 0.9784 (11 Jan high), 0.9850 (12-13 Dec highs) and 1.0065 (1 Dec high).
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|