With the destructive earthquake and tsunami off Japan, the market is in a risk averse mood and prices are dropping in many pairs. In a recap of the week so far as of 9:20AM EST:
AUDUSD has had a challenging week, dropping from a high of 1.0202 last week to a low of .9969 today. This is strong support—it includes the monthly pivot, the 100 daily SMA and confluence. Currently the pair is trying to base. If it can't then Aussie may be heading towards a weekly close lower than parity, something that hasn't occurred since the end of January. There has been no daily close below parity since February 15.
EURGBP has struggled with resistance this week with a high through yesterday of .8608, only one pip higher than last week. Lows have been mostly lower this week but Thursday's candle had a long lower shadow, indicating that the pair is rejecting lower prices. The low of the shadow was .8534. The pair has bounced back up to .8600. This should confirm the support zone in the .8500 range. There's a potential inverted head and shoulders pattern that requires a break.8672 for confirmation.
EURJPY hasn't followed through on last week's spike high to 116.01. Throughout the week, the pair lingered in a narrow range of 114.21 to 115.26. This morning, though, it's suffering from the risk aversion downdraft, dropping to a low of 112.93 so far today. This is bearish. It's having a tough time rallying. However, there is strong support in the 111.50/112.79 zone, provided by daily moving averages, monthly pivot, prior lows and .618 retracement of the 110.67/116.01 move. If this support zone fails, additional support is at 110.77 and 109.58. The bottom of the bear flag on the weekly chart is near 107.50.
EURUSD disappointed the Euro bulls this week, dropping from last week's high of 1.4007 to a low so far today of 1.3752. On the way, it destroyed key support at 1.3880/3800. Next is a support zone between 1.3732 (50% retracement and last week's low) and 1.3685 (fib confluence). Yes, risk aversion. However, as I wrote several times this week, the move from 1.3429, while strong, looked corrective rather than impulsive. In addition, the 1.4036 high looks as though it completed an ABC correction from 1.2874 on the daily chart. It satisfies a fib relationship as well. If the downtrend continues, it's in line with the longer-term weekly and monthly charts.
GBPJPY dropped to a low of 131.18 this morning, puncturing the 200-day moving average. It's possible that the Guppy will complete its .618 retracement and retest its prior low at 129.50/25. If it failed there, then expect 125.51. However, I'd expect a rally at some point. The pair recently broke above a long-term trend line and closed above the 200-day moving average. These are bullish signs.
GBPUSD has been hammered this week with lower highs each day this week. This morning things became worse—it pierced a prior low of 1.6032 and traveled on to 1.5977. Key support is at 1.5963. That's a .382 retracement of the entire move from 1.5345, the Feb. 11 low, and confluence. Below 1.5752, the outlook would be very bearish.
USDCAD has managed to stabilize a bit, staying above last week's low of .9684. Until yesterday, the high was .9767, still below last week's high of .9790. This morning it touched .9804. The 2008 low was .9711. This is a key support level and if the bulls can't defend it, the price target from the weekly triangle of .9549 is still possible.
USDCHF stayed above its dismal .9202 low from last week as well but isn't exactly robust. The high so far this week has only been .9369. Price needs to get above .9506.
USDJPY has been lackluster this week. The high has been 83.30. The low today has been 82.01. Bottom line is it's still within its range of 80.94 to 83.97. I'll continue to trade that range for now.
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.