Market Analysis
| 28 February 2011
The transitional period for the Forex market particularly for the USD passive recovery has been extended as shown on the weakness of the USDX still below the 78.05 level. Although, the slight retrieval from last week's closing have given some sign of relief as most major players were hesitant to push it further by simply taking long positions either on the GBPUSD or the EURUSD.
Based on our previous market view analysis that the slow ladder-like recovery for the USD would be towards the end of the 1st quarter. As the 74.25-76.80 support range is still viably supportive on a technical stand point as of this writing. The direction of the USD would be determined by the report on the Non-Farm Payroll numbers and unemployment data due this week. However, the determining factor before the reports would be the Middle-east situation where money flows well over the commodities market in oil trading for the past few weeks now. Until a more solid resolution other than the sanctions held by both the US and UK would still not be enough for investors to change any immediate sentiments. As they would normally say...go where the money flows.
The Euro and Pound's rally for the past week have been anticipated in spite of a mixture of reports in the market. As investors market sentiments and trades were focused on the oil accelerating over the $100.00/bl. level. Though some corrective moves were made but the continuing tensions over at Libya and parts of the Middle-East has made this transitional move for the USD to start. No such momentum has been building as volumes are seen over at the commodities market.
The rally for the EURGBP touching its previous resistance and a FIBO retracement of 50% at the 0.8591 have retreated back lower to it current price of 0.8528 as of this writing. While the Doji candlestick bar for the weekly Euro is an indication that such corrective move would be in the making in the near term currently at 1.3770 with some expected daily extensions higher to a 1.3880 resitance price.The same holds true for the GBPUSD at 1.6147 where its steadier trend higher is pretty much intact. Therefore, short Euro vs.the Pound for the cross rate stil is favorable as risk to the 0.8660 would be far fetched for now. The only technical contrarian analysis to this is that the fact the prices levels for the cross rate of the EURGBP is within the sysmetrical triangle formation that any attempt higher breaking the immediate daily resistance would trigger a continued support for the EURUSD. Watching this market price behavior more thoroughly would likewise be equally important. Any initial penetration from its resistance would have a similar drawback called the corrective move. So sellers on this market may want to reconfigure your strategies as we have. Just a friendly reminder, tolerance levels and amount of exposure together with a certain time-table to follow would be the best startegy to have in place together with hedging any position.
The USDJPY had been more influential to the GBPJPY cross as the correction down to the 131.10 low of last week was resting exactly on its major support. This was extended from the higher channel from the previous weeks trend channel.Which indicates that higher lows are now in place. Again, the determining factor for this pair is for the report for the week to be friendlier towards the USD.
We remain true to our market analysis for now not as a bias opinion but simply it does take more time to ignite a sluggish US Dollar with oil rising and Gold at the back-drop of the fundamentals. However, the month of April should prove to be quite interesting if and when our time table on market projections would coincide with the market movements.
