EUR/GBP stalls - USD steady

Written by Trade Team | 23 March 2010

A Technically driven Forex Market

Update: Trend following the CHF/JPY Cross

FUNDAMENTAL :

In the absence of any real economic reports except what has been in the limelight over and over again are the Chinese Reminbi or the Yuan being discussed by the US congressmen attack on the currency, its value relative to the US trade deficits, recession and the financial crisis.

Supporting Video for this Analysis : Youtube URL:http://www.youtube.com/watch?v=-i7hRGB06Os 

The continued bashing of the China's policy on the other hand has been an envy for most of the US politicians as the US recovery has been slow from the Jobs data, real estate and contrary to the stock markets performance for the 1st quarter of the year. The housing numbers and the indirect relations on the economy with the bill passage of the Healthcare insurance for most Americans may drive some good numbers for the stocks and may spillover some positive sentiments for the US dollar as a whole although, it may too early to say the direct effects could be slow. However, revenue growth and consumer have been slowly increasing for the past few months.

Good signs are there for the USD, however, as most investors and traders are more focused on the EUR/USD decline as the major factor for the USD recovery and not more of the other way around. These are the fundamentals that has been hanging over the air for sometime now as it is only now that the shift and focus is turning form negative to positive for the USD. The irony of the matter is by then the USD would take a corrective move and the shift will revert back from the previous sentiments.

In addition, there are a lot of European funds still caught in between the recent sales of the Euro around the 1.3600 average price levels where some analyst were expecting that the EUR/USD will go back to the 1.2880 as expectations of the European financial crisisled by Greece and Spain's inability to handle their debt problems. for this to be attained a much stronger finish for the USD needs to be attained which may not happen in a single days movement.

TECHNICAL :

On the technical stand point, keeping an eye on the USDX opening for the week lower from it Friday's close had indicated that the USD may try to finish the 1st quarter ending with a stronger tone with a shortened trading week in the the 1st week of April due to Asia's market holiday closures in trading. The lower opening at 80.50 and a high of 81.08 1st attempt have shown that this would probably happen. It is more defined on the support levels of 79.50-80.05 bp as long as the USDX holds above these levels it is still in an upward trend with minor corrective moves along the way.

This also holds true for the GBP/USD more than the EUR/USD with the EUR/GBP has a more influential movement rather than by the individual pair still on a corrective divergence since March 14 which had a technical indicator for this correction. The correction held true and filled the gap that is shown in the shaded area on the left hand of the chart. As the charts still shows no real indication of a market reversal except some price swings for corrective movements inherent in a major trend regardless they be an up or down major trends. It is important to look at these charts on a bigger perspective even if the day to day indicators shows otherwise.

There is a video supporting these analysis which can be found http://youtube.com/megatrade101. The GBP/USD earlier support at 1.4770 may still be valid as a basis ; as for the EUR/USD the 1.3440 was the closest price from our target price of 1.3380 pivotal point for the EUR/USD to recover on a temporary reaction from its downturn. However, it is still within the trading range, but will really depend more on the USDX continued recovery rather than the weakness of the Euro as everyone is focused on.

Otherwise, if it indeed goes lower the targets on the low side will be within the range of 1.3180-1.3250 only whenever the USDX will touch the 82.20 bp on the upside with sustainable volumes for the June DXMO futures index.