After a weak NFP, every retailer decided to short USD and
long the EUR and GBP and was shocked to see their positions in red, deep red.
The NFP street expectation was 169k where as the actual was 115. But voila, USD
continued to rally. But as per one of the reports, the March NFP was revised
from 120K to 154K and adding that one to the current figures, it will be a
little down from the expectation and also the unemployment rate improved to
8.1% versus the expected 8.2%. So, can we think fundamentals don’t always work?
But as an adage goes, buy the rumor and
sell the news. The trend was pretty strong for EUR and GBP since 2nd
week of April and when the news came, those who had positions booked their
profit taking the EUR and GBP down after NFP release on the last working day of
the week. This week end is also quite interesting with French president
election and Greek parliamentary election which can impact a lot on EUR.
Now, let’s try to analyze the long term weekly chart to an
hourly chart to identify the key support and resistance zones for EUR and GBP.
On a larger time frame of weekly chart, we are seeing a
strong resistance at 50% Fibonacci retracement and support is assumed at 1.3
zone being 61.8% Fibonacci retracement. RSI indicating that EUR is struggling
to break out of 50 suggest that the longer term weakness in the pair continues
to hold. With these inputs we may assume that the trend on weekly chart is
neutral with negative bias. It will move faster on a break below 1.3 and move
above 1.34 on a weekly close.
However, on a daily chart, EUR continues to be bearish and
trading at 61.8% retracement. In fact it’s been stuck at these ranges for
nearly 3 months but the highs are lower than the previous highs there by making
a symmetric triangle formation. At the close of Friday, EUR has almost closed
at the lower high trend line from where we may expect bounce which depends on
the out come of the Election in French. For short term trend to be bullish it
must trade above the recent high of 1.3360 and below 1.3 on a daily close it
would be highly bearish.
It’s pretty interesting to read the shorter 4 hour chart.
After making a low at 1.2980 in 2nd week of April EUR made a
continuous higher highs and higher lows indicating a strong EUR rally but the
formation of the raising wedge broke heavily at the support zone. While price
was making a stronger looking feel of the pair, RSI disclosed that the market
would not hold the highs as it gave a negative divergence. As can be seen on
the chart, the pair was taking support at 50 in every fall; it was failing to
make new highs even when the price was making a high.
On a 30 minutes chart, EUR moved in a box for almost a week
giving scalpers a high opportunity to make quick buck but tested the patience
of the swing traders. As always, EUR moved in a side ways before major news
break out as the traders and investors are averse to risk at those times and
the participation will be less. As we can see, the initial hour market moved up
as expected by retailers but the crash in the pair came a little later.
This week watch for a resistance in EUR at 1.3060 levels.
Daily closing above 1.3060 we may expect the market to be bullish up to 1.3170
and up to 1.34 with a minor resistance around 1.3250. On the contrary, it may
correct up to 1.3 being the multiple bottoms and 1.2850 and 1.2740 will act as
support for the pair.
On a weekly chart, pound is struggling between 23.6% and
39.2% Fibonacci retracement for about 18 months. However, it is stable at the trend
line which is currently making higher lows but the high seems to be fixed at
1.66. RSI indicates neutral trend on weekly chart and the Moving averages of
100 and 30 seems to indicate neutral trend.
On a daily chart we are seeing a formation of Head and
Shoulder pattern but it’s currently showing a strong support at the neck level.
This week too we saw a resistance around the shoulder level formed in August
last year and the lower high trend line is also acting as resistance. As long
as the recent high of 1.63 is not taken, we will expect the pair to be weaker
and we would love to short the pair in every rally. Having said that we will
stay away from the pair between the April high of 1.63 and 1.66 as anything can
happen between those levels and would prefer day trading than swing unless
there is a clear signal of the trend. On daily chart the moving averages are
signaling the strength in the pair but RSI indicates it is at over bought zone.
On a shorter 4 hour chart pound did make a rising wedge and
break above the higher wedge failed to hold it making it a trader’s remorse. In
the current scenario it may be bearish to watch for the pair if it starts
trading below the previous high of 1.6030 made on March end.
All through the previous month pound did enjoy the support
of the bulls gained about 500 pips in an ascending trend channel but once it
started trading below the higher low trend line it’s resumed the bearish moves
and in a smaller descending trend channel. It’s safe to trade the longs near
the lower band of the descending trend channel and short at the upper band of
the descending trend channel with a negative bias as long as the pound respects
the descending trend channel.
For the week, we may expect 1.6180 zones to be the
resistance being the upper band of the trend channel and above that may witness
1.6240 and 1.6364 on the other hand if it continues to be in the channel, we
may expect the lows to be tested at 1.6050 and 1.6000.
The fundamental news/Economic data expected for the week.
It will be prudent to have an eye on the Economic data
release every day as the outcome of the data released can change the trend of
the market as the Fundamental news over rides the Technical behavior of any
pair. Here are the data which are expected
Monday through Wednesday are not much data with high impact but the day is Thursday for pound with as many as 6 data in around 2 hours.
Good luck and wish you green pips.