Posted: 26 Mar 2010 02:40 AM PDT

After losing a critical support line and making a deep dive, EUR/USD is making a nice recovery. Learning from the near past – fasten your seat belts for a fresh dive.

EUR/USD broke down under the 1.3423 earlier this week and made a sharp drop. In February, the pair was supported at this line several times, and eventually began a journey north. I then wondered if this is a rise before the plunge. Indeed, when EUR/USD failed to breach the important resistance line of 1.3850, it began a sharp fall that culminated in the break of 1.3423.

Reasons for drops and reasons for rises

This EUR/USD break was backed by the credit downgrade that Portugal received from Fitch, and with the ongoing Greek crisis. Well, good news for Greece: the European leaders reached an agreement involving the IMF in a bailout plan for Greece.

Jean-Claude Trichet, president of the ECB, opposed aid from the IMF, but now changed his mind. He praised the deal and expressed optimism. This optimism boosts EUR/USD from the lows of 1.3267 up to 1.3382 – nice recovery indeed.

You may say – now that Greek crisis is behind us, the Euro can surge. Well, these troubles are far from over. The Greek accord doesn’t solve all the problems in Greece and it isn’t alone, as seen in this Reuters article reporting about the Euro’s fresh rise:

“Basically, it seems the problem will be settled without much turmoil, so things should calm. The only concern is if more problems arise with Portugal and Spain,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

European stock markets aren’t too excited by this resolution. Initial gains were erased.

EUR/USD technicals

The next significant support line for EUR/USD appears at 1.3080 – this is the line where the pair began the long term rise in 2009. After dropping almost 50% from 1.3423 to 1.3080, to 1.3267, this retracement is natural.

If the pair fails to top 1.3423 at the close of the week, more drops can be expected next week. So, 1.3250 provides a minor support line and 1.3080 a major one. Note that there’s a long way before the next support line of 1.3080.

If the Greek hopes do take over the markets and EUR/USD rides on a miracle and jumps over 1.3423, the next line of resistance is at 1.3530, followed by 1.3680.

American final GDP is the last significant indicator for the week. Will it push the Euro down?

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Forex Daily Outlook – March 26th 2010

Posted: 25 Mar 2010 02:00 PM PDT

American final GDP and a revised version of consumer sentiment are the main events for today. Will the dollar continue rising? Let’s see what’s awaiting us today.

The European economic summit continues today and will shake the EUR/USD that broke down earlier in the week.

Jean-Claude Trichet is attending the summit, but will also speak in a separate event late in the day. The summit will provide high volatility for the Euro. For technical levels, read the EUR/USD forecast and Casey Stubbs’ latest analysis.

In Britain, the revised Revised Business Investment is expected to show a drop of 5.6%, better than the first release. The British Pound suffered from Alistair Darling on Wednesday, and is trading lower since then.

In the US, final GDP is expected to confirm the high growth rate of 5.9% (annually). This strong growth isn’t backed by jobs. Not yet. The first release showed a 5.7% growth rate.

The revised version of consumer sentiment from the University of Michigan is expected to show a rise from 72.5 to 73.1 points. This will help the dollar just before the markets close.

A few speeches are due in the US from various FOMC members: Kevin Warsh, James Bullard and Daniel Tarullo will all speak and could release statements about future policy about the rates.

That’s it for today. Happy forex trading!

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GBP/JPY at Crossroads

Posted: 25 Mar 2010 06:46 AM PDT

GBP/JPY is in a collision course between an uptrend and a downtrend. As both the pound and the yen are losing to the dollar due to each country’s internal problems, the technicals will speak.

GBP/JPY uptrends and downtrends. Click to enlarge:

GBP/JPY was trading in an uptrend during February and it traded around 143.50 at the peak – a peak marking the uptrend resistance. It then eased to 141, touching the uptrend. As GBP/JPY was at this tight spot, it lost the uptrend support line and collapsed quickly to 132 on March 1st. And then a new move began:

From this low point, it began a fresh uptrend in which it trades right now. The support for this uptrend is marked by a low point on March 4th, and another one on March 22nd. The uptrend resistance line is marked by peaks on March 5th, 8th and March 17th.

March 17th’s peak is a meeting point with another line. This is the downtrend resistance line that already began in January 19th and approached again on February 17th. The support for this line appears on February 5th and March 1st.

The scenario of breaking lower on an uptrend, like in February could be repeated now, but also the scenario of breaking the longer standing downtrend to the upside sure is possible.

Fundamentals don’t give any currency an advantage over the other. Japan’s central bank is taking additional measures to stimulate the economy, and the yen suffers. Alistair Darling’s budget in Britain didn’t provide any good news whatsoever, so the Pound suffers as well.

So, GBP/JPY (or Geppy / Dragon) is at technical crossroads, and anything can happen.

Where do you think it will go?

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