Friday, July 8, 2011

Daily Technical Analysis - July 8, 2011

08/07/2011 USD/CAD

Positive sentiments in the markets are still evident for the eighth day running with the United States dollar – Canadian dollar, that is being traded with a negative correlation to the market trend, signaling that it intends to continue its downwards movement. Essentially, exchange rate rises in the markets have provided support for the Canadian dollar which led to the United States dollar – Canadian dollar pair breaking through its "MEGAPHONE" pattern and an additional break to the important support level at 0.9620.

The fact that the pair returned upwards to examine its previous support line that is, for the moment, used as a resistance level, and was then pushed back down, hints to us that there is a very good chance for the continuation of the wave of price drops towards the previous low points at around 0.9450 – our short term price target. After the pair stopped when it touched its 200 day moving average line, it is reasonable to assume that it will continue on from here to new, even lower levels. Our medium term price target is set close to the previous low point that was registered prior to the crisis, at around 0.9050 Canadian dollars to the United States pound.

08/07/2011 EURUSD

Yesterday's sharp fall of the euro – United States dollar pair when it reached a low point of 1.4215 in the early morning hours has led the pair straight towards its rising trend line that it has been in from the beginning of May. This steep climb upwards towards the second half of yesterday's trading day, created the Japanese reversal pattern - BULLISH KEY REVERSAL. This pattern is evidence as to the strength of the buyers at around the trend line which is used as a strong support level.

The expectation is that the euro will renew it movement upwards towards the resistance level of 1.4700 in relation to the short and medium term forecasts. On the other hand, it is important to stress that the pair is suffering from a brittle and vulnerable state. Therefore, a break of the trend line should be used as a defensive measure for the buy position below. Speculative traders can even consider the reversal of a position and the move to a short position with a view to price drops down to the next significant support level which can be found at around 1.4000 United States dollars to the euro.

08/07/2011 AUD/CHF

Following the long lasting wave of price drops that began at the beginning of April and carried on until the start of this month, the Australian dollar – Swiss franc pair can be expected to continue the movement it began some time ago when it began to climb up immediately after it met the significant support level of 0.8700. The assessment is that the pair is, in all probability, on the way to a reversal of its negative trend of the past three months.

The short wave of price drops at the beginning of the week, corrected exactly to the Fibonacci level of 38.2%, which further increases the chances for the continuation of movement northwards, especially against the background of the Japanese reverse pattern that was created - BULLISH MORNING DOJI STAR. From here on, the pair can be expected to move on up towards the resistance level of 0.9470 and then on to the higher resistance level at around 0.9850 Swiss francs to the Australian dollar.

08/07/2011 GBP/USD

Despite the weakness of the United States dollar against most of the other leading currencies, against the United Kingdom pound the dollar has succeeded in maintaining its dominant position and has pulled the UK pound – US dollar pair all the way down to record low levels and strong support levels at around 1.5950. Against the background of positive sentiments in the markets, we can assume that the pair has exhausted its full potential for price drops in preparation for a change in direction and a move to rising exchange rates in harmony with the general trend in the markets.

From a technical point of view, we can identify a positive deviation in the MACD indicator. This technical deviation supports the potential turning point. As the pair can, at the moment, be found at the bottom of its shuffling pattern, a break of the last support level at 1.5920 will constitute a very real danger to the positive forecasts for the pair and could even cause a change of positions for the pair in the short term. Such a breakthrough can be expected to lead the United Kingdom pound – United States dollar pair towards its next support level at around 1.5830 US dollars to the UK pound.