Poslano Petek, 10th April 2009 od admin
ECB joining the Quantitative Easing Rhetoric
Last Thursday, although economists had expected a 50bp-cut, ECB
only cut 25bps. Meanwhile, speculation has been increasing that
the bank will soon have to move to tools outside of the interest
rate policy, namely quantitative easing. This Thursday, ECB
council member Nowotny announced that rates would likely go
below 1.00% (1.25% at the moment), and that the bank is
considering buying coporate debt. That put extra pressure on the
Eurozone, along with more disappointing releases from the
Eurozone. Despite a bout of risk appetite on Thursday which
normally pushes up the EUR/USD for example, this pair fell,
indicating that the market was more attentive to the
fundamentals and central bank direction than risk sentiments.
Meanwhile, the RBA cut the OCR to a 49-year of 3.00%. The BoE
also had its interest rate decision, holding the benchmark rate
at 0.50%.
EUR/GBP Falls Below Supports
Last week, we took notice of EUR/GBP’s testing of support. This
week, price action broke through the support in what initially
looked like a clearout action before re-entering the channel.
Then there were further clues of bullish bias as the pair
retested that support and had a very clear rally. However, this
rally was stopped short on Thursday, as the ECB reaffirmed the
market’s speculation that it plans to move to quantitative
easing. This action broke below two converging support lines.
Although our bullish bias (from a previous Gartley), the decline
has brought the pair only to the 61.8% retracement level and at
the 0.9000 area. If the pair breaks this area, it can decline to
0.8800 before a rally. However, a break of that should warn that
the EUR/GBP may be in a major decline. A break of 0.8500 would
be a confirmation of a major decline.
EUR/USD Declines; Gartley Watch
The EUR/USD is possibly setting itself up with a Gartley. This
week’s ECB and fundamentally driven decline puts the EUR/USD
near the 1.3100 area. Further decline is possible, but there is
support at 1.2950-1.3000. Here lies the 61.8% retracement level
as well as the previous resistance which would now be tested as
support. If prices indeed reach this area, a gartley is formed,
and the trader should monitor bullish action. However a break of
that may lead the EUR/USD to the 1.2400-1.2500 support zone.
CHF/JPY Falls Near Upsloping Channel Support
Technical Setup:
In recent issues, we mentioned that the CHF/JPY completed a “W”
or Double-Bottom formation. This week, the pair declined, though
staying within the upsloping channel it has been in since
February. Current RSI levels show strength in sustaining a rally
. We anticiapte this weeks action only to be a minor corrective
decline, which will meet support at both the dynamic trendline
as well as resistance at the 86.00 level. Look for price action
to reflect those previous 2 attempts to break the dynamic
support (either with long tail, or sharp reversal candlestick
combination). That should be the first signal for a re-entrance
to the rally.
USD/CHF: Settling up Gartley in Corrective Move
Technical Setup:
Breaking above its previous minor top and extending about 127%.
This is between the 50% and 61.8% level of the previous rundown.
The result is a gartley formation, indicating bearish bias. The
pattern formed a bit pre-mature, reletive to the classical
fibonacci resistance at 61.8% (1.1668). The 1.1700 level has
even stronger resistance. But if indeed price is ready to head
south, this “miss” of important resistance may indicate bearish
aggressiveness and give more confidence to the bias.
Looking at the 4-H chart, we can also spot a 14-period RSI
bearish divergence. With all this information, an agressive
trader may jump on the decline now with a short-term target of 1
.1170, but waiting for a break in the upsloping support (of a
triangle) would be a very significant step for confirmation. A
break below this level would suggest a more major decline, with
a target at the 1.0850 level (projecting previous range of
decline).
