Week of March 6, 2008

EURUSD fall from the February 23, 2009 high of 1.2990 remains active as only a daily close above 1.2659 will complete this fall while 1.2455 holds, as prices will then move within a 1.2659-1.2786 consolidation zone before another attempt to the downside. Once prices have closed on a daily basis within the above mentioned zone, a sustained break of this zone will see further price extension in the direction of the break.  As to the medium term outlook, the fall from the December 18, 2008 high of 1.4718 remains active as only a daily open and close above 1.3319 will complete this fall while 1.2455 holds, as prices will then move within a 1.3319-1.3854 consolidation zone before another attempt to the downside.

GBPUSD long term outlook remains firmly to the downside after eight consecutive months of lower closing prices and February 2009 close of 1.4311, the lowest monthly close since March 2002. Though February prices closed well above the 1.3502 low witnessed in January of this year, the move lower over the last few months has been the most explosive move witnessed in GBPUSD since 1992, as this was our August 18, 2008 and August 26, 2008 forecast. (please read)  Dring the 1992 fall, GBPUSD fell from 2.0100 to 1.4063 in 6 months. Similarly, the current move lower began July 2008 at 2.0155 and reached 1.3502 January 2009, a few pips below our August 26, 2008 forecast.  Since 1992, GBPUSD has made 3 attempts to sustain prices below 1.4 but was unable to do so as 1.4 has essentially limited the downside on GBPUSD since Septemeber 1985.  A monthly open and close below 1.4 would be a very bearish event and confirm prices will continue to move much lower targeting the 1985 low of 1.0345.  However, daily and weekly studies are showing early signs that a correction may soon unfold, but until monthly prices can open and close above 1.5475, the broad outlook favors the downside.  Corrections to the upside have been limited to the daily 55 EMA which has capped prices since August 2008.  As of this writing, the daily 55 EMA comes in at 1.4560 while trendline resistance from the December 2008 high comes in at 1.4450 as of this writing. A daily open and close above 1.4700 would indicate that prices are likely to continue to move higher with a 1.5 and 1.5475 as the objectives. As to the short term fall from the February 23, 2009 high of 1.4660, this fall remains active as only a daily close above 1.4225 will complete this fall while 1.3956 holds, as prices will then move within a 1.4225-1.4391 consolidation zone before another attempt to the downside.  Once prices have closed on a daily basis within the above mentioned zone, a sustained break of this zone will see further price extension in the direction of the break.

We will have a detailed outllook for the week ahead after today’s close.